Question 1

Evidence from the Sudan indicates that the supply of slaves is likely:

Accepted Answer

A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  more elastic than inelastic. 
D)  more inelastic than elastic. 
A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  more elastic than inelastic. 
D)  more inelastic than elastic.

Question 2

If the elasticity of demand for oil is 0.5 and the elasticity of supply for oil is 0.3, then a 1 percent increase in the supply of oil would cause the price of oil to:

Accepted Answer

A)  increase by 1.25 percent. 
B)  increase by 2.50 percent. 
C)  decrease by 1.25 percent. 
D)  decrease by 2.50 percent. 
A)  increase by 1.25 percent. 
B)  increase by 2.50 percent. 
C)  decrease by 1.25 percent. 
D)  decrease by 2.50 percent.

Question 3

In 2005, Ireland began taxing residents on how much garbage they threw away in an effort to promote recycling. In response, residents began burning trash (which is environmentally more harmful and resulted in an increase in burn victims as people accidentally set themselves on fire). This story suggests that the elasticity of demand for trash collection was more ______ than lawmakers believed because ______ than previously thought.

Accepted Answer

A)  elastic; the tax took up a larger part of residents' budgets 
B)  elastic; there were more substitutes for trash collection 
C)  inelastic; the tax took up a smaller part of residents' budgets 
D)  inelastic; there were fewer substitutes for trash collection 
A)  elastic; the tax took up a larger part of residents' budgets 
B)  elastic; there were more substitutes for trash collection 
C)  inelastic; the tax took up a smaller part of residents' budgets 
D)  inelastic; there were fewer substitutes for trash collection

Question 4

The elasticity of demand measures how sensitive the:

Accepted Answer

A)  price is to a change in quantity demanded. 
B)  quantity demanded is to a change in price. 
C)  price is to a change in the quantity supplied. 
D)  demand is to a change in the number of suppliers. 
A)  price is to a change in quantity demanded. 
B)  quantity demanded is to a change in price. 
C)  price is to a change in the quantity supplied. 
D)  demand is to a change in the number of suppliers.

Question 5

If the price of electronic readers falls 6 percent and quantity demanded rises by 9 percent, the elasticity of demand is ______ in absolute value, so demand is ______.

Accepted Answer

A)  3.0, elastic 
B)  15; inelastic 
C)  0.67; inelastic 
D)  1.5; elastic 
A)  3.0, elastic 
B)  15; inelastic 
C)  0.67; inelastic 
D)  1.5; elastic

Question 6

If the elasticity of demand for cigarettes is 0.75 and the elasticity of supply for cigarettes is 1.25, then a 5 percent decrease in the demand for cigarettes would cause the price of cigarettes to:

Accepted Answer

A)  increase by 2.5 percent. 
B)  increase by 5 percent. 
C)  decrease by 2.5 percent. 
D)  decrease by 5 percent. 
A)  increase by 2.5 percent. 
B)  increase by 5 percent. 
C)  decrease by 2.5 percent. 
D)  decrease by 5 percent.

Question 7

Figure: Price Elasticity of Supply   Refer to the figure. Compared to S1, S2 is more:

Accepted Answer

A)  elastic since quantity supplied increases more with an increase in price. 
B)  elastic since quantity supplied increases less with an increase in price. 
C)  inelastic since quantity supplied increases more with an increase in price. 
D)  inelastic since quantity supplied increases less with an increase in price. 
A)  elastic since quantity supplied increases more with an increase in price. 
B)  elastic since quantity supplied increases less with an increase in price. 
C)  inelastic since quantity supplied increases more with an increase in price. 
D)  inelastic since quantity supplied increases less with an increase in price.

Question 8

The quantity demanded for cosmetic surgery increased by 12 percent following a period of strong economic growth that raised consumer income by 4 percent. What type of good is cosmetic surgery?

