Question 1

Suppose that the value of the income elasticity of demand for a product is 2 and average incomes increase by 16%. What will happen to the quantity demanded?

Accepted Answer

A)  It will increase by 8%. 
B)  It will increase by 32%. 
C)  It will decrease by 8%. 
D)  It will decrease by 32%. 
E)  It cannot be determined without further information. 
A)  It will increase by 8%. 
B)  It will increase by 32%. 
C)  It will decrease by 8%. 
D)  It will decrease by 32%. 
E)  It cannot be determined without further information.

Question 2

A local transit authority has just applied to its regulatory board for a fare increase on its rail-transit system, arguing that the increase is needed to cover rising costs. A citizens committee is opposed to the proposed increase, arguing that the company could increase its revenue by decreasing fares. Which of the statements below is correct?

Accepted Answer

A)  The company thinks that the demand is inelastic, whereas the committee thinks it is elastic. 
B)  The company thinks that the demand is elastic, whereas the committee thinks it is inelastic. 
C)  Both the company and the committee think that elasticity is unity. 
D)  It is possible that both the company and the committee are correct. 
A)  The company thinks that the demand is inelastic, whereas the committee thinks it is elastic. 
B)  The company thinks that the demand is elastic, whereas the committee thinks it is inelastic. 
C)  Both the company and the committee think that elasticity is unity. 
D)  It is possible that both the company and the committee are correct.

Question 3

$$\begin{array} { c c c } 
& \text { Quantity } & \text { Quantity } \
\text { Price \$ } & \text { Demanded } & \text { Supplied } \
7 & 80 & 40 \
8 & 70 & 50 \
9 & 60 & 60 \
10 & 50 & 70 \
11 & 40 & 80
\end{array}$$
-Refer to the information above to answer this question. What will be the equilibrium price and quantity if a $2 per unit excise tax is imposed on this product?

Accepted Answer

A)  $11 and 40. 
B)  $11 and 80. 
C)  $10 and 50. 
D)  $10 and 70. 
E)  $7 and 40. 
A)  $11 and 40. 
B)  $11 and 80. 
C)  $10 and 50. 
D)  $10 and 70. 
E)  $7 and 40.

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 is parallel to the vertical axis?

Accepted Answer

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

Question 5

What will cause the price elasticity of demand for a product to be high?

Accepted Answer

A)  A low percentage of income is spent on the product. 
B)  There are a small number of available substitutes. 
C)  The elasticity of supply for the product is high. 
D)  A long time period is used to measure elasticity. 
A)  A low percentage of income is spent on the product. 
B)  There are a small number of available substitutes. 
C)  The elasticity of supply for the product is high. 
D)  A long time period is used to measure elasticity.

Question 6

If the price of Moonlight massage oil decreases from $3 to $2.50 and, as a result, total revenue increases from $6,000 to $7,500, what is the elasticity of demand?

Accepted Answer

A)  0.22. 
B)  0.55. 
C)  1.22. 
D)  1.67. 
E)  2.2. 
A)  0.22. 
B)  0.55. 
C)  1.22. 
D)  1.67. 
E)  2.2.

Question 7

-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 can be said about the cross-elasticity of demand for the two juices and their relationship?

Accepted Answer

A)  The cross elasticity of demand coefficient between the two juices is negative and the juices are substitutes. 
B)  The cross elasticity of demand coefficient between the two juices is negative and the juices are complements. 
C)  The cross elasticity of demand coefficient between the two juices is positive and the juices are complements. 
D)  The cross elasticity of demand coefficient between the two juices is positive and the juices are substitutes. 
A)  The cross elasticity of demand coefficient between the two juices is negative and the juices are substitutes. 
B)  The cross elasticity of demand coefficient between the two juices is negative and the juices are complements. 
C)  The cross elasticity of demand coefficient between the two juices is positive and the juices are complements. 
D)  The cross elasticity of demand coefficient between the two juices is positive and the juices are substitutes.

Question 8

Below is a graphical representation of the wheat market in the distant land of Nod.
  
