Question 1

Which of the following would NOT make elasticity of demand for a good more elastic?

Accepted Answer

A)  more substitutes 
B)  luxuries 
C)  large part of budget 
D)  less time 
A)  more substitutes 
B)  luxuries 
C)  large part of budget 
D)  less time

Question 2

For each of the following goods would you expect the demand to be elastic or inelastic? Provide explanation for each of your rationales.
a. oil
b. Coca-Cola
c. bread

Accepted Answer

a. The demand for oil is inelastic, at l

Question 3

The more quantity demanded responds to a change in the price of that good the _____ is for that good.

Accepted Answer

A)  more elastic demand 
B)  less elastic demand 
C)  more elastic supply 
D)  less elastic supply 
A)  more elastic demand 
B)  less elastic demand 
C)  more elastic supply 
D)  less elastic supply

Question 4

The price elasticity of demand is:

Accepted Answer

A)  the responsiveness of price to changes in the quantity demanded of the product. 
B)  the responsiveness of quantity demanded to changes in the price of the product. 
C)  the change in the firm's total revenue when prices change. 
D)  exactly the same as the slope of the demand curve. 
A)  the responsiveness of price to changes in the quantity demanded of the product. 
B)  the responsiveness of quantity demanded to changes in the price of the product. 
C)  the change in the firm's total revenue when prices change. 
D)  exactly the same as the slope of the demand curve.

Question 5

The supply of ancient Egyptian papyrus manuscripts is probably:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  hyperelastic. 
A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  hyperelastic.

Question 6

If the price of ice cream changes by 30 percent and the quantity demanded changes by 75 percent, what is the absolute value of demand elasticity?

Accepted Answer

A)  2.5, so demand is inelastic 
B)  0.4, so demand is inelastic 
C)  0.4, so demand is elastic 
D)  2.5, so demand is elastic 
A)  2.5, so demand is inelastic 
B)  0.4, so demand is inelastic 
C)  0.4, so demand is elastic 
D)  2.5, so demand is elastic

Question 7

A good with an absolute value of the price elasticity of demand of 1.0 is classified as:

Accepted Answer

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

Question 8

The demand for Pepsi is more elastic than the demand for soda.

Accepted Answer

A) True 
 B)False

Question 9

Figure: Elasticity of Swim Trunks   
The demand for swim trunks appears in the figure. What is the elasticity of demand for swim trunks? Suppose that your swimwear business is currently overstocked with swim trunks. If you want to sell 18 percent more swim trunks, how much should you cut your price?

Accepted Answer

The elasticity of demand is 30/25 ÷ -10/

Question 10

On June 14, 2011, the Delaware Senate approved a gun buyback program. The yearlong program would authorize the state to pay $100 for every gun turned over to police. What sort of guns should Delaware officials expect to get if this plan becomes law?

Accepted Answer

A)  Small guns, usually used as self-defense in bad neighborhoods. 
B)  Heavy guns, usually used by criminals to support their illegal enterprises. 
C)  Nonworking guns, usually kept in someone's back closet. 
D)  Guns that use a lot of bullets very quickly. 
A)  Small guns, usually used as self-defense in bad neighborhoods. 
B)  Heavy guns, usually used by criminals to support their illegal enterprises. 
C)  Nonworking guns, usually kept in someone's back closet. 
D)  Guns that use a lot of bullets very quickly.

Question 11

If two linear demand curves run through a common point, then at any given quantity the curve that is flatter is more elastic.

Accepted Answer

A) True 
 B)False

Question 12

Assume a product has an inelastic demand. If the producer of the good raises the price of the product, that producer's total revenue will decrease.

Accepted Answer

A) True 
 B)False

Question 13

A new per unit tax on yacht production decreases the supply of yachts. If yachts are elastically demanded, what will happen to total revenues from yacht production?

Accepted Answer

A)  They will rise. 
B)  They will fall. 
C)  They will remain the same. 
D)  They will change in an indeterminate direction. 
A)  They will rise. 
B)  They will fall. 
C)  They will remain the same. 
D)  They will change in an indeterminate direction.

