Question 1

Price elasticity of supply is used to gauge

Accepted Answer

A)  how responsive suppliers are to price changes. 
B)  how responsive suppliers are to changes in future prices. 
C)  how responsive suppliers are to a change in demand. 
D)  how responsive sales are to a change in input prices. 
A)  how responsive suppliers are to price changes. 
B)  how responsive suppliers are to changes in future prices. 
C)  how responsive suppliers are to a change in demand. 
D)  how responsive sales are to a change in input prices.

Question 2

Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his household income was $30,000. This year, his household income fell to $20,000 and Sefton purchased 80 pounds of potatoes. All else constant, Sefton's income elasticity of demand for potatoes is

Accepted Answer

A)  negative, so Sefton considers potatoes to be an inferior good. 
B)  positive, so Sefton considers potatoes to be an inferior good. 
C)  positive, so Sefton considers potatoes to be a normal good and a necessity. 
D)  negative, so Sefton considers potatoes to be a normal good. 
A)  negative, so Sefton considers potatoes to be an inferior good. 
B)  positive, so Sefton considers potatoes to be an inferior good. 
C)  positive, so Sefton considers potatoes to be a normal good and a necessity. 
D)  negative, so Sefton considers potatoes to be a normal good.

Question 3

When Audrina raised the price of her homemade cookies, her total revenue increased. This suggests that the demand for Audrina's cookies is elastic.

Accepted Answer

A) True 
 B)False

Question 4

When demand is unit elastic, a change in price causes total revenue to stay the same because

Accepted Answer

A)  the percentage change in quantity demanded exactly offsets the percentage change in price. 
B)  buyers are buying the same quantity. 
C)  total revenue never changes with price changes. 
D)  the change in profit is offset by the change in production cost. 
A)  the percentage change in quantity demanded exactly offsets the percentage change in price. 
B)  buyers are buying the same quantity. 
C)  total revenue never changes with price changes. 
D)  the change in profit is offset by the change in production cost.

Question 5

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value). This means that a 20 percent increase in the price of beef, holding every thing else constant, will cause the quantity of beef demanded to

Accepted Answer

A)  decrease by 12 percent. 
B)  decrease by 26 percent. 
C)  decrease by 32 percent. 
D)  decrease by 60 percent. 
A)  decrease by 12 percent. 
B)  decrease by 26 percent. 
C)  decrease by 32 percent. 
D)  decrease by 60 percent.

Question 6

Suppose the current price of oil is $50 a barrel and the quantity supplied is 800 million barrels per day. If the price elasticity of supply for oil in the short run is estimated at 0.5, use the midpoint formula to calculate the percentage change in quantity supplied when the price of oil rises to $58 a barrel.

Accepted Answer

The percentage change in quant

Question 7

If the absolute value of the price elasticity of demand for gasoline is 0.5, then a 10 percent increase in the price of gasoline leads to a 0.5 percent decrease in the quantity demanded.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is true?

Accepted Answer

A)  If the price of a good is lowered and total revenue decreases, demand is elastic. 
B)  If the price of a good is raised and total revenue does not change, demand is perfectly elastic. 
C)  If the price of a good is raised and total revenue increases, demand is inelastic. 
D)  If the price of a good is lowered and total revenue increases, demand is inelastic. 
A)  If the price of a good is lowered and total revenue decreases, demand is elastic. 
B)  If the price of a good is raised and total revenue does not change, demand is perfectly elastic. 
C)  If the price of a good is raised and total revenue increases, demand is inelastic. 
D)  If the price of a good is lowered and total revenue increases, demand is inelastic.

Question 9

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is ________ than 0, and the good is ________ good.

Accepted Answer

A)  greater; an inferior 
B)  less; a normal 
C)  less; an inferior 
D)  greater; a normal 
A)  greater; an inferior 
B)  less; a normal 
C)  less; an inferior 
D)  greater; a normal

Question 10

The U.S. government's focus on supply reduction efforts in its "war on drugs" has been relatively unsuccessful at addressing illegal drug use. Some economists believe that a successful anti-drug program must concentrate on reducing demand; for example, through drug education and voluntary treatment programs for addicts.
a. What will happen to the equilibrium price, quantity, and total revenue from cocaine sales if the government succeeds in its efforts to reduce demand? What is likely to happen to the incentive to sell cocaine?
b. Suppose the government continues to concentrate its efforts on supply reduction and is able to reduce the supply of cocaine. As a result of the reduction in supply the price of cocaine increases by 25 percent. If the price elasticity of demand is -0.5, what is likely to happen to the incentive to sell cocaine?
c. Based on your answers, explain why one approach might be preferred over the other.

Accepted Answer

a. A decrease in demand will lead to a d

Question 11

Suppose the demand curve for a product is represented by a typical downward-sloping curve. Now suppose the demand for this product decreases. Which of the following statements accurately predicts the resulting decrease in price?

Accepted Answer

A)  The more elastic the supply curve, the greater the price increase. 
B)  The more elastic the supply curve, the smaller the price decrease. 
C)  The increase in price is not affected by the elasticity of the supply curve. 
D)  The decrease in price will always be proportional to the magnitude of the demand shift. 
A)  The more elastic the supply curve, the greater the price increase. 
B)  The more elastic the supply curve, the smaller the price decrease. 
C)  The increase in price is not affected by the elasticity of the supply curve. 
D)  The decrease in price will always be proportional to the magnitude of the demand shift.

Question 12

A supply curve that is vertical

Accepted Answer

A)  is perfectly elastic. 
B)  is perfectly inelastic. 
C)  is impossible. 
D)  has an elasticity equal to 1. 
A)  is perfectly elastic. 
B)  is perfectly inelastic. 
C)  is impossible. 
D)  has an elasticity equal to 1.

