Question 1

Cross elasticity of demand is the percentage change in the quantity __________ of a good divided by the percentage change in __________.

Accepted Answer

A)  demanded; the price of the good 
B)  supplied; the price of the good 
C)  demanded; the price of another good 
D)  supplied; the price of another good 
E)  demanded; income 
A)  demanded; the price of the good 
B)  supplied; the price of the good 
C)  demanded; the price of another good 
D)  supplied; the price of another good 
E)  demanded; income

Question 2

A good will tend to have a low price elasticity of demand if

Accepted Answer

A)  the good has few substitutes. 
B)  a person spends a high percentage of his or her budget on the good. 
C)  a person has a long period of time to adjust to price changes. 
D)  the good is a luxury. 
A)  the good has few substitutes. 
B)  a person spends a high percentage of his or her budget on the good. 
C)  a person has a long period of time to adjust to price changes. 
D)  the good is a luxury.

Question 3

Suppose at a price of $4 and at a price of $6,John purchases 40 units of good X.Given this information,we know that

Accepted Answer

A)  John's entire demand curve for good X is perfectly elastic. 
B)  John's demand for good X is inelastic. 
C)  John's demand for good X is perfectly inelastic between the prices of $4 and $6. 
D)  John's demand for good X is perfectly elastic between the prices of $4 and $6. 
E)  John's demand for good X is unit elastic. 
A)  John's entire demand curve for good X is perfectly elastic. 
B)  John's demand for good X is inelastic. 
C)  John's demand for good X is perfectly inelastic between the prices of $4 and $6. 
D)  John's demand for good X is perfectly elastic between the prices of $4 and $6. 
E)  John's demand for good X is unit elastic.

Question 4

Vernon spends the following percentages of his budget on the following goods: 23 percent on good A,11 percent on good B,1 percent on good C,and 3 percent on good D.For which good is price elasticity of demand the highest,ceteris paribus?

Accepted Answer

A)  good A 
B)  good B 
C)  good C 
D)  good D 
A)  good A 
B)  good B 
C)  good C 
D)  good D

Question 5

A Ford Mustang would tend to be more elastic in demand than cars as a whole.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 20-7
  
-Refer to Exhibit 20-7.Which of the graphs shows a perfectly inelastic demand curve?

Accepted Answer

A)  (1) 
B)  (2) 
C)  (3) and (4) 
D)  none of the above 
A)  (1) 
B)  (2) 
C)  (3) and (4) 
D)  none of the above

Question 7

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 S1to S2.As a result,the equilibrium price

Accepted Answer

A)  rises from $5.00 to $6.25. 
B)  falls from $5.00 to $4.00. 
C)  remains constant at $5.00. 
D)  none of the above 
A)  rises from $5.00 to $6.25. 
B)  falls from $5.00 to $4.00. 
C)  remains constant at $5.00. 
D)  none of the above

Question 8

When quantity demanded increases,total revenue

Accepted Answer

A)  increases. 
B)  decreases. 
C)  increases, if demand is elastic. 
D)  increases, if demand is inelastic. 
E)  increases, depending on whether price increases as well. 
A)  increases. 
B)  decreases. 
C)  increases, if demand is elastic. 
D)  increases, if demand is inelastic. 
E)  increases, depending on whether price increases as well.

Question 9

If good Z has an income elasticity of 1.0,then demand for good Z is income __________ and the good is __________.

Accepted Answer

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

Question 10

If income elasticity of demand is 2.12,it means that quantity demanded will __________ by 2.12 percent for every __________ percent __________ in income.

Accepted Answer

A)  rise; 2.12; fall 
B)  rise; 1.0; rise 
C)  fall; 1.0; rise 
D)  fall; 2.12; fall 
E)  none of the above 
A)  rise; 2.12; fall 
B)  rise; 1.0; rise 
C)  fall; 1.0; rise 
D)  fall; 2.12; fall 
E)  none of the above

Question 11

Exhibit 20-6
  
-Refer to Exhibit 20-6.Let S1 be the supply curve of a firm.If S2represents the supply curve of the same firm after the government imposes a per-unit tax,the tax is

Accepted Answer

A)  $1 per unit. 
B)  $2 per unit. 
C)  $3 per unit. 
D)  -$1 per unit, i.e., a subsidy of $1. 
A)  $1 per unit. 
B)  $2 per unit. 
C)  $3 per unit. 
D)  -$1 per unit, i.e., a subsidy of $1.

