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Dr. Bromley
ECN112
(Microeconomics):

Additional
Multiple Choice
Questions

Elasticity (chapter 4) Questions

4e-1 If the price of gasoline rises from $1.00 to $1.40, other things being equal,. The quantity demanded falls from 900 million barrels to 600 million gallons. Using this information, it appears that the elasticity of demand (at a price of $1.00) is closest to
A. -1.75

B. -.57

C. -1.20

D. -.83

E. -1.50

4e-2 If the price of gasoline rises from $1.00 to $1.40, other things being equal,. The quantity demanded falls from 900 million barrels to 600 million gallons. Using this information, it appears that the elasticity of demand (at a price of $1.40) is closest to
A. -1.75

B. -.57

C. -1.20

D. -.83

E. -1.50

4e-3 The price of zallooms rises from $12 to $18. The maker of zallooms says that the demand for zallooms is relatively elastic at a price of $12.. What would have to be the corresponding percentage change in quantity demanded of zallooms in order for demand for zallooms to be called "elastic?"
A. greater than 50%
B. less than 50%
C. exactly 50%
D. infinity
E. zero

4e-4 Floods in Brazil, Columbia, and Bolivia wipe out 30% of the entire world's coffee production. As a result, the price of coffee rises by 200%, to three times its original level. What is the elasticity of demand for coffee?
A. -6.67

B. -.67

C. -3.000
D. -0.333

E. none of these

4e-5 A drought on Kronos, the Klingon home world, wipes out 75% of the gagh (pronounced "gakh") worm harvest. As a result, the price of gagh rises by 400%. What is the elasticity of demand for gagh?
A. -5.333

B. -0.1875

C. -3.000
D. -0.333

E. none of these

4e-6 A 25% increase in the price of cocoa powder reduces the quantity purchased by 15%. What is the elasticity of demand for cocoa?
A. -1.67

B. -.67

C. -.6
C. -1.4

E. -1.6

4e-7 Banana Computer lowers prices of its iSplit model computers by 20%, causing a 30% increase in quantity sold. What is the elasticity of demand for iSplit computers?
A. -6.67

B. -1.5

C. -.15
D. -.67

E. -1.0

4e-8 Badyear Rubber Co. lowers prices of its Slider model tires by 20%, causing a 15% increase in quantity sold. What is the elasticity of demand for Slider tires?
A. -1.33

B. -.75

C. -.30
D. -.5

E. -.25

4e-9 The Dachshund Meat Packing Co. raises prices of its Benchwarmer Hot Dogs by 10%, causing a 15% decrease in quantity sold. What is the elasticity of demand for Benchwarmer Hot Dogs?
A. -1.5

B. -.75

C. -.67
D. -.5

E. -1.0

4e-10 Smack Crackers rise in price from $2.50 per package to $2.75 per package. No other circumstance has changed. The quantity sold falls from 2000 packages per week to 1900 packages per week in the Phoenix area. At a price of $2.75, the Phoenix area elasticity of demand for Smack Crackers is closest to
A. -1.73

B. -1.0

C. -.5
D. -.58

E. -2.0

4e-11 Fig Einstein Cookies rise in price from $2.50 per package to $2.75 per package. No other circumstance has changed. The quantity sold falls from 2000 packages per week to 1900 packages per week in the Phoenix area. At a price of $2.50, the Phoenix area elasticity of demand for Fig Einstein Cookies is closest to
A. -1.73

B. -1.0

C. -.5
D. -.58

E. -2.0

The following is a demand schedule for Beefy Queen Plopper® Sandwiches at a particular location. Use the schedule to answer the questions below.

Price	$2.70	$2.40	$2.10	$1.80	$1.50	$1.20	$.90
Quantity per day	0	50	100	150	200	250	300

4e-12 At a price of $2.10, the price elasticity of demand is, in absolute value,
A. zero

B. exactly one
C. less than one

D. greater than one
E. impossible to determine

4e-13 At a price of $1.50, the price elasticity of demand is, in absolute value,
A. zero

B. exactly one
C. less than one

D. greater than one
E. impossible to determine

4e-14 At a price of $1.20, the price elasticity of demand is, in absolute value,
A. zero

B. exactly one
C. less than one

D. greater than one
E. impossible to determine

4e-15 At a price of $2.10, the price elasticity of demand is, approximately,
A. -3.50

B. -.29

C. -1.67
D. -.6

E. -2.10

4e-16 At a price of $1.50, the price elasticity of demand is, approximately,
A. -.80

B. -1.33

C. -.75
D. -1.67

E. -1.25

4e-17 At a price of $1.20, the price elasticity of demand is, approximately,
A. -.80

B. -1.20

C. -.60
D. -1.67

E. -2.08

4e-18 At a price of $1.80, the price elasticity of demand is, approximately,
A. -1.20

B. -.83

C. -1.38
D. -2.0

E. -.50

4e-19 At a price of $0.90, the price elasticity of demand is, approximately,
A. -2.0

B. -1.67

C. -.50
D. -3.33

E. -.60

---

4e-20 The elasticity of demand is best defined as
A. the change in the price of a good divided by the change in its quantity demanded.
B. the percentage change in price divided by the percentage change in quantity demanded.
C. the change in the quantity demanded of a good divided by the change in its price.
D. the percentage change in quantity demanded of a good divided by the percentage change in price.
E. the percentage change in price divided by the quantity demanded.