Question 13

The estimated price elasticities of demand for the products listed in the table as "Product A" are from Table 6-2 in the text. Indicate whether the products listed as "Product B" will have a more elastic or less elastic demand than the corresponding Product A.

Accepted Answer

The answer of The estimated price elasticities of demand for...

Question 14

Economists use the concept of ________ to measure how one economic variable, such as quantity, responds to a change in another economic variable, such as price.

Accepted Answer

A)  slope 
B)  efficiency 
C)  relativity 
D)  elasticity 
A)  slope 
B)  efficiency 
C)  relativity 
D)  elasticity

Question 15

With the increased usage of cell phone services, what has happened to the price elasticity of demand for land-line telephone services?

Accepted Answer

A)  It has become more price inelastic. 
B)  It has become more price elastic. 
C)  It has become more income elastic. 
D)  The absolute value of the price elasticity coefficient has probably gone down. 
A)  It has become more price inelastic. 
B)  It has become more price elastic. 
C)  It has become more income elastic. 
D)  The absolute value of the price elasticity coefficient has probably gone down.

Question 16

Holding everything else constant, the absolute value of the price elasticity of demand for Saucony tennis shoes is ________ the price elasticity of demand for tennis shoes in general.

Accepted Answer

A)  less than 
B)  equal to 
C)  twice as great as 
D)  greater than 
A)  less than 
B)  equal to 
C)  twice as great as 
D)  greater than

Question 17

The demand for gasoline in the short run is

Accepted Answer

A)  elastic because people can easily switch to public transportation. 
B)  perfectly inelastic because people have no choice but to buy gasoline. 
C)  unit elastic because people tend to consume a stable amount of gasoline per period. 
D)  inelastic because there are very few good substitutes for gasoline. 
A)  elastic because people can easily switch to public transportation. 
B)  perfectly inelastic because people have no choice but to buy gasoline. 
C)  unit elastic because people tend to consume a stable amount of gasoline per period. 
D)  inelastic because there are very few good substitutes for gasoline.

Question 18

A perfectly elastic demand curve is

Accepted Answer

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

Question 19

Jill Borts believes that the price elasticity of demand for her economics textbook is relatively inelastic. She argues "I was told I had to purchase a book written by Hubbard and O'Brien that is required by my instructor. If I wanted to buy a mystery novel I would have many authors to choose from. Therefore, the demand for mystery novels is more elastic than the demand for my textbook." Is Jill correct?

Accepted Answer

A)  The demand for the textbook is more inelastic, but Jill's reasoning is incorrect. The reason the textbook has an inelastic demand is that it is more expensive than any novel. 
B)  She is correct. 
C)  She is confused. She should have concluded that the textbook has a more elastic demand than a novel. 
D)  She is correct that the textbook has a more inelastic demand, but that is because most students pay for their textbooks with credit cards. Most people pay for novels and other books with debit cards. 
A)  The demand for the textbook is more inelastic, but Jill's reasoning is incorrect. The reason the textbook has an inelastic demand is that it is more expensive than any novel. 
B)  She is correct. 
C)  She is confused. She should have concluded that the textbook has a more elastic demand than a novel. 
D)  She is correct that the textbook has a more inelastic demand, but that is because most students pay for their textbooks with credit cards. Most people pay for novels and other books with debit cards.

Question 20

The price elasticity of supply is usually a positive number because

Accepted Answer

A)  quantity supplied increases in response to income increases. 
B)  quantity supplied increases in response to price increases. 
C)  the quantity demanded usually rises when price falls and therefore suppliers would want to capitalize on this increase in demand. 
D)  price rises when supply increases. 
A)  quantity supplied increases in response to income increases. 
B)  quantity supplied increases in response to price increases. 
C)  the quantity demanded usually rises when price falls and therefore suppliers would want to capitalize on this increase in demand. 
D)  price rises when supply increases.

Exam 6: Elasticity: the Responsiveness of Demand and Supply

Price elasticity of supply is used to gauge

Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his household income was $30,000. This year, his household income fell to $20,000 and Sefton purchased 80 pounds of potatoes. All else constant, Sefton's income elasticity of demand for potatoes is

When Audrina raised the price of her homemade cookies, her total revenue increased. This suggests that the demand for Audrina's cookies is elastic.

When demand is unit elastic, a change in price causes total revenue to stay the same because

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value). This means that a 20 percent increase in the price of beef, holding every thing else constant, will cause the quantity of beef demanded to

If the absolute value of the price elasticity of demand for gasoline is 0.5, then a 10 percent increase in the price of gasoline leads to a 0.5 percent decrease in the quantity demanded.

Which of the following statements is true?

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is ________ than 0, and the good is ________ good.

Suppose the demand curve for a product is represented by a typical downward-sloping curve. Now suppose the demand for this product decreases. Which of the following statements accurately predicts the resulting decrease in price?

A supply curve that is vertical

The estimated price elasticities of demand for the products listed in the table as "Product A" are from Table 6-2 in the text. Indicate whether the products listed as "Product B" will have a more elastic or less elastic demand than the corresponding Product A.

Economists use the concept of ________ to measure how one economic variable, such as quantity, responds to a change in another economic variable, such as price.

With the increased usage of cell phone services, what has happened to the price elasticity of demand for land-line telephone services?

Holding everything else constant, the absolute value of the price elasticity of demand for Saucony tennis shoes is ________ the price elasticity of demand for tennis shoes in general.

The demand for gasoline in the short run is

A perfectly elastic demand curve is

The price elasticity of supply is usually a positive number because

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is than 0, and the good is good.