Question 1

$\begin{array}{c}
\begin{array}{c}
 \text {Price}\
14\
16\
18\
20\
22 
\end{array}
\begin{array}{c}
\text {Quantity Demanded}\
220 \
200 \
180 \
160 \
140 
\end{array}
\end{array}$

-Refer to the information above to answer this question. Over what price range is demand elastic?

Accepted Answer

A)  $14 to $16. 
B)  $14 to $20. 
C)  $16 to $18. 
D)  $16 to $20. 
E)  $18 to $22. 
A)  $14 to $16. 
B)  $14 to $20. 
C)  $16 to $18. 
D)  $16 to $20. 
E)  $18 to $22.

Question 2

$$\begin{array} { c c c } 
& \text { Quantity } & \text { Quantity } \
\text { Price \$ } & \text { Demanded } & \text { Supplied } \
7 & 80 & 40 \
8 & 70 & 50 \
9 & 60 & 60 \
10 & 50 & 70 \
11 & 40 & 80
\end{array}$$
-Refer to the information above to answer this question. All of the following statements except one are correct. Which is the exception?

Accepted Answer

A)  The equilibrium price and quantity are $9 and 60. 
B)  At a price of $7, there is a surplus of 40. 
C)  At a price of $10, there is a surplus of 20. 
D)  At a price of $8, there is a shortage of 20. 
A)  The equilibrium price and quantity are $9 and 60. 
B)  At a price of $7, there is a surplus of 40. 
C)  At a price of $10, there is a surplus of 20. 
D)  At a price of $8, there is a shortage of 20.

Question 3

Graphically, what is the effect of imposing an excise tax on a product?

Accepted Answer

A)  It will shift both the supply and the demand curve for the product to the left. 
B)  It will shift the supply curve for the product to the left. 
C)  It will shift the supply curve for the product to the right. 
D)  It will shift both the supply and the demand curve for the product to the right. 
E)  It will shift the supply curve for the product to the left and the demand curve to the right. 
A)  It will shift both the supply and the demand curve for the product to the left. 
B)  It will shift the supply curve for the product to the left. 
C)  It will shift the supply curve for the product to the right. 
D)  It will shift both the supply and the demand curve for the product to the right. 
E)  It will shift the supply curve for the product to the left and the demand curve to the right.

Question 4

The graph below illustrates three demand curves.
  
-Refer to the graph above to answer this question. Which of the following statements is correct?

Accepted Answer

A)  The price elasticity of demand between points A and B on D2 is 0.5. 
B)  D1 illustrates an inferior good. 
C)  The slope of all three demand curves is constant. 
D)  The shift from D1 to D2 could illustrate a change in the quantity demanded for a product as a result of a decrease in the price of a substitute good. 
A)  The price elasticity of demand between points A and B on D2 is 0.5. 
B)  D1 illustrates an inferior good. 
C)  The slope of all three demand curves is constant. 
D)  The shift from D1 to D2 could illustrate a change in the quantity demanded for a product as a result of a decrease in the price of a substitute good.

Question 5

What term is used to describe quantities demanded that do not change much in response to a change in price?

Accepted Answer

A)  Inelastic demand. 
B)  Elastic demand. 
C)  Unitary elasticity. 
D)  Price elasticity of demand. 
E)  The elasticity coefficient. 
A)  Inelastic demand. 
B)  Elastic demand. 
C)  Unitary elasticity. 
D)  Price elasticity of demand. 
E)  The elasticity coefficient.

Question 6

The Dean of Arts recently announced a 20% increase in tuition and explained that the increase was needed to raise the university's revenue. Which of the following might the Dean be assuming about the elasticity of demand for education at her school?

Accepted Answer

A)  It is elastic. 
B)  It is inelastic. 
C)  It is perfectly elastic. 
D)  It could be either elastic or perfectly elastic. 
A)  It is elastic. 
B)  It is inelastic. 
C)  It is perfectly elastic. 
D)  It could be either elastic or perfectly elastic.

Question 7

What is the likely effect of the government reducing the supply of illegal drugs?

