Question 1

If there are very few substitutes for a product, then an increase in its price causes

Accepted Answer

A)  a relatively large increase in quantity demanded. 
B)  a relatively large decrease in quantity demanded. 
C)  no change in quantity demanded. 
D)  a relatively small increase in quantity demanded. 
E)  a relatively small decrease in quantity demanded. 
A)  a relatively large increase in quantity demanded. 
B)  a relatively large decrease in quantity demanded. 
C)  no change in quantity demanded. 
D)  a relatively small increase in quantity demanded. 
E)  a relatively small decrease in quantity demanded.

Question 2

A perfectly elastic supply curve is vertical, and a perfectly elastic demand curve is horizontal.

Accepted Answer

A) True 
 B)False

Question 3

In the case of a price floor,

Accepted Answer

A)  there will be a shortage. 
B)  there is no need for government to buy any excess. 
C)  government must require producers to increase production to meet demand. 
D)  there is a redistribution of income from consumers to producers. 
E)  supply decreases. 
A)  there will be a shortage. 
B)  there is no need for government to buy any excess. 
C)  government must require producers to increase production to meet demand. 
D)  there is a redistribution of income from consumers to producers. 
E)  supply decreases.

Question 4

Exhibit 4-1  
-Refer to Exhibit 4-1. The price elasticity of demand is most likely to be elastic

Accepted Answer

A)  at point A. 
B)  at point B. 
C)  at point C. 
D)  anywhere along the demand curve. 
E)  nowhere along the demand curve. 
A)  at point A. 
B)  at point B. 
C)  at point C. 
D)  anywhere along the demand curve. 
E)  nowhere along the demand curve.

Question 5

The minimum wage is an example of a

Accepted Answer

A)  price floor. 
B)  price ceiling. 
C)  market equilibrium. 
D)  restriction on quantity. 
E)  price elasticity. 
A)  price floor. 
B)  price ceiling. 
C)  market equilibrium. 
D)  restriction on quantity. 
E)  price elasticity.

Question 6

If the consumption of alcoholic beverages is higher for lower-income people than for higher-income people, then the income elasticity of demand for alcoholic beverages is positive.

Accepted Answer

A) True 
 B)False

Question 7

The price elasticity of demand is expressed as the

Accepted Answer

A)  percentage change in the quantity demanded divided by the percentage change in income. 
B)  percentage change in the price divided by the percentage change in the quantity demanded. 
C)  percentage change in the quantity demanded divided by the percentage change in the price. 
D)  percentage change in supply divided by the percentage change in demand. 
E)  absolute change in the quantity demanded divided by the absolute change in the price. 
A)  percentage change in the quantity demanded divided by the percentage change in income. 
B)  percentage change in the price divided by the percentage change in the quantity demanded. 
C)  percentage change in the quantity demanded divided by the percentage change in the price. 
D)  percentage change in supply divided by the percentage change in demand. 
E)  absolute change in the quantity demanded divided by the absolute change in the price.

Question 8

Which of the following often occurs as a result of a price ceiling?

Accepted Answer

A)  More of a product is produced than people are willing to buy. 
B)  The product becomes unavailable. 
C)  Consumers wanting to buy the product form long lines. 
D)  Poor people find it harder to obtain the product. 
E)  Black markets for the product disappear. 
A)  More of a product is produced than people are willing to buy. 
B)  The product becomes unavailable. 
C)  Consumers wanting to buy the product form long lines. 
D)  Poor people find it harder to obtain the product. 
E)  Black markets for the product disappear.

Question 9

Explain how price elasticity of demand indicates how total revenue changes when there is a change in price.

Accepted Answer

Total revenue equals P * Q_d.

Question 10

Indicate whether the percentage change in quantity demanded or percentage change in price is greater and whether demand is considered sensitive or insensitive for each of the following categories: elastic, inelastic, unit elastic.

Accepted Answer

The percentage change in quantity demand

Question 11

Last year, Keith purchased 20 pounds of beef when his income was $30,000. This year his income is $40,000 and he purchased 40 pounds of beef. Which of the following statements is true?

Accepted Answer

A)  Keith's demand for beef is price inelastic. 
B)  Beef and income are substitutes. 
C)  Keith's demand for beef is price elastic. 
D)  Beef is a normal good. 
E)  None of the other answers is true. 
A)  Keith's demand for beef is price inelastic. 
B)  Beef and income are substitutes. 
C)  Keith's demand for beef is price elastic. 
D)  Beef is a normal good. 
E)  None of the other answers is true.

Question 12

The price elasticity of demand is the same as the slope of the demand curve.

Accepted Answer

A) True 
 B)False

Question 13

Because people can adapt to paying higher prices over time, the price elasticity of demand is lower in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 14

If the cross-price elasticity between two goods is positive, then it is most likely that the two goods are

Accepted Answer

A)  both inferior goods. 
B)  both luxury goods. 
C)  complements. 
D)  substitutes. 
E)  necessities. 
A)  both inferior goods. 
B)  both luxury goods. 
C)  complements. 
D)  substitutes. 
E)  necessities.

