Question 1

For demand to be inelastic,

Accepted Answer

A)  the percentage change in quantity demanded must be equal to the associated percentage change in price. 
B)  demand must change with a change in price. 
C)  the percentage change in quantity demanded must be less than the associated percentage change in price. 
D)  quantity demanded must change with a change in price. 
E)  the percentage change in quantity demanded must be greater than the associated percentage change in price. 
A)  the percentage change in quantity demanded must be equal to the associated percentage change in price. 
B)  demand must change with a change in price. 
C)  the percentage change in quantity demanded must be less than the associated percentage change in price. 
D)  quantity demanded must change with a change in price. 
E)  the percentage change in quantity demanded must be greater than the associated percentage change in price. C

Question 2

Suppose demand is a straight line as follows: Qd = 100 -2P. Calculate the price elasticity of demand between the prices of $41 and $43.

Accepted Answer

100 - 2(41) = 18 = Q_d at $41 100 - 2(43) = 14 = Q_d at $43

Question 3

Explain why economists care about the price elasticity of demand. What does it tell us?

Accepted Answer

The price elasticity of demand tells us how sensitive consumers are to a change in the price of a good or service. By knowing how much quantity demanded changes when price changes, we can also know how much price changes with a change in the quantity of a good or service available in a market. Therefore, price elasticity of demand helps us anticipate the size of price changes in a market when supply changes.

Question 4

Does a price ceiling result in a shortage or a surplus? Why?

Accepted Answer

A price ceiling results in a s

Question 5

Because tea and coffee are substitutes, their cross-price elasticity must be

Accepted Answer

A)  less than 1. 
B)  less than 0. 
C)  equal to 0. 
D)  positive. 
E)  infinity. 
A)  less than 1. 
B)  less than 0. 
C)  equal to 0. 
D)  positive. 
E)  infinity.

Question 6

When the demand curve is a vertical line, demand is

Accepted Answer

A)  relatively elastic. 
B)  perfectly inelastic. 
C)  unit elastic. 
D)  infinitely elastic. 
E)  cross-elastic. 
A)  relatively elastic. 
B)  perfectly inelastic. 
C)  unit elastic. 
D)  infinitely elastic. 
E)  cross-elastic.

Question 7

A unit elastic supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 8

Total revenue will decrease if price

Accepted Answer

A)  rises and demand is inelastic. 
B)  falls and demand is unit elastic. 
C)  rises and demand is unit elastic. 
D)  rises and demand is elastic. 
E)  falls and demand is elastic. 
A)  rises and demand is inelastic. 
B)  falls and demand is unit elastic. 
C)  rises and demand is unit elastic. 
D)  rises and demand is elastic. 
E)  falls and demand is elastic.

Question 9

If 12 candy bars are demanded at $.30 each and 4 candy bars are demanded at $.50 each, what is the price elasticity of demand using the midpoint formula?

Accepted Answer

A)  2 
B)  .5 
C)  7.5 
D)  .4 
E)  1.67 
A)  2 
B)  .5 
C)  7.5 
D)  .4 
E)  1.67

Question 10

When a given percentage change in the price leads to a larger percentage change in the quantity supplied, supply is said to be

Accepted Answer

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

Question 11

A perfectly elastic demand curve has a price elasticity

Accepted Answer

A)  equal to zero. 
B)  that varies. 
C)  equal to 1. 
D)  less than 1. 
E)  of infinity. 
A)  equal to zero. 
B)  that varies. 
C)  equal to 1. 
D)  less than 1. 
E)  of infinity.

Question 12

The price elasticity of demand partly depends on how readily and easily consumers can switch their purchases from one product to another.

Accepted Answer

A) True 
 B)False

Question 13

A price elasticity of supply of 1.5 implies that

Accepted Answer

A)  a 20 percent increase in the quantity supplied increases the price by 30 percent. 
B)  total revenue is 1.5 times total cost. 
C)  a 20 percent increase in the price increases the quantity supplied by 30 percent. 
D)  a 20-unit increase in supply reduces the price by $30. 
E)  a $20 increase in the price increases the quantity supplied by 30 units. 
A)  a 20 percent increase in the quantity supplied increases the price by 30 percent. 
B)  total revenue is 1.5 times total cost. 
C)  a 20 percent increase in the price increases the quantity supplied by 30 percent. 
D)  a 20-unit increase in supply reduces the price by $30. 
E)  a $20 increase in the price increases the quantity supplied by 30 units.

Question 14

A price ceiling is typically set below the equilibrium price.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that the price of product G increases from $10 to $20 and, in response, quantity demanded declines from 100 to 80. Using the midpoint formula, what is the elasticity of demand?

Accepted Answer

A)  .5 
B)  3 
C)  .67 
D)  .33 
E)  2 
A)  .5 
B)  3 
C)  .67 
D)  .33 
E)  2

Question 16

Suppose that the government imposes a sales tax on the consumption of natural gas, which of the following would have the least impact on the producers of natural gas?

Accepted Answer

A)  Perfectly elastic demand 
B)  Perfectly inelastic demand 
C)  Unitary elastic demand 
D)  Zero demand 
E)  Plastic is an inferior good. 
A)  Perfectly elastic demand 
B)  Perfectly inelastic demand 
C)  Unitary elastic demand 
D)  Zero demand 
E)  Plastic is an inferior good.