Accepted Answer

A)  It is a luxury good since the income elasticity of demand exceeds 1. 
B)  It is a normal good since the income elasticity is less than 1. 
C)  It is a necessity since the income elasticity of demand is equal to 1. 
D)  It is a supernormal good since the income elasticity is greater than 2. 
A)  It is a luxury good since the income elasticity of demand exceeds 1. 
B)  It is a normal good since the income elasticity is less than 1. 
C)  It is a necessity since the income elasticity of demand is equal to 1. 
D)  It is a supernormal good since the income elasticity is greater than 2.

Question 9

Which of the following factors causes a demand curve to become more elastic over time?

Accepted Answer

A)  New substitutes for the product are discovered. 
B)  New and important uses for the product are discovered. 
C)  More producers begin to produce the product. 
D)  More consumers acquire a desire for the product. 
A)  New substitutes for the product are discovered. 
B)  New and important uses for the product are discovered. 
C)  More producers begin to produce the product. 
D)  More consumers acquire a desire for the product.

Question 10

Figure: Elasticity and Quantity Demanded   Refer to the figure. An increase in price from $40 to $50 would cause the change in quantity demanded for D1 to be:

Accepted Answer

A)  greater than the change in quantity demanded for D2 so D1 is more elastic than D2. 
B)  greater than the change in quantity demanded for D2 so D2 is more elastic than D1. 
C)  less than the change in quantity demanded for D2 so D1 is more inelastic than D2. 
D)  less than the change in quantity demanded for D2 so D2 is more inelastic than D1. 
A)  greater than the change in quantity demanded for D2 so D1 is more elastic than D2. 
B)  greater than the change in quantity demanded for D2 so D2 is more elastic than D1. 
C)  less than the change in quantity demanded for D2 so D1 is more inelastic than D2. 
D)  less than the change in quantity demanded for D2 so D2 is more inelastic than D1.

Question 11

When price increases and demand is elastic, revenue decreases.

Accepted Answer

A) True 
 B)False

Question 12

The fundamental determinant of the elasticity of demand is:

Accepted Answer

A)  how quickly per-unit costs increase with an increase in production. 
B)  tastes and preferences. 
C)  population. 
D)  the number and closeness of substitutes. 
A)  how quickly per-unit costs increase with an increase in production. 
B)  tastes and preferences. 
C)  population. 
D)  the number and closeness of substitutes.

Question 13

The elasticity of demand:

Accepted Answer

A)  equals the inverse of price to quantity demanded. 
B)  measures how far the demand curve shifts from a change in price. 
C)  tells us how responsive consumer purchases are to price changes. 
D)  estimates the relationship between quantity demanded and production costs. 
A)  equals the inverse of price to quantity demanded. 
B)  measures how far the demand curve shifts from a change in price. 
C)  tells us how responsive consumer purchases are to price changes. 
D)  estimates the relationship between quantity demanded and production costs.

Question 14

The elasticity of demand for a particular good is constant across individuals.

Accepted Answer

A) True 
 B)False

Question 15

If the supply of raw materials is ________, increasing their production leads to ________ per-unit costs.

Accepted Answer

A)  inelastic; higher 
B)  perfectly elastic; higher 
C)  perfectly elastic; lower 
D)  inelastic; lower 
A)  inelastic; higher 
B)  perfectly elastic; higher 
C)  perfectly elastic; lower 
D)  inelastic; lower

Question 16

Because producing more oil requires a significant increase in exploration and drilling costs, the supply curve for oil is:

Accepted Answer

A)  relatively elastic. 
B)  relatively inelastic. 
C)  perfectly elastic. 
D)  unit elastic. 
A)  relatively elastic. 
B)  relatively inelastic. 
C)  perfectly elastic. 
D)  unit elastic.

Question 17

Because of aging requirements it takes many years to make good Scotch. If a technology were invented that made it possible to create good Scotch literally overnight, how would the short-run supply of good Scotch change?

