Question 1

When agricultural production increases, the total amount paid for agricultural products tends to

Accepted Answer

A) increase because demand is price elastic 
B) decrease because demand is price elastic 
C) increase because demand is price inelastic 
D) decrease because demand is price inelastic 
E) remain constant because demand is price inelastic 
A) increase because demand is price elastic 
B) decrease because demand is price elastic 
C) increase because demand is price inelastic 
D) decrease because demand is price inelastic 
E) remain constant because demand is price inelastic

Question 2

Demand is inelastic if

Accepted Answer

A) the percentage change in price is greater than the percentage change in quantity demanded 
B) the percentage change in price is less than the percentage change in quantity demanded 
C) the percentage change in price is equal to the percentage change in quantity demanded 
D) the value of price elasticity is equal to -1 
E) the value of price elasticity is less than -1 
A) the percentage change in price is greater than the percentage change in quantity demanded 
B) the percentage change in price is less than the percentage change in quantity demanded 
C) the percentage change in price is equal to the percentage change in quantity demanded 
D) the value of price elasticity is equal to -1 
E) the value of price elasticity is less than -1

Question 3

If price elasticity of demand is -0.5,

Accepted Answer

A) a 1% decrease in quantity demanded leads to a 0.5% decrease in price 
B) a 1% decrease in price leads to a 0.5% increase in quantity demanded 
C) a 50% decrease in price leads to a 1% increase in quantity demanded 
D) a 50% decrease in price leads to a 100% increase in quantity demanded 
E) demand is elastic 
A) a 1% decrease in quantity demanded leads to a 0.5% decrease in price 
B) a 1% decrease in price leads to a 0.5% increase in quantity demanded 
C) a 50% decrease in price leads to a 1% increase in quantity demanded 
D) a 50% decrease in price leads to a 100% increase in quantity demanded 
E) demand is elastic

Question 4

Price elasticity of demand is calculated as

Accepted Answer

A) the percentage change in quantity demanded divided by the percentage change in price 
B) the percentage change in price divided by the percentage change in quantity demanded 
C) the absolute change in quantity demanded divided by the absolute change in price 
D) the absolute change in price divided by the absolute change in quantity demanded 
E) none of the above 
A) the percentage change in quantity demanded divided by the percentage change in price 
B) the percentage change in price divided by the percentage change in quantity demanded 
C) the absolute change in quantity demanded divided by the absolute change in price 
D) the absolute change in price divided by the absolute change in quantity demanded 
E) none of the above

Question 5

Which of the following is true of U.S.farm products over the past few decades?

Accepted Answer

A) The increase in supply has been greater than the increase in demand, which has led to an increase in price. 
B) The increase in supply has been less than the increase in demand, which has led to an increase in price. 
C) The increase in supply has been greater than the increase in demand, which has led to a decrease in price. 
D) The increase in supply has been less than the increase in demand, which has led to a decrease in price. 
E) The increase in supply has been greater than the decrease in demand, which has led to an increase in price. 
A) The increase in supply has been greater than the increase in demand, which has led to an increase in price. 
B) The increase in supply has been less than the increase in demand, which has led to an increase in price. 
C) The increase in supply has been greater than the increase in demand, which has led to a decrease in price. 
D) The increase in supply has been less than the increase in demand, which has led to a decrease in price. 
E) The increase in supply has been greater than the decrease in demand, which has led to an increase in price.

Question 6

Exhibit 5-26   Refer to Exhibit 5-26.Between points C and D price elasticity of demand is:

Accepted Answer

A) unitary 
B) elastic 
C) inelastic 
D) perfectly elastic 
E) perfectly inelastic 
A) unitary 
B) elastic 
C) inelastic 
D) perfectly elastic 
E) perfectly inelastic

Question 7

Exhibit 5-8   Which of the following statements is true in the range of the total revenue curve labeled B in Exhibit 5-8?

Accepted Answer

A) Demand is elastic. 
B) Demand is inelastic. 
C) Demand is unit elastic. 
D) We cannot tell anything about elasticity of demand because this is a total revenue curve. 
E) Demand is perfectly elastic. 
A) Demand is elastic. 
B) Demand is inelastic. 
C) Demand is unit elastic. 
D) We cannot tell anything about elasticity of demand because this is a total revenue curve. 
E) Demand is perfectly elastic.

Question 8

Exhibit 5-25   Exhibit 5-25 shows a hypothetical demand curve for soybeans.The vertical axis measures the average price per bushel in dollars.The horizontal axis measures billions of bushels per year.If perfect weather boosts the harvest from 3.5 billion bushels to 4.0 billion bushels (a 13 percent increase), what must happen to average price in order for the increased production to be sold?

Accepted Answer

A) The average price must increase by $1 per bushel, a 22 percent increase. 
B) The average price will remain at $5 per bushel. 
C) The average price must fall by $0.58 per bushel, a 13 percent decrease. 
D) The average price must fall by $1 per bushel, a 22 percent decrease. 
E) It is not possible to answer without knowing exactly how much supply decreases. 
A) The average price must increase by $1 per bushel, a 22 percent increase. 
B) The average price will remain at $5 per bushel. 
C) The average price must fall by $0.58 per bushel, a 13 percent decrease. 
D) The average price must fall by $1 per bushel, a 22 percent decrease. 
E) It is not possible to answer without knowing exactly how much supply decreases.

Question 9

For which of the following is demand likely to be the most price inelastic?

