Question 1

FIGURE 4- 2
-Refer to Figure 4- 2. The price elasticity of demand is continuously increasing as the price falls in part(s)

Accepted Answer

A)  1. 
B)  2. 
C)  1, 2, and 3. 
D)  2, 3, and 4. 
E)  none of the above 
A)  1. 
B)  2. 
C)  1, 2, and 3. 
D)  2, 3, and 4. 
E)  none of the above

Question 2

Income elasticity measures the change in quantity demanded of some product with respect to changes in

Accepted Answer

A)  its price. 
B)  the demand of the product. 
C)  the price of another related product. 
D)  households' income. 
E)  the supply of the product. 
A)  its price. 
B)  the demand of the product. 
C)  the price of another related product. 
D)  households' income. 
E)  the supply of the product.

Question 3

$\text { Demand Schedule for Ski Tickets }$
$\begin{array}{|l|l|}
\hline \text { Price (\$) } & \begin{array}{l}
\text { Quantity } \
\text { Demanded (no. of } \
\text { tickets) }
\end{array} \\hline 120 & 0 \
\hline 110 & 100 \
\hline 100 & 200 \
\hline 90 & 300 \
\hline 80 & 400 \
\hline 70 & 500 \
\hline 60 & 600 \\hline 50 & 700 \
\hline 40 & 800 \
\hline 30 & 900 \
\hline 20 & 1000 \
\hline 10 & 1100 \
\hline 0 & 1200 \
\hline
\end{array}$
$\text { TABLE 4-2 }$
-Refer to Table 4- 2. Using the data provided to plot the demand curve for ski tickets results in a
Demand curve. Price elasticity along this demand curve is therefore _ as price is falling.

Accepted Answer

A)  rectangular hyperbola; constant at a value of 1 
B)  horizontal; constant at a value of 8 
C)  downward sloping and linear; continuously decreasing 
D)  vertical; constant at a value of 0 
E)  downward sloping and linear; continuously increasing 
A)  rectangular hyperbola; constant at a value of 1 
B)  horizontal; constant at a value of 8 
C)  downward sloping and linear; continuously decreasing 
D)  vertical; constant at a value of 0 
E)  downward sloping and linear; continuously increasing

Question 4

As the price for some product increases from $4.00 to $5.00 per unit, quantity demanded decreases from 400 to 300 units per month. For this segment of the demand curve, the price elasticity of demand is

Accepted Answer

A)  7. 
B)  9. 
C)  1. 
D)  9/7. 
E)  7/9. 
A)  7. 
B)  9. 
C)  1. 
D)  9/7. 
E)  7/9.

Question 5

Suppose the cross- elasticity of demand for two goods, X and Y, is positive. If the price of Y falls, then quantity demanded will

Accepted Answer

A)  rise for X and fall for Y. 
B)  fall for X and rise for Y. 
C)  fall for both goods. 
D)  remain the same for both goods. 
E)  rise for both goods. 
A)  rise for X and fall for Y. 
B)  fall for X and rise for Y. 
C)  fall for both goods. 
D)  remain the same for both goods. 
E)  rise for both goods.

Question 6

If the price elasticity of demand is 0.5, then a 10 percent increase in price results in a

Accepted Answer

A)  5 percent decrease in quantity demanded. 
B)  50 percent reduction in quantity demanded. 
C)  5 percent increase in quantity demanded. 
D)  0.5 percent decrease in quantity demanded. 
E)  5 percent decrease in total revenues. 
A)  5 percent decrease in quantity demanded. 
B)  50 percent reduction in quantity demanded. 
C)  5 percent increase in quantity demanded. 
D)  0.5 percent decrease in quantity demanded. 
E)  5 percent decrease in total revenues.

Question 7

A value of zero for the elasticity of supply of some product implies that

Accepted Answer

A)  the supply curve is horizontal. 
B)  the product will not be supplied at any price. 
C)  there is no supply. 
D)  supply is highly responsive to price. 
E)  the supply curve is vertical. 
A)  the supply curve is horizontal. 
B)  the product will not be supplied at any price. 
C)  there is no supply. 
D)  supply is highly responsive to price. 
E)  the supply curve is vertical.

Question 8

FIGURE 4- 3
-Refer to Figure 4- 3, which shows a demand shift and the short- run and long- run supply curves for some product. The diagram illustrates the general principle that

Accepted Answer

A)  demand is less elastic in the long run. 
B)  both demand and supply are less elastic in the long run. 
C)  demand is more elastic in the long run. 
D)  supply is less elastic in the long run. 
E)  supply is more elastic in the long run. 
A)  demand is less elastic in the long run. 
B)  both demand and supply are less elastic in the long run. 
C)  demand is more elastic in the long run. 
D)  supply is less elastic in the long run. 
E)  supply is more elastic in the long run.

