Macroeconomics 15th Canadian Edition By Christopher T.S. Ragan – Test Bank

 

 

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Sample Questions

 

Economics – Canadian Edition, 15e (Ragan)

Chapter 4   Elasticity

 

4.1  Price Elasticity of Demand

 

1) The price elasticity of demand measures the responsiveness of

1.    A) quantity demanded to changes in the price.

2.    B) the price to changes in quantity demanded.

3.    C) demand to supply changes.

4.    D) supply to demand changes.

5.    E) equilibrium changes.

Answer:  A

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

2) Consider two demand curves and the same price change for both. If the resulting percentage change in quantity demanded is greater for one (D1) than the other (D2), we can conclude

1.    A) that D1is inelastic and D2is elastic.

2.    B) that D1is elastic and D2is inelastic.

3.    C) that D2is more elastic than D1.

4.    D) that D1is more elastic than D2.

5.    E) nothing about their relative elasticities.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

3) When the percentage change in quantity demanded is greater than the percentage change in price that brought it about, demand is said to be

1.    A) zero elastic.

2.    B) unelastic.

3.    C) inelastic.

4.    D) unit elastic.

5.    E) elastic.

Answer:  E

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

4) When the percentage change in quantity demanded is less than the percentage change in price that brought it about, demand is said to be

1.    A) zero elastic.

2.    B) unelastic.

3.    C) inelastic.

4.    D) unit elastic.

5.    E) elastic.

Answer:  C

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

5) The formula for the price elasticity of demand for a commodity can be written as which of the following?

A)

B)

C)

D)

E)

Answer:  C

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

6) If demand is unit elastic at all prices, then the demand curve is

1.    A) a straight line.

2.    B) a parabola.

3.    C) a rectangular hyperbola.

4.    D) upward sloping.

5.    E) perfectly horizontal.

Answer:  C

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

7) A demand curve that is the shape of a rectangular hyperbola

1.    A) is elastic over the whole curve.

2.    B) is inelastic over the whole curve.

3.    C) is unit elastic over the whole curve.

4.    D) has the same elasticity as a straight-line demand curve.

5.    E) has an elasticity of 100% over the whole curve.

Answer:  C

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

8) If household income increases by 50% and desired household expenditure on vacation travel increases by 15%, the price elasticity of demand for vacation travel is

1.    A) elastic.

2.    B) inelastic.

3.    C) unity.

4.    D) positive.

5.    E) not determinable from the information given.

Answer:  E

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

9) If the price elasticity of demand is 0.5, then a 10% increase in price results in a

1.    A) 50% reduction in quantity demanded.

2.    B) 5% increase in quantity demanded.

3.    C) 5% decrease in total revenues.

4.    D) 5% decrease in quantity demanded.

5.    E) 0.5% decrease in quantity demanded.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

 

10) Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit. The price elasticity of demand for this product is

1.    A) 0.5.

2.    B) 1.0.

3.    C) 1.5.

4.    D) 2.0.

5.    E) 4.0.

Answer:  A

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

11) Suppose the price elasticity of demand for some good is 1.4.  A 10% increase in the price of the good results in

1.    A) a 1.4% decrease in the quantity demanded.

2.    B) a 1.4% increase in the quantity demanded.

3.    C) a 14% increase in the quantity demanded.

4.    D) a 14% decrease in the quantity demanded.

5.    E) There is not enough information to answer this question.

Answer:  D

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

12) If the value of the price elasticity of demand is 0.6, demand is said to be

1.    A) elastic.

2.    B) partially elastic.

3.    C) inelastic.

4.    D) partially inelastic.

5.    E) somewhat inelastic.

Answer:  C

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

 

13) Suppose that the quantity of lemonade demanded falls from 103 000 litres per week to 97 000 litres per week as a result of a 10% increase in its price. The price elasticity of demand for lemonade is therefore

1.    A) 0.6.

2.    B) 6.0.

3.    C) 1.97.

4.    D) 1.03.

5.    E) impossible to compute unless we know the before and after prices.

Answer:  A

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

14) Suppose that the quantity demanded of skipping ropes rises from 1250 to 1750 units when the price falls from $1.25 to $0.75 per unit. The price elasticity of demand for this product is

3.    A) 1/3.

4.    B) 2/3.

5.    C) 1.

6.    D) 3/2.

7.    E) 2.

Answer:  B

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

 

The table below shows the demand schedule for museum admissions in a small city.

