Question 1

The demand curve for a good that has many perfect substitutes in consumption is likely to be

Accepted Answer

A) upward sloping 
B) steep 
C) highly inelastic 
D) horizontal 
E) vertical 
A) upward sloping 
B) steep 
C) highly inelastic 
D) horizontal 
E) vertical D

Question 2

If there is no change in equilibrium price after a $1 per unit tax is imposed on suppliers, demand must be perfectly inelastic.

Accepted Answer

A) True 
 B)False  False

Question 3

All of the following are examples of a constant-elasticity demand curve except a(n)

Accepted Answer

A) perfectly elastic demand curve 
B) linear demand curve with a slope of -4 
C) perfectly inelastic demand curve 
D) unit-elastic demand curve 
E) vertical demand curve 
A) perfectly elastic demand curve 
B) linear demand curve with a slope of -4 
C) perfectly inelastic demand curve 
D) unit-elastic demand curve 
E) vertical demand curve B

Question 4

If Joe says that nothing comes close to a Pepsi, his demand for Pepsi is likely to be

Accepted Answer

A) relatively price elastic 
B) relatively income elastic 
C) relatively price inelastic 
D) unit elastic 
E) infinitely elastic 
A) relatively price elastic 
B) relatively income elastic 
C) relatively price inelastic 
D) unit elastic 
E) infinitely elastic

Question 5

An inferior good is

Accepted Answer

A) any good of low quality 
B) one that consumers buy less of as the price rises 
C) one that consumers buy less of as their income rises 
D) one that has few substitutes 
E) any good made with inexpensive labor 
A) any good of low quality 
B) one that consumers buy less of as the price rises 
C) one that consumers buy less of as their income rises 
D) one that has few substitutes 
E) any good made with inexpensive labor

Question 6

Exhibit 5-10   In Exhibit 5-10, between the two equilibrium prices shown, demand is

Accepted Answer

A) price elastic 
B) price inelastic 
C) unit elastic 
D) perfectly elastic 
E) perfectly inelastic 
A) price elastic 
B) price inelastic 
C) unit elastic 
D) perfectly elastic 
E) perfectly inelastic

Question 7

In calculating price elasticity of demand, which of the following is assumed to be constant?

Accepted Answer

A) the price of the product itself 
B) the quantity demanded of the product 
C) total revenue received from the sale of the product 
D) the prices of all other products 
E) none of the above 
A) the price of the product itself 
B) the quantity demanded of the product 
C) total revenue received from the sale of the product 
D) the prices of all other products 
E) none of the above

Question 8

The most important determinant of price elasticity of supply is

Accepted Answer

A) price elasticity of demand 
B) technological conditions such as how rapidly costs increase when a firm increases its output 
C) whether the production process relies heavily on capital or on labor 
D) the number and closeness of available substitutes 
E) whether the product is a normal good or an inferior good 
A) price elasticity of demand 
B) technological conditions such as how rapidly costs increase when a firm increases its output 
C) whether the production process relies heavily on capital or on labor 
D) the number and closeness of available substitutes 
E) whether the product is a normal good or an inferior good

Question 9

If demand is unit elastic, a price reduction will

Accepted Answer

A) increase revenues 
B) reduce revenues 
C) reduce quantity demanded 
D) have no effect on revenues 
E) increase profits 
A) increase revenues 
B) reduce revenues 
C) reduce quantity demanded 
D) have no effect on revenues 
E) increase profits

Question 10

Along a linear demand curve, as the price rises, demand becomes more

Accepted Answer

A) steep 
B) elastic 
C) inelastic 
D) unit elastic 
E) variable 
A) steep 
B) elastic 
C) inelastic 
D) unit elastic 
E) variable

Question 11

Exhibit 5-5   In Exhibit 5-5, what is the total revenue to the right of point a?

Accepted Answer

A) less than $50, if demand is price inelastic 
B) less than $50, if demand is price elastic 
C) $50 
D) more than $50, if demand is price inelastic 
E) not enough information to tell 
A) less than $50, if demand is price inelastic 
B) less than $50, if demand is price elastic 
C) $50 
D) more than $50, if demand is price inelastic 
E) not enough information to tell

Question 12

The percentage change in the demand for film divided by the percentage change in the price of cameras indicates

Accepted Answer

A) the cross-price elasticity of demand between film and cameras 
B) the cross-price elasticity of demand for photographs 
C) the price elasticity of demand for film 
D) the price elasticity of demand for cameras 
E) nothing because the two goods fall into the broadly defined category of photographic equipment 
A) the cross-price elasticity of demand between film and cameras 
B) the cross-price elasticity of demand for photographs 
C) the price elasticity of demand for film 
D) the price elasticity of demand for cameras 
E) nothing because the two goods fall into the broadly defined category of photographic equipment

Question 13

If a $1 increase in price leads to a 3-unit decrease in quantity demanded, then demand must be elastic.