Accepted Answer

A)  The total amount spent on drugs will decrease. 
B)  The total amount spent on drugs will increase. 
C)  The quantity of drugs consumed will remain unchanged. 
D)  The demand for drugs will fall. 
E)  The demand for drugs will increase. 
A)  The total amount spent on drugs will decrease. 
B)  The total amount spent on drugs will increase. 
C)  The quantity of drugs consumed will remain unchanged. 
D)  The demand for drugs will fall. 
E)  The demand for drugs will increase.

Question 8

Below are some data on price, income and demand for five different time periods.
 $$\begin{array} { l l c c c c } 
\text { Year } & \text { Income } & \text { Price of X } & \begin{array} { l } 
\text { Quantity } \
\text { Demanded } \
\text { of } \mathbf { X}
\end{array} & \text { Price of Y } & \begin{array} { l } 
\text { Quantity } \
\text { Demanded } \
\text { of Y }
\end{array} \
1 & \$ 40000 & \$ 140 & 50 & \$ 40 & 200 \
2 & 40000 & 150 & 40 & 40 & 160 \
3 & 40000 & 150 & 30 & 70 & 140 \
4 & 50000 & 150 & 40 & 70 & 160 \
5 & 50000 & 160 & 50 & 90 & 200
\end{array}$$
-Refer to the information above to answer this question. What is the cross price elasticity of demand of product X for Y between years 4 and 5?

Accepted Answer

A)  - 0.89. 
B)  + 3.0. 
C)  - 3.42. 
D)  Cannot be determined. 
A)  - 0.89. 
B)  + 3.0. 
C)  - 3.42. 
D)  Cannot be determined.

Question 9

A firm's total revenue is equal to price times demand.

Accepted Answer

A) True 
 B)False

Question 10

What is the effect on tax revenue if the government increases the excise tax on a product that has an inelastic demand?

Accepted Answer

A)  Tax revenue will rise. 
B)  Tax revenue will fall. 
C)  The price of the product will rise but the quantity traded will remain unchanged. 
D)  The price of the product will rise and the quantity traded will rise. 
A)  Tax revenue will rise. 
B)  Tax revenue will fall. 
C)  The price of the product will rise but the quantity traded will remain unchanged. 
D)  The price of the product will rise and the quantity traded will rise.

Question 11

What is the relationship between goods A and B if an increase in the price of A leads to an increase in the quantity demanded of B?

Accepted Answer

A)  A and B are complementary goods. 
B)  A and B are substitute goods. 
C)  A must be an inferior good while B must be a normal good. 
D)  B must be an inferior good while A must be a normal good. 
A)  A and B are complementary goods. 
B)  A and B are substitute goods. 
C)  A must be an inferior good while B must be a normal good. 
D)  B must be an inferior good while A must be a normal good.

Question 12

If the price of Moonlight massage oil decreases from $3 to $2.50 and, as a result, total revenue of $6,000 does not change, what is the elasticity of demand?

Accepted Answer

A)  0.22. 
B)  0.55. 
C)  1. 
D)  1.2. 
E)  1.67. 
A)  0.22. 
B)  0.55. 
C)  1. 
D)  1.2. 
E)  1.67.

Question 13

Under which of the following situations will total revenue fall?

Accepted Answer

A) If elasticity is > 1 and price falls. B) If elasticity is > 1 and price rises. C) If elasticity is < 1 and price rises. D) If elasticity is = 1 and price falls. A) If elasticity is > 1 and price falls. B) If elasticity is > 1 and price rises. C) If elasticity is < 1 and price rises. D) If elasticity is = 1 and price falls.

Question 14

Below are some data on price, income and demand for five different time periods.
 $$\begin{array} { l l c c c c } 
\text { Year } & \text { Income } & \text { Price of X } & \begin{array} { l } 
\text { Quantity } \
\text { Demanded } \
\text { of } \mathbf { X}
\end{array} & \text { Price of Y } & \begin{array} { l } 
\text { Quantity } \
\text { Demanded } \
\text { of Y }
\end{array} \
1 & \$ 40000 & \$ 140 & 50 & \$ 40 & 200 \
2 & 40000 & 150 & 40 & 40 & 160 \
3 & 40000 & 150 & 30 & 70 & 140 \
4 & 50000 & 150 & 40 & 70 & 160 \
5 & 50000 & 160 & 50 & 90 & 200
\end{array}$$
-Refer to the information above to answer this question. What is the price elasticity of demand for product Y between years 2 and 3?

