Question 1

As the price of a good falls from $5 to $3,the quantity supplied of the good falls from 550 units to 400 units.Price elasticity of supply is

Accepted Answer

A)  0.95. 
B)  1.20. 
C)  1.58. 
D)  0.63. 
A)  0.95. 
B)  1.20. 
C)  1.58. 
D)  0.63. D

Question 2

Exhibit 20-2
  
-Refer to Exhibit 20-2.The market for good X is initially in equilibrium at $5.The government then places a per-unit tax on good X,as shown by the shift of S1 to S2.Approximately what percentage of the tax do consumers end up paying?

Accepted Answer

A)  63 percent 
B)  45 percent 
C)  70 percent 
D)  55 percent 
E)  25 percent 
A)  63 percent 
B)  45 percent 
C)  70 percent 
D)  55 percent 
E)  25 percent D

Question 3

Income rises from $3,500 to $4,000 a month and the quantity demanded of good X falls from 7 to 5 units a month.Income elasticity of demand (for good X)is __________ and good X is a(n)__________ good.

Accepted Answer

A)  -2.50; inferior 
B)  0.40; normal 
C)  -2.28; inferior. 
D)  2.50; normal.. 
E)  0.40; normal. 
A)  -2.50; inferior 
B)  0.40; normal 
C)  -2.28; inferior. 
D)  2.50; normal.. 
E)  0.40; normal. A

Question 4

If the price elasticity of demand for a given product is 7,this means that

Accepted Answer

A)  the percentage change in quantity demanded is 7 times the percentage change in price. 
B)  if quantity demanded fell by 1 percent, price would fall by 7 percent. 
C)  if price was raised 7 percent, quantity demanded would fall by 7 percent. 
D)  if price was raised 7 percent, quantity demanded would rise 7 percent. 
E)  none of the above 
A)  the percentage change in quantity demanded is 7 times the percentage change in price. 
B)  if quantity demanded fell by 1 percent, price would fall by 7 percent. 
C)  if price was raised 7 percent, quantity demanded would fall by 7 percent. 
D)  if price was raised 7 percent, quantity demanded would rise 7 percent. 
E)  none of the above

Question 5

When price = $16,quantity demanded = 200.When price = $14,quantity demanded = 225.When the firm lowered price from $16 to $14,it discovered that demand is __________ and total revenue __________ by ____________,

Accepted Answer

A)  elastic; increased; $3,200 
B)  elastic; decreased; $3,150 
C)  inelastic; increased; $50 
D)  inelastic; decreased; $50 
E)  inelastic; decreased; $3,150 
A)  elastic; increased; $3,200 
B)  elastic; decreased; $3,150 
C)  inelastic; increased; $50 
D)  inelastic; decreased; $50 
E)  inelastic; decreased; $3,150

Question 6

If the price of good A decreases by 10 percent and the quantity demanded of good B increases by 10 percent,this is evidence that goods A and B are

Accepted Answer

A)  substitute for one another. 
B)  complement goods to one another. 
C)  both inferior goods. 
D)  both normal goods. 
E)  not related. 
A)  substitute for one another. 
B)  complement goods to one another. 
C)  both inferior goods. 
D)  both normal goods. 
E)  not related.

Question 7

The existence of substitutes for a good and the percentage of one's budget spent on the good are among the factors that determine how elastic the demand for the good will be.

Accepted Answer

A) True 
 B)False

Question 8

Suppose the demand for a particular good is perfectly inelastic and the government decides to impose a tax on the production of this good.Who will pay the greater share of such a tax?

Accepted Answer

A)  The buyers will pay the entire share. 
B)  The sellers will pay the entire share. 
C)  The buyers and the sellers will pay equal shares. 
D)  The sellers will bear the greater share of the tax. 
A)  The buyers will pay the entire share. 
B)  The sellers will pay the entire share. 
C)  The buyers and the sellers will pay equal shares. 
D)  The sellers will bear the greater share of the tax.