The following is a demand schedule for Phoenix College is Really College T-shirts which the bookstore is thinking of stocking. Use the schedule to answer questions 23-25 below.

Price	$9	$8	$7	$6	$5	$4	$3
Quantity	10	20	30	40	50	60	70

4e-21 In the table, the price elasticity of demand is closest to -1 when
A. price is $5

B. price is $6
C. price is $7

D. price is $8
E. price is $9

4e-22 At a price of $7, in the table, the price elasticity of demand is, in absolute value
A. zero

B. exactly one
C. less than one

D. greater than one
E. impossible to determine

4e-23 Which of the following prices, if selected, would best maximize the revenue of the bookstore from sales of the shirts?
A. $9

B. $7

C. $5
D. $3

E. $1

4e-24 Skimpy peanut butter falls in price from $4.00 per jar to $3.50 per jar. No other circumstance has changed. The quantity sold rises 15%. As the price falls
A. revenues from the sale of Skimpy peanut butter will rise.
B. revenues from the sale of Skimpy peanut butter will fall.
C. revenues from the sale of Skimpy peanut butter will stay the same.
D. the effect on revenues cannot be determined without knowing exact quantities.
E. revenues from the sale of Skimpy peanut butter could rise if the good has lots of substitutes or could fall if the good has few substitutes.

4e-25 The price of Belch's Grape Jelly rises from $3.00 per jar to $3.50 per jar. No other circumstance has changed. The quantity sold falls 5%. As the price rises,
A. revenues from the sale of Belch's Grape Jelly will rise.
B. revenues from the sale of Belch's Grape Jelly will fall.
C. revenues from the sale of Belch's Grape Jelly will stay the same.
D. the effect on revenues cannot be determined without knowing exact quantities.
E. revenues from the sale of Belch's Grape Jelly could rise if the good has lots of substitutes or could fall if the good has few substitutes.

4e-26 A local University recently increased tuition by 25% in an attempt to increase revenues. What will happen?
A. Enrollments will rise and so will revenues.
B. If demand is elastic, revenues will rise despite the falling enrollment.
C. If demand is inelastic, revenues will rise despite the falling enrollment.
D. If demand is elastic, revenues will rise and enrollment will increase.
E. If demand is inelastic, revenues will rise and enrollment will increase.

 

4e-27 Smokey's Nightmare:"If half of our forests were destroyed in a fire, the value of the remaining lumber would be greater than the value of all the lumber in the country before the fire." If a reduction of the quantity of timber in the U.S.of 50% would double the total value of the remaining timber, what must be happening to price?
A. The price of each unit of timber must be the same after the fire as before.
B. The price of each unit of timber must be going up after the fire, but we cannot say by how much.
C. The price of each unit of timber must double after such a fire.
D. The price of each unit of timber must triple after such a fire.
E. The price of each unit of timber must quadruple after such a fire.

4e-28 Smokey's Nightmare:"If half of our forests were destroyed in a fire, the value of the remaining lumber would be greater than the value of all the lumber in the country before the fire." If a reduction of the quantity of timber in the U.S.of 50% would double the total value of the remaining timber, what does this imply about elasticity of demand?
A. Nothing can be determined about elasticity of demand from a change in price and quantity.
B. Demand must be elastic.
C. Demand must be inelastic.
D. Demand could be elastic or inelastic; we cannot tell.
E. Elasticity must be unity.

4e-29 Which statement is false?
A. A ten percent reduction in price which results in a fifteen percent increase in the amount purchased indicates that demand is inelastic.
B. If a ten percent decrease in price leads to a two percent increase in expenditures, then demand is elastic.
C. If an increase in price leads to a reduction in quantity demanded, we can say nothing about the elasticity of demand, except that it is negative.
D. If demand elasticity is -2.0, a ten percent fall in price will increase quantity demanded by twenty percent.
E. If demand is inelastic, raising price will (other things equal) increase revenues (or expenditures).

NOTE: for quiz questions, one of the above true statements could be changed to a false one, and the false statement might be changed into a true one. Carefully consider each statement and its meaning before answering.

