Question 1

If total expenditure on a product rises and falls directly with a productʹs price,then demand for this product has an elasticity of

Accepted Answer

A) zero. 
B) less than one. 
C) greater than one. 
D) one. 
E) direct proportions. 
A) zero. 
B) less than one. 
C) greater than one. 
D) one. 
E) direct proportions.

Question 2

If the total expenditure on clothing decreases when the price of clothing falls,the price elasticity of demand is

Accepted Answer

A) greater than one (demand is elastic). 
B) less than one (demand is inelastic). 
C) unity (demand is unit elastic). 
D) exactly zero. 
E) not determinable from the information given. 
A) greater than one (demand is elastic). 
B) less than one (demand is inelastic). 
C) unity (demand is unit elastic). 
D) exactly zero. 
E) not determinable from the information given.

Question 3

Consumers will bear a larger burden of an excise tax if

Accepted Answer

A) demand is relatively elastic and supply is relatively inelastic. 
B) demand is relatively inelastic and supply is relatively elastic. 
C) both demand and supply are relatively inelastic. 
D) both demand and supply are relatively elastic. 
E) the tax is collected by firms rather than remitted directly to the government by consumers. 
A) demand is relatively elastic and supply is relatively inelastic. 
B) demand is relatively inelastic and supply is relatively elastic. 
C) both demand and supply are relatively inelastic. 
D) both demand and supply are relatively elastic. 
E) the tax is collected by firms rather than remitted directly to the government by consumers.

Question 4

A vertical demand curve shows that the price elasticity of demand is

Accepted Answer

A) zero. 
B) unity. 
C) less than one. 
D) infinity. 
E) not defined. 
A) zero. 
B) unity. 
C) less than one. 
D) infinity. 
E) not defined.

Question 5

Consider a firmʹs price elasticity of supply.If firmsʹ costs rise rapidly as output increases,the

Accepted Answer

A) supply curve will tend to be flat. 
B) demand curve will tend to be steep. 
C) elasticity of demand will tend to be low. 
D) price elasticity of supply will tend to be high. 
E) price elasticity of supply will tend to be low. 
A) supply curve will tend to be flat. 
B) demand curve will tend to be steep. 
C) elasticity of demand will tend to be low. 
D) price elasticity of supply will tend to be high. 
E) price elasticity of supply will tend to be low.

Question 6

Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit.The price elasticity of demand for this product is

Accepted Answer

A) 0.5. 
B) 1.0. 
C) 1.5. 
D) 2.0. 
E) 4.0. 
A) 0.5. 
B) 1.0. 
C) 1.5. 
D) 2.0. 
E) 4.0.

Question 7

Suppose the current level of output of some good is 100 units.If market demand is inelastic at that quantity,total expenditure on this product would be higher if output was

Accepted Answer

A) maximized. 
B) kept constant. 
C) greater than 100 units. 
D) less than 100 units. 
E) minimized. 
A) maximized. 
B) kept constant. 
C) greater than 100 units. 
D) less than 100 units. 
E) minimized.

Question 8

If household expenditures on electricity remain constant when the price of electricity increases,the price elasticity for electricity is

Accepted Answer

A) greater than one (demand is elastic). 
B) less than one (demand is inelastic). 
C) one (demand is unit elastic). 
D) exactly zero. 
E) not determinable from the information given. 
A) greater than one (demand is elastic). 
B) less than one (demand is inelastic). 
C) one (demand is unit elastic). 
D) exactly zero. 
E) not determinable from the information given.

Question 9

Consider an excise tax imposed on daily parking charges in the downtown of a small city.Before the imposition of the tax,equilibrium price and quantity are $15 and 100 cars parked.(P = $15,Q = 100).The city government imposes a tax of $3 per car parked per day.Market equilibrium adjusts to P = $16 and Q = 95.After imposition of the tax,what is the daily after -tax price received by the seller per car parked?