-Refer to the graph above to answer this question. What is the price elasticity of demand between the original equilibrium and the new equilibrium after the increase in supply of 30 million bushels?

Accepted Answer

A)  0.44. 
B)  0.5. 
C)  2. 
D)  2.25. 
A)  0.44. 
B)  0.5. 
C)  2. 
D)  2.25.

Question 9

Which of the two following pairs of product categories are income elastic?

Accepted Answer

A)  Food and housing. 
B)  Public transport and household operation. 
C)  Tobacco and alcohol. 
D)  Education and textbooks. 
A)  Food and housing. 
B)  Public transport and household operation. 
C)  Tobacco and alcohol. 
D)  Education and textbooks.

Question 10

What is a normal good?

Accepted Answer

A)  It is a good whose income elasticity of demand is  1. 
A)  It is a good whose income elasticity of demand is  1.

Question 11

What is the term for the total amount of income a firm receives from its sales?

Accepted Answer

A)  Total profit. 
B)  Total revenue. 
C)  Revenue coefficient. 
D)  Total demand. 
E)  Sales maximizing. 
A)  Total profit. 
B)  Total revenue. 
C)  Revenue coefficient. 
D)  Total demand. 
E)  Sales maximizing.

Question 12

The graph below shows the supply and demand for tickets to a Raptors basketball game.
  
-Refer to the graph above to answer this question. All of the statements below, except one are correct. Which is the exception?

Accepted Answer

A)  If the price of a ticket is $40 and demand is D3, then there will be 5,000 unsold tickets. 
B)  If the price of a ticket is $60 and demand is D2, then there is a shortage of 2,500 seats. 
C)  If the price of a ticket is $20 and demand is D1, then 5,000 people who would like to attend the game will not be able to unless they are able to buy a ticket from a scalper. 
D)  Any price under $40 will result in all the tickets being sold regardless of which of the three demand curves is considered. 
A)  If the price of a ticket is $40 and demand is D3, then there will be 5,000 unsold tickets. 
B)  If the price of a ticket is $60 and demand is D2, then there is a shortage of 2,500 seats. 
C)  If the price of a ticket is $20 and demand is D1, then 5,000 people who would like to attend the game will not be able to unless they are able to buy a ticket from a scalper. 
D)  Any price under $40 will result in all the tickets being sold regardless of which of the three demand curves is considered.

Question 13

According to Alfred Marshall, time plays a critical role in the determination of the elasticity of supply and the shape of the supply curves over time. What are these shapes?

Accepted Answer

The answer of According to Alfred Marshall, time plays a...

Question 14

What is the main determinant of the price elasticity of supply?

Accepted Answer

Time is the main determinant of supply e

Question 15

Suppose that average incomes increased from $30,000 to $34,000, and the quantity demanded of a product increased from 45 to 55. What type of product must this be?

Accepted Answer

A)  Substitute product. 
B)  Inferior product. 
C)  Luxury product. 
D)  Necessity. 
E)  Superior product. 
A)  Substitute product. 
B)  Inferior product. 
C)  Luxury product. 
D)  Necessity. 
E)  Superior product.

Question 16

What is the effect on total revenue if demand is elastic and price rises?

Accepted Answer

A)  Total revenue will fall. 
B)  Total revenue will rise. 
C)  Quantity demanded will rise. 
D)  Supply will rise. 
A)  Total revenue will fall. 
B)  Total revenue will rise. 
C)  Quantity demanded will rise. 
D)  Supply will rise.

Question 17

The data in the table below are for boxes of fresh shrimp. $$\begin{array} { c c c c } 
\hline \text { Price } & \begin{array} { c } 
\text { Quantity } \
\text { Demanded }
\end{array} & \text { Quantity Supplied } & \begin{array} { c } 
\text { Quantity } \
\text { Supplied After } \
\text { Tax }
\end{array} \
\hline \$ 80 & 420 & 480 & \
75  & 430 & 470 &\
70 & 440 & 460 & \
65   & 450 & 450 &\
60& 460 & 440 & \
55&470&430  \
\hline
\end{array}$$ a) Before the tax, what is the equilibrium price and quantity?
b) Fill in the Quantity Supplied After Tax column assuming that a $10 per unit excise tax is put on the product.
c) What is the new equilibrium price and quantity?
d) What portion of the $10 per unit tax is paid by the seller and what portion is paid by the consumer?

