Question 1

Which of the following is most likely an inferior good?

Accepted Answer

A) Rolex watches. 
B) Nike running shoes. 
C) Generic canned food. 
D) A custom-built mansion. 
A) Rolex watches. 
B) Nike running shoes. 
C) Generic canned food. 
D) A custom-built mansion.

Question 2

If demand is very inelastic,

Accepted Answer

A) The demand curve will be very flat. 
B) The demand curve will be horizontal. 
C) The demand curve will be very steep. 
D) The demand curve is upward-sloping. 
A) The demand curve will be very flat. 
B) The demand curve will be horizontal. 
C) The demand curve will be very steep. 
D) The demand curve is upward-sloping.

Question 3

Suppose the quantity demanded of ski boats falls from 4.0 million to 3.0 million as a result of an average price increase from $20,000 to $25,000 per boat.The absolute value of the price elasticity of demand is closest to

Accepted Answer

A) 0.20. 
B) 1.29. 
C) 0.78. 
D) 0.29. 
A) 0.20. 
B) 1.29. 
C) 0.78. 
D) 0.29.

Question 4

Ceteris paribus,which of the following causes demand to be more elastic with respect to price?

Accepted Answer

A) Shorter periods of time to adjust to a change in price. 
B) A steeper demand curve for a given price and quantity. 
C) Fewer substitutes. 
D) A high ratio of price to income. 
A) Shorter periods of time to adjust to a change in price. 
B) A steeper demand curve for a given price and quantity. 
C) Fewer substitutes. 
D) A high ratio of price to income.

Question 5

In Figure 20.1,at what price is the elasticity of demand unitary?

Accepted Answer

A) $40. 
B) $100. 
C) $160. 
D) $200. 
A) $40. 
B) $100. 
C) $160. 
D) $200.

Question 6

If a good is normal,its

Accepted Answer

A) Price elasticity of demand is positive. 
B) Income elasticity of demand is negative. 
C) Income elasticity of demand is positive. 
D) Cross-price elasticity is positive. 
A) Price elasticity of demand is positive. 
B) Income elasticity of demand is negative. 
C) Income elasticity of demand is positive. 
D) Cross-price elasticity is positive.

Question 7

In the $80 to $40 price range in Figure 20.1,demand is

Accepted Answer

A) Perfectly price-elastic. 
B) Price-inelastic. 
C) Unitary elastic. 
D) Price-elastic. 
A) Perfectly price-elastic. 
B) Price-inelastic. 
C) Unitary elastic. 
D) Price-elastic.

Question 8

The demand for normal goods

Accepted Answer

A) Rises when incomes fall. 
B) Rises when incomes rise. 
C) Falls when incomes rise. 
D) Shifts to the right when incomes fall. 
A) Rises when incomes fall. 
B) Rises when incomes rise. 
C) Falls when incomes rise. 
D) Shifts to the right when incomes fall.

Question 9

Total revenue is

Accepted Answer

A) Price times income. 
B) Quantity sold times price. 
C) Equal to total profit. 
D) Equal to costs of production. 
A) Price times income. 
B) Quantity sold times price. 
C) Equal to total profit. 
D) Equal to costs of production.

Question 10

Elasticity of supply looks at

Accepted Answer

A) How responsive producers are to a change in quantity demanded. 
B) How much quantity demanded changes with a change in price. 
C) The responsiveness of sellers to a change in consumer's incomes. 
D) How responsive sellers are to a change in price. 
A) How responsive producers are to a change in quantity demanded. 
B) How much quantity demanded changes with a change in price. 
C) The responsiveness of sellers to a change in consumer's incomes. 
D) How responsive sellers are to a change in price.

Question 11

The price elasticity of supply will always be a negative number.

Accepted Answer

A) True 
 B)False

Question 12

A price decrease will cause total revenue to fall if

Accepted Answer

A) Demand is elastic. 
B) Demand is inelastic. 
C) Demand is unitary elastic. 
D) The price elasticity of demand is less than zero. 
A) Demand is elastic. 
B) Demand is inelastic. 
C) Demand is unitary elastic. 
D) The price elasticity of demand is less than zero.