Question 17

The concept of price elasticity of demand makes it possible to

Accepted Answer

A)  predict how much demand will shift with a change in price. 
B)  predict how much price will change with a change in demand. 
C)  predict how much price will change with a change in supply. 
D)  predict how much supply will shift with a change in price. 
E)  anticipate shifts in demand. 
A)  predict how much demand will shift with a change in price. 
B)  predict how much price will change with a change in demand. 
C)  predict how much price will change with a change in supply. 
D)  predict how much supply will shift with a change in price. 
E)  anticipate shifts in demand.

Question 18

A price ceiling is

Accepted Answer

A)  a minimum price set by government. It causes a surplus if effective. 
B)  a maximum price set by government. It causes a shortage if effective. 
C)  the equilibrium price. 
D)  a maximum price set by government. It causes a surplus if effective. 
E)  a minimum price set by government. It causes a shortage if effective. 
A)  a minimum price set by government. It causes a surplus if effective. 
B)  a maximum price set by government. It causes a shortage if effective. 
C)  the equilibrium price. 
D)  a maximum price set by government. It causes a surplus if effective. 
E)  a minimum price set by government. It causes a shortage if effective.

Question 19

If the supply curve is perfectly elastic, then an increase in demand results in no change in the

Accepted Answer

A)  equilibrium quantity but a large increase in the equilibrium price. 
B)  equilibrium quantity but a large decrease in the equilibrium price. 
C)  equilibrium price but a decrease in the equilibrium quantity equal to the change in demand. 
D)  equilibrium price but an increase in the equilibrium quantity equal to the change in demand. 
E)  equilibrium quantity or the equilibrium price. 
A)  equilibrium quantity but a large increase in the equilibrium price. 
B)  equilibrium quantity but a large decrease in the equilibrium price. 
C)  equilibrium price but a decrease in the equilibrium quantity equal to the change in demand. 
D)  equilibrium price but an increase in the equilibrium quantity equal to the change in demand. 
E)  equilibrium quantity or the equilibrium price.

Question 20

Explain why economists care about the price elasticity of supply. What does it tell us?

Accepted Answer

The price elasticity of supply tells us

For demand to be inelastic,

Suppose demand is a straight line as follows: Q_d = 100 -2P. Calculate the price elasticity of demand between the prices of $41 and $43.

Explain why economists care about the price elasticity of demand. What does it tell us?

Does a price ceiling result in a shortage or a surplus? Why?

Because tea and coffee are substitutes, their cross-price elasticity must be

When the demand curve is a vertical line, demand is

A unit elastic supply curve is vertical.

Total revenue will decrease if price

If 12 candy bars are demanded at $.30 each and 4 candy bars are demanded at $.50 each, what is the price elasticity of demand using the midpoint formula?

When a given percentage change in the price leads to a larger percentage change in the quantity supplied, supply is said to be

A perfectly elastic demand curve has a price elasticity

The price elasticity of demand partly depends on how readily and easily consumers can switch their purchases from one product to another.

A price elasticity of supply of 1.5 implies that

A price ceiling is typically set below the equilibrium price.

Suppose that the price of product G increases from $10 to $20 and, in response, quantity demanded declines from 100 to 80. Using the midpoint formula, what is the elasticity of demand?

Suppose that the government imposes a sales tax on the consumption of natural gas, which of the following would have the least impact on the producers of natural gas?

The concept of price elasticity of demand makes it possible to

A price ceiling is

If the supply curve is perfectly elastic, then an increase in demand results in no change in the

Explain why economists care about the price elasticity of supply. What does it tell us?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters

Exam 4: Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

For demand to be inelastic,

Suppose demand is a straight line as follows: Qd = 100 -2P. Calculate the price elasticity of demand between the prices of $41 and $43.

Explain why economists care about the price elasticity of demand. What does it tell us?

Does a price ceiling result in a shortage or a surplus? Why?

Because tea and coffee are substitutes, their cross-price elasticity must be

When the demand curve is a vertical line, demand is

A unit elastic supply curve is vertical.

Total revenue will decrease if price

If 12 candy bars are demanded at $.30 each and 4 candy bars are demanded at $.50 each, what is the price elasticity of demand using the midpoint formula?

When a given percentage change in the price leads to a larger percentage change in the quantity supplied, supply is said to be

A perfectly elastic demand curve has a price elasticity

The price elasticity of demand partly depends on how readily and easily consumers can switch their purchases from one product to another.

A price elasticity of supply of 1.5 implies that

A price ceiling is typically set below the equilibrium price.

Suppose that the price of product G increases from $10 to $20 and, in response, quantity demanded declines from 100 to 80. Using the midpoint formula, what is the elasticity of demand?

Suppose that the government imposes a sales tax on the consumption of natural gas, which of the following would have the least impact on the producers of natural gas?

The concept of price elasticity of demand makes it possible to

A price ceiling is

If the supply curve is perfectly elastic, then an increase in demand results in no change in the

Explain why economists care about the price elasticity of supply. What does it tell us?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters

Suppose demand is a straight line as follows: Q_d = 100 -2P. Calculate the price elasticity of demand between the prices of $41 and $43.