Question 1

In response to a price change for good Y, if the cross-elasticity of demand for good Y is negative, good X and good Y are substitutes.
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​

Accepted Answer

A) True 
 B)False

Question 2

Exhibit 5-9 Supply and demand curves for good X
​  
-As shown in Exhibit 5-9, assuming good X is a normal good, an increase in consumer income, other factors held constant, could move the equilibrium from point E to point: ​

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 3

An inferior good is:

Accepted Answer

A)  any good of low quality. 
B)  one that consumers buy less of at a higher price. 
C)  one that consumers buy less of as their income rises. 
D)  one that has few substitutes. 
E)  any good made with inexpensive labor. 
A)  any good of low quality. 
B)  one that consumers buy less of at a higher price. 
C)  one that consumers buy less of as their income rises. 
D)  one that has few substitutes. 
E)  any good made with inexpensive labor.

Question 4

When the government imposes a tax, sellers raise their price by the full amount of the tax.
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​
​

Accepted Answer

A) True 
 B)False

Question 5

If the income elasticity of demand for a good is positive, the good is a normal good.
​

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 5-8 Supply and demand curves for good X
​  
-As shown in Exhibit 5-8, assuming good X is an inferior good, a decrease in consumer income, other factors held constant, will move the equilibrium from point E to point:

Accepted Answer

A)  X. 
B)  W. 
C)  Z. 
D)  Y. 
A)  X. 
B)  W. 
C)  Z. 
D)  Y.

Question 7

If the supply of a good is inelastic, a decrease in price must increase total revenue.
​

Accepted Answer

A) True 
 B)False

Question 8

If a tripling of price triples the quantity of a good supplied, the price elasticity of supply for this good is:

Accepted Answer

A)  3. 
B)  300. 
C)  1. 
D)  −1. 
E)  −3. 
A)  3. 
B)  300. 
C)  1. 
D)  −1. 
E)  −3.

Question 9

Along the elastic range of a demand curve, a price change causes:

Accepted Answer

A)  a change in total revenue in the opposite direction. 
B)  a change in total revenue in the same direction. 
C)  no change in total revenue. 
D)  an unpredictable change in the total revenue. 
A)  a change in total revenue in the opposite direction. 
B)  a change in total revenue in the same direction. 
C)  no change in total revenue. 
D)  an unpredictable change in the total revenue.

Question 10

We would expect the cross elasticity between tennis racquets and tennis balls to be:

Accepted Answer

A)  negative. 
B)  positive. 
C)  zero. 
D)  one. 
E)  infinite. 
A)  negative. 
B)  positive. 
C)  zero. 
D)  one. 
E)  infinite.

Question 11

Exhibit 5-8 Supply and demand curves for good X
​  
-As shown in Exhibit 5-8, the price elasticity of supply for good X between points E and X is:

Accepted Answer

A)  1/5 = 0.20. 
B)  1/11 = 0.91. 
C)  1/2 = 0.50. 
D)  5/11 = 0.45. 
A)  1/5 = 0.20. 
B)  1/11 = 0.91. 
C)  1/2 = 0.50. 
D)  5/11 = 0.45.

Question 12

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then according to the averaging equation, the value of price elasticity of demand in absolute terms is:

Accepted Answer

A)  0.33. 
B)  2.33. 
C)  0.25. 
D)  3. 
E)  0.66. 
A)  0.33. 
B)  2.33. 
C)  0.25. 
D)  3. 
E)  0.66.

Question 13

If the short-run price elasticity of demand for hospital care is .27, then the long-run price elasticity is expected to be:

Accepted Answer

A)  greater than .27. 
B)  greater than 1. 
C)  less than .27. 
D)  equal to .27. 
E)  less than 0. 
A)  greater than .27. 
B)  greater than 1. 
C)  less than .27. 
D)  equal to .27. 
E)  less than 0.

Question 14

A study of consumers in an area found that as family income increased from $25,000 per year to $35, 000 per year, other factors held constant, the number of houses purchased increased from 7,000 per year to 11,000 per year. This finding indicates an income elasticity of demand coefficient for housing over this family income range of:

Accepted Answer

A)  0.22. 
B)  0.75. 
C)  1.33. 
D)  4.50. 
A)  0.22. 
B)  0.75. 
C)  1.33. 
D)  4.50.