 

Price (per visit per person)	Quantity Demanded (thousands of person-visits per year)
$10	2
$8	4
$6	6
$4	8
$2	10

               

TABLE 4-1

 

15) Refer to Table 4-1. The elasticity of demand for museum admissions is

1.    A) greater at higher prices than at lower prices.

2.    B) elastic at all points on the demand curve.

3.    C) inelastic at all points on the demand curve.

4.    D) greater at lower prices than at higher prices.

5.    E) constant at all points on the demand curve.

Answer:  A

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Table

User2:  Qualitative

16) Refer to Table 4-1. Between the prices of $8 and $10, the elasticity of demand is

3.    A) 1/3.

4.    B) 2/3.

5.    C) 1.

6.    D) 2.

7.    E) 3.

Answer:  E

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Table

User2:  Quantitative

 

 

17) Refer to Table 4-1. Between the prices of $4 and $6 the price elasticity of demand is

1.    A) 0.50.

2.    B) 0.71.

3.    C) 1.00.

4.    D) 1.40.

5.    E) 0.40.

Answer:  B

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Table

User2:  Quantitative

 

18) Refer to Table 4-1. Between the prices of $2 and $4 the price elasticity of demand is

3.    A) 1/3.

4.    B) 2/3.

5.    C) 1.

6.    D) 2.

7.    E) 3.

Answer:  A

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

User1:  Table

User2:  Quantitative

 

19) Refer to Table 4-1. Between the prices of $8 and $6 the price elasticity of demand is

1.    A) 0.5.

2.    B) 0.71.

3.    C) 1.00.

4.    D) 1.40.

5.    E) 0.40.

Answer:  D

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

User1:  Table

User2:  Quantitative

 

20) If the price elasticity of demand for some good is 2.7, a 10% increase in the price results in

2.    A) a 2.7% decrease in the quantity demanded.

3.    B) a 2.7% increase in the quantity demanded.

4.    C) a 27% increase in the quantity demanded.

5.    D) a 27% decrease in the quantity demanded.

6.    E) There is not enough information to answer this question.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

21) As the price for some product increases from $4.00 to $5.00 per unit, quantity demanded decreases from 400 to 300 units per month. For this segment of the demand curve, the price elasticity of demand is

9.    A) 7/9.

10.  B) 1.

11.  C) 9/7.

12.  D) 7.

13.  E) 9.

Answer:  C

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

22) As the price for some product decreases from $4.00 to $3.00 per unit, quantity demanded increases from 400 to 500 units per day. For this segment of the demand curve, the price elasticity of demand is

9.    A) 7/9.

10.  B) 1.

11.  C) 9/7.

12.  D) 7.

13.  E) 9.

Answer:  A

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

23) Which of the following illustrates elastic demand?

1.    A) A 10% increase in price causes a 5% decrease in quantity demanded.

2.    B) A 10% increase in price causes a 20% decrease in quantity demanded.

3.    C) a price elasticity of 0.8

4.    D) a price elasticity of 1.0

5.    E) A 10% increase in price causes a 10% reduction in quantity demanded.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

24) If per capita income increases by 10% and household expenditure on fur coats increases by 15%, one can conclude that the price elasticity of demand for fur coats is

1.    A) elastic.

2.    B) inelastic.

3.    C) unity.

4.    D) positive.

5.    E) not determinable from the information given.

Answer:  E

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

 

                                                           FIGURE 4-1

 

25) Refer to Figure 4-1, which shows two demand curves, one linear and the other a rectangular hyperbola. In diagram 1, the price elasticity of demand

1.    A) at point A is equal to that at point C.

2.    B) at point A is less than at point C.

3.    C) at point A is greater than at point C.

4.    D) is equal at points A, B, and C.

5.    E) at point A is equal to that at point B.

Answer:  C

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Qualitative

 

26) Refer to Figure 4-1, which shows two demand curves, one linear and the other a rectangular hyperbola. The price elasticity of demand is equal to one along the entire demand curve in

1.    A) diagram 1 only.

2.    B) diagram 2 only.

3.    C) both diagrams.

4.    D) neither diagram.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Qualitative

 

27) A perfectly horizontal demand curve shows that the price elasticity of demand is

1.    A) zero.

2.    B) unity.

3.    C) less than one.

4.    D) infinite.

5.    E) not defined.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

28) A vertical demand curve shows that the price elasticity of demand is

1.    A) zero.

2.    B) unity.

3.    C) less than one.

4.    D) infinity.

5.    E) not defined.

Answer:  A

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

29) The price elasticity of demand for a product tends to be greater the

1.    A) lower its price.

2.    B) more broadly the product is defined.

3.    C) fewer close substitutes for it there are.

4.    D) more close substitutes for it there are.

5.    E) shorter the time span being considered.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

30) Which of the following statements would you expect to be true about the demand elasticities for cornflakes and food?