Question 12

Airlines that try to lower fares in order to increase revenue must believe that the demand for airline service is

Accepted Answer

A)  price inelastic. 
B)  income elastic. 
C)  income inelastic. 
D)  price elastic. 
E)  cross-price elastic. 
A)  price inelastic. 
B)  income elastic. 
C)  income inelastic. 
D)  price elastic. 
E)  cross-price elastic.

Question 13

If a good is income elastic,it follows that the percentage change in quantity demanded of a good

Accepted Answer

A)  is less than the percentage change in income. 
B)  is greater than the percentage change in income. 
C)  is equal to the percentage change in income. 
D)  is greater than the percentage change in the price of another good. 
E)  none of the above 
A)  is less than the percentage change in income. 
B)  is greater than the percentage change in income. 
C)  is equal to the percentage change in income. 
D)  is greater than the percentage change in the price of another good. 
E)  none of the above

Question 14

Which of the following statements represents a correct and sequentially accurate economic explanation?

Accepted Answer

A)  A tax is placed on the production of good X, the supply curve of good X shifts to the left, equilibrium price rises, equilibrium quantity falls, and buyers pay 100 percent of the tax. 
B)  A tax is placed on the production of good X, the supply curve of good X shifts to the left, equilibrium price rises, equilibrium quantity stays constant, and buyers pay 100 percent of the tax. 
C)  A tax is placed on the production of good X, the supply curve of good X shifts to the left, equilibrium price does not change, equilibrium quantity rises, and sellers pay 50 percent of the tax. 
D)  A tax is placed on the production of good X, the supply curve of good X shifts to the right, equilibrium price falls, equilibrium quantity falls, and sellers pay 100 percent of the tax. 
A)  A tax is placed on the production of good X, the supply curve of good X shifts to the left, equilibrium price rises, equilibrium quantity falls, and buyers pay 100 percent of the tax. 
B)  A tax is placed on the production of good X, the supply curve of good X shifts to the left, equilibrium price rises, equilibrium quantity stays constant, and buyers pay 100 percent of the tax. 
C)  A tax is placed on the production of good X, the supply curve of good X shifts to the left, equilibrium price does not change, equilibrium quantity rises, and sellers pay 50 percent of the tax. 
D)  A tax is placed on the production of good X, the supply curve of good X shifts to the right, equilibrium price falls, equilibrium quantity falls, and sellers pay 100 percent of the tax.

Question 15

The price elasticity of demand would most likely be highest for which of the following goods?

Accepted Answer

A)  food (in general) 
B)  cars (in general) 
C)  clothing (in general) 
D)  Ford cars 
E)  a, b, or c 
A)  food (in general) 
B)  cars (in general) 
C)  clothing (in general) 
D)  Ford cars 
E)  a, b, or c

Question 16

If the demand for a good is unit elastic and the price of the good increases,then

Accepted Answer

A)  total revenue increases. 
B)  total revenue decreases. 
C)  total revenue is not affected. 
D)  the direction of the change in total revenue cannot be determined from the information given. 
A)  total revenue increases. 
B)  total revenue decreases. 
C)  total revenue is not affected. 
D)  the direction of the change in total revenue cannot be determined from the information given.

Question 17

The fewer substitutes for a good,

Accepted Answer

A)  the lower its income elasticity of demand. 
B)  the higher its income elasticity of demand. 
C)  the lower its price elasticity of demand. 
D)  the higher its price elasticity of demand. 
A)  the lower its income elasticity of demand. 
B)  the higher its income elasticity of demand. 
C)  the lower its price elasticity of demand. 
D)  the higher its price elasticity of demand.