Accepted Answer

a) $65 and 450
b) @#IMG-DLM& c

Question 18

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

Accepted Answer

A)  It will rise. 
B)  It will fall. 
C)  It may rise or fall depending on whether the tax is a flat rate or a percentage of the price of the product. 
D)  It is totally unpredictable. 
A)  It will rise. 
B)  It will fall. 
C)  It may rise or fall depending on whether the tax is a flat rate or a percentage of the price of the product. 
D)  It is totally unpredictable.

Question 19

Under which of the following situations will total revenue rise?

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 falls. 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 falls. D) If elasticity is = 1 and price falls.

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 a firm can sell either more or less of a product at a constant price?

Accepted Answer

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

Suppose that the value of the income elasticity of demand for a product is 2 and average incomes increase by 16%. What will happen to the quantity demanded?

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. What will be the equilibrium price and quantity if a $2 per unit excise tax is imposed on this product?

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 is parallel to the vertical axis?

What will cause the price elasticity of demand for a product to be high?

If the price of Moonlight massage oil decreases from $3 to $2.50 and, as a result, total revenue increases from $6,000 to $7,500, what is the elasticity of demand?

-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 can be said about the cross-elasticity of demand for the two juices and their relationship?

Below is a graphical representation of the wheat market in the distant land of Nod. -Refer to the graph above to answer this question. What is the price elasticity of demand between the original equilibrium and the new equilibrium after the increase in supply of 30 million bushels?

Which of the two following pairs of product categories are income elastic?

What is a normal good?

What is the term for the total amount of income a firm receives from its sales?

The graph below shows the supply and demand for tickets to a Raptors basketball game. -Refer to the graph above to answer this question. All of the statements below, except one are correct. Which is the exception?

According to Alfred Marshall, time plays a critical role in the determination of the elasticity of supply and the shape of the supply curves over time. What are these shapes?

What is the main determinant of the price elasticity of supply?

Suppose that average incomes increased from $30,000 to $34,000, and the quantity demanded of a product increased from 45 to 55. What type of product must this be?

What is the effect on total revenue if demand is elastic and price rises?

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

Under which of the following situations will total revenue rise?

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 firm can sell either more or less of a product at a constant price?

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 that the value of the income elasticity of demand for a product is 2 and average incomes increase by 16%. What will happen to the quantity demanded?

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. What will be the equilibrium price and quantity if a $2 per unit excise tax is imposed on this product?

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 is parallel to the vertical axis?

What will cause the price elasticity of demand for a product to be high?

If the price of Moonlight massage oil decreases from $3 to $2.50 and, as a result, total revenue increases from $6,000 to $7,500, what is the elasticity of demand?

-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 can be said about the cross-elasticity of demand for the two juices and their relationship?

Below is a graphical representation of the wheat market in the distant land of Nod. -Refer to the graph above to answer this question. What is the price elasticity of demand between the original equilibrium and the new equilibrium after the increase in supply of 30 million bushels?

Which of the two following pairs of product categories are income elastic?

What is a normal good?

What is the term for the total amount of income a firm receives from its sales?

The graph below shows the supply and demand for tickets to a Raptors basketball game. -Refer to the graph above to answer this question. All of the statements below, except one are correct. Which is the exception?

According to Alfred Marshall, time plays a critical role in the determination of the elasticity of supply and the shape of the supply curves over time. What are these shapes?

What is the main determinant of the price elasticity of supply?

Suppose that average incomes increased from $30,000 to $34,000, and the quantity demanded of a product increased from 45 to 55. What type of product must this be?

What is the effect on total revenue if demand is elastic and price rises?

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

Under which of the following situations will total revenue rise?

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 firm can sell either more or less of a product at a constant price?

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 orange juice increases from P₁ to P₂ and the demand curve for apple juice shifts to the right from D₁ to D₂. What can be said about the cross-elasticity of demand for the two juices and their relationship?