4e-30 If a 50 percent increase in the price of Mr. PotatoHead sets led to a 40 percent reduction in the quantity of Mr. PotatoHead sets demanded, this would suggest
A. households increased their total spending on Mr. PotatoHead sets.
B. demand for potatoes is elastic (in the elastic portion of the demand curve).
C. household reduced their total spending on Mr. PotatoHead sets.
D.demand for Mr. PotatoHead sets is elastic (in the elastic portion of the demand curve).
E. spending on Mr. PotatoHead sets could rise or fall, we cannot tell without more information.

4e-31 Assuming that demand for farm products is relatively inelastic, if all farmers substantially reduced their output, what would be the likely result?
A. Ceteris paribus, prices of farm products would probably rise little, if at all.
B. Farmers' total revenues would rise.
C. The total benefits from trading farm products (that is, the total of producer and consumer surplus) would rise.
D. Marginal utility to buyers of farm products would probably fall.
E. The country would be better off.

4e-32 "Because this year is expected to be unusually wet, Arizona lettuce growers expect (1) a smaller harvest than usual, but (2) larger revenues from the sale of the harvest than is usual." Assuming that demand for Arizona lettuce has not changed from previous years,
A. the two statements cannot possibly both be true.
B.the statement implies that Arizona lettuce probably has many good substitutes at their usual price.
C. the statements together imply that demand is inelastic.
D. the statements together imply that demand is elastic.
E. B. and D.

4e-33 A rise of 15 percent in the price of milk reduces the consumption of milk by 30 percent. As a result of the price increase, households
A. spend more money on milk.
B. spend less money on milk
C. spend the same amount of money on milk as before.
D. buy more goods which are complements to milk.
E. buy fewer goods which are substitutes for milk.

4e-34 Find the true statement in the following (note: only one is true).
A. If a 10 percent reduction in the price of a good leads to a 15 percent increase in quantity demanded, then demand is elastic (elasticity is greater than one in absolute value).
B. If a 10 percent reduction in the price of a good leads to a 2 percent increase in the total expenditure on the good (or the total revenue from its sale), then demand was inelastic (the absolute value of elasticity was less than one).
C. If the percentage change is price is less than the percentage change in quantity demanded, then demand is inelastic.
D. Raising price will always raise revenue, if demand is downward-sloping.
E. If a rise in price reduces quantity demanded, then demand is elastic.

NOTE: for quiz questions, the above true statement could be changed to a false one, and one of the false statements might be changed into a true one. Carefully consider each statement and its meaning before answering.

4e-35 "A number of mass transit systems have exhibited declining revenues despite fare increases." This statement
A. must be false; it cannot be true.
B. indicates that a profit-maximizing firm would have raised price by even more.
C. indicates that the demand for mass transit must be inelastic.
D. indicates that the demand for mass transit must be elastic.
E. none of the above.

4e-36 "A number of mass transit systems have exhibited declining ridership after increasing their fares." This statement
A. must be false; it cannot be true.
B. indicates that a profit-maximizing firm would have raised price by even more.
C. indicates that the demand for mass transit must be inelastic.
D. indicates that the demand for mass transit must be elastic.
E. none of the above.

4e-37 If the price of a good is increased, and other circumstances do not change,
A. expenditures on the good will increase.
B. expenditures on the good will fall.
C. expenditures on the good will remain the same.
D. expenditures on the good will fall or rise, depending on the elasticity of demand.
E. expenditures on the good will rise or fall, depending on the supply.

4e-38 Which of the following is true of a straight -line demand curve?
A. Elasticity is equal to 0 at the midpoint.
B. As you move down the curve, the elasticity falls (in absolute value) throughout.
C. As you move down the curve, the elasticity rises, and then falls (in absolute value).
D. As you move down the curve, the elasticity rises throughout (in absolute value).
E. As you move down the curve, the elasticity remains unchanged.

4e-39 Which of the following is true of a straight -line demand curve?
A. Total revenue is equal to 0 at the midpoint.
B. As you move down the curve, total revenue falls throughout.
C. As you move down the curve, total revenue rises, and then falls.
D. As you move down the curve, total revenue rises throughout.
E. As you move down the curve, total revenue remains unchanged.

4e-40 Demand for a good will be more elastic
A. the fewer substitutes the good has.
B. the more complements the good has.
C. the lower the current price for the good is.
D. the larger the proportion of buyers' incomes that the good comprises.
E. the less time people have to adjust to price changes.

