Question 1

Suppose the demand curve is perfectly inelastic and the government imposes a tax of $2 per unit. What portion of the tax will be paid by the producer?

Accepted Answer

The more inelastic the demand curve of a

Question 2

Under which of the following two scenarios would demand for hot dogs be more elastic? Explain.
(a) You are at a hockey game at the local ice rink and want to eat a hot dog.
(b) It is Tuesday, you are planning the menu for a picnic you are going to have on Saturday and you decide to serve hot dogs.

Accepted Answer

Demand for hot dogs will be more elastic

Question 3

When is the percentage change in quantity exactly equal to the percentage change in price?

Accepted Answer

A)  When there is unitary elasticity. 
B)  When demand is inelastic. 
C)  When demand is elastic. 
D)  When demand does not change. 
A)  When there is unitary elasticity. 
B)  When demand is inelastic. 
C)  When demand is elastic. 
D)  When demand does not change.

Question 4

If the short-run price elasticity of demand for petroleum is 0.8, which of the following statements is most likely to be true for the long run?

Accepted Answer

A)  The price elasticity of demand will be less than 0.8. 
B)  The price elasticity of demand will be greater than 0.8. 
C)  The price elasticity of demand will be 0.8. 
D)  No generalization can be made about the differences between the short run and the long run. 
A)  The price elasticity of demand will be less than 0.8. 
B)  The price elasticity of demand will be greater than 0.8. 
C)  The price elasticity of demand will be 0.8. 
D)  No generalization can be made about the differences between the short run and the long run.

Question 5

What is the significance of a positive cross-elasticity coefficient between products X and Y?

Accepted Answer

A)  The demand for both products must be elastic. 
B)  The demand for both products must be inelastic. 
C)  Products X and Y must be substitutes. 
D)  Products X and Y must be complements. 
E)  There is no significance since all calculations of cross elasticity are positive. 
A)  The demand for both products must be elastic. 
B)  The demand for both products must be inelastic. 
C)  Products X and Y must be substitutes. 
D)  Products X and Y must be complements. 
E)  There is no significance since all calculations of cross elasticity are positive.

Question 6

What measures the responsiveness of quantity demanded to a change in price?

Accepted Answer

A)  Total revenue. 
B)  Equilibrium price. 
C)  Price elasticity of demand. 
D)  Income elasticity. 
E)  Inelasticity. 
A)  Total revenue. 
B)  Equilibrium price. 
C)  Price elasticity of demand. 
D)  Income elasticity. 
E)  Inelasticity.

Question 7

What does the elasticity coefficient refer to?

Accepted Answer

A)  It is price multiplied by the quantity of the product sold. 
B)  It indicates the responsiveness of quantity demanded to a change in price. 
C)  It is the responsiveness of price to a change in quantity demanded. 
D)  It is quantity demanded at any given price. 
A)  It is price multiplied by the quantity of the product sold. 
B)  It indicates the responsiveness of quantity demanded to a change in price. 
C)  It is the responsiveness of price to a change in quantity demanded. 
D)  It is quantity demanded at any given price.

Question 8

If cross-elasticity of demand is positive, we could conclude that the two products are substitutes.

Accepted Answer

A) True 
 B)False

Question 9

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 income elasticity for product Y between years 3 and 4?

Accepted Answer

A)  + 0.38. 
B)  + 0.60. 
C)  + 1.67. 
D)  + 2.45. 
E)  None of the choices are correct. 
A)  + 0.38. 
B)  + 0.60. 
C)  + 1.67. 
D)  + 2.45. 
E)  None of the choices are correct.

Question 10

Below is some information on the demand for products K, L and M.
 $$\begin{array} { c c c c } 
\text { Income } & \begin{array} { c } 
\text { Quantity of } \
\text { K's Demanded }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { L's Demanded }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { M's Demanded }
\end{array} \
\$ 50000 & 200 & 40 & 80 \
\$ 60000 & 260 & 50 & 85
\end{array}$$
-Refer to the information above to answer this question. What is the income elasticity of product K?

