Elasticities Practice Problems - Topic The Price Elasticity of Demand Skill Conceptual Topic Calculating Elasticity Skill Recognition 1 The slope of a

Elasticities Practice Problems - Topic The Price Elasticity...

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Unformatted text preview: Topic: The Price Elasticity of Demand Skill: Conceptual Topic: Calculating Elasticity Skill: Recognition 1) The slope of a demand curve depends on A) the units used to measure price and the units used to measure quantity. B) the units used to measure price but not the units used to measure quantity. C) the units used to measure quantity but not the units used to measure price. D) neither the units used to measure price nor the units used to measure quantity. 5) The price elasticity of demand equals A) the change in the price divided by the change in quantity demanded. B) the change in the quantity demanded divid-­‐ ed by the change in price. C) the percentage change in the price divided by the percentage change in the quantity demanded. D) the percentage change in the quantity de-­‐ manded divided by the percentage change in the price. Answer: A Topic: The Price Elasticity of Demand Skill: Conceptual 2) The price elasticity of demand depends on A) the units used to measure price and the units used to measure quantity. B) the units used to measure price but not the units used to measure quantity. C) the units used to measure quantity but not the units used to measure price. D) neither the units used to measure price nor the units used to measure quantity. Answer: D Topic: The Price Elasticity of Demand Skill: Recognition 3) The price elasticity of demand measures A) how often the price of a good changes. B) the slope of a budget curve. C) how sensitive the quantity demanded is to changes in demand. D) the responsiveness of the quantity demand-­‐ ed to changes in price. Answer: D Topic: Calculating Elasticity Skill: Conceptual 4) When the quantity of coal supplied is meas-­‐ ured in kilograms instead of pounds, the de-­‐ mand for coal becomes A) more elastic. B) less elastic. C) neither more nor less elastic. D) undefined. Answer: C Answer: D Topic: Calculating Elasticity Skill: Analytical 6) If a rightward shift of the supply curve leads to a 6 percent decrease in the price and a 5 percent increase in the quantity demanded, the price elasticity of demand is A) 0.30. B) 0.60. C) 0.83. D) 1.20. Answer: C Topic: Calculating Elasticity Skill: Analytical 7) A 10 percent increase in the quantity of spin-­‐ ach demanded results from a 20 percent de-­‐ cline in its price. The price elasticity of de-­‐ mand for spinach is A) 0.5. B) 2.0. C) 10.0. D) 20.0. Answer: A Topic: Calculating Elasticity Skill: Analytical 8) A 20 percent increase in the quantity of pizza demanded results from a 10 percent decline in its price. The price elasticity of demand for pizza is A) 0.5. B) 2.0. C) 10.0. D) 20.0. Answer: B Topic: Calculating Elasticity Skill: Analytical Topic: Calculating Elasticity Skill: Analytical 9) Suppose a rise in the price of peaches from $5.50 to $6.50 per bushel decreases the quantity demanded from 12,500 to 11,500 bushels. The price elasticity of demand is A) 0.5. B) 1.0. C) 2.0. D) 1000.0. 13) The price elasticity of demand is 5.0 if a 10 percent increase in the price results in a ____ decrease in the quantity demanded. A) 2 percent B) 5 percent C) 10 percent D) 50 percent Answer: A Topic: Calculating Elasticity Skill: Analytical 10) A fall in the price of lemons from $10.50 to $9.50 per bushel increases the quantity de-­‐ manded from 19,200 to 20,800 bushels. The price elasticity of demand is A) 0.80. B) 1.20. C) 1.25. D) 8.00. Answer: A Topic: Calculating Elasticity Skill: Analytical 11) A fall in the price of cabbage from $10.50 to $9.50 per bushel increases the quantity de-­‐ manded from 18,800 to 21,200 bushels. The price elasticity of demand is A) 0.80. B) 1.20. C) 1.25. D) 8.00. Answer: D Topic: Calculating Elasticity Skill: Analytical 14) A shift of the supply curve of oil raises the