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The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -When the cross-price elasticity of demand for two goods is a positive number, one can correctly conclude that: A) the goods are normal goods. B) the goods are inferior goods. C) the goods are substitutes. D) the goods are complements. E) total revenue will increase when the price increases. -When the cross-price elasticity of demand for two goods is a positive number, one can correctly conclude that:


A) the goods are normal goods.
B) the goods are inferior goods.
C) the goods are substitutes.
D) the goods are complements.
E) total revenue will increase when the price increases.

F) All of the above
G) B) and E)

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​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. ​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -What would be the consequence of a 10 percent decrease in the price of a good for which price elasticity of demand is 5? A) A 50 percent decrease in the quantity demanded B) A 5 percent increase in the quantity demanded C) A 50 percent increase in the quantity demanded D) A decrease in the quantity demanded by 0.2 units E) An increase in the quantity demanded by 0.2 units -What would be the consequence of a 10 percent decrease in the price of a good for which price elasticity of demand is 5?


A) A 50 percent decrease in the quantity demanded
B) A 5 percent increase in the quantity demanded
C) A 50 percent increase in the quantity demanded
D) A decrease in the quantity demanded by 0.2 units
E) An increase in the quantity demanded by 0.2 units

F) A) and D)
G) None of the above

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The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -An economic survey observed that a 20 percent cut in the price of a certain line of women's clothing, almost doubled the quantity demanded of the clothing. This led economists to conclude that the demand for this line of clothing is _____. A) highly elastic B) highly inelastic C) unit-elastic D) perfectly elastic E) perfectly inelastic -An economic survey observed that a 20 percent cut in the price of a certain line of women's clothing, almost doubled the quantity demanded of the clothing. This led economists to conclude that the demand for this line of clothing is _____.


A) highly elastic
B) highly inelastic
C) unit-elastic
D) perfectly elastic
E) perfectly inelastic

F) C) and D)
G) A) and B)

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The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -An inferior good or service is any good or service for which: A) an increase in price causes an increase in the quantity demanded. B) a decrease in price causes an increase in demand. C) an increase in price causes a decrease in the quantity demanded. D) an increase in the amount consumed causes a decrease in marginal utility. E) an increase in income causes a decrease in demand. -An inferior good or service is any good or service for which:


A) an increase in price causes an increase in the quantity demanded.
B) a decrease in price causes an increase in demand.
C) an increase in price causes a decrease in the quantity demanded.
D) an increase in the amount consumed causes a decrease in marginal utility.
E) an increase in income causes a decrease in demand.

F) C) and D)
G) B) and D)

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​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. ​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -Which of the following is explained by the price elasticity of demand for a product? A) The effect of changes in price on the supply of the product B) The effect of changes in quantity on the supply of the product C) The effect of changes in quantity on the price of the product D) The effect of changes in price on the quantity demanded of the product E) The effect of changes in price on the quantity supplied of the product -Which of the following is explained by the price elasticity of demand for a product?


A) The effect of changes in price on the supply of the product
B) The effect of changes in quantity on the supply of the product
C) The effect of changes in quantity on the price of the product
D) The effect of changes in price on the quantity demanded of the product
E) The effect of changes in price on the quantity supplied of the product

F) A) and B)
G) B) and D)

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Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px. Assume that P = $8, I = 200, and Px = $10. -If supply is price-inelastic and demand is price-elastic, then the firm can earn positive profits by increasing the price.

A) True
B) False

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The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -If = -1.50 for a good, and price of the good decreases by 20 percent, then: A) quantity demanded will decrease by 30 percent. B) quantity demanded will increase by 30 percent. C) total revenue will remain unchanged. D) total revenue will decrease. E) quantity demanded will increase by 3 percent. -If = -1.50 for a good, and price of the good decreases by 20 percent, then: The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -If = -1.50 for a good, and price of the good decreases by 20 percent, then: A) quantity demanded will decrease by 30 percent. B) quantity demanded will increase by 30 percent. C) total revenue will remain unchanged. D) total revenue will decrease. E) quantity demanded will increase by 3 percent.


A) quantity demanded will decrease by 30 percent.
B) quantity demanded will increase by 30 percent.
C) total revenue will remain unchanged.
D) total revenue will decrease.
E) quantity demanded will increase by 3 percent.

F) A) and C)
G) B) and C)

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The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income.Table 6.2 The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income.Table 6.2 -Suppose the price of a product is reduced from $10 to $6 and the quantity demanded increases from 40 to 60 units. From this we can conclude that the price elasticity of demand over this price range is equal to _____. A) 1.2 B) 1.25 C) 0.80 D) 0.20 E) 0.5 -Suppose the price of a product is reduced from $10 to $6 and the quantity demanded increases from 40 to 60 units. From this we can conclude that the price elasticity of demand over this price range is equal to _____.


A) 1.2
B) 1.25
C) 0.80
D) 0.20
E) 0.5

F) All of the above
G) A) and E)

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Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px. Assume that P = $8, I = 200, and Px = $10. -If a 10 percent increase in the price of tomatoes leads to a 20 percent decrease in quantity demanded, then the price elasticity of demand for tomatoes, , equals -2. Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P<sub>x</sub>. Assume that P = $8, I = 200, and P<sub>x</sub> = $10. -If a 10 percent increase in the price of tomatoes leads to a 20 percent decrease in quantity demanded, then the price elasticity of demand for tomatoes, , equals -2.