4e-41 Patients usually do not pay the full price of prescription drugs themselves (as insurance pays for most of them). Also, patients cannot choose which particular prescription drugs they will take but can only take those which are specifically prescribed by a doctor. Over-the-counter drugs, on the other had are paid for by the patient entirely and the patient can select to take any over-the-counter drugs they wish. Given these facts,
A. the demand for prescription drugs is probably less elastic than the demand for over-the-counter medicines.
B. the demand for prescription drugs is probably more elastic than the demand for over-the-counter medicines.
C. the demand for prescription drugs is probably just about as elastic as the demand for over-the-counter medicines.
D. it would not be possible to guess about how the elasticity of demand compares for prescription drugs and over-the-counter medicines.
E. prescription drugs probably have no elasticity, since people have not choice but to get them and take them.

4e-42 For which pair of goods listed below would you expect the first product listed (1) to have a lower elasticity of demand (in absolute value) than the second product (2)does?
A. (1) salt or (2) fresh green peas
B. (1) movie theater tickets or (2) insulin for a diabetic
C. (1) a Ford Taurus or (2) all automobiles
D. (1) electricity in the long run or (2) electricity in the short run
E. (1) oil changes at Jiffy Lube or (2) emergency room service

4e-43 For which pair of goods listed below would you expect the first product listed (1) to have a lower elasticity of demand (in absolute value) than the second product (2)does?
A. (1) fresh green peas or (2) salt
B. (1) movie theater tickets or (2) insulin for a diabetic
C. (1) a Toyota Tercel or (2) all automobiles
D. (1) electricity in the long run or (2) electricity in the short run
E. (1) emergency physician services or (2) fresh tomatoes

4e-44 For which pair of goods listed below would you expect the first product listed (1) to have a lower elasticity of demand (in absolute value) than the second product (2)does?
A. (1) emergency room medical services or (2) fresh tomatoes
B. (1) movie theater tickets or (2) insulin for a diabetic
C. (1) a Toyota Tercel or (2) all automobiles
D. (1) electricity in the long run or (2) electricity in the short run
E. (1) cable television service or (2) college textbooks

4e-45 New technology
A. makes demand less elastic for all things, since it makes things more important than people.
B. makes demand for some things more elastic if it increases the substitutes available.
C. makes demand for more things inelastic.
D. makes demand more elastic by making it harder to find substitutes.
E. makes demand less elastic by making it easier to find substitutes.

4e-46 Access to convenient transportation
A. makes demand less elastic for all things, since people need transportation.
B. makes demand for some things more elastic if it increases the substitutes available.
C. makes demand for more things inelastic.
D. makes demand more elastic by making it harder to find substitutes.
E. makes demand less elastic by making it easier to find substitutes.

4e-47 Which of the following might indicate that men have a more elastic demand for dry cleaning services at Desert Dry Cleaning Store than women do?
A. Women know how to do laundry at home; men sort of guess at the process.
B. Women desire to be thought of as neat and well-dressed; men can tolerate wearing wrinkled or slightly soiled clothes.
C. Women open their "junk mail" which includes ads from dry cleaners; men don't.
D. Women read newspapers, and see ads for dry cleaners; men don't.
E. Women tend to be "smart shoppers," looking around for bargains; men are impatient and tend to shop around less.

4e-48 Two groups of consumers can be identified for Granny's Green Goop. The nerds are less elastic in their demand than the dweebs are. What should Granny do to make the most money?
A. Charge a higher price to the nerds than to the dweebs, if possible.
B. Charge a lower price to the nerds than to the dweebs, if possible.
C. Charge the same price to nerd and dweeb alike, but make the nerds more elastic.
D. Find some way to get the dweebs to quit buying her Goop altogether.
E. Charge the same price to nerd and dweeb alike, without regard for elasticity.

4e-49 Mr. Burns buys 8 cigars per week. The price of the cigars falls by $.25 a piece. What will happen to his consumer surplus? What will happen to his expenditure on cigars?
A. consumer surplus will rise by $2.00, and total expenditure will fall by $2.00.
B. consumer surplus will rise by at least $2.00, and total expenditure will fall.
C. consumer surplus will rise by at least $2.00, and total expenditure might rise or fall.
D. consumer surplus will rise by $2.00, and total expenditure might rise or fall.
E. we can say none of the above for certain.

4e-50 The Victor Company of Japan (JVC) is thinking of reducing prices on its TV's with screen sizes of 27 inches and below, but leaving the prices of its large-screen TV's unchanged. Assuming that large screen TV's are a substitute for smaller-screen sets, how do you predict the price reduction will affect JVC's revenues, other things being equal?
A. Revenues from large sets will rise, while revenues from small sets will certainly fall.
B. Revenues from large sets will stay the same, while revenues from small sets will rise.
C. Revenues from large sets will fall, while revenues from small sets could either rise or fall.
D. Revenues from large sets could rise or fall, while revenues from small sets will rise.
E. We really can't make any predictions without more information.

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Elasticity Questions