Accepted Answer

A) $1 
B) $3 
C) $13 
D) $15 
E) $16 
A) $1 
B) $3 
C) $13 
D) $15 
E) $16

Question 10

A perfectly horizontal demand curve shows that the price elasticity of demand is

Accepted Answer

A) zero. 
B) unity. 
C) less than one. 
D) infinite. 
E) not defined. 
A) zero. 
B) unity. 
C) less than one. 
D) infinite. 
E) not defined.

Question 11

If per capita income increases by 10% and household expenditure on fur coats increases by 15%,one can conclude that the price elasticity of demand for fur coats is

Accepted Answer

A) elastic. 
B) inelastic. 
C) unity. 
D) positive. 
E) not determinable from the information given. 
A) elastic. 
B) inelastic. 
C) unity. 
D) positive. 
E) not determinable from the information given.

Question 12

When the percentage change in quantity demanded is greater than the percentage change in price that brought it about,demand is said to be

Accepted Answer

A) zero elastic. 
B) unelastic. 
C) inelastic. 
D) unit elastic. 
E) elastic. 
A) zero elastic. 
B) unelastic. 
C) inelastic. 
D) unit elastic. 
E) elastic.

Question 13

If a producer knew his product to be an inferior good and he also knew average household income was falling,he might

Accepted Answer

A) decrease output because the demand for his product would rise. 
B) increase output because the demand for his product would rise. 
C) keep his output the same. 
D) cut output immediately because the demand for his product would surely fall. 
E) close down,because inferior goods are the first to be eliminated from household budgets when income falls. 
A) decrease output because the demand for his product would rise. 
B) increase output because the demand for his product would rise. 
C) keep his output the same. 
D) cut output immediately because the demand for his product would surely fall. 
E) close down,because inferior goods are the first to be eliminated from household budgets when income falls.

Question 14

The imposition of an excise tax will cause the least burden on consumers when demand is

Accepted Answer

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

Question 15

If the demand for some good fluctuates,but the supply curve is stable,then which of the following combinations would generally yield the greatest quantity fluctuations?

Accepted Answer

A) large demand fluctuations and inelastic supply 
B) small demand fluctuations and unit elastic supply 
C) small demand fluctuations and inelastic supply 
D) small demand fluctuations and elastic supply 
E) large demand fluctuations and elastic supply 
A) large demand fluctuations and inelastic supply 
B) small demand fluctuations and unit elastic supply 
C) small demand fluctuations and inelastic supply 
D) small demand fluctuations and elastic supply 
E) large demand fluctuations and elastic supply

Question 16

Elasticity of demand for prescription drugs is estimated to be much lower than elasticity of demand for one particular brand of over-the-counter cough medicine.One reason for this is

Accepted Answer

A) there are many substitutes for prescription drugs in the short run. 
B) there are many substitutes for prescription drugs in the long run. 
C) there are no substitutes for one brand of cough medicine in the short run. 
D) there are no substitutes for one brand of cough medicine in the long run. 
E) there are few substitutes for the broad category of prescription drugs while there are many substitutes for one brand of cough medicine. 
A) there are many substitutes for prescription drugs in the short run. 
B) there are many substitutes for prescription drugs in the long run. 
C) there are no substitutes for one brand of cough medicine in the short run. 
D) there are no substitutes for one brand of cough medicine in the long run. 
E) there are few substitutes for the broad category of prescription drugs while there are many substitutes for one brand of cough medicine.

Question 17

Suppose the supply curve for breakfast cereals is upward sloping.Suppose also that as average household income increases we observe a fall in the price of breakfast cereal.We can conclude that breakfast cereal is a(n)

Accepted Answer

A) luxury good. 
B) substitute good. 
C) inferior good. 
D) normal good. 
E) necessity good. 
A) luxury good. 
B) substitute good. 
C) inferior good. 
D) normal good. 
E) necessity good.