1.    A) Compared with food, cornflakes have a lower price elasticity of demand because it is specifically defined.

2.    B) Because cornflakes is food, but not all food is cornflakes, cornflakes would have a lower price elasticity of demand.

3.    C) Food has a higher price elasticity of demand because it is a necessity.

4.    D) Because cornflakes is food, cornflakes would have the same price elasticity of demand as food.

5.    E) Food has a lower price elasticity of demand than cornflakes because it is more broadly defined.

Answer:  E

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

31) With a downward-sloping straight-line demand curve, price elasticity of demand is

1.    A) rising continuously with price increases.

2.    B) decreasing continuously with price increases.

3.    C) increasing to the midpoint of the curve and then decreasing.

4.    D) constant everywhere on it.

5.    E) indeterminate.

Answer:  A

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

32) Which of the following statements about price elasticity of demand is true?

1.    A) It is greater than one if the percentage increase in the commodity’s price is greater than the percentage decline in quantity demanded.

2.    B) It is very small when good substitutes are readily available for the commodity.

3.    C) It usually increases over time.

4.    D) It is a positive number because price and quantity demanded move in the same direction.

5.    E) It is higher for an entire group of related products than it is for a particular product in that group.

Answer:  C

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

33) Suppose you are shown two intersecting demand curves that are drawn on the same scale. At the point of intersection, one of the demand curves is steeper than the other. Which of the following could explain the difference in slopes?

1.    A) The steeper one has a higher income elasticity of demand.

2.    B) The steeper one is probably the demand curve for a luxury good.

3.    C) The steeper one applies for the short run whereas the flatter one applies for the long run.

4.    D) The flatter one is for a good with no close substitutes.

5.    E) It is not possible to compare the slopes of different demand curves.

Answer:  C

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

34) Suppose egg producers succeed in permanently raising the price of their product by 15%, and as a result the quantity demanded falls by 15% in the short run. In the long run we can expect the quantity demanded to fall by

1.    A) 0%.

2.    B) 15%.

3.    C) between 0 and 15%.

4.    D) more than 15%.

5.    E) 100%.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

35) Suppose that the quantity demanded of a good rises from 40 units to 60 units per month when the price falls from $1.05 to 95 cents per unit. The price elasticity of demand for this product is

1.    A) 0.5.

2.    B) 1.0.

3.    C) 1.5.

4.    D) 2.0.

5.    E) 4.0.

Answer:  E

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

36) Which of the following statements would you expect to be true about price elasticities of demand for T-shirts and clothing?

1.    A) Compared with clothing, T-shirts have a lower price elasticity of demand because they are specifically defined.

2.    B) Because T-shirts are clothing, but not all clothing is T-shirts, T-shirts would have a lower price elasticity of demand than clothing.

3.    C) Clothing has a higher price elasticity of demand because it is a necessity.

4.    D) T-shirts would have the same price elasticity of demand as clothing.

5.    E) Clothing has a lower price elasticity of demand because it is more broadly defined.

Answer:  E

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

37) Which of the following illustrates elastic demand?

2.    A) A 5% increase in price causes a 2.5% decrease in quantity demanded.

3.    B) A 5% increase in price causes a 10% decrease in quantity demanded.

4.    C) a price elasticity of 0.8

5.    D) a price elasticity of 1.0

6.    E) A 10% increase in price causes a 10% reduction in quantity demanded.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

38) Suppose that the quantity demanded of paperback novels rises from 80 000 to 120 000 units per month when the price falls from $11 to $9 per unit. The price elasticity of demand for this product is

3.    A) 1/3.

4.    B) 1.

5.    C) 2/3.

6.    D) 3/2.

7.    E) 2.

Answer:  E

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

Demand Schedule for Ski Tickets

 

Price ($)	Quantity Demanded (no. of tickets)
120	0
110	100
100	200
90	300
80	400
70	500
60	600
50	700
40	800
30	900
20	1000
10	1100
0	1200

 

TABLE 4-2

 

39) Refer to Table 4-2. Using the data provided to plot the demand curve for ski tickets results in a ________ demand curve. Price elasticity along this demand curve is therefore ________ as price is falling.

