Question 1

The cross-price elasticity of demand between good X and good Y is -3. Given this information, which of the following statements is true?

Accepted Answer

A)  The demand for goods X and Y is elastic. 
B)  Goods X and Y are substitutes. 
C)  Goods X and Y are complements. 
D)  The demand for goods X and Y is income elastic. 
A)  The demand for goods X and Y is elastic. 
B)  Goods X and Y are substitutes. 
C)  Goods X and Y are complements. 
D)  The demand for goods X and Y is income elastic.

Question 2

In ________ markets, the elasticity of supply tends to be positive.

Accepted Answer

A)  input 
B)  labor 
C)  output 
D)  all 
A)  input 
B)  labor 
C)  output 
D)  all

Question 3

In order to discourage consumers from consuming sugary soft drinks, the government is considering placing a tax on sugary soft drink sales. Which of the following statements is true?

Accepted Answer

A)  Given the numerous alternatives, consumers' demand for sugary soft drinks is relatively elastic and the tax will likely work to discourage sugary soft drink consumption. 
B)  The tax on sugary soft drinks will likely raise considerable revenue, but will be unlikely to reduce the consumption of sugary soft drinks by consumers. 
C)  The tax on sugary soft drinks will likely decrease the demand for sugar-free soft drinks. 
D)  Taxes do not discourage consumers from consuming products. 
A)  Given the numerous alternatives, consumers' demand for sugary soft drinks is relatively elastic and the tax will likely work to discourage sugary soft drink consumption. 
B)  The tax on sugary soft drinks will likely raise considerable revenue, but will be unlikely to reduce the consumption of sugary soft drinks by consumers. 
C)  The tax on sugary soft drinks will likely decrease the demand for sugar-free soft drinks. 
D)  Taxes do not discourage consumers from consuming products.

Question 4

When there are fewer substitutes for a product, the ________ for the product is ________.

Accepted Answer

A)  demand; less price elastic 
B)  demand; more price elastic 
C)  income elasticity; greater 
D)  income elasticity; smaller 
A)  demand; less price elastic 
B)  demand; more price elastic 
C)  income elasticity; greater 
D)  income elasticity; smaller

Question 5

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 the intersection of the demand curve and supply curve S2. If supply shifts from S2 to S1, which of the following statements is true?

Accepted Answer

A)  Price will still serve as a rationing device causing quantity supplied to exceed 12 pizzas. 
B)  There is no need for price to serve as a rationing device in this case because the new equilibrium quantity is less than the original equilibrium quantity. 
C)  Price will still serve as a rationing device causing quantity demanded to rise from 10 to 12 pizzas. 
D)  The market cannot move to a new equilibrium unless demand shifts at the same time that supply shifts. 
A)  Price will still serve as a rationing device causing quantity supplied to exceed 12 pizzas. 
B)  There is no need for price to serve as a rationing device in this case because the new equilibrium quantity is less than the original equilibrium quantity. 
C)  Price will still serve as a rationing device causing quantity demanded to rise from 10 to 12 pizzas. 
D)  The market cannot move to a new equilibrium unless demand shifts at the same time that supply shifts.

Question 6

Demand is more elastic for an item which represents a relatively large part of a person's total budget.

Accepted Answer

A) True 
 B)False

Question 7

Demand is more inelastic for an item which is a luxury as compared to an item which is a necessity.

Accepted Answer

A) True 
 B)False

Question 8

Perfectly inelastic demand is represented as a vertical line.

Accepted Answer

A) True 
 B)False

Question 9

The cross-price elasticity of demand between good X and good Y is -0.8. Given this information, which of the following statements is true?

Accepted Answer

A)  The demand for goods X and Y is elastic. 
B)  Goods X and Y are substitutes. 
C)  Goods X and Y are complements. 
D)  The demand for goods X and Y is income elastic. 
A)  The demand for goods X and Y is elastic. 
B)  Goods X and Y are substitutes. 
C)  Goods X and Y are complements. 
D)  The demand for goods X and Y is income elastic.