Question 13

Refer to Figure 20.2.Suppose the areas 0P1AB and 0P2CD are equal.We can conclude that the price elasticity of demand between point A and point C is

Accepted Answer

A) Elastic. 
B) Inelastic. 
C) Unitary elastic. 
D) Impossible to determine.It depends on whether the price has increased or decreased. 
A) Elastic. 
B) Inelastic. 
C) Unitary elastic. 
D) Impossible to determine.It depends on whether the price has increased or decreased.

Question 14

Suppose income falls 5 percent in a year,and as a result,housing construction falls from 10 million to 5 million units annually.Based on this information,housing starts are

Accepted Answer

A) An inferior good. 
B) A normal good. 
C) Price-elastic. 
D) Price-inelastic. 
A) An inferior good. 
B) A normal good. 
C) Price-elastic. 
D) Price-inelastic.

Question 15

Suppose a university raises its tuition by 6 percent and as a result the enrollment of students decreases by 3 percent.The absolute value of the price elasticity of demand is

Accepted Answer

A) 0.5. 
B) 2.0. 
C) 8.0. 
D) 6.0. 
A) 0.5. 
B) 2.0. 
C) 8.0. 
D) 6.0.

Question 16

If the price of gasoline rises by 10 percent and new car sales fall by 5 percent,this indicates that these two goods are complementary.

Accepted Answer

A) True 
 B)False

Question 17

If demand is elastic,a price reduction will lead to an increase in total revenue.

Accepted Answer

A) True 
 B)False

Question 18

Demand is more price-elastic

Accepted Answer

A) In the long run. 
B) If the product is a necessity. 
C) If the product is a small part of the consumer's budget. 
D) If the product has very few substitutes. 
A) In the long run. 
B) If the product is a necessity. 
C) If the product is a small part of the consumer's budget. 
D) If the product has very few substitutes.

Question 19

The sign on the income elasticity formula will be positive for inferior goods and negative for normal goods.

Accepted Answer

A) True 
 B)False

Question 20

If incomes fall by 5 percent and the quantity demanded for new cars falls by 10 percent,

Accepted Answer

A) New cars are a normal good,and the income elasticity is +.5. 
B) New cars are an inferior good,and the income elasticity is +2.0. 
C) New cars are a normal good,and the income elasticity is +2.0. 
D) New cars are an inferior good,and the income elasticity is +0.5. 
A) New cars are a normal good,and the income elasticity is +.5. 
B) New cars are an inferior good,and the income elasticity is +2.0. 
C) New cars are a normal good,and the income elasticity is +2.0. 
D) New cars are an inferior good,and the income elasticity is +0.5.

Exam 20: Elasticity

Which of the following is most likely an inferior good?

If demand is very inelastic,

Suppose the quantity demanded of ski boats falls from 4.0 million to 3.0 million as a result of an average price increase from $20,000 to $25,000 per boat.The absolute value of the price elasticity of demand is closest to

Ceteris paribus,which of the following causes demand to be more elastic with respect to price?

In Figure 20.1,at what price is the elasticity of demand unitary?

If a good is normal,its

In the $80 to $40 price range in Figure 20.1,demand is

The demand for normal goods

Total revenue is

Elasticity of supply looks at

The price elasticity of supply will always be a negative number.

A price decrease will cause total revenue to fall if

Refer to Figure 20.2.Suppose the areas 0P1AB and 0P2CD are equal.We can conclude that the price elasticity of demand between point A and point C is

Suppose income falls 5 percent in a year,and as a result,housing construction falls from 10 million to 5 million units annually.Based on this information,housing starts are

Suppose a university raises its tuition by 6 percent and as a result the enrollment of students decreases by 3 percent.The absolute value of the price elasticity of demand is

If the price of gasoline rises by 10 percent and new car sales fall by 5 percent,this indicates that these two goods are complementary.

If demand is elastic,a price reduction will lead to an increase in total revenue.

Demand is more price-elastic

The sign on the income elasticity formula will be positive for inferior goods and negative for normal goods.

If incomes fall by 5 percent and the quantity demanded for new cars falls by 10 percent,

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

Filters

Refer to Figure 20.2.Suppose the areas 0P₁AB and 0P₂CD are equal.We can conclude that the price elasticity of demand between point A and point C is