1.    A) horizontal; constant at a value of 8

2.    B) vertical; constant at a value of 0

3.    C) rectangular hyperbola; constant at a value of 1

4.    D) downward sloping and linear; continuously increasing

5.    E) downward sloping and linear; continuously decreasing

Answer:  E

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Table

User2:  Quantitative

 

 

40) Refer to Table 4-2. Total expenditure for ski tickets reaches a maximum at a price/quantity demanded combination of

90.  A) $30/90.

91.  B) $60/600.

92.  C) $100/200.

93.  D) $20/1000.

94.  E) $80/400.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Table

User2:  Quantitative

41) Refer to Table 4-2. The price elasticity of demand over the interval of the demand curve between prices of $40 and $20 is

3.    A) 3.0.

4.    B) -3.0.

5.    C) 1.0.

6.    D) 0.33.

7.    E) 0.

Answer:  D

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Table

User2:  Quantitative

 

42) Refer to Table 4-2. Price elasticity over the interval of the demand curve between prices of $90 and $70 is

1.    A) 0.5.

2.    B) 2.0.

3.    C) -0.5.

4.    D) 4.0.

5.    E) 1.0.

Answer:  B

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Table

User2:  Quantitative

 

                                                                    FIGURE 4-2

 

43) Refer to Figure 4-2. In diagram 1, the elasticity of demand over the price range $14 to $16 is

1.    A) 0.

2.    B) less than 1.

3.    C) 1.

4.    D) greater than 1.

5.    E) infinity.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Quantitative

 

44) Refer to Figure 4-2. In diagram 1, the elasticity of demand over the price range $12 to $14 is

1.    A) 0.

2.    B) less than 1.

3.    C) 1.

4.    D) greater than 1.

5.    E) infinity.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Quantitative

 

45) Refer to Figure 4-2. In diagram 1, the elasticity of demand for prices below $10 is

1.    A) 0.

2.    B) less than 1.

3.    C) 1.

4.    D) greater than 1.

5.    E) infinity.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Quantitative

 

46) Refer to Figure 4-2. In diagram 1, the elasticity of demand at $10 is

1.    A) 0.

2.    B) less than 1.

3.    C) exactly 1.

4.    D) greater than 1.

5.    E) infinity.

Answer:  C

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Quantitative

 

47) Refer to Figure 4-2. In diagram 3, the elasticity of demand between prices $10 and $20 is

1.    A) 0.

2.    B) less than 1.

3.    C) exactly 1.

4.    D) greater than 1.

5.    E) infinity.

Answer:  C

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Quantitative

 

48) Refer to Figure 4-2. In diagram 3, the elasticity of demand between prices $5 and $10 is

1.    A) 0.

2.    B) less than 1.

3.    C) exactly 1.

4.    D) greater than 1.

5.    E) infinity.

Answer:  C

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Quantitative

 

49) Refer to Figure 4-2. In diagram 2, the price elasticity of demand is

1.    A) 0.

2.    B) less than -1.

3.    C) exactly 1.

4.    D) greater than 1.

5.    E) infinity.

Answer:  A

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Quantitative

 

50) Refer to Figure 4-2. The price elasticity of demand is continuously decreasing as the price falls in diagram(s)

1.    A) 1.

2.    B) 2.

3.    C) 1, 2, and 3.

4.    D) 2, 3, and 4.

5.    E) 1 and 2.

Answer:  A

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Qualitative

 

51) Refer to Figure 4-2. The price elasticity of demand is continuously increasing as the price falls in diagram(s)

1.    A) 1.

2.    B) 2.

3.    C) 1, 2, and 3.

4.    D) 2, 3, and 4.

5.    E) none of the above

Answer:  E

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Qualitative

 

52) Refer to Figure 4-2. The price elasticity of demand is constant as price changes in diagram(s)

1.    A) 1.

2.    B) 2.

3.    C) 1, 2, and 3.

4.    D) 2, 3, and 4.

5.    E) none of the above

Answer:  D

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Qualitative

 

53) Refer to Figure 4-2. Demand is inelastic

1.    A) over the entire demand curve in diagram 1.

2.    B) over the entire demand curve in diagram 3.

3.    C) over section (a) of the demand curve in diagram 1.

4.    D) over section (b) of the demand curve in diagram 1.

5.    E) at the midpoint between sections (a) and (b) of the demand curve in diagram 1.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Qualitative

 

54) Refer to Figure 4-2. There is good reason to suppose that, of the four goods whose demand curves are shown in diagrams 1-4 of the figure, the good that has the fewest close substitutes is shown in

1.    A) diagram 1.

2.    B) diagram 2.

3.    C) diagram 3.

4.    D) diagram 4.

5.    E) There is not enough information to determine this.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Qualitative

 

55) Refer to Figure 4-2. There is good reason to suppose that, of the four goods whose demand curves are shown in diagrams 1-4 of the figure, the good that has the fewest close substitutes is shown in