Accepted Answer

A)  0.15. 
B)  15. 
C)  approximately 14. 
D)  approximately 1.4. 
E)  approximately 0.7. 
A)  0.15. 
B)  15. 
C)  approximately 14. 
D)  approximately 1.4. 
E)  approximately 0.7.

Question 11

Suppose that the price of a product decreased from $6.50 to $5.50, and the quantity demanded increased from 55 to 65. What is the value of the price elasticity of demand?

Accepted Answer

A)  0.5. 
B)  0.85. 
C)  1.0. 
D)  1.18. 
E)  2.0. 
A)  0.5. 
B)  0.85. 
C)  1.0. 
D)  1.18. 
E)  2.0.

Question 12

$$\begin{array} { c c c } 
& \text { Quantity } & \text { Quantity } \
\text { Price \$ } & \text { Demanded } & \text { Supplied } \
7 & 80 & 40 \
8 & 70 & 50 \
9 & 60 & 60 \
10 & 50 & 70 \
11 & 40 & 80
\end{array}$$
-Refer to the information above to answer this question. If the government imposes a $2 per unit sales tax on this product, how much of that tax will consumers pay and how much will sellers pay?

Accepted Answer

A)  Consumers will pay all $2 of the tax. 
B)  Consumers will pay $1.50 and sellers $.50. 
C)  Consumers and sellers will each pay $1. 
D)  Consumers will pay $.50 and seller $1.50. 
E)  Sellers will pay all $2 of the tax. 
A)  Consumers will pay all $2 of the tax. 
B)  Consumers will pay $1.50 and sellers $.50. 
C)  Consumers and sellers will each pay $1. 
D)  Consumers will pay $.50 and seller $1.50. 
E)  Sellers will pay all $2 of the tax.

Question 13

-Refer to the graphs above to answer this question. Suppose that the price of nuts decreases from P1 to P2 and the demand curve for chocolates shifts to the right from D1 to D2. What is the effect to total revenue from the sale of both nuts and chocolates?

Accepted Answer

A)  Total revenue will not change since the cross-elasticity coefficient is not known. 
B)  Total revenue from the sale of chocolates will rise but not the total revenue from nuts. 
C)  Total revenue may rise or fall depending on the size of the price decrease of nuts. 
D)  Total revenue from the sale of both nuts and chocolates will fall. 
E)  Total revenue from the sale of both nuts and chocolates will rise. 
A)  Total revenue will not change since the cross-elasticity coefficient is not known. 
B)  Total revenue from the sale of chocolates will rise but not the total revenue from nuts. 
C)  Total revenue may rise or fall depending on the size of the price decrease of nuts. 
D)  Total revenue from the sale of both nuts and chocolates will fall. 
E)  Total revenue from the sale of both nuts and chocolates will rise.

Question 14

Suppose that the cross elasticity of demand for Product A and Product B is -1.6 and the price of Product A decreased by 20 per cent. What will happen to the quantity demanded of Product B?

Accepted Answer

A)  It will increase by 3.2%. 
B)  It will increase by 32%. 
C)  It will decrease by 3.2%. 
D)  It will decrease by 32%. 
E)  The quantity will be unaffected but the price of Product B will increase by 32%. 
A)  It will increase by 3.2%. 
B)  It will increase by 32%. 
C)  It will decrease by 3.2%. 
D)  It will decrease by 32%. 
E)  The quantity will be unaffected but the price of Product B will increase by 32%.

Question 15

-Refer to the graphs above to answer this question. Suppose that the price of orange juice increases from P1 to P2 and the demand curve for apple juice shifts to the right from D1 to D2. What is the effect to total revenue from the sale of apple juice?

Accepted Answer

A)  Total revenue will not change since the cross-elasticity coefficient is not known. 
B)  Total revenue will rise. 
C)  Total revenue may rise or fall depending on the size of the price increase. 
D)  Total revenue will fall. 
E)  Total revenue will not change since there is no change in the price of apple juice. 
A)  Total revenue will not change since the cross-elasticity coefficient is not known. 
B)  Total revenue will rise. 
C)  Total revenue may rise or fall depending on the size of the price increase. 
D)  Total revenue will fall. 
E)  Total revenue will not change since there is no change in the price of apple juice.