Question 10

Refer to the information provided in Figure 5.3 below to answer the question(s) that follow.   Figure 5.3
-Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger increases from $8 to $10, the price elasticity of demand equals ________ and demand is ________.

Accepted Answer

A)  4.5; elastic 
B)  -0.5; inelastic 
C)  -4.5; elastic 
D)  -9.0; inelastic 
A)  4.5; elastic 
B)  -0.5; inelastic 
C)  -4.5; elastic 
D)  -9.0; inelastic

Question 11

The price elasticity of demand is generally negative to reflect the indirect relationship between the quantity demanded of a good and its price.

Accepted Answer

A) True 
 B)False

Question 12

A firm is currently producing in the elastic portion of its demand curve. What course of action do you recommend for it assuming it wants to raise revenue?

Accepted Answer

A)  Continue producing at the current output level, because it maximizes its total revenue by producing in the elastic portion of its demand curve. 
B)  Reduce price, because if it reduces price and demand is elastic, total revenue will increase. 
C)  Increase price, because if it increases price and demand is elastic, total revenue will increase. 
D)  Continue selling at the same price, but increase the amount it produces. 
A)  Continue producing at the current output level, because it maximizes its total revenue by producing in the elastic portion of its demand curve. 
B)  Reduce price, because if it reduces price and demand is elastic, total revenue will increase. 
C)  Increase price, because if it increases price and demand is elastic, total revenue will increase. 
D)  Continue selling at the same price, but increase the amount it produces.

Question 13

Demand determines price entirely when

Accepted Answer

A)  demand is downward sloping. 
B)  demand is perfectly inelastic. 
C)  supply is perfectly inelastic. 
D)  supply is perfectly elastic. 
A)  demand is downward sloping. 
B)  demand is perfectly inelastic. 
C)  supply is perfectly inelastic. 
D)  supply is perfectly elastic.

Question 14

If an increase 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 15

Refer to the information provided in Figure 5.7 below to answer the question(s) that follow.   Figure 5.7
The above figure represents the market for pumpkins both before and after the imposition of an excise tax, which is represented by the shift of the supply curve.
-Refer to Figure 5.7. Had the demand for pumpkins been perfectly inelastic at Point A, the amount customers would have paid per pumpkin after the imposition of this tax would have been

Accepted Answer

A)  $0. 
B)  $5.50. 
C)  $7.25. 
D)  $8.50. 
A)  $0. 
B)  $5.50. 
C)  $7.25. 
D)  $8.50.

Question 16

When demand is unit elastic, a decrease in price will result in no change in total revenue.

Accepted Answer

A) True 
 B)False

Question 17

If the supply of oranges is unit elastic, the price elasticity of supply of oranges is

Accepted Answer

A)  1.0. 
B)  0.0. 
C)  -1.0. 
D)  -100.0. 
A)  1.0. 
B)  0.0. 
C)  -1.0. 
D)  -100.0.

Question 18

The price elasticity of demand for alfalfa is perfectly elastic. Thus, the price elasticity demand for alfalfa is

Accepted Answer

A)  1.0. 
B)  0.0. 
C)  -1.0. 
D)  infinity. 
A)  1.0. 
B)  0.0. 
C)  -1.0. 
D)  infinity.

Question 19

Refer to the information provided in Figure 5.4 below to answer the question(s) that follow.   Figure 5.4
-Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If the milkshake price rises from P2 to P1, total revenue will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  either increase or decrease. 
A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  either increase or decrease.

Question 20

Refer to the information provided in Figure 5.7 below to answer the question(s) that follow.   Figure 5.7
The above figure represents the market for pumpkins both before and after the imposition of an excise tax, which is represented by the shift of the supply curve.
-Refer to Figure 5.7. The amount by which the store owners will raise the price of pumpkins after the imposition of the tax is ________ per pumpkin.