1.    A) diagram 1

2.    B) diagram 2

3.    C) diagram 3

4.    D) diagram 4

5.    E) There is not enough information to determine this.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

User1:  Graph

User2:  Quantitative

 

56) Suppose you are advising the government on changes in the gasoline market. The current price is $1.00 per litre and the quantity demanded is 2.5 million litres per day. Short-run price elasticity of demand is constant at 0.3. If the supply of gasoline is reduced so that the price rises to $1.50 per litre, then quantity demanded is predicted to fall in the short run by

1.    A) 15%, and total expenditure will rise.

2.    B) 15%, and total expenditure will fall.

3.    C) 50%, and total expenditure will fall.

4.    D) 12%, and total expenditure will rise.

5.    E) 13.3%, and total expenditure will rise.

Answer:  D

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

57) Suppose you are advising the government on changes in the gasoline market. The current price is $1.00 per litre and the quantity demanded is 2.5 million litres per day. Long-run price elasticity of demand is constant at 0.8. If the supply of gasoline is reduced so that the price rises to $1.50 per litre, then quantity demanded is predicted to fall in the long run by

1.    A) 12%, and total expenditure will fall.

2.    B) 32%, and total expenditure will rise.

3.    C) 15%, and total expenditure will rise.

4.    D) 15%, and total expenditure will fall.

5.    E) 50%, and total expenditure will rise.

Answer:  B

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

58) Suppose you are advising the government on changes in the gasoline market. The current price is $1.00 per litre and the long-run price elasticity of demand is constant at 0.8. If a tax on gasoline causes the price to rise to $1.50 per litre, then quantity demanded is predicted to fall in the long run by

1.    A) 12% and total expenditure will fall.

2.    B) 24% and total expenditure will fall.

3.    C) 32% and total expenditure will fall.

4.    D) 24% and total expenditure will rise.

5.    E) 50% and total expenditure will rise.

Answer:  C

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

User2:  Quantitative

 

59) Suppose a fast-food chain determines that the price elasticity of demand for its hamburgers is 1.7, and the price of the hamburger is currently $4.00. What will be the effect on quantity demanded and total expenditure on this chain’s hamburgers if the price is increased to $6.00?

1.    A) Quantity demanded will fall by 68% and total expenditure will decrease.

2.    B) Quantity demanded will fall by 11.76% and total expenditure will decrease.

3.    C) Quantity demanded will fall by 17% and total expenditure will increase.

4.    D) Quantity demanded will fall by 1.7% and total expenditure will increase.

5.    E) Quantity demanded will fall by 34% and total expenditure will decrease.

Answer:  A

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

60) Suppose a fast-food chain determines that the price elasticity of demand for its hamburgers is 0.75, and the price of the hamburger is currently $4.00. What will be the effect on quantity demanded and total expenditure on this chain’s hamburgers if the price is increased to $6.00?

1.    A) Quantity demanded will fall by 30%, and total expenditure will increase.

2.    B) Quantity demanded will fall by 40%, and total expenditure will increase.

3.    C) Quantity demanded will fall by 75%, and total expenditure will increase.

4.    D) Quantity demanded will fall by 0.3%, and total expenditure will decrease.

5.    E) Quantity demanded will fall by 0.4%, and total expenditure will decrease.

Answer:  A

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

User2:  Quantitative

 

61) Rania is selling boxes of cookies door to door in her neighbourhood. At a price of $10 per box she sold 40 boxes per day. When the price was reduced to $4 per box she sold 100 boxes per day.  Assuming that the demand conditions were unchanged, what is the price elasticity of demand for Rania’s cookies?

1.    A) -1.7

2.    B) 0

3.    C) 0.85

4.    D) 1

5.    E) 1.17

Answer:  D

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

62) Every month Olivier buys exactly 6 take-out pizzas even though the price may fluctuate significantly. Apparently, Olivier’s price elasticity of demand for take-out pizza is

1.    A) -1.

2.    B) 0.

3.    C) 1.

4.    D) 6.

5.    E) infinity.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

63) Suppose the price of take-out pizza has been stable for many months at exactly $12.50 per pizza – and Olivier buys 6 pizzas per month at this price. When the price rises to $12.55 per pizza, Olivier’s quantity demanded drops to zero. Apparently, Olivier’s price elasticity of demand for take-out pizza is

1.    A) -1.

2.    B) 0.

3.    C) 100

4.    D) 6.

5.    E) higher than 10 000.

Answer:  E

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

User2:  Quantitative