Accepted Answer

A)  It would become more elastic. 
B)  It would become less elastic. 
C)  Its elasticity would remain the same. 
D)  It is impossible to say anything about the change. 
A)  It would become more elastic. 
B)  It would become less elastic. 
C)  Its elasticity would remain the same. 
D)  It is impossible to say anything about the change.

Question 18

Use the following to answer questions: Figure: Slave Redemption  
-(Figure: Slave Redemption) Refer to the figure. Assume the graph illustrates the Sudanese slave trade. When slave redeemers enter the market, the number of slaves remaining in captivity is:

Accepted Answer

A) 100. 
B) 400. 
C) 500. 
D)  1,100 
A) 100. 
B) 400. 
C) 500. 
D)  1,100

Question 19

The elasticity of demand measures:

Accepted Answer

A)  how responsive price is to a change in the quantity demanded of a good or service. 
B)  how much value consumers place on each unit of the good or service. 
C)  the rate of change of demand in relation to supply. 
D)  how responsive quantity demanded is to a change in the price of a good or service. 
A)  how responsive price is to a change in the quantity demanded of a good or service. 
B)  how much value consumers place on each unit of the good or service. 
C)  the rate of change of demand in relation to supply. 
D)  how responsive quantity demanded is to a change in the price of a good or service.

Question 20

The availability of fewer substitutes for a good means its demand curve:

Accepted Answer

A)  becomes less elastic. 
B)  becomes more elastic. 
C)  maintains the same elasticity. 
D)  changes elasticity in an indeterminate direction. 
A)  becomes less elastic. 
B)  becomes more elastic. 
C)  maintains the same elasticity. 
D)  changes elasticity in an indeterminate direction.

Exam 5: Elasticity and Its Applications

Evidence from the Sudan indicates that the supply of slaves is likely:

If the elasticity of demand for oil is 0.5 and the elasticity of supply for oil is 0.3, then a 1 percent increase in the supply of oil would cause the price of oil to:

The elasticity of demand measures how sensitive the:

If the price of electronic readers falls 6 percent and quantity demanded rises by 9 percent, the elasticity of demand is ______ in absolute value, so demand is ______.

If the elasticity of demand for cigarettes is 0.75 and the elasticity of supply for cigarettes is 1.25, then a 5 percent decrease in the demand for cigarettes would cause the price of cigarettes to:

Figure: Price Elasticity of Supply Refer to the figure. Compared to S1, S2 is more:

The quantity demanded for cosmetic surgery increased by 12 percent following a period of strong economic growth that raised consumer income by 4 percent. What type of good is cosmetic surgery?

Which of the following factors causes a demand curve to become more elastic over time?

Figure: Elasticity and Quantity Demanded Refer to the figure. An increase in price from $40 to $50 would cause the change in quantity demanded for D1 to be:

When price increases and demand is elastic, revenue decreases.

The fundamental determinant of the elasticity of demand is:

The elasticity of demand:

The elasticity of demand for a particular good is constant across individuals.

If the supply of raw materials is ________, increasing their production leads to ________ per-unit costs.

Because producing more oil requires a significant increase in exploration and drilling costs, the supply curve for oil is:

Because of aging requirements it takes many years to make good Scotch. If a technology were invented that made it possible to create good Scotch literally overnight, how would the short-run supply of good Scotch change?

Use the following to answer questions: Figure: Slave Redemption -(Figure: Slave Redemption) Refer to the figure. Assume the graph illustrates the Sudanese slave trade. When slave redeemers enter the market, the number of slaves remaining in captivity is:

The elasticity of demand measures:

The availability of fewer substitutes for a good means its demand curve:

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters

If the price of electronic readers falls 6 percent and quantity demanded rises by 9 percent, the elasticity of demand is in absolute value, so demand is .

Figure: Price Elasticity of Supply Refer to the figure. Compared to S₁, S₂ is more:

Figure: Elasticity and Quantity Demanded Refer to the figure. An increase in price from $40 to $50 would cause the change in quantity demanded for D₁ to be:

If the supply of raw materials is , increasing their production leads to per-unit costs.