Accepted Answer

A)  $1.25 
B)  $1.75 
C)  $3.00 
D)  $7.25 
A)  $1.25 
B)  $1.75 
C)  $3.00 
D)  $7.25

The cross-price elasticity of demand between good X and good Y is -3. Given this information, which of the following statements is true?

In ________ markets, the elasticity of supply tends to be positive.

In order to discourage consumers from consuming sugary soft drinks, the government is considering placing a tax on sugary soft drink sales. Which of the following statements is true?

When there are fewer substitutes for a product, the for the product is .

Demand is more elastic for an item which represents a relatively large part of a person's total budget.

Demand is more inelastic for an item which is a luxury as compared to an item which is a necessity.

Perfectly inelastic demand is represented as a vertical line.

The cross-price elasticity of demand between good X and good Y is -0.8. Given this information, which of the following statements is true?

Refer to the information provided in Figure 5.3 below to answer the question(s) that follow. Figure 5.3 -Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger increases from $8 to $10, the price elasticity of demand equals and demand is .

The price elasticity of demand is generally negative to reflect the indirect relationship between the quantity demanded of a good and its price.

A firm is currently producing in the elastic portion of its demand curve. What course of action do you recommend for it assuming it wants to raise revenue?

Demand determines price entirely when

If an increase 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 .

When demand is unit elastic, a decrease in price will result in no change in total revenue.

If the supply of oranges is unit elastic, the price elasticity of supply of oranges is

The price elasticity of demand for alfalfa is perfectly elastic. Thus, the price elasticity demand for alfalfa is

Refer to the information provided in Figure 5.4 below to answer the question(s) that follow. Figure 5.4 -Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If the milkshake price rises from P₂ to P₁, total revenue will

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

The cross-price elasticity of demand between good X and good Y is -3. Given this information, which of the following statements is true?

In ________ markets, the elasticity of supply tends to be positive.

In order to discourage consumers from consuming sugary soft drinks, the government is considering placing a tax on sugary soft drink sales. Which of the following statements is true?

When there are fewer substitutes for a product, the ________ for the product 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 the intersection of the demand curve and supply curve S2. If supply shifts from S2 to S1, which of the following statements is true?

Demand is more elastic for an item which represents a relatively large part of a person's total budget.

Demand is more inelastic for an item which is a luxury as compared to an item which is a necessity.

Perfectly inelastic demand is represented as a vertical line.

The cross-price elasticity of demand between good X and good Y is -0.8. Given this information, which of the following statements is true?

Refer to the information provided in Figure 5.3 below to answer the question(s) that follow. Figure 5.3 -Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger increases from $8 to $10, the price elasticity of demand equals ________ and demand is ________.

The price elasticity of demand is generally negative to reflect the indirect relationship between the quantity demanded of a good and its price.

A firm is currently producing in the elastic portion of its demand curve. What course of action do you recommend for it assuming it wants to raise revenue?

Demand determines price entirely when

If an increase 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 ________.

When demand is unit elastic, a decrease in price will result in no change in total revenue.

If the supply of oranges is unit elastic, the price elasticity of supply of oranges is

The price elasticity of demand for alfalfa is perfectly elastic. Thus, the price elasticity demand for alfalfa is

Refer to the information provided in Figure 5.4 below to answer the question(s) that follow. Figure 5.4 -Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If the milkshake price rises from P2 to P1, total revenue will

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

When there are fewer substitutes for a product, the for the product is .

Refer to the information provided in Figure 5.3 below to answer the question(s) that follow. Figure 5.3 -Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger increases from $8 to $10, the price elasticity of demand equals and demand is .

If an increase 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 .

Refer to the information provided in Figure 5.4 below to answer the question(s) that follow. Figure 5.4 -Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If the milkshake price rises from P₂ to P₁, total revenue will