Question 9

It is very important for the seller of a good to know whether the good is elastic,unit elastic,or inelastic in demand so that she will know what will happen to total revenue when she changes the price of the good.

Accepted Answer

A) True 
 B)False

Question 10

Income elasticity of demand for good A is -0.22.Good A is income __________ and is a(n)__________ good.

Accepted Answer

A)  unit elastic; normal 
B)  elastic; inferior 
C)  inelastic; normal 
D)  elastic; normal 
E)  inelastic; inferior 
A)  unit elastic; normal 
B)  elastic; inferior 
C)  inelastic; normal 
D)  elastic; normal 
E)  inelastic; inferior

Question 11

Exhibit 20-1
  
-Refer to Exhibit 20-l.The demand curve D3 is

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  unit elastic. 
D)  perfectly elastic. 
E)  varying in elasticity along its length. 
A)  inelastic. 
B)  elastic. 
C)  unit elastic. 
D)  perfectly elastic. 
E)  varying in elasticity along its length.

Question 12

Demand is elastic,which means that the percentage change in __________ is greater than the percentage change in __________.

Accepted Answer

A)  quantity demanded; income 
B)  quantity demanded; price 
C)  price; quantity demanded 
D)  income; price 
E)  none of the above 
A)  quantity demanded; income 
B)  quantity demanded; price 
C)  price; quantity demanded 
D)  income; price 
E)  none of the above

Question 13

If the price of good X falls and the demand for good X is unit elastic,then the percentage rise in quantity demanded is __________ the percentage fall in price,and total revenue __________.

Accepted Answer

A)  greater than; rises 
B)  less than; falls 
C)  equal to; remains constant 
D)  greater than; falls 
E)  less than; rises 
A)  greater than; rises 
B)  less than; falls 
C)  equal to; remains constant 
D)  greater than; falls 
E)  less than; rises

Question 14

If demand is __________,price and total revenue are __________ related; if demand is __________,price and total revenue are directly related.

Accepted Answer

A)  elastic; inversely; inelastic 
B)  inelastic; inversely; elastic 
C)  unit elastic; not; elastic 
D)  inelastic; inversely; unit elastic 
E)  none of the above 
A)  elastic; inversely; inelastic 
B)  inelastic; inversely; elastic 
C)  unit elastic; not; elastic 
D)  inelastic; inversely; unit elastic 
E)  none of the above

Question 15

If the percentage change in quantity demanded is greater than the percentage change in price,demand is

Accepted Answer

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

Question 16

Exhibit 20-3
  
-Refer to Exhibit 20-3.If price decreases from $5.50 to $4.50,total revenue along the demand curve

Accepted Answer

A)  increases to $67.50. 
B)  increases to $87.50. 
C)  remains at $87.50. 
D)  decreases to $67.50. 
E)  decreases to $27.50. 
A)  increases to $67.50. 
B)  increases to $87.50. 
C)  remains at $87.50. 
D)  decreases to $67.50. 
E)  decreases to $27.50.

Question 17

Exhibit 20-6
  
-Refer to Exhibit 20-6.Suppose the three equilibrium quantities are 700,800,and 900,and the two equilibrium prices are $2.20 and $2.75.What is the tax revenue collected from the tax that shifted S1 to S2 when D2 is the relevant demand curve?

Accepted Answer

A)  $440 
B)  $600 
C)  $800 
D)  $900 
A)  $440 
B)  $600 
C)  $800 
D)  $900

Question 18

The cross elasticity of demand coefficient between Coca-Cola and Pepsi Cola would be expected to be negative.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 20-3
  
-Refer to Exhibit 20-3.If price increases from $2.50 to $3.50,total revenue along the demand curve

Accepted Answer

A)  increases to $67.50. 
B)  increases to $87.50. 
C)  remains at $87.50. 
D)  decreases to $67.50. 
A)  increases to $67.50. 
B)  increases to $87.50. 
C)  remains at $87.50. 
D)  decreases to $67.50.