Accepted Answer

A)  0.18. 
B)  0.24. 
C)  3.00. 
D)  4.09. 
E)  Infinity. 
A)  0.18. 
B)  0.24. 
C)  3.00. 
D)  4.09. 
E)  Infinity.

Question 15

The graph below shows the supply and demand for tickets to a Raptors basketball game.
  
-Refer to the graph above to answer this question. Which of the following statements is correct regarding the change in the demand curve from D1 to D2?

Accepted Answer

A)  Demand has decreased by 7,500. 
B)  Demand has increased by 7,500. 
C)  Demand has decreased by 20. 
D)  Demand has increased by 20. 
E)  None of the choices are correct. 
A)  Demand has decreased by 7,500. 
B)  Demand has increased by 7,500. 
C)  Demand has decreased by 20. 
D)  Demand has increased by 20. 
E)  None of the choices are correct.

Question 16

Suppose that the value of the income elasticity of demand for a product is -2 and average incomes decrease by 10%. What will happen to the quantity demanded?

Accepted Answer

A)  It will increase by 5%. 
B)  It will increase by 20%. 
C)  It will decrease by 5%. 
D)  It will decrease by 20%. 
E)  It cannot be determined without further information. 
A)  It will increase by 5%. 
B)  It will increase by 20%. 
C)  It will decrease by 5%. 
D)  It will decrease by 20%. 
E)  It cannot be determined without further information.

Question 17

Which of the following statements is most likely true about the price elasticity of demand for beer?

Accepted Answer

A)  It is perfectly elastic. 
B)  It is perfectly inelastic. 
C)  It is more elastic than the demand for Labatt's Blue. 
D)  It is less elastic than the demand for Molson's Canadian. 
A)  It is perfectly elastic. 
B)  It is perfectly inelastic. 
C)  It is more elastic than the demand for Labatt's Blue. 
D)  It is less elastic than the demand for Molson's Canadian.

Question 18

If the government puts a $2 excise tax on a product and as a result, price rises by $0.75, which of the following statements is correct?

Accepted Answer

A)  The sellers pay more of the tax than the buyers. 
B)  The buyers pay more of the tax than the sellers. 
C)  The government's tax revenue falls. 
D)  The quantity demanded of the product falls by 37.5%. 
E)  The quantity demanded of the product rises by 37.5%. 
A)  The sellers pay more of the tax than the buyers. 
B)  The buyers pay more of the tax than the sellers. 
C)  The government's tax revenue falls. 
D)  The quantity demanded of the product falls by 37.5%. 
E)  The quantity demanded of the product rises by 37.5%.

Question 19

What is price elasticity of demand?

Accepted Answer

A)  The responsiveness of price to a change in the quantity demanded. 
B)  The responsiveness of quantity demanded to a change in price. 
C)  Price divided by quantity demanded. 
D)  Price multiplied by quantity demanded. 
A)  The responsiveness of price to a change in the quantity demanded. 
B)  The responsiveness of quantity demanded to a change in price. 
C)  Price divided by quantity demanded. 
D)  Price multiplied by quantity demanded.

Question 20

The list below refers to the price elasticity of demand.
1) perfectly inelastic
2) perfectly elastic
3) unitary elasticity
4) elastic
5) inelastic
-Refer to the information above to answer this question. What is a demand when the elasticity coefficient is less than 1 but greater than 0?

Accepted Answer

A)  1. 
B)  2. 
C)  3. 
D)  4. 
E)  5. 
A)  1. 
B)  2. 
C)  3. 
D)  4. 
E)  5.

Price 14 16 18 20 22 Quantity Demanded 220 200 180 160 140 -Refer to the information above to answer this question. Over what price range is demand elastic?

Quantity Quantity Price \ Demanded Supplied 7 80 40 8 70 50 9 60 60 10 50 70 11 40 80 -Refer to the information above to answer this question. All of the following statements except one are correct. Which is the exception?

Graphically, what is the effect of imposing an excise tax on a product?

The graph below illustrates three demand curves. -Refer to the graph above to answer this question. Which of the following statements is correct?

What term is used to describe quantities demanded that do not change much in response to a change in price?

