Question 1

Why do some people argue that attempts to reduce much of the crime in our society by governments "getting tough" on crime will not be successful?

Accepted Answer

A)  Because much of the crime in our society is drug related and the supply of illegal drugs is very inelastic. 
B)  Because much of the crime in our society is drug related and the supply of illegal drugs is very elastic. 
C)  Because much of the crime in our society is drug related and the demand for illegal drugs is very elastic. 
D)  Because much of the crime in our society is drug related and the demand for illegal drugs is very inelastic. 
A)  Because much of the crime in our society is drug related and the supply of illegal drugs is very inelastic. 
B)  Because much of the crime in our society is drug related and the supply of illegal drugs is very elastic. 
C)  Because much of the crime in our society is drug related and the demand for illegal drugs is very elastic. 
D)  Because much of the crime in our society is drug related and the demand for illegal drugs is very inelastic.

Question 2

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 X between years 3 and 4?

Accepted Answer

A)  + 0.78. 
B)  + 1.05. 
C)  + 1.29. 
D)  + 2.6. 
A)  + 0.78. 
B)  + 1.05. 
C)  + 1.29. 
D)  + 2.6.

Question 3

What is the effect of the imposition of a sales tax?

Accepted Answer

A)  The supply curve will shift to the left. 
B)  The supply curve will shift to the right. 
C)  The demand curve will shift to the left. 
D)  The demand curve will shift to the right. 
A)  The supply curve will shift to the left. 
B)  The supply curve will shift to the right. 
C)  The demand curve will shift to the left. 
D)  The demand curve will shift to the right.

Question 4

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 curve that forms a rectangular hyperbola?

Accepted Answer

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

Question 5

During an economic slowdown, should investors invest in an industry that produces goods whose demand is income elastic or income inelastic?

Accepted Answer

An industry that produces a good whose d

Question 6

Below is a graphical representation of the wheat market in the distant land of Nod.
  
-Refer to the graph above to answer this question. If supply was increased by 30 million bushels, what would be the new equilibrium price and quantity?

Accepted Answer

A)  $3 and 20 million bushels. 
B)  $3 and 50 million bushels. 
C)  $3 and 70 million bushels. 
D)  $7 and 30 million bushels. 
E)  $7 and 60 million bushels. 
A)  $3 and 20 million bushels. 
B)  $3 and 50 million bushels. 
C)  $3 and 70 million bushels. 
D)  $7 and 30 million bushels. 
E)  $7 and 60 million bushels.

Question 7

Define 'elasticity of supply'. How is it calculated?

Accepted Answer

The responsiveness o

Question 8

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 a decrease in price increases total revenue?

Accepted Answer

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

Question 9

How will the imposition of a sales tax shift the supply curve?

Accepted Answer

A)  The supply curve will shift to the left. 
B)  The supply curve will shift to the right. 
C)  The supply curve might shift to the right or to the left depending on whether the tax was a flat rate tax or a percentage tax. 
D)  Imposing a sales tax will have no effect on the supply curve. 
A)  The supply curve will shift to the left. 
B)  The supply curve will shift to the right. 
C)  The supply curve might shift to the right or to the left depending on whether the tax was a flat rate tax or a percentage tax. 
D)  Imposing a sales tax will have no effect on the supply curve.

Question 10

If income elasticity is positive, we could conclude that the product in question is an inferior good.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)  The demand curves in graphs I, II and III are, respectively, perfectly elastic, inelastic and perfectly inelastic. 
B)  The demand curves in graphs I, II and III are, respectively, perfectly inelastic, inelastic and perfectly elastic. 
C)  The demand curves in graphs I, II and III are, respectively, perfectly inelastic, unitary elastic and perfectly elastic. 
D)  All three demand curves have an elastic and an inelastic portion to them. 
A)  The demand curves in graphs I, II and III are, respectively, perfectly elastic, inelastic and perfectly inelastic. 
B)  The demand curves in graphs I, II and III are, respectively, perfectly inelastic, inelastic and perfectly elastic. 
C)  The demand curves in graphs I, II and III are, respectively, perfectly inelastic, unitary elastic and perfectly elastic. 
D)  All three demand curves have an elastic and an inelastic portion to them.

Question 12

If demand is elastic and price rises, then total revenue will rise.

Accepted Answer

A) True 
 B)False

Question 13

Define price elasticity of demand. What does it mean if the price elasticity of demand is equal to 4?