Question 20

If the percentage change in quantity demanded is less than the percentage change in price,demand is

Accepted Answer

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

Exam 20: Elasticity

As the price of a good falls from $5 to $3,the quantity supplied of the good falls from 550 units to 400 units.Price elasticity of supply is

Exhibit 20-2 -Refer to Exhibit 20-2.The market for good X is initially in equilibrium at $5.The government then places a per-unit tax on good X,as shown by the shift of S1 to S2.Approximately what percentage of the tax do consumers end up paying?

Income rises from $3,500 to $4,000 a month and the quantity demanded of good X falls from 7 to 5 units a month.Income elasticity of demand (for good X)is __________ and good X is a(n)__________ good.

If the price elasticity of demand for a given product is 7,this means that

When price = $16,quantity demanded = 200.When price = $14,quantity demanded = 225.When the firm lowered price from $16 to $14,it discovered that demand is __________ and total revenue __________ by ____________,

If the price of good A decreases by 10 percent and the quantity demanded of good B increases by 10 percent,this is evidence that goods A and B are

The existence of substitutes for a good and the percentage of one's budget spent on the good are among the factors that determine how elastic the demand for the good will be.

Suppose the demand for a particular good is perfectly inelastic and the government decides to impose a tax on the production of this good.Who will pay the greater share of such a tax?

It is very important for the seller of a good to know whether the good is elastic,unit elastic,or inelastic in demand so that she will know what will happen to total revenue when she changes the price of the good.

Income elasticity of demand for good A is -0.22.Good A is income __________ and is a(n)__________ good.

Exhibit 20-1 -Refer to Exhibit 20-l.The demand curve D3 is

Demand is elastic,which means that the percentage change in __________ is greater than the percentage change in __________.

If the price of good X falls and the demand for good X is unit elastic,then the percentage rise in quantity demanded is __________ the percentage fall in price,and total revenue __________.

If demand is __________,price and total revenue are __________ related; if demand is __________,price and total revenue are directly related.

If the percentage change in quantity demanded is greater than the percentage change in price,demand is

Exhibit 20-3 -Refer to Exhibit 20-3.If price decreases from $5.50 to $4.50,total revenue along the demand curve

Exhibit 20-6 -Refer to Exhibit 20-6.Suppose the three equilibrium quantities are 700,800,and 900,and the two equilibrium prices are $2.20 and $2.75.What is the tax revenue collected from the tax that shifted S1 to S2 when D2 is the relevant demand curve?

The cross elasticity of demand coefficient between Coca-Cola and Pepsi Cola would be expected to be negative.

Exhibit 20-3 -Refer to Exhibit 20-3.If price increases from $2.50 to $3.50,total revenue along the demand curve

If the percentage change in quantity demanded is less than the percentage change in price,demand is

What Economics Is About

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Filters

Exhibit 20-2 -Refer to Exhibit 20-2.The market for good X is initially in equilibrium at $5.The government then places a per-unit tax on good X,as shown by the shift of S₁ to S₂.Approximately what percentage of the tax do consumers end up paying?

Income rises from $3,500 to $4,000 a month and the quantity demanded of good X falls from 7 to 5 units a month.Income elasticity of demand (for good X)is and good X is a(n) good.

When price = $16,quantity demanded = 200.When price = $14,quantity demanded = 225.When the firm lowered price from $16 to $14,it discovered that demand is and total revenue by ____,

Income elasticity of demand for good A is -0.22.Good A is income and is a(n) good.

Exhibit 20-1 -Refer to Exhibit 20-l.The demand curve D₃ is

Demand is elastic,which means that the percentage change in is greater than the percentage change in .

If the price of good X falls and the demand for good X is unit elastic,then the percentage rise in quantity demanded is the percentage fall in price,and total revenue .

If demand is ,price and total revenue are related; if demand is __,price and total revenue are directly related.

Exhibit 20-6 -Refer to Exhibit 20-6.Suppose the three equilibrium quantities are 700,800,and 900,and the two equilibrium prices are $2.20 and $2.75.What is the tax revenue collected from the tax that shifted S₁ to S₂ when D₂ is the relevant demand curve?