price of oil from $9.50 a barrel to $10.50 a barrel and reduces the quantity demanded from 41 million to 39 million barrels a day. The price elasticity of demand for oil is A) 2 million barrels a day per dollar. B) $1 per 2 million barrels a day. C) 0.5. D) 2.0. Answer: C Price (dollars per bush-­‐ el) 8 7 6 5 4 3 Quantity demanded (bushels) 2,000 4,000 6,000 8,000 10,000 12,000 Answer: B Topic: Calculating Elasticity Skill: Analytical Topic: Calculating Elasticity Skill: Analytical 15) The table above gives the demand schedule for snow peas. The price elasticity of demand between $6.00 and $7.00 per bushel is A) 1.0. B) 2.0. C) 2.6. D) 5.0. 12) Suppose that the quantity of root beer de-­‐ manded declines from 103,000 gallons per week to 97,000 gallons per week as a conse-­‐ quence of a 10 percent increase in the price of root beer. The price elasticity of demand is A) 0.60. B) 1.40. C) 1.66. D) 6.00. Answer: A Answer: C Topic: Total Revenue and Elasticity Skill: Analytical Topic: Calculating Elasticity Skill: Analytical* 16) The table above gives the demand schedule for snow peas. If the price of snow peas falls from $4.00 to $3.00 a bushel, total revenue will A) increase because demand is elastic in this range. B) decrease because demand is elastic in this range. C) increase because demand is inelastic in this range. D) decrease because demand is inelastic in this range. 19) The table above gives the demand schedule for peas. As you move from point C to point D, the price elasticity of demand is A) elastic. B) unit elastic. C) 0.75. D) 3.00. Answer: D Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical 17) The table above gives the demand schedule for snow peas. The demand curve for snow peas is a straight line and so the elasticity of demand is A) 1 at all prices. B) the same at all prices but not 1. C) higher at higher prices. D) lower at higher prices. Answer: C A B C D E Price (dollars per bush-­‐ el) 10 8 6 4 2 Quantity demanded (bushels) 0 4 8 12 16 Topic: Calculating Elasticity Skill: Analytical* 18) The table above gives the demand schedule for peas. As you move from point A to point B, the price elasticity of demand equals A) 0.11. B) 0.50. C) 0.22. D) 9.09. Answer: D Answer: B Topic: Calculating Elasticity Skill: Conceptual* 20) The table above gives the demand schedule for peas. Which of the following statements correctly describes the price elasticity of de-­‐ mand? A) The price elasticity of demand is larger at point A than at point B. B) The price elasticity of demand is larger at point D than at point A. C) The price elasticity of demand is constant because the slope is constant. D) The price elasticity of demand increases moving from point A to point B to point C to point D to point E. Answer: A Topic: Inelastic and Elastic Demand Skill: Recognition 21) If demand is price elastic, A) a 1 percent decrease in the price leads to an increase in the quantity demanded that ex-­‐ ceeds 1 percent. B) a 1 percent increase in the price leads to an increase in the quantity demanded that ex-­‐ ceeds 1 percent. C) a 1 percent decrease in the price leads to a decrease in the quantity demanded that is less than 1 percent. D) the price is very sensitive to any shift of the supply curve. Answer: A Topic: Inelastic and Elastic Demand Skill: Conceptual Topic: Inelastic and Elastic Demand Skill: Recognition 22) The price elasticity of demand can range be-­‐ tween A) zero and one. B) negative infinity and infinity. C) zero and infinity. D) negative one and one. 26) A good with a vertical demand curve has a demand with A) unit elasticity. B) infinite elasticity. C) zero elasticity. D) varying elasticity. Answer: C Answer: C Topic: Inelastic and Elastic Demand Skill: Recognition 23) Demand is perfectly inelastic when A) shifts in the supply curve results in no change in price. B) the good in question has perfect substitutes. C) shifts of the supply curve results in no change in quantity demanded. D) shifts of the supply curve results in no change in the total revenue from sales. Answer: C Topic: Inelastic and Elastic Demand Skill: Recognition 24) If the price elasticity is between 0 and 1, de-­‐ mand is A) elastic. B) inelastic. C) unit elastic. D) perfectly elastic. Answer: B Topic: Inelastic and Elastic Demand Skill: Recognition 25) Demand is inelastic if A) a large change in quantity demanded re-­‐ sults in a small change in price. B) the quantity demanded is very responsive to changes in price. C) the price elasticity of demand is less than 1. D) the price elasticity of demand is greater than 1. Answer: C Topic: Inelastic and Elastic Demand Skill: Analytical 27) The demand curve in the figure above illus-­‐ trates the demand for a product with A) zero price elasticity of demand at all prices. B) infinite price elasticity of demand. C) unit price elasticity of demand at all prices. D) a price elasticity of demand that is different at all prices. Answer: A Topic: Inelastic and Elastic Demand Skill: Conceptual 28) When the price elasticity of demand for a good equals A) 0, the demand curve is vertical. B) 0, the demand curve is horizontal. C) 1, the demand curve is vertical. D) 1, the demand curve is horizontal. Answer: A Topic: Inelastic and Elastic Demand Skill: Analytical 29) A straight-­‐line demand curve along which the price elasticity of demand equals 0 is one that A) forms a 45 degree angle with the vertical axis. B) forms a 60 degree angle with the horizontal axis. C) is vertical. D) is horizontal. Answer: C Topic: Inelastic and Elastic Demand Skill: Analytical 30) The demand for movies is unit elastic if A) a 5 percent decrease in the price leads to an infinite increase in the quantity demanded. B) a 5 percent increase in the price leads to a 5 percent decrease in the quantity demanded. C) any increase in the price leads to a 1 per-­‐ cent decrease in the quantity demanded. D) a 5 percent increase in the price leads to a 5 percent increase in total revenue. Answer: B Topic: Inelastic and Elastic Demand Skill: Analytical 31) Unit elastic demand A) means that the ratio of a change in the quantity demanded to a change in the price equals 1. B) means that the ratio of a percentage change in the quantity demanded to a percentage change in the price equals 1. C) will be vertical. D) will be horizontal. Answer: B Topic: Inelastic and Elastic Demand Skill: Conceptual 32) A good with a horizontal demand curve has a demand A) with an income elasticity of demand of 0. B) with a price elasticity of demand of 0. C) with a price elasticity of demand of infinity. D) for which there are no substitute. Answer: C Topic: Inelastic and Elastic Demand Skill: Analytical 33) The demand curve in the figure above illus-­‐ trates a product whose demand has a price elasticity of demand equal to A) zero at all prices. B) infinity. C) one at all prices. D) a different amount at different prices. Answer: B Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical 37) A straight-­‐line demand curve with negative slope intersects the horizontal axis at 100 tons per week. At the midpoint on the de-­‐ mand curve (corresponding to 50 tons per week) the price elasticity of demand is A) 0. B) 0.5. C) 1.0. D) greater than 1.0. Answer: C Topic: Inelastic and Elastic Demand Skill: Analytical 34) The demand curve in the figure above illus-­‐ trates the demand for a product with A) zero price elasticity of demand at all prices. B) infinite price elasticity of demand. C) unit price elasticity of demand at all prices. D) a price elasticity of demand that is different at all prices. Answer: C Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical 35) On a linear demand curve that intersects both axes, A) the elasticity exceeds 1.00 at all prices. B) the elasticity is less than 1.00 at all prices. C) the elasticity equals 1.00 at all prices. D) the elasticity decreases as the price falls and quantity increases. Answer: D Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical 36) On a straight-­‐line downward-­‐sloping demand curve, the maximum elasticity of demand oc-­‐ curs A) at its