Question 18

Consider the following data for a hypothetical economy.   TABLE 4-4
-Refer to Table 4-4.The income elasticity of demand for transit passes in this economy is

Accepted Answer

A) 0.4. 
B) 0.5. 
C) 2.5. 
D) 2.5%. 
E) 3.0%. 
A) 0.4. 
B) 0.5. 
C) 2.5. 
D) 2.5%. 
E) 3.0%.

Question 19

Suppose a market is in equilibrium at price P0,and then an excise tax of t dollars per unit of the good is imposed.At a price of (P0 + t) there will be excess ________ for the good unless the demand curve is ________.

Accepted Answer

A) supply; horizontal 
B) supply; vertical 
C) demand; horizontal 
D) demand; vertical 
E) tax; unit elastic 
A) supply; horizontal 
B) supply; vertical 
C) demand; horizontal 
D) demand; vertical 
E) tax; unit elastic

Question 20

A demand curve that is the shape of a rectangular hyperbola

Accepted Answer

A) is elastic over the whole curve. 
B) is inelastic over the whole curve. 
C) is unit elastic over the whole curve. 
D) has the same elasticity as a straight-line demand curve. 
E) has an elasticity of 100% over the whole curve. 
A) is elastic over the whole curve. 
B) is inelastic over the whole curve. 
C) is unit elastic over the whole curve. 
D) has the same elasticity as a straight-line demand curve. 
E) has an elasticity of 100% over the whole curve.

Exam 4: Elasticity

If total expenditure on a product rises and falls directly with a productʹs price,then demand for this product has an elasticity of

If the total expenditure on clothing decreases when the price of clothing falls,the price elasticity of demand is

Consumers will bear a larger burden of an excise tax if

A vertical demand curve shows that the price elasticity of demand is

Consider a firmʹs price elasticity of supply.If firmsʹ costs rise rapidly as output increases,the

Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit.The price elasticity of demand for this product is

Suppose the current level of output of some good is 100 units.If market demand is inelastic at that quantity,total expenditure on this product would be higher if output was

If household expenditures on electricity remain constant when the price of electricity increases,the price elasticity for electricity is

A perfectly horizontal demand curve shows that the price elasticity of demand is

If per capita income increases by 10% and household expenditure on fur coats increases by 15%,one can conclude that the price elasticity of demand for fur coats is

When the percentage change in quantity demanded is greater than the percentage change in price that brought it about,demand is said to be

If a producer knew his product to be an inferior good and he also knew average household income was falling,he might

The imposition of an excise tax will cause the least burden on consumers when demand is

If the demand for some good fluctuates,but the supply curve is stable,then which of the following combinations would generally yield the greatest quantity fluctuations?

Elasticity of demand for prescription drugs is estimated to be much lower than elasticity of demand for one particular brand of over-the-counter cough medicine.One reason for this is

Suppose the supply curve for breakfast cereals is upward sloping.Suppose also that as average household income increases we observe a fall in the price of breakfast cereal.We can conclude that breakfast cereal is a(n)

Consider the following data for a hypothetical economy. TABLE 4-4 -Refer to Table 4-4.The income elasticity of demand for transit passes in this economy is

Suppose a market is in equilibrium at price P0,and then an excise tax of t dollars per unit of the good is imposed.At a price of (P0 + t) there will be excess ________ for the good unless the demand curve is ________.

A demand curve that is the shape of a rectangular hyperbola

Economic Issues and Concepts

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Price Controls and Market Efficiency

Consumer Behaviour

Producers in the Short Run

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How Factor Markets Work

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Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

What Macroeconomics Is All About

The Measurement of National Income

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Adding Government and Trade to the Simple Macro Model

Output and Prices in the Short Run

From the Short Run to the Long Run: the Adjustment of Factor Prices

Long-Run Economic Growth

Money and Banking

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Monetary Policy in Canada

Inflation and Disinflation

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Suppose a market is in equilibrium at price P0,and then an excise tax of t dollars per unit of the good is imposed.At a price of (P0 + t) there will be excess for the good unless the demand curve is .