Question 16

What is the formula used to calculate the price elasticity of demand?

Accepted Answer

A)  Change in price divided by change in quantity demanded. 
B)  Change in quantity demanded divided by change in price. 
C)  Percentage change in price divided by percentage change in quantity demanded. 
D)  Percentage change in quantity demanded divided by percentage change in price 
A)  Change in price divided by change in quantity demanded. 
B)  Change in quantity demanded divided by change in price. 
C)  Percentage change in price divided by percentage change in quantity demanded. 
D)  Percentage change in quantity demanded divided by percentage change in price

Question 17

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

-Refer to the information above to answer this question. At what price is total revenue maximized?

Accepted Answer

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

Question 18

The world's price of oil increased dramatically in 1973. Which of the following statements was most valid in 2012?

Accepted Answer

A)  The price elasticity of demand for oil for the 40 year period would be lower than for a shorter period. 
B)  The price elasticity of demand for oil for the 40 year period would be higher than for a shorter period. 
C)  The income elasticity for oil was much lower in 2012 than in 1973 because of the price increase. 
D)  The supply elasticity of oil was much lower in 2012 than in 1973 because of the price increase. 
A)  The price elasticity of demand for oil for the 40 year period would be lower than for a shorter period. 
B)  The price elasticity of demand for oil for the 40 year period would be higher than for a shorter period. 
C)  The income elasticity for oil was much lower in 2012 than in 1973 because of the price increase. 
D)  The supply elasticity of oil was much lower in 2012 than in 1973 because of the price increase.

Question 19

Suppose that the price of a product increased from $18 to $22, and the quantity demanded decreased from 63 to 57. What is the value of the price elasticity of demand?

Accepted Answer

A)  0.43. 
B)  0.5. 
C)  1.5. 
D)  2.0. 
E)  2.3. 
A)  0.43. 
B)  0.5. 
C)  1.5. 
D)  2.0. 
E)  2.3.

Question 20

-Refer to the graph above to answer this question. Which of the following statements is correct?

Accepted Answer

A)  Demand curve D2 is the inelastic portion of a curve that could be extended upward to the left. 
B)  Demand curve D1 is the elastic portion of a curve that could be extended upward to the left. 
C)  Demand curve D2 is more elastic than D1. 
D)  Demand curve D2 is perfectly inelastic. 
A)  Demand curve D2 is the inelastic portion of a curve that could be extended upward to the left. 
B)  Demand curve D1 is the elastic portion of a curve that could be extended upward to the left. 
C)  Demand curve D2 is more elastic than D1. 
D)  Demand curve D2 is perfectly inelastic.

Suppose the demand curve is perfectly inelastic and the government imposes a tax of $2 per unit. What portion of the tax will be paid by the producer?

Under which of the following two scenarios would demand for hot dogs be more elastic? Explain. (a) You are at a hockey game at the local ice rink and want to eat a hot dog. (b) It is Tuesday, you are planning the menu for a picnic you are going to have on Saturday and you decide to serve hot dogs.

When is the percentage change in quantity exactly equal to the percentage change in price?

If the short-run price elasticity of demand for petroleum is 0.8, which of the following statements is most likely to be true for the long run?

What is the significance of a positive cross-elasticity coefficient between products X and Y?

What measures the responsiveness of quantity demanded to a change in price?

What does the elasticity coefficient refer to?

If cross-elasticity of demand is positive, we could conclude that the two products are substitutes.

Below is some information on the demand for products K, L and M. Income Quantity of K's Demanded Quantity of L's Demanded Quantity of M's Demanded \ 50000 200 40 80 \ 60000 260 50 85 -Refer to the information above to answer this question. What is the income elasticity of product K?

Suppose that the price of a product decreased from $6.50 to $5.50, and the quantity demanded increased from 55 to 65. What is the value of the price elasticity of demand?

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. If the government imposes a $2 per unit sales tax on this product, how much of that tax will consumers pay and how much will sellers pay?