The Dean of Arts recently announced a 20% increase in tuition and explained that the increase was needed to raise the university's revenue. Which of the following might the Dean be assuming about the elasticity of demand for education at her school?

What is the likely effect of the government reducing the supply of illegal drugs?

A firm's total revenue is equal to price times demand.

What is the effect on tax revenue if the government increases the excise tax on a product that has an inelastic demand?

What is the relationship between goods A and B if an increase in the price of A leads to an increase in the quantity demanded of B?

If the price of Moonlight massage oil decreases from $3 to $2.50 and, as a result, total revenue of $6,000 does not change, what is the elasticity of demand?

Under which of the following situations will total revenue fall?

The graph below shows the supply and demand for tickets to a Raptors basketball game. -Refer to the graph above to answer this question. Which of the following statements is correct regarding the change in the demand curve from D₁ to D₂?

Suppose that the value of the income elasticity of demand for a product is -2 and average incomes decrease by 10%. What will happen to the quantity demanded?

Which of the following statements is most likely true about the price elasticity of demand for beer?

If the government puts a $2 excise tax on a product and as a result, price rises by $0.75, which of the following statements is correct?

What is price elasticity of demand?

The list below refers to the price elasticity of demand. 1) perfectly inelastic 2) perfectly elastic 3) unitary elasticity 4) elastic 5) inelastic -Refer to the information above to answer this question. What is a demand when the elasticity coefficient is less than 1 but greater than 0?

The Economic Problem

Demand and Supply: an Introduction

Demand and Supply: an Elaboration

Consumer Choice

A Firms Production Decisions and Costs in the Short Run

Costs in the Long Run

An Evaluation of Competitive Markets

Monopoly

Imperfect Competition

The Factors of Production

International Trade

Filters

Exam 4: Elasticity

Price 14 16 18 20 22 Quantity Demanded 220 200 180 160 140 -Refer to the information above to answer this question. Over what price range is demand elastic?

Quantity Quantity Price \ Demanded Supplied 7 80 40 8 70 50 9 60 60 10 50 70 11 40 80 -Refer to the information above to answer this question. All of the following statements except one are correct. Which is the exception?

Graphically, what is the effect of imposing an excise tax on a product?

The graph below illustrates three demand curves. -Refer to the graph above to answer this question. Which of the following statements is correct?

What term is used to describe quantities demanded that do not change much in response to a change in price?

The Dean of Arts recently announced a 20% increase in tuition and explained that the increase was needed to raise the university's revenue. Which of the following might the Dean be assuming about the elasticity of demand for education at her school?

What is the likely effect of the government reducing the supply of illegal drugs?

A firm's total revenue is equal to price times demand.

What is the effect on tax revenue if the government increases the excise tax on a product that has an inelastic demand?

What is the relationship between goods A and B if an increase in the price of A leads to an increase in the quantity demanded of B?

If the price of Moonlight massage oil decreases from $3 to $2.50 and, as a result, total revenue of $6,000 does not change, what is the elasticity of demand?

Under which of the following situations will total revenue fall?

The graph below shows the supply and demand for tickets to a Raptors basketball game. -Refer to the graph above to answer this question. Which of the following statements is correct regarding the change in the demand curve from D1 to D2?

Suppose that the value of the income elasticity of demand for a product is -2 and average incomes decrease by 10%. What will happen to the quantity demanded?

Which of the following statements is most likely true about the price elasticity of demand for beer?

If the government puts a $2 excise tax on a product and as a result, price rises by $0.75, which of the following statements is correct?

What is price elasticity of demand?

The list below refers to the price elasticity of demand. 1) perfectly inelastic 2) perfectly elastic 3) unitary elasticity 4) elastic 5) inelastic -Refer to the information above to answer this question. What is a demand when the elasticity coefficient is less than 1 but greater than 0?

The Economic Problem

Demand and Supply: an Introduction

Demand and Supply: an Elaboration

Consumer Choice

A Firms Production Decisions and Costs in the Short Run

Costs in the Long Run

An Evaluation of Competitive Markets

Monopoly

Imperfect Competition

The Factors of Production

International Trade

Filters

The graph below shows the supply and demand for tickets to a Raptors basketball game. -Refer to the graph above to answer this question. Which of the following statements is correct regarding the change in the demand curve from D₁ to D₂?