Question 14

Total revenue is:

Accepted Answer

A)  price × quantity. 
B)  quantity/price. 
C)  the elasticity of demand X price. 
D)  price + quantity. 
A)  price × quantity. 
B)  quantity/price. 
C)  the elasticity of demand X price. 
D)  price + quantity.

Question 15

The supply curve for oil is ________ because ________.

Accepted Answer

A)  elastic; per unit costs do not increase when the quantity supplied increases 
B)  elastic; oil exploration and drilling is not expensive relative to revenues earned 
C)  inelastic; per-unit costs rise quickly when the quantity supplied increases 
D)  inelastic; oil exploration and drilling is not expensive relative to revenues earned 
A)  elastic; per unit costs do not increase when the quantity supplied increases 
B)  elastic; oil exploration and drilling is not expensive relative to revenues earned 
C)  inelastic; per-unit costs rise quickly when the quantity supplied increases 
D)  inelastic; oil exploration and drilling is not expensive relative to revenues earned

Question 16

Assume a product has a rather elastic demand. If the producer of the good raises the price of the product, that producer's total revenue will decrease.

Accepted Answer

A) True 
 B)False

Question 17

If the demand for a good is estimated to be _____, then firms producing the good will experience an increase in total revenue if prices fall.

Accepted Answer

A)  .05 
B)  .75 
C)  1 
D)  2.5 
A)  .05 
B)  .75 
C)  1 
D)  2.5

Question 18

The demand for fruit is more elastic than the demand for apples.

Accepted Answer

A) True 
 B)False

Question 19

Figure: iPod Consumers   
A local electronics store sells iPods for $100 per unit. The manager who took a lesson from his economics course in college decides to offer a 20 percent discount to students who can present their current student ID at purchase. Given the demand curves for regular and student customers, answer the following questions.
a. What will be the total revenue for both groups of customers if the store offers the discount?
b. For which group of customers is the demand more elastic?
c. What is the elasticity of demand between the prices of $100 and $80 in the regular market?
d. What is the elasticity of demand between the prices of $100 and $80 in the student market?
e. If the manager increases the regular price of iPods to $120 and lowers the discount price to $70, how much could the store increase total revenues?

Accepted Answer

a. Total revenue from regular consumers

Question 20

The demand for oil would become less elastic if the price of oil increases by a significant amount for a long period of time.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Applications

Which of the following would NOT make elasticity of demand for a good more elastic?

For each of the following goods would you expect the demand to be elastic or inelastic? Provide explanation for each of your rationales. a. oil b. Coca-Cola c. bread

The more quantity demanded responds to a change in the price of that good the _____ is for that good.

The price elasticity of demand is:

The supply of ancient Egyptian papyrus manuscripts is probably:

If the price of ice cream changes by 30 percent and the quantity demanded changes by 75 percent, what is the absolute value of demand elasticity?

A good with an absolute value of the price elasticity of demand of 1.0 is classified as:

The demand for Pepsi is more elastic than the demand for soda.

Figure: Elasticity of Swim Trunks The demand for swim trunks appears in the figure. What is the elasticity of demand for swim trunks? Suppose that your swimwear business is currently overstocked with swim trunks. If you want to sell 18 percent more swim trunks, how much should you cut your price?

On June 14, 2011, the Delaware Senate approved a gun buyback program. The yearlong program would authorize the state to pay $100 for every gun turned over to police. What sort of guns should Delaware officials expect to get if this plan becomes law?

If two linear demand curves run through a common point, then at any given quantity the curve that is flatter is more elastic.

Assume a product has an inelastic demand. If the producer of the good raises the price of the product, that producer's total revenue will decrease.

A new per unit tax on yacht production decreases the supply of yachts. If yachts are elastically demanded, what will happen to total revenues from yacht production?

Total revenue is:

The supply curve for oil is ________ because ________.

Assume a product has a rather elastic demand. If the producer of the good raises the price of the product, that producer's total revenue will decrease.

If the demand for a good is estimated to be _____, then firms producing the good will experience an increase in total revenue if prices fall.

The demand for fruit is more elastic than the demand for apples.

The demand for oil would become less elastic if the price of oil increases by a significant amount for a long period of time.

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

The supply curve for oil is because .