Question 1

At a price of $5, quantity demanded is 70; and at a price of $7, quantity demanded is 50. Since total revenue ________ by the price increase, demand must be ________.

Accepted Answer

A)  is increased; elastic 
B)  is decreased; inelastic 
C)  is unchanged; unit elastic 
D)  is unchanged; elastic 
A)  is increased; elastic 
B)  is decreased; inelastic 
C)  is unchanged; unit elastic 
D)  is unchanged; elastic

Question 2

If a decrease in income results in a decrease in the quantity demanded for a product, the product is ________, and the value of the income elasticity of demand is ________.

Accepted Answer

A)  a normal good; positive 
B)  a normal good, negative 
C)  an inferior good; positive 
D)  an inferior good; negative 
A)  a normal good; positive 
B)  a normal good, negative 
C)  an inferior good; positive 
D)  an inferior good; negative

Question 3

Price elasticity of demand is calculated as the ratio of the change in quantity demanded to the change in price.

Accepted Answer

A) True 
 B)False

Question 4

If the elasticity of labor supply is positive, the labor-supply curve would be

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward sloping. 
A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward sloping.

Question 5

Total revenue decreases if price ________ and demand is ________.

Accepted Answer

A)  falls; elastic 
B)  falls; inelastic 
C)  rises; inelastic 
D)  rises; unit elastic 
A)  falls; elastic 
B)  falls; inelastic 
C)  rises; inelastic 
D)  rises; unit elastic

Question 6

If a group has a negative elasticity of labor supply (above some income level), then continued increases in wages will result in decreases in the quantity of labor supplied.

Accepted Answer

A) True 
 B)False

Question 7

Refer to the information provided in Figure 5.6 below to answer the question that follows.   Figure 5.6
-Refer to Figure 5.6. The market is initially in equilibrium at Point A and supply shifts from S1 to S2. Which of the following statements is true?

Accepted Answer

A)  Price will still serve as a rationing device causing quantity supplied to exceed 12 thousand pizzas. 
B)  There is no need for price to serve as a rationing device in this case because the new equilibrium quantity exceeds the original equilibrium quantity. 
C)  Price will still serve as a rationing device causing quantity demanded to fall from 12 to 10 thousand pizzas. 
D)  The market cannot move to a new equilibrium until there is also a change in demand. 
A)  Price will still serve as a rationing device causing quantity supplied to exceed 12 thousand pizzas. 
B)  There is no need for price to serve as a rationing device in this case because the new equilibrium quantity exceeds the original equilibrium quantity. 
C)  Price will still serve as a rationing device causing quantity demanded to fall from 12 to 10 thousand pizzas. 
D)  The market cannot move to a new equilibrium until there is also a change in demand.

Question 8

The All Smiles Greeting Card Company wants to increase the quantity of greeting cards it sells by 20%. If the price elasticity of demand is -5.0, the company must

Accepted Answer

A)  increase price by 4.0%. 
B)  decrease price by 4.0%. 
C)  increase price by 0.25%. 
D)  decrease price by 0.25%. 
A)  increase price by 4.0%. 
B)  decrease price by 4.0%. 
C)  increase price by 0.25%. 
D)  decrease price by 0.25%.

At a price of $5, quantity demanded is 70; and at a price of $7, quantity demanded is 50. Since total revenue by the price increase, demand must be .

If a decrease in income results in a decrease in the quantity demanded for a product, the product is , and the value of the income elasticity of demand is .

Price elasticity of demand is calculated as the ratio of the change in quantity demanded to the change in price.

If the elasticity of labor supply is positive, the labor-supply curve would be

Total revenue decreases if price and demand is .

If a group has a negative elasticity of labor supply (above some income level), then continued increases in wages will result in decreases in the quantity of labor supplied.

Refer to the information provided in Figure 5.6 below to answer the question that follows. Figure 5.6 -Refer to Figure 5.6. The market is initially in equilibrium at Point A and supply shifts from S₁ to S₂. Which of the following statements is true?

The All Smiles Greeting Card Company wants to increase the quantity of greeting cards it sells by 20%. If the price elasticity of demand is -5.0, the company must

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Exam 5: Elasticity

At a price of $5, quantity demanded is 70; and at a price of $7, quantity demanded is 50. Since total revenue ________ by the price increase, demand must be ________.

If a decrease in income results in a decrease in the quantity demanded for a product, the product is ________, and the value of the income elasticity of demand is ________.

Price elasticity of demand is calculated as the ratio of the change in quantity demanded to the change in price.

If the elasticity of labor supply is positive, the labor-supply curve would be

Total revenue decreases if price ________ and demand is ________.

If a group has a negative elasticity of labor supply (above some income level), then continued increases in wages will result in decreases in the quantity of labor supplied.

Refer to the information provided in Figure 5.6 below to answer the question that follows. Figure 5.6 -Refer to Figure 5.6. The market is initially in equilibrium at Point A and supply shifts from S1 to S2. Which of the following statements is true?

The All Smiles Greeting Card Company wants to increase the quantity of greeting cards it sells by 20%. If the price elasticity of demand is -5.0, the company must

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

At a price of $5, quantity demanded is 70; and at a price of $7, quantity demanded is 50. Since total revenue by the price increase, demand must be .

If a decrease in income results in a decrease in the quantity demanded for a product, the product is , and the value of the income elasticity of demand is .

Total revenue decreases if price and demand is .

Refer to the information provided in Figure 5.6 below to answer the question that follows. Figure 5.6 -Refer to Figure 5.6. The market is initially in equilibrium at Point A and supply shifts from S₁ to S₂. Which of the following statements is true?