Question 15

For demand to be elastic,

Accepted Answer

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

Question 16

If some product has an elastic demand, then we can expect

Accepted Answer

A)  a price increase to increase total revenue. 
B)  total revenue to rise if price falls. 
C)  that there are few substitutes for this product. 
D)  the absolute value of the elasticity of demand coefficient to be less than 1. 
E)  a smaller percentage change in the quantity demanded, given some percentage change in the price. 
A)  a price increase to increase total revenue. 
B)  total revenue to rise if price falls. 
C)  that there are few substitutes for this product. 
D)  the absolute value of the elasticity of demand coefficient to be less than 1. 
E)  a smaller percentage change in the quantity demanded, given some percentage change in the price.

Question 17

A price floor that is effective results in a surplus.

Accepted Answer

A) True 
 B)False

Question 18

If supply is perfectly elastic, then the supply curve must

Accepted Answer

A)  be vertical. 
B)  be horizontal. 
C)  be upward sloping. 
D)  be downward sloping. 
E)  have a slope of zero. 
A)  be vertical. 
B)  be horizontal. 
C)  be upward sloping. 
D)  be downward sloping. 
E)  have a slope of zero.

Question 19

Suppose the price of a good falls from $4.95 to $3.85, and the quantity demanded changes from 77 units to 99 units. Calculate the price elasticity of demand using the midpoint formula, and indicate whether demand is elastic, inelastic, or unit-elastic.

Accepted Answer

The answer of Suppose the price of a good falls...

Question 20

If price falls by 10 percent, total revenue

Accepted Answer

A)  rises if quantity demanded changes by 10 percent. 
B)  rises if quantity demanded does not change. 
C)  rises if quantity demanded changes by less than 10 percent. 
D)  falls if quantity demanded changes by 10 percent. 
E)  falls if quantity demanded changes by less than 10 percent. 
A)  rises if quantity demanded changes by 10 percent. 
B)  rises if quantity demanded does not change. 
C)  rises if quantity demanded changes by less than 10 percent. 
D)  falls if quantity demanded changes by 10 percent. 
E)  falls if quantity demanded changes by less than 10 percent.

If there are very few substitutes for a product, then an increase in its price causes

A perfectly elastic supply curve is vertical, and a perfectly elastic demand curve is horizontal.

In the case of a price floor,

Exhibit 4-1 -Refer to Exhibit 4-1. The price elasticity of demand is most likely to be elastic

The minimum wage is an example of a

If the consumption of alcoholic beverages is higher for lower-income people than for higher-income people, then the income elasticity of demand for alcoholic beverages is positive.

The price elasticity of demand is expressed as the

Which of the following often occurs as a result of a price ceiling?

Explain how price elasticity of demand indicates how total revenue changes when there is a change in price.

Indicate whether the percentage change in quantity demanded or percentage change in price is greater and whether demand is considered sensitive or insensitive for each of the following categories: elastic, inelastic, unit elastic.

Last year, Keith purchased 20 pounds of beef when his income was $30,000. This year his income is $40,000 and he purchased 40 pounds of beef. Which of the following statements is true?

The price elasticity of demand is the same as the slope of the demand curve.

Because people can adapt to paying higher prices over time, the price elasticity of demand is lower in the long run than in the short run.

If the cross-price elasticity between two goods is positive, then it is most likely that the two goods are

For demand to be elastic,

If some product has an elastic demand, then we can expect

A price floor that is effective results in a surplus.

If supply is perfectly elastic, then the supply curve must

Suppose the price of a good falls from $4.95 to $3.85, and the quantity demanded changes from 77 units to 99 units. Calculate the price elasticity of demand using the midpoint formula, and indicate whether demand is elastic, inelastic, or unit-elastic.

If price falls by 10 percent, total revenue

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

If there are very few substitutes for a product, then an increase in its price causes

A perfectly elastic supply curve is vertical, and a perfectly elastic demand curve is horizontal.

In the case of a price floor,

Exhibit 4-1 -Refer to Exhibit 4-1. The price elasticity of demand is most likely to be elastic

The minimum wage is an example of a

If the consumption of alcoholic beverages is higher for lower-income people than for higher-income people, then the income elasticity of demand for alcoholic beverages is positive.

The price elasticity of demand is expressed as the

Which of the following often occurs as a result of a price ceiling?

Explain how price elasticity of demand indicates how total revenue changes when there is a change in price.

Indicate whether the percentage change in quantity demanded or percentage change in price is greater and whether demand is considered sensitive or insensitive for each of the following categories: elastic, inelastic, unit elastic.

Last year, Keith purchased 20 pounds of beef when his income was $30,000. This year his income is $40,000 and he purchased 40 pounds of beef. Which of the following statements is true?

The price elasticity of demand is the same as the slope of the demand curve.

Because people can adapt to paying higher prices over time, the price elasticity of demand is lower in the long run than in the short run.

If the cross-price elasticity between two goods is positive, then it is most likely that the two goods are

For demand to be elastic,

If some product has an elastic demand, then we can expect

A price floor that is effective results in a surplus.

If supply is perfectly elastic, then the supply curve must

Suppose the price of a good falls from $4.95 to $3.85, and the quantity demanded changes from 77 units to 99 units. Calculate the price elasticity of demand using the midpoint formula, and indicate whether demand is elastic, inelastic, or unit-elastic.

If price falls by 10 percent, total revenue

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