Accepted Answer

A) furniture 
B) automobiles 
C) hotel rooms 
D) airline travel 
E) candy bars 
A) furniture 
B) automobiles 
C) hotel rooms 
D) airline travel 
E) candy bars

Question 10

"More elastic" means

Accepted Answer

A) unchanging 
B) less desirable 
C) more desirable 
D) less responsive 
E) more responsive 
A) unchanging 
B) less desirable 
C) more desirable 
D) less responsive 
E) more responsive

Question 11

Exhibit 5-7   In Exhibit 5-7, demand is unit elastic

Accepted Answer

A) between points a and d 
B) between points d and e 
C) between points e and g 
D) only at the top and bottom of the curve 
E) anywhere along the curve 
A) between points a and d 
B) between points d and e 
C) between points e and g 
D) only at the top and bottom of the curve 
E) anywhere along the curve

Question 12

If a price reduction leads to larger total revenue, demand is

Accepted Answer

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

Question 13

Substitutes are pairs of products with

Accepted Answer

A) positive cross-price elasticity of demand 
B) negative cross-price elasticity of demand 
C) positive income elasticity of demand 
D) negative income elasticity of demand 
E) positive price elasticity of demand 
A) positive cross-price elasticity of demand 
B) negative cross-price elasticity of demand 
C) positive income elasticity of demand 
D) negative income elasticity of demand 
E) positive price elasticity of demand

Question 14

The cross-price elasticity of demand between rifles and bullets 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 substitutes 
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 substitutes

Question 15

Inferior goods have an income elasticity of demand that is

Accepted Answer

A) positive 
B) negative 
C) 0 
D) greater than 1 in absolute value 
E) equal to 1 in absolute value 
A) positive 
B) negative 
C) 0 
D) greater than 1 in absolute value 
E) equal to 1 in absolute value

Question 16

The demand for flour is

Accepted Answer

A) inelastic because there are few substitutes for flour and it represents a large percentage of a consumer's budget 
B) inelastic because there are many substitutes for flour and it represents a large percentage of a consumer's budget 
C) inelastic because there are few substitutes for flour and it represents a small percentage of a consumer's budget 
D) elastic because there are no substitutes for flour and it represents a large percentage of a consumer's budget 
E) elastic because there are many substitutes for flour and it represents a large percentage of a consumer's budget 
A) inelastic because there are few substitutes for flour and it represents a large percentage of a consumer's budget 
B) inelastic because there are many substitutes for flour and it represents a large percentage of a consumer's budget 
C) inelastic because there are few substitutes for flour and it represents a small percentage of a consumer's budget 
D) elastic because there are no substitutes for flour and it represents a large percentage of a consumer's budget 
E) elastic because there are many substitutes for flour and it represents a large percentage of a consumer's budget

Question 17

For which of the following goods is the income elasticity of demand likely to be largest?

Accepted Answer

A) paperback mystery stories 
B) best-selling hardcover novels 
C) used textbooks 
D) children's books 
E) leather-bound editions of Shakespeare 
A) paperback mystery stories 
B) best-selling hardcover novels 
C) used textbooks 
D) children's books 
E) leather-bound editions of Shakespeare

Question 18

If the demand for airline tickets to Fort Lauderdale is price elastic,

Accepted Answer

A) airline revenue will increase if supply increases 
B) airline revenue will increase if supply decreases 
C) a small change in price will cause a large shift in the demand curve 
D) a large change in price will cause a small shift in the demand curve 
E) a large change in price will cause a large shift in the demand curve 
A) airline revenue will increase if supply increases 
B) airline revenue will increase if supply decreases 
C) a small change in price will cause a large shift in the demand curve 
D) a large change in price will cause a small shift in the demand curve 
E) a large change in price will cause a large shift in the demand curve

Question 19

Along a downward-sloping linear demand curve,

Accepted Answer

A) slope is constant and elasticity is changing 
B) slope is changing and elasticity is constant 
C) both slope and elasticity are constant 
D) both slope and elasticity are changing 
E) no generalizations can be made about slope 
A) slope is constant and elasticity is changing 
B) slope is changing and elasticity is constant 
C) both slope and elasticity are constant 
D) both slope and elasticity are changing 
E) no generalizations can be made about slope

Question 20

If the demand curve shifts but the supply curve does not and price remains the same, supply must be perfectly inelastic.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity of Demand and Supply

When agricultural production increases, the total amount paid for agricultural products tends to

Demand is inelastic if

If price elasticity of demand is -0.5,

Price elasticity of demand is calculated as

Which of the following is true of U.S.farm products over the past few decades?

Exhibit 5-26 Refer to Exhibit 5-26.Between points C and D price elasticity of demand is:

Exhibit 5-8 Which of the following statements is true in the range of the total revenue curve labeled B in Exhibit 5-8?

For which of the following is demand likely to be the most price inelastic?

"More elastic" means

Exhibit 5-7 In Exhibit 5-7, demand is unit elastic

If a price reduction leads to larger total revenue, demand is

Substitutes are pairs of products with

The cross-price elasticity of demand between rifles and bullets is likely to be

Inferior goods have an income elasticity of demand that is

The demand for flour is

For which of the following goods is the income elasticity of demand likely to be largest?

If the demand for airline tickets to Fort Lauderdale is price elastic,

Along a downward-sloping linear demand curve,

If the demand curve shifts but the supply curve does not and price remains the same, supply must be perfectly inelastic.

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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