Accepted Answer

Price elasticity of demand measures the

Question 14

Table 4.2 shows Alex's demand schedule for chocolate bars. $$\begin{array}{l}
\text { Table } 4.2\
\begin{array} { l l } 
\hline \mathrm { P } & \mathrm { Q_D } \
\hline 1 & 9 \
3 & 7 \
5 & 5 \
7 & 3 \
9 & 1 \
\hline
\end{array}
\end{array}$$ a) Calculate the price elasticity of demand between $1 and $3
b) Calculate the price elasticity of demand between $3 and $5
c) Calculate the price elasticity of demand between $5 and $7
d) Calculate the price elasticity of demand between $7 and $9

Accepted Answer

a) 0.25
b)

Question 15

Suppose that the value of the supply elasticity of a product is 2 and its price decreases by 14%. What will happen to the quantity supplied?

Accepted Answer

A)  It will increase by 7%. 
B)  It will increase by 28%. 
C)  It will decrease by 7%. 
D)  It will decrease by 28%. 
E)  It cannot be determined without further information. 
A)  It will increase by 7%. 
B)  It will increase by 28%. 
C)  It will decrease by 7%. 
D)  It will decrease by 28%. 
E)  It cannot be determined without further information.

Question 16

What is the relationship between the form of elasticity (e.g. unitary) and total revenue?

Accepted Answer

If the demand is inelastic, price and to

Question 17

If the elasticity of demand is unitary and the price rises, then total revenue will rise.

Accepted Answer

A) True 
 B)False

Question 18

Suppose the demand for Good X is unit elastic. If the price of Good X is $10 the quantity traded is 300. How many units will be traded if the price is $25? Explain.

Accepted Answer

120 units. If Good X is unit elastic, a

Question 19

Define cross-price elasticity. What does it mean if the cross-price elasticity is equal -3?

Accepted Answer

Cross-price elasticity measures the resp

Question 20

The graph below illustrates three demand curves.
  
-Refer to the graph above to answer this question. Between the price range of $50 and $60, which of the three demand curves is the most elastic?

Accepted Answer

A)  D1. 
B)  D2. 
C)  D3. 
D)  Cannot be determined. 
A)  D1. 
B)  D2. 
C)  D3. 
D)  Cannot be determined.

Why do some people argue that attempts to reduce much of the crime in our society by governments "getting tough" on crime will not be successful?

What is the effect of the imposition of a sales tax?

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 curve that forms a rectangular hyperbola?

During an economic slowdown, should investors invest in an industry that produces goods whose demand is income elastic or income inelastic?

Below is a graphical representation of the wheat market in the distant land of Nod. -Refer to the graph above to answer this question. If supply was increased by 30 million bushels, what would be the new equilibrium price and quantity?

Define 'elasticity of supply'. How is it calculated?

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 a decrease in price increases total revenue?

How will the imposition of a sales tax shift the supply curve?

If income elasticity is positive, we could conclude that the product in question is an inferior good.

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

If demand is elastic and price rises, then total revenue will rise.

Define price elasticity of demand. What does it mean if the price elasticity of demand is equal to 4?

Suppose that the value of the supply elasticity of a product is 2 and its price decreases by 14%. What will happen to the quantity supplied?

What is the relationship between the form of elasticity (e.g. unitary) and total revenue?

If the elasticity of demand is unitary and the price rises, then total revenue will rise.

Suppose the demand for Good X is unit elastic. If the price of Good X is $10 the quantity traded is 300. How many units will be traded if the price is $25? Explain.

Define cross-price elasticity. What does it mean if the cross-price elasticity is equal -3?

The graph below illustrates three demand curves. -Refer to the graph above to answer this question. Between the price range of $50 and $60, which of the three demand curves is the most elastic?

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

Why do some people argue that attempts to reduce much of the crime in our society by governments "getting tough" on crime will not be successful?

What is the effect of the imposition of a sales tax?

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 curve that forms a rectangular hyperbola?

During an economic slowdown, should investors invest in an industry that produces goods whose demand is income elastic or income inelastic?

Below is a graphical representation of the wheat market in the distant land of Nod. -Refer to the graph above to answer this question. If supply was increased by 30 million bushels, what would be the new equilibrium price and quantity?

Define 'elasticity of supply'. How is it calculated?

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 a decrease in price increases total revenue?

How will the imposition of a sales tax shift the supply curve?

If income elasticity is positive, we could conclude that the product in question is an inferior good.

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

If demand is elastic and price rises, then total revenue will rise.

Define price elasticity of demand. What does it mean if the price elasticity of demand is equal to 4?

Suppose that the value of the supply elasticity of a product is 2 and its price decreases by 14%. What will happen to the quantity supplied?

What is the relationship between the form of elasticity (e.g. unitary) and total revenue?

If the elasticity of demand is unitary and the price rises, then total revenue will rise.

Suppose the demand for Good X is unit elastic. If the price of Good X is $10 the quantity traded is 300. How many units will be traded if the price is $25? Explain.

Define cross-price elasticity. What does it mean if the cross-price elasticity is equal -3?

The graph below illustrates three demand curves. -Refer to the graph above to answer this question. Between the price range of $50 and $60, which of the three demand curves is the most elastic?

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