Question 1

If the demand for gasoline becomes more elastic over time,

Accepted Answer

A)  the demand curve will shift out.
B)  the demand curve will become flatter.
C)  other things being equal, the equilibrium price of gasoline must fall.
D)  other things being equal, the equilibrium quantity of gasoline must fall.E) C) and D)
F) None of the above

Question 2

All of the following observations concerning the elasticity formula are true except

Accepted Answer

A)  the changes with which it deals is measured as a percentage change.
B)  each of the percentage changes is calculated in terms of the average values.
C)  the calculation considers both positive and negative signs.
D)  each percentage change is taken as an "absolute value."E) A) and B)
F) A) and C)

Question 3

Perfectly elastic demand curves are vertical.

Accepted Answer

A) True 
 B)False

Question 4

The value of zero is used to distinguish between elastic and inelastic price elasticity of demand for a product; so, if the elasticity is greater than zero, it is elastic and if it is less than zero, then it is inelastic.

Accepted Answer

A) True 
 B)False

Question 5

When the price of penicillin tablets increases by $5 per dozen, the drug company's revenue increases by $6 million.Its elasticity of demand (in absolute terms)  must be

Accepted Answer

A)  zero.
B)  greater than one.
C)  less than one.
D)  infinitely large.E) A) and B)
F) A) and C)

Question 6

A straight-line demand curve has the same elasticity throughout its length.

Accepted Answer

A) True 
 B)False

Question 7

Income elasticity of demand describes how change in income affects the quantity demanded of a good.

Accepted Answer

A) True 
 B)False

Question 8

When price falls, demand rises.

Accepted Answer

A) True 
 B)False

Question 9

Demand is said to be price elastic at a point on a demand curve if a

Accepted Answer

A)  1 percent rise in price reduces the quantity demanded by more than 1 percent.
B)  1 percent rise in price reduces the quantity demanded by less than 1 percent.
C)  1 percent rise in price reduces the quantity demanded by more than 10 percent.
D)  10 percent rise in price reduces the quantity demanded by less than 10 percent.E) A) and B)
F) None of the above

Question 10

If an increase in quantity demanded of a product reduces the quantity demanded of another, then the two goods are said to be substitutes.

Accepted Answer

A) True 
 B)False

Question 11

The elasticity of any demand curve is the same as its slope.

Accepted Answer

A) True 
 B)False

Question 12

A vertical demand curve has an elasticity of demand equal to zero.

Accepted Answer

A) True 
 B)False

Question 13

In the DuPont cellophane case, rivals accused DuPont of monopolizing cellophane.DuPont claimed that the relevant market was flexible wrapping material, such as wax paper and aluminum foil, rather than just cellophane.DuPont won the case.What type of evidence constituted DuPont's defense?

Accepted Answer

DuPont needed to show that other flexibl...

Question 14

Historical demand curves are always suspect because their demand curves are likely to have shifted over time.

Accepted Answer

A) True 
 B)False

Question 15

A correct formula (dropping all minus signs)  for the calculation of the elasticity of demand between point Q1, P1 and point Q2, P2 is

Accepted Answer

A)  [(P2 − P1) /(P2 + P1) ]/[(Q2 − Q1) /(Q2 + Q1) ].
B)  [(P2 − P1) /P1]/[(Q2 − Q1) /Q1].
C)  [(Q2 − Q1) /(Q2 + Q1) ]/[(P2 − P1) /(P2 + P1) ].
D)  [(Q2 − Q1) /Q2) ]/[(P2 − P1) /P2].E) C) and D)
F) A) and B)

Question 16

A craze for apples in Riverdale increases the quantity demanded at every price by five bushels.Between any two prices, the new demand curve will be ____ the old demand curve.

Accepted Answer

A)  more elastic than
B)  less elastic than
C)  equal in elasticity to
D)  More information is needed to predict the relationship.E) A) and D)
F) None of the above

Question 17

Elasticity of demand equals the ratio of the percentage change in the quantity demanded to the percentage change in the price of the good.

Accepted Answer

A) True 
 B)False

Question 18

All straight-line demand curves have the same elasticity value since the slope is constant.

Accepted Answer

A) True 
 B)False

Question 19

A rise in price will always result in an increase in the total amount that consumers spend on a product.

Accepted Answer

A) True 
 B)False

Question 20

Figure 6-3 
-Along the elastic portion of a demand curve, the

Accepted Answer

A)  change in price will always be greater than the change in quantity demanded.
B)  percentage change in quantity demanded will be less than the percentage change in price.
C)  change in price will always be less than the change in quantity demanded.
D)  percentage change in price will be less than the percentage change in quantity demanded.E) A) and D)
F) A) and C)

Exam 6: Demand and Elasticity

A vertical demand curve has an elasticity of demand equal to zero.

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Historical demand curves are always suspect because their demand curves are likely to have shifted over time.

Correct AnswerverifiedShow Answer

Income elasticity of demand describes how change in income affects the quantity demanded of a good.

Correct AnswerverifiedShow Answer

When the price of penicillin tablets increases by $5 per dozen, the drug company's revenue increases by $6 million.Its elasticity of demand (in absolute terms) must be

Correct AnswerverifiedShow Answer

In the DuPont cellophane case, rivals accused DuPont of monopolizing cellophane.DuPont claimed that the relevant market was flexible wrapping material, such as wax paper and aluminum foil, rather than just cellophane.DuPont won the case.What type of evidence constituted DuPont's defense?

Correct AnswerverifiedDuPont needed to show that other flexibl...View AnswerShow Answer

Elasticity of demand equals the ratio of the percentage change in the quantity demanded to the percentage change in the price of the good.

Correct AnswerverifiedShow Answer

Figure 6-3 -Along the elastic portion of a demand curve, the

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A rise in price will always result in an increase in the total amount that consumers spend on a product.

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When price falls, demand rises.

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If an increase in quantity demanded of a product reduces the quantity demanded of another, then the two goods are said to be substitutes.

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Demand is said to be price elastic at a point on a demand curve if a

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All of the following observations concerning the elasticity formula are true except

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Perfectly elastic demand curves are vertical.

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All straight-line demand curves have the same elasticity value since the slope is constant.

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The value of zero is used to distinguish between elastic and inelastic price elasticity of demand for a product; so, if the elasticity is greater than zero, it is elastic and if it is less than zero, then it is inelastic.

Correct AnswerverifiedShow Answer

If the demand for gasoline becomes more elastic over time,

Correct AnswerverifiedShow Answer

The elasticity of any demand curve is the same as its slope.

Correct AnswerverifiedShow Answer

A correct formula (dropping all minus signs) for the calculation of the elasticity of demand between point Q1, P1 and point Q2, P2 is

Correct AnswerverifiedShow Answer

A craze for apples in Riverdale increases the quantity demanded at every price by five bushels.Between any two prices, the new demand curve will be ____ the old demand curve.

Correct AnswerverifiedShow Answer

A straight-line demand curve has the same elasticity throughout its length.

Correct AnswerverifiedShow Answer

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DuPont needed to show that other flexibl...
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A correct formula (dropping all minus signs) for the calculation of the elasticity of demand between point Q₁, P₁ and point Q₂, P₂ is

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