vertical intercept. B) at its midpoint. C) at its horizontal intercept. D) where it intersects the supply curve. Answer: A Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical 38) The figure above illustrates a linear demand curve. By comparing the price elasticity in the $2 to $4 price range with the elasticity in the $8 to $10 range, you can conclude that the elasticity is A) greater in the $8 to $10 range. B) greater in the $2 to $4 range. C) the same in both price ranges. D) greater in the $8 to $10 range when the price rises but greater in the $2 to $4 range when the price falls. Answer: A Topic: Total Revenue and Elasticity Skill: Conceptual Topic: Total Revenue and Elasticity Skill: Analytical 46) Demand is inelastic if A) large shifts of the supply curve lead to only small changes in price. B) the good in question has close substitutes. C) a leftward shift of the supply curve raises the total revenue. D) the smaller angle between the vertical axis and the demand curve is less than 45 de-­‐ grees. 50) If the demand for a good is unit elastic, A) a 5 percent increase in price results in a 5 percent increase in total revenue. B) a 5 percent increase in price results in a 5 percent decrease in total revenue. C) a 5 percent increase in price does not change total revenue. D) the demand curve is a straight line with slope of –1. Topic: Total Revenue and Elasticity Skill: Recognition Topic: Total Revenue and Elasticity Skill: Analytical 47) Demand is unit elastic when A) the slope of the demand curve is –1. B) a shift of the supply curve leads to no change in price. C) a shift of the supply curve leads to an equal shift of the demand curve. D) a change in the price of the product leads to no change in the total revenue. 51) A shift of the supply curve of oil raises the price from $10 a barrel to $30 a barrel and reduces the quantity demanded from 40 mil-­‐ lion to 23 million barrels a day. You can con-­‐ clude that the A) demand for oil is elastic. B) demand for oil is inelastic. C) supply of oil is elastic. D) supply of oil is inelastic. Answer: C Answer: D Topic: Total Revenue and Elasticity Skill: Analytical 48) Producers’ total revenue will decrease if A) income increases and the good is a normal good. B) the price rises and demand is elastic. C) the price rises and demand is inelastic. D) income falls and the good is an inferior good. Answer: B Topic: Total Revenue and Elasticity Skill: Analytical 49) Producers’ total revenue will increase if A) income increases and the good is an inferior good. B) the price rises and demand is elastic. C) the price rises and demand is inelastic. D) income falls and the good is a normal good. Answer: C Answer: C Answer: B Topic: Total Revenue and Elasticity Skill: Analytical 52) A shift of the supply curve of oil raises the price from $10 a barrel to $15 a barrel and reduces the quantity demanded from 40 mil-­‐ lion to 15 million barrels a day. You can con-­‐ clude that the A) demand for oil is elastic. B) demand for oil is inelastic. C) supply of oil is elastic. D) supply of oil is inelastic. Answer: A Topic: Total Revenue and Elasticity Skill: Analytical 53) A leftward shift of the supply curve of cookies raises the price of a cookie from 10 cents to 20 cents and decreases the quantity demand-­‐ ed from 700,000 to 500,000. You can con-­‐ clude that A) the demand for cookies is elastic. B) the demand for cookies is inelastic. C) the supply of cookies is elastic. D) the supply of cookies is inelastic. Answer: B Topic: Factors That Influence the Price Elasticity of Demand Skill: Conceptual 63) The elasticity of demand for Gateway com-­‐ puters is probably A) inelastic and smaller than the elasticity of demand for computers overall. B) elastic and smaller than the elasticity of demand for computers overall. C) inelastic but larger than the elasticity of demand for computers overall. D) elastic and larger than the elasticity of de-­‐ mand for computers overall. Answer: D Topic: Factors That Influence the Price Elasticity of Demand Skill: Conceptual 