Question 9

The formula for the own- price elasticity of demand for a commodity can be written as which of the following?

Accepted Answer

A)  $\frac{\text {change in quantity demanded }}{\text { change in price}}$ 
B)  $\frac{\text {perentage changeinprice }}{\text {percentage change inquantity demanded }}$ 
C)  $\frac{\text {change in price }}{\text {change in quantity demanded }}$ 
D)  $\frac{\text {perentage change in quantity demanded}}{\text { percentage change in price }}$ 
E)  $\frac{\text {percentage change in one price  }}{\text { percentage change in the other price}}$ 
A)  $\frac{\text {change in quantity demanded }}{\text { change in price}}$ 
B)  $\frac{\text {perentage changeinprice }}{\text {percentage change inquantity demanded }}$ 
C)  $\frac{\text {change in price }}{\text {change in quantity demanded }}$ 
D)  $\frac{\text {perentage change in quantity demanded}}{\text { percentage change in price }}$ 
E)  $\frac{\text {percentage change in one price  }}{\text { percentage change in the other price}}$

Question 10

FIGURE 4- 1
-Refer to Figure 4- 1, which shows two demand curves, one linear and the other a rectangular hyperbola. In diagram 1, the price elasticity of demand

Accepted Answer

A)  at point A is equal to that at point C. 
B)  is equal at points A, B, and C. 
C)  at point A is greater than at point C. 
D)  at point A is less than at point C. 
E)  at point A is equal to that at point B. 
A)  at point A is equal to that at point C. 
B)  is equal at points A, B, and C. 
C)  at point A is greater than at point C. 
D)  at point A is less than at point C. 
E)  at point A is equal to that at point B.

Question 11

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

Question 12

If the total expenditure on automobiles increases when the price of automobiles rises, the price elasticity of demand for automobiles is

Accepted Answer

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

Question 13

FIGURE 4- 2
-Refer to Figure 4- 2. In part 1 of the figure, the elasticity of demand over the price range $14 to $16 is

Accepted Answer

A)  0. 
B)  less than 1. 
C)  1. 
D)  greater than 1. 
E)  infinity. 
A)  0. 
B)  less than 1. 
C)  1. 
D)  greater than 1. 
E)  infinity.

Question 14

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

Accepted Answer

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

Question 15

Consider two demand curves and the same price change for both. If the resulting percentage change in quantity demanded is greater for one (D1) than the other (D2), we can conclude

Accepted Answer

A)  that D1 is elastic and D2 is inelastic. 
B)  that D2 is more elastic than D1. 
C)  that D1 is inelastic and D2 is elastic. 
D)  that D1 is more elastic than D2. 
E)  nothing about their relative elasticities. 
A)  that D1 is elastic and D2 is inelastic. 
B)  that D2 is more elastic than D1. 
C)  that D1 is inelastic and D2 is elastic. 
D)  that D1 is more elastic than D2. 
E)  nothing about their relative elasticities.

Question 16

FIGURE 4- 2
-Refer to Figure 4- 2. In part 2 of the figure, the elasticity of demand is

Accepted Answer

A)  0. 
B)  less than 1. 
C)  1. 
D)  greater than 1. 
E)  infinity. 
A)  0. 
B)  less than 1. 
C)  1. 
D)  greater than 1. 
E)  infinity.

Question 17

Nancy's income has just risen from $950 per week to $1,050 per week. As a result, she decides to double the number of movies she attends each week. Nancy's demand for movies is

Accepted Answer

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

Question 18

FIGURE 4- 2
-Refer to Figure 4- 2. As price decreases, total expenditure remains constant in diagram(s)

Accepted Answer

A)  1. 
B)  2. 
C)  3. 
D)  4. 
E)  2 and 4. 
A)  1. 
B)  2. 
C)  3. 
D)  4. 
E)  2 and 4.

Question 19

Given that elasticity of supply changes over time, in the short run an increase in demand will generally cause

Accepted Answer

A)  the quantity exchanged to rise above its long- run equilibrium value. 
B)  the price to rise to a level below its long- run equilibrium value. 
C)  the price to rise above its long- run equilibrium value. 
D)  both price and quantity exchanged to rise above their long- run equilibrium values. 
E)  supply to change. 
A)  the quantity exchanged to rise above its long- run equilibrium value. 
B)  the price to rise to a level below its long- run equilibrium value. 
C)  the price to rise above its long- run equilibrium value. 
D)  both price and quantity exchanged to rise above their long- run equilibrium values. 
E)  supply to change.

