Question 1

Rent control for apartments in New York City 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 2

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 3

When a higher price cannot bring about any increase in the quantity supplied, the supply is

Accepted Answer

A)  perfectly elastic. 
B)  unit elastic. 
C)  zero. 
D)  perfectly inelastic. 
E)  infinity. 
A)  perfectly elastic. 
B)  unit elastic. 
C)  zero. 
D)  perfectly inelastic. 
E)  infinity.

Question 4

Elasticity of supply is

Accepted Answer

A)  the responsiveness of supply to changes in costs. 
B)  the percentage change in quantity supplied due to a percentage change in price. 
C)  the responsiveness of the price to changes in supply. 
D)  1 minus the elasticity of demand. 
E)  the change in quantity supplied due to a change in quantity demanded. 
A)  the responsiveness of supply to changes in costs. 
B)  the percentage change in quantity supplied due to a percentage change in price. 
C)  the responsiveness of the price to changes in supply. 
D)  1 minus the elasticity of demand. 
E)  the change in quantity supplied due to a change in quantity demanded.

Question 5

The price elasticity of supply can serve as an indicator of how much consumer expenditures will change with a change in price.

Accepted Answer

A) True 
 B)False

Question 6

The price elasticity of demand is measured by the percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 7

Minimum wage is a price floor because employers are prohibited from paying workers at a wage rate lower than a certain level. Some occupations, such as wait staff in restaurants, are exempt from the minimum-wage law. What is the argument against a price floor for these occupations?

Accepted Answer

Wait staff earn tips in addition to the

Question 8

Which of the following is the equation for price elasticity of supply?

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 9

If the percentage change in quantity demanded is greater than the percentage change in the price for a good, then the demand for the good is elastic.

Accepted Answer

A) True 
 B)False

Question 10

For a given shift in demand, the less elastic is supply, the

Accepted Answer

A)  greater is the shift in demand. 
B)  greater is the change in equilibrium quantity. 
C)  smaller is the shift in demand. 
D)  greater is the change in price. 
E)  smaller is the change in price. 
A)  greater is the shift in demand. 
B)  greater is the change in equilibrium quantity. 
C)  smaller is the shift in demand. 
D)  greater is the change in price. 
E)  smaller is the change in price.

Question 11

Supply is elastic if the quantity supplied responds substantially to a change in price, and supply is inelastic if the quantity supplied responds only slightly to a change in price.

Accepted Answer

A) True 
 B)False

Question 12

If a consumer is spending a large portion of his or her income on a good, then the demand for the good is inelastic.

Accepted Answer

A) True 
 B)False

Question 13

The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

If the producers of a product do not respond to price changes at all, then an increase in demand results in

Accepted Answer

A)  no change in price but a large increase in equilibrium quantity. 
B)  an increase in price but no change in equilibrium quantity. 
C)  as much an increase in price as in equilibrium quantity. 
D)  no change in both price and equilibrium quantity. 
E)  a large increase in price and a large decrease in equilibrium quantity . 
A)  no change in price but a large increase in equilibrium quantity. 
B)  an increase in price but no change in equilibrium quantity. 
C)  as much an increase in price as in equilibrium quantity. 
D)  no change in both price and equilibrium quantity. 
E)  a large increase in price and a large decrease in equilibrium quantity .

Question 16

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 17

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

Accepted Answer

A) True 
 B)False

Question 18

Suppose the price elasticity of demand for apples is 2.3 and the price elasticity of demand for housing is .65. In comparing price elasticities of demand, it is proper to say that the demand for apples is

Accepted Answer

A)  inelastic; for housing it is elastic. 
B)  more elastic than the demand for housing. 
C)  more inelastic than the demand for housing. 
D)  more than three times as inelastic as the demand for housing. 
E)  less elastic than the demand for housing. 
A)  inelastic; for housing it is elastic. 
B)  more elastic than the demand for housing. 
C)  more inelastic than the demand for housing. 
D)  more than three times as inelastic as the demand for housing. 
E)  less elastic than the demand for housing.

Question 19

Good X has a high price elasticity of demand; it is most likely that

Accepted Answer

A)  consumers have high incomes. 
B)  good X has a lot of substitutes. 
C)  good X has a lot of complements. 
D)  good X is in short supply. 
E)  good X is not related to any other goods. 
A)  consumers have high incomes. 
B)  good X has a lot of substitutes. 
C)  good X has a lot of complements. 
D)  good X is in short supply. 
E)  good X is not related to any other goods.

Question 20

When price changes, the effect on quantity demanded is larger as time passes at least partly because

Accepted Answer

A)  people are better able to search out alternatives in the long run. 
B)  government regulations affect the short run but not the long run. 
C)  consumers are irrational in the short run. 
D)  fewer people consume in the long run than in the short run. 
E)  most consumers do not realize price has changed in the short run. 
A)  people are better able to search out alternatives in the long run. 
B)  government regulations affect the short run but not the long run. 
C)  consumers are irrational in the short run. 
D)  fewer people consume in the long run than in the short run. 
E)  most consumers do not realize price has changed in the short run.

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

Rent control for apartments in New York City is an example of a

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

When a higher price cannot bring about any increase in the quantity supplied, the supply is

Elasticity of supply is

The price elasticity of supply can serve as an indicator of how much consumer expenditures will change with a change in price.

The price elasticity of demand is measured by the percentage change in quantity demanded divided by the percentage change in price.

Minimum wage is a price floor because employers are prohibited from paying workers at a wage rate lower than a certain level. Some occupations, such as wait staff in restaurants, are exempt from the minimum-wage law. What is the argument against a price floor for these occupations?

Which of the following is the equation for price elasticity of supply?

If the percentage change in quantity demanded is greater than the percentage change in the price for a good, then the demand for the good is elastic.

For a given shift in demand, the less elastic is supply, the

Supply is elastic if the quantity supplied responds substantially to a change in price, and supply is inelastic if the quantity supplied responds only slightly to a change in price.

If a consumer is spending a large portion of his or her income on a good, then the demand for the good is inelastic.

The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

For demand to be inelastic,

If the producers of a product do not respond to price changes at all, then an increase in demand results in

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.

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

Suppose the price elasticity of demand for apples is 2.3 and the price elasticity of demand for housing is .65. In comparing price elasticities of demand, it is proper to say that the demand for apples is

Good X has a high price elasticity of demand; it is most likely that

When price changes, the effect on quantity demanded is larger as time passes at least partly because

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth and Globalization

International Trade

International Finance

Reading, Understanding, and Creating Graphs

the Miracle of Compound Growth

Present Discounted Value

Deriving the Growth Accounting Formula

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