64) Aglets are the metal or plastic tips on shoe-­‐ laces that make it easier to lace your shoes. The demand for aglets is probably A) inelastic. B) unit elastic. C) elastic but not perfectly elastic. D) perfectly elastic. Answer: A Topic: Cross Elasticity of Demand Skill: Recognition 65) The cross elasticity of demand measures the responsiveness of the quantity demanded of a particular good to changes in the prices of A) its substitutes and its complements. B) its substitutes but not its complements. C) its complements but not its substitutes. D) neither its substitutes nor its complements. Answer: A Topic: Cross Elasticity of Demand Skill: Recognition 66) If goods are complements, definitely their A) cross elasticities are positive. B) income elasticities are positive. C) income elasticities are negative. D) cross elasticities are negative. Answer: D Topic: Cross Elasticity of Demand Skill: Analytical 67) If a rise in the price of good 1 decreases the quantity of good 2 demanded, A) the cross elasticity of demand is negative. B) the cross elasticity of demand is positive. C) good 1 is an inferior good. D) good 2 is an inferior good. Answer: A Topic: Cross Elasticity of Demand Skill: Recognition 68) The cross elasticity of demand between ap-­‐ ples and oranges is defined as A) the percentage change in the quantity of apples demanded divided by the percentage change in the price of oranges. B) the price elasticity of demand for apples di-­‐ vided by the price elasticity of demand for oranges. C) the percentage change in the quantity of apples demanded divided by the percentage change in the quantity of oranges demand-­‐ ed. D) the change in the quantity of apples de-­‐ manded divided by the change in the quan-­‐ tity of oranges demanded. Answer: A Topic: Cross Elasticity of Demand Skill: Conceptual 69) If the cross elasticity of demand between goods A and B is positive, A) the demands for A and B are both price elastic. B) the demands for A and B are both price ine-­‐ lastic. C) A and B are complements. D) A and B are substitutes. Answer: D Topic: Cross Elasticity of Demand Skill: Conceptual 70) If the cross elasticity of demand between goods A and B is negative, A) the demands for A and B are both price elastic. B) the demands for A and B are both price ine-­‐ lastic. C) A and B are complements. D) A and B are substitutes. Answer: C Topic: Income Elasticity of Demand Skill: Conceptual Topic: Income Elasticity of Demand Skill: Analytical 81) An increase in Abigail’s income decreases her demand for cassette tapes. For her, cassette tapes are A) a normal good. B) an inferior good. C) a complement to any good. D) a substitute good. 85) Fred’s income has just risen from $940 per week to $1,060 per week. As a result, he de-­‐ cides to purchase 9 percent more steak per week. The income elasticity of Fred’s demand for steak is A) 0.75. B) 0.90. C) 1.00. D) 1.33. Answer: B Topic: Income Elasticity of Demand Skill: Recognition 82) Goods whose income elasticities are negative are called A) normal goods. B) superior goods. C) inferior goods. D) complements. Answer: C Topic: Income Elasticity of Demand Skill: Analytical 83) A 10 percent increase in income has caused a 5 percent decrease in the quantity demand-­‐ ed. The income elasticity is A) 0.5. B) –0.5. C) 2.0. D) –2.0. Answer: B Topic: Income Elasticity of Demand Skill: Analytical 84) Deb’s income has just risen from $950 per week to $1,050 per week. As a result, she de-­‐ cides to increase the number of movies she attends each month by 5 percent. Her de-­‐ mand for movies is A) represented by a vertical line. B) represented by a horizontal line. C) income elastic. D) income inelastic. Answer: D Answer: A Topic: Income Elasticity of Demand Skill: Analytical 86) Joan’s income has just risen from $940 per week to $1,060 per week. As a result, she de-­‐ cides to purchase 12 percent more lettuce per week. The income elasticity of Joan’s de-­‐ mand for lettuce is A) 0.75. B) 0.90. C...
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