Question 20

Suppose you are advising the government on changes in the gasoline market. The current price is
$1.00 per litre and the quantity demanded is 2.5 million litres per day. Long- run price elasticity of demand is constant at 0.8. If the supply of gasoline is reduced so that the price rises to $1.50 per litre, then quantity demanded is predicted to fall in the long run by

Accepted Answer

A)  32 percent, and total expenditure will rise. 
B)  50 percent, and total expenditure will rise. 
C)  15 percent, and total expenditure will fall. 
D)  15 percent, and total expenditure will rise. 
E)  12 percent, and total expenditure will fall. 
A)  32 percent, and total expenditure will rise. 
B)  50 percent, and total expenditure will rise. 
C)  15 percent, and total expenditure will fall. 
D)  15 percent, and total expenditure will rise. 
E)  12 percent, and total expenditure will fall.

FIGURE 4- 2 -Refer to Figure 4- 2. The price elasticity of demand is continuously increasing as the price falls in part(s)

Income elasticity measures the change in quantity demanded of some product with respect to changes in

As the price for some product increases from $4.00 to $5.00 per unit, quantity demanded decreases from 400 to 300 units per month. For this segment of the demand curve, the price elasticity of demand is

Suppose the cross- elasticity of demand for two goods, X and Y, is positive. If the price of Y falls, then quantity demanded will

If the price elasticity of demand is 0.5, then a 10 percent increase in price results in a

A value of zero for the elasticity of supply of some product implies that

FIGURE 4- 3 -Refer to Figure 4- 3, which shows a demand shift and the short- run and long- run supply curves for some product. The diagram illustrates the general principle that

The formula for the own- price elasticity of demand for a commodity can be written as which of the following?

FIGURE 4- 1 -Refer to Figure 4- 1, which shows two demand curves, one linear and the other a rectangular hyperbola. In diagram 1, the price elasticity of demand

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)

If the total expenditure on automobiles increases when the price of automobiles rises, the price elasticity of demand for automobiles is

FIGURE 4- 2 -Refer to Figure 4- 2. In part 1 of the figure, the elasticity of demand over the price range $14 to $16 is

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

Consider two demand curves and the same price change for both. If the resulting percentage change in quantity demanded is greater for one (D1) than the other (D2), we can conclude

FIGURE 4- 2 -Refer to Figure 4- 2. In part 2 of the figure, the elasticity of demand is

Nancy's income has just risen from $950 per week to $1,050 per week. As a result, she decides to double the number of movies she attends each week. Nancy's demand for movies is

FIGURE 4- 2 -Refer to Figure 4- 2. As price decreases, total expenditure remains constant in diagram(s)

Given that elasticity of supply changes over time, in the short run an increase in demand will generally cause

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Markets in Action

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets

Interest Rates and the Capital Market

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

The Gains From International Trade

Trade Policy

Filters

Exam 4: Elasticity

FIGURE 4- 2 -Refer to Figure 4- 2. The price elasticity of demand is continuously increasing as the price falls in part(s)

Income elasticity measures the change in quantity demanded of some product with respect to changes in

As the price for some product increases from $4.00 to $5.00 per unit, quantity demanded decreases from 400 to 300 units per month. For this segment of the demand curve, the price elasticity of demand is

Suppose the cross- elasticity of demand for two goods, X and Y, is positive. If the price of Y falls, then quantity demanded will

If the price elasticity of demand is 0.5, then a 10 percent increase in price results in a

A value of zero for the elasticity of supply of some product implies that

FIGURE 4- 3 -Refer to Figure 4- 3, which shows a demand shift and the short- run and long- run supply curves for some product. The diagram illustrates the general principle that

The formula for the own- price elasticity of demand for a commodity can be written as which of the following?

FIGURE 4- 1 -Refer to Figure 4- 1, which shows two demand curves, one linear and the other a rectangular hyperbola. In diagram 1, the price elasticity of demand

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)

If the total expenditure on automobiles increases when the price of automobiles rises, the price elasticity of demand for automobiles is

FIGURE 4- 2 -Refer to Figure 4- 2. In part 1 of the figure, the elasticity of demand over the price range $14 to $16 is

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

Consider two demand curves and the same price change for both. If the resulting percentage change in quantity demanded is greater for one (D1) than the other (D2), we can conclude

FIGURE 4- 2 -Refer to Figure 4- 2. In part 2 of the figure, the elasticity of demand is

Nancy's income has just risen from $950 per week to $1,050 per week. As a result, she decides to double the number of movies she attends each week. Nancy's demand for movies is

FIGURE 4- 2 -Refer to Figure 4- 2. As price decreases, total expenditure remains constant in diagram(s)

Given that elasticity of supply changes over time, in the short run an increase in demand will generally cause

Economic Issues and Concepts

Economic Theories, Data, and Graphs

Demand, Supply, and Price

Markets in Action

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, Cartels, and Price Discrimination

Imperfect Competition

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets

Interest Rates and the Capital Market

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

The Gains From International Trade

Trade Policy

Filters