-Refer to the graphs above to answer this question. Suppose that the price of nuts decreases from P₁ to P₂ and the demand curve for chocolates shifts to the right from D₁ to D₂. What is the effect to total revenue from the sale of both nuts and chocolates?

Suppose that the cross elasticity of demand for Product A and Product B is -1.6 and the price of Product A decreased by 20 per cent. What will happen to the quantity demanded of Product B?

-Refer to the graphs above to answer this question. Suppose that the price of orange juice increases from P₁ to P₂ and the demand curve for apple juice shifts to the right from D₁ to D₂. What is the effect to total revenue from the sale of apple juice?

What is the formula used to calculate the price elasticity of demand?

Price 14 16 18 20 22 Quantity Demanded 220 200 180 160 140 -Refer to the information above to answer this question. At what price is total revenue maximized?

The world's price of oil increased dramatically in 1973. Which of the following statements was most valid in 2012?

Suppose that the price of a product increased from $18 to $22, and the quantity demanded decreased from 63 to 57. What is the value of the price elasticity of demand?

-Refer to the graph above to answer this question. Which of the following statements is correct?

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

Suppose the demand curve is perfectly inelastic and the government imposes a tax of $2 per unit. What portion of the tax will be paid by the producer?

Under which of the following two scenarios would demand for hot dogs be more elastic? Explain. (a) You are at a hockey game at the local ice rink and want to eat a hot dog. (b) It is Tuesday, you are planning the menu for a picnic you are going to have on Saturday and you decide to serve hot dogs.

When is the percentage change in quantity exactly equal to the percentage change in price?

If the short-run price elasticity of demand for petroleum is 0.8, which of the following statements is most likely to be true for the long run?

What is the significance of a positive cross-elasticity coefficient between products X and Y?

What measures the responsiveness of quantity demanded to a change in price?

What does the elasticity coefficient refer to?

If cross-elasticity of demand is positive, we could conclude that the two products are substitutes.

Below is some information on the demand for products K, L and M. Income Quantity of K's Demanded Quantity of L's Demanded Quantity of M's Demanded \ 50000 200 40 80 \ 60000 260 50 85 -Refer to the information above to answer this question. What is the income elasticity of product K?

Suppose that the price of a product decreased from $6.50 to $5.50, and the quantity demanded increased from 55 to 65. What is the value of the price elasticity of demand?

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. If the government imposes a $2 per unit sales tax on this product, how much of that tax will consumers pay and how much will sellers pay?

-Refer to the graphs above to answer this question. Suppose that the price of nuts decreases from P1 to P2 and the demand curve for chocolates shifts to the right from D1 to D2. What is the effect to total revenue from the sale of both nuts and chocolates?

Suppose that the cross elasticity of demand for Product A and Product B is -1.6 and the price of Product A decreased by 20 per cent. What will happen to the quantity demanded of Product B?

-Refer to the graphs above to answer this question. Suppose that the price of orange juice increases from P1 to P2 and the demand curve for apple juice shifts to the right from D1 to D2. What is the effect to total revenue from the sale of apple juice?

What is the formula used to calculate the price elasticity of demand?

Price 14 16 18 20 22 Quantity Demanded 220 200 180 160 140 -Refer to the information above to answer this question. At what price is total revenue maximized?

The world's price of oil increased dramatically in 1973. Which of the following statements was most valid in 2012?

Suppose that the price of a product increased from $18 to $22, and the quantity demanded decreased from 63 to 57. What is the value of the price elasticity of demand?

-Refer to the graph above to answer this question. Which of the following statements is correct?

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

-Refer to the graphs above to answer this question. Suppose that the price of nuts decreases from P₁ to P₂ and the demand curve for chocolates shifts to the right from D₁ to D₂. What is the effect to total revenue from the sale of both nuts and chocolates?

-Refer to the graphs above to answer this question. Suppose that the price of orange juice increases from P₁ to P₂ and the demand curve for apple juice shifts to the right from D₁ to D₂. What is the effect to total revenue from the sale of apple juice?