A) True
B) False

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The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -Which of the following items is likely to have the highest positive income elasticity of demand? A) Bread B) Jewelry C) Soap D) A plumber's service E) Table salt -Which of the following items is likely to have the highest positive income elasticity of demand?


A) Bread
B) Jewelry
C) Soap
D) A plumber's service
E) Table salt

F) All of the above
G) A) and B)

Correct Answer

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The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -The value of price elasticity of demand is more likely to be above 1 if: A) consumers have a long time to adjust to a price change. B) the product is a necessity. C) demand is inelastic. D) there are few close substitutes for the product. E) total revenue declines in response to a price reduction. -The value of price elasticity of demand is more likely to be above 1 if:


A) consumers have a long time to adjust to a price change.
B) the product is a necessity.
C) demand is inelastic.
D) there are few close substitutes for the product.
E) total revenue declines in response to a price reduction.

F) A) and B)
G) A) and C)

Correct Answer

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The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -A horizontal demand curve shows that demand for a good is _____. A) ​perfectly inelastic B) ​moderately inelastic C) ​unit-elastic D) ​moderately elastic E) ​perfectly elastic -A horizontal demand curve shows that demand for a good is _____.


A) ​perfectly inelastic
B) ​moderately inelastic
C) ​unit-elastic
D) ​moderately elastic
E) ​perfectly elastic

F) A) and E)
G) A) and D)

Correct Answer

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​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. ​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -When the manager of a local movie theater raises the price of movie tickets from $7.50 to $8.50, his total revenue falls. This means that: A) the demand for movie tickets is highly elastic. B) the supply of movie tickets is perfectly elastic. C) the supply of movie tickets is unit-elastic. D) the demand for movie tickets is inelastic. E) the supply of movie tickets is inelastic. -When the manager of a local movie theater raises the price of movie tickets from $7.50 to $8.50, his total revenue falls. This means that:


A) the demand for movie tickets is highly elastic.
B) the supply of movie tickets is perfectly elastic.
C) the supply of movie tickets is unit-elastic.
D) the demand for movie tickets is inelastic.
E) the supply of movie tickets is inelastic.

F) B) and D)
G) A) and B)

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​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. ​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. -If a 50 percent increase in the price of pizza results in a 25 percent decrease in the quantity demanded of pizza, then the price elasticity of demand for pizza: A) is equal to 0.5 and demand for pizza is inelastic. B) is equal to 0.5 and demand for pizza is elastic. C) is equal to 2 and demand for pizza is elastic. D) is equal to 2 and demand for pizza is inelastic. E) cannot be determined from the information provided. -If a 50 percent increase in the price of pizza results in a 25 percent decrease in the quantity demanded of pizza, then the price elasticity of demand for pizza:


A) is equal to 0.5 and demand for pizza is inelastic.
B) is equal to 0.5 and demand for pizza is elastic.
C) is equal to 2 and demand for pizza is elastic.
D) is equal to 2 and demand for pizza is inelastic.
E) cannot be determined from the information provided.

F) A) and B)
G) C) and E)

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Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px. Assume that P = $8, I = 200, and Px = $10. -Everything else held constant, the greater the number of close substitutes there are for a good, the smaller the price elasticity of demand for that good.

A) True
B) False

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Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px. Assume that P = $8, I = 200, and Px = $10. -Supply curves applicable to shorter periods of time tend to:


A) be represented by horizontal lines parallel to the quantity axis.
B) be perfectly elastic.
C) be more inelastic than supply curves that apply to longer periods of time.
D) be more elastic than supply curves that apply to longer periods of time.
E) have a price elasticity of supply that is approximately equal to 1.

F) C) and E)
G) A) and C)

Correct Answer

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The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income.Table 6.2 The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income.Table 6.2 -Based on the information given in Table 6.2, margarine is: A) an inferior good. B) a necessity. C) a normal good. D) a complementary good. E) a luxury good. -Based on the information given in Table 6.2, margarine is:


A) an inferior good.
B) a necessity.
C) a normal good.
D) a complementary good.
E) a luxury good.

F) A) and E)
G) B) and D)

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Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px. Assume that P = $8, I = 200, and Px = $10. -If price elasticity of supply is large and demand is price-inelastic, then the firm can earn positive profits by increasing the price.

A) True
B) False

Correct Answer

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The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -If the demand for beans tends to decline as incomes rise, everything else held constant, beans are _____. A) luxury goods B) normal goods C) price sensitive D) not price sensitive E) inferior goods -If the demand for beans tends to decline as incomes rise, everything else held constant, beans are _____.


A) luxury goods
B) normal goods
C) price sensitive
D) not price sensitive
E) inferior goods

F) A) and D)
G) None of the above

Correct Answer

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The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1 -If the demand for corn is elastic, then: A) there are not many substitutes for the consumption of corn. B) the price elasticity of demand for corn is less than -1. C) a decrease in price will reduce total revenue for corn producers. D) an increase in price will increase total revenue for corn producers. E) consumers will continue buying the same quantity even if price increases. -If the demand for corn is elastic, then:


A) there are not many substitutes for the consumption of corn.
B) the price elasticity of demand for corn is less than -1.
C) a decrease in price will reduce total revenue for corn producers.
D) an increase in price will increase total revenue for corn producers.
E) consumers will continue buying the same quantity even if price increases.

F) A) and D)
G) B) and D)

Correct Answer

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