Question 18

Suppose a producer decides that if the price of his or her product is $10,the quantity supplied will be 1,000 units,and if the price is $11,the quantity supplied will be 1,100.The supply of the good is

Accepted Answer

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

Question 19

If the cross elasticity of demand is +2.0,this means that

Accepted Answer

A)  the percentage change in quantity demanded of a product is 2 times the percentage change in price of some other product. 
B)  if quantity demanded of a product fell by 1 percent, price of another product would fall by 2 percent. 
C)  if price of one product was raised by 2 percent, quantity demanded of another product would fall by 2 percent. 
D)  if price of one product was raised 2 percent, quantity demanded of another product would rise 2 percent. 
E)  the percentage change in quantity demanded of a product is 2 times the percentage change in the price of that product. 
A)  the percentage change in quantity demanded of a product is 2 times the percentage change in price of some other product. 
B)  if quantity demanded of a product fell by 1 percent, price of another product would fall by 2 percent. 
C)  if price of one product was raised by 2 percent, quantity demanded of another product would fall by 2 percent. 
D)  if price of one product was raised 2 percent, quantity demanded of another product would rise 2 percent. 
E)  the percentage change in quantity demanded of a product is 2 times the percentage change in the price of that product.

Question 20

Consumers will pay the full tax that is placed on the sellers of a good if demand is __________ or supply is __________.

Accepted Answer

A)  perfectly inelastic; perfectly inelastic 
B)  elastic; inelastic 
C)  perfectly inelastic; unit elastic 
D)  perfectly elastic; perfectly inelastic 
E)  perfectly inelastic; perfectly elastic 
A)  perfectly inelastic; perfectly inelastic 
B)  elastic; inelastic 
C)  perfectly inelastic; unit elastic 
D)  perfectly elastic; perfectly inelastic 
E)  perfectly inelastic; perfectly elastic

Exam 20: Elasticity

Cross elasticity of demand is the percentage change in the quantity __________ of a good divided by the percentage change in __________.

A good will tend to have a low price elasticity of demand if

Suppose at a price of $4 and at a price of $6,John purchases 40 units of good X.Given this information,we know that

Vernon spends the following percentages of his budget on the following goods: 23 percent on good A,11 percent on good B,1 percent on good C,and 3 percent on good D.For which good is price elasticity of demand the highest,ceteris paribus?

A Ford Mustang would tend to be more elastic in demand than cars as a whole.

Exhibit 20-7 -Refer to Exhibit 20-7.Which of the graphs shows a perfectly inelastic demand curve?

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 S1to S2.As a result,the equilibrium price

When quantity demanded increases,total revenue

If good Z has an income elasticity of 1.0,then demand for good Z is income __________ and the good is __________.

If income elasticity of demand is 2.12,it means that quantity demanded will __________ by 2.12 percent for every __________ percent __________ in income.

Exhibit 20-6 -Refer to Exhibit 20-6.Let S1 be the supply curve of a firm.If S2represents the supply curve of the same firm after the government imposes a per-unit tax,the tax is

Airlines that try to lower fares in order to increase revenue must believe that the demand for airline service is

If a good is income elastic,it follows that the percentage change in quantity demanded of a good

Which of the following statements represents a correct and sequentially accurate economic explanation?

The price elasticity of demand would most likely be highest for which of the following goods?

If the demand for a good is unit elastic and the price of the good increases,then

The fewer substitutes for a good,

Suppose a producer decides that if the price of his or her product is $10,the quantity supplied will be 1,000 units,and if the price is $11,the quantity supplied will be 1,100.The supply of the good is

If the cross elasticity of demand is +2.0,this means that

Consumers will pay the full tax that is placed on the sellers of a good if demand is __________ or supply is __________.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

Cross elasticity of demand is the percentage change in the quantity of a good divided by the percentage change in .

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 S₁to S₂.As a result,the equilibrium price

If good Z has an income elasticity of 1.0,then demand for good Z is income and the good is .

If income elasticity of demand is 2.12,it means that quantity demanded will by 2.12 percent for every percent __ in income.

Exhibit 20-6 -Refer to Exhibit 20-6.Let S₁be the supply curve of a firm.If S₂represents the supply curve of the same firm after the government imposes a per-unit tax,the tax is

Consumers will pay the full tax that is placed on the sellers of a good if demand is or supply is .