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Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

A) True
B) False

Correct Answer

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If a firm that produces honey is facing elastic demand,then the firm would decrease price to increase revenue.

A) True
B) False

Correct Answer

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If we observe that when the price of chocolate decreases by 10%,quantity demanded increases by 25%,then the demand for chocolate is price elastic.

A) True
B) False

Correct Answer

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True

A government program that reduces land under cultivation can help farmers by raising prices but hurts consumers.

A) True
B) False

Correct Answer

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The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

A) True
B) False

Correct Answer

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The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

A) True
B) False

Correct Answer

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True

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

A) True
B) False

Correct Answer

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The flatter the demand curve that passes through a given point,the more elastic the demand.

A) True
B) False

Correct Answer

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The demand for desserts tends to be more inelastic than the demand for red velvet cake.

A) True
B) False

Correct Answer

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The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

A) True
B) False

Correct Answer

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An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

A) True
B) False

Correct Answer

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If the price elasticity of demand is equal to 1,then demand is unit elastic.

A) True
B) False

Correct Answer

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verified

True

If we observe that when the price of chocolate increases by 10%,total revenue increases by 10%,then the demand for chocolate is unit price elastic.

A) True
B) False

Correct Answer

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verified

If the cross-price elasticity of demand for two goods is negative,then the two goods are substitutes.

A) True
B) False

Correct Answer

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Cross-price elasticity is used to determine whether goods are substitutes or complements.

A) True
B) False

Correct Answer

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If a firm is facing inelastic demand,then the firm should decrease price to increase revenue.

A) True
B) False

Correct Answer

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verified

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

A) True
B) False

Correct Answer

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Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

A) True
B) False

Correct Answer

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Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

A) True
B) False

Correct Answer

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If we observe that when the price of ice cream rises by 10%,ice cream manufacturers increase the quantity supplied of ice cream by 20%,then the price elasticity of supply is 2.

A) True
B) False

Correct Answer

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