Accepted Answer

A) True 
 B)False

Question 14

Suppose that you allow yourself $50 per month to spend on compact disks.You spend exactly this much every month regardless of the price of compact disks.Therefore, your demand for CDs

Accepted Answer

A) is elastic 
B) is inelastic 
C) is unit elastic 
D) cannot be characterized unless we know the price of a disk 
E) cannot be characterized unless we know the price and quantity of compact disks purchased 
A) is elastic 
B) is inelastic 
C) is unit elastic 
D) cannot be characterized unless we know the price of a disk 
E) cannot be characterized unless we know the price and quantity of compact disks purchased

Question 15

The cross-price elasticity of demand between milk and soft drinks is likely to be

Accepted Answer

A) negative because the goods are complements 
B) positive because the goods are complements 
C) negative because the goods are substitutes 
D) positive because the goods are substitutes 
E) 0 because the goods are not usually consumed by the same person at one time 
A) negative because the goods are complements 
B) positive because the goods are complements 
C) negative because the goods are substitutes 
D) positive because the goods are substitutes 
E) 0 because the goods are not usually consumed by the same person at one time

Question 16

Suppose the price elasticity of demand for your economics textbook is -1.If the publisher raises the price by 5 percent,

Accepted Answer

A) revenues will rise 5 percent 
B) quantity demanded will rise 5 percent 
C) total revenues will not change 
D) revenues will fall 
E) revenues will fall 5 percent 
A) revenues will rise 5 percent 
B) quantity demanded will rise 5 percent 
C) total revenues will not change 
D) revenues will fall 
E) revenues will fall 5 percent

Question 17

Suppose the income elasticity of demand for a private college education is equal to 1.5.This means that

Accepted Answer

A) every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education 
B) every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education 
C) a 10 percent increase in income causes a 15 percent increase in the demand for a private college education 
D) a 15 percent increase in income causes a 10 percent increase in the demand for a private college education 
E) a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent 
A) every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education 
B) every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education 
C) a 10 percent increase in income causes a 15 percent increase in the demand for a private college education 
D) a 15 percent increase in income causes a 10 percent increase in the demand for a private college education 
E) a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent

Question 18

If output in the calculator market increases by 5 percent when the price increases by more than 5 percent, then

Accepted Answer

A) supply is inelastic 
B) supply is elastic 
C) a small increase in price will cause a leftward shift of the supply curve 
D) a small increase in price will cause a rightward shift of the supply curve 
E) a large increase in price will cause a large shift of the supply curve 
A) supply is inelastic 
B) supply is elastic 
C) a small increase in price will cause a leftward shift of the supply curve 
D) a small increase in price will cause a rightward shift of the supply curve 
E) a large increase in price will cause a large shift of the supply curve

Question 19

If the cross-price elasticity of demand between two goods is positive, then

Accepted Answer

A) consumers are being irrational 
B) supply is elastic 
C) the goods may have similar uses 
D) the goods may go well together in consumption 
E) one good must be a necessity 
A) consumers are being irrational 
B) supply is elastic 
C) the goods may have similar uses 
D) the goods may go well together in consumption 
E) one good must be a necessity

Question 20

The price elasticity of demand helps determine the effect of price changes on a firm's

Accepted Answer

A) property taxes 
B) profits 
C) quantity supplied 
D) revenues 
E) total costs 
A) property taxes 
B) profits 
C) quantity supplied 
D) revenues 
E) total costs

Exam 5: Elasticity of Demand and Supply

The demand curve for a good that has many perfect substitutes in consumption is likely to be

If there is no change in equilibrium price after a $1 per unit tax is imposed on suppliers, demand must be perfectly inelastic.

All of the following are examples of a constant-elasticity demand curve except a(n)

If Joe says that nothing comes close to a Pepsi, his demand for Pepsi is likely to be

An inferior good is

Exhibit 5-10 In Exhibit 5-10, between the two equilibrium prices shown, demand is

In calculating price elasticity of demand, which of the following is assumed to be constant?

The most important determinant of price elasticity of supply is

If demand is unit elastic, a price reduction will

Along a linear demand curve, as the price rises, demand becomes more

Exhibit 5-5 In Exhibit 5-5, what is the total revenue to the right of point a?

The percentage change in the demand for film divided by the percentage change in the price of cameras indicates

If a $1 increase in price leads to a 3-unit decrease in quantity demanded, then demand must be elastic.

Suppose that you allow yourself $50 per month to spend on compact disks.You spend exactly this much every month regardless of the price of compact disks.Therefore, your demand for CDs

The cross-price elasticity of demand between milk and soft drinks is likely to be

Suppose the price elasticity of demand for your economics textbook is -1.If the publisher raises the price by 5 percent,

Suppose the income elasticity of demand for a private college education is equal to 1.5.This means that

If output in the calculator market increases by 5 percent when the price increases by more than 5 percent, then

If the cross-price elasticity of demand between two goods is positive, then

The price elasticity of demand helps determine the effect of price changes on a firm's

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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