Question 15

It is Valentine's Day and Jason is desperately looking all over town for a dozen roses to give to Judy. Most likely, Jason's price elasticity of demand is:

Accepted Answer

A)  infinitely large. 
B)  negative. 
C)  equal to one. 
D)  greater than one. 
E)  less than one. 
A)  infinitely large. 
B)  negative. 
C)  equal to one. 
D)  greater than one. 
E)  less than one.

Question 16

If automobiles and gasoline are complements, then their cross-elasticity coefficient will be:

Accepted Answer

A)  strictly greater than one. 
B)  positive. 
C)  equal to zero. 
D)  negative. 
A)  strictly greater than one. 
B)  positive. 
C)  equal to zero. 
D)  negative.

Question 17

An increase in total revenue results occurs from which of the following?

Accepted Answer

A)  Price decreases when demand is inelastic. 
B)  Price increases when demand is elastic. 
C)  Price decreases when demand is elastic. 
D)  Price increases when demand is unitary elastic. 
A)  Price decreases when demand is inelastic. 
B)  Price increases when demand is elastic. 
C)  Price decreases when demand is elastic. 
D)  Price increases when demand is unitary elastic.

Question 18

Suppose the president of a textbook publisher argues that a 10 percent increase in the price of textbooks will raise total revenue for the publisher. It can be concluded that the company president thinks that demand for textbooks is:

Accepted Answer

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

Question 19

If a good is inferior in an economic sense, income elasticity will:

Accepted Answer

A)  be less than one. 
B)  exceed one. 
C)  be zero. 
D)  be inelastic. 
E)  be negative. 
A)  be less than one. 
B)  exceed one. 
C)  be zero. 
D)  be inelastic. 
E)  be negative.

Question 20

Suppose the president of a college argues that a 25 percent tuition increase will raise revenues for the college. It can be concluded that the president thinks that demand to attend this college is:

Accepted Answer

A)  elastic. 
B)  inelastic, but not perfectly inelastic. 
C)  unitary elastic. 
D)  perfectly elastic. 
A)  elastic. 
B)  inelastic, but not perfectly inelastic. 
C)  unitary elastic. 
D)  perfectly elastic.

In response to a price change for good Y, if the cross-elasticity of demand for good Y is negative, good X and good Y are substitutes.

Exhibit 5-9 Supply and demand curves for good X -As shown in Exhibit 5-9, assuming good X is a normal good, an increase in consumer income, other factors held constant, could move the equilibrium from point E to point:

An inferior good is:

When the government imposes a tax, sellers raise their price by the full amount of the tax.

If the income elasticity of demand for a good is positive, the good is a normal good.

Exhibit 5-8 Supply and demand curves for good X -As shown in Exhibit 5-8, assuming good X is an inferior good, a decrease in consumer income, other factors held constant, will move the equilibrium from point E to point:

If the supply of a good is inelastic, a decrease in price must increase total revenue.

If a tripling of price triples the quantity of a good supplied, the price elasticity of supply for this good is:

Along the elastic range of a demand curve, a price change causes:

We would expect the cross elasticity between tennis racquets and tennis balls to be:

Exhibit 5-8 Supply and demand curves for good X -As shown in Exhibit 5-8, the price elasticity of supply for good X between points E and X is:

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then according to the averaging equation, the value of price elasticity of demand in absolute terms is:

If the short-run price elasticity of demand for hospital care is .27, then the long-run price elasticity is expected to be:

It is Valentine's Day and Jason is desperately looking all over town for a dozen roses to give to Judy. Most likely, Jason's price elasticity of demand is:

If automobiles and gasoline are complements, then their cross-elasticity coefficient will be:

An increase in total revenue results occurs from which of the following?

Suppose the president of a textbook publisher argues that a 10 percent increase in the price of textbooks will raise total revenue for the publisher. It can be concluded that the company president thinks that demand for textbooks is:

If a good is inferior in an economic sense, income elasticity will:

Suppose the president of a college argues that a 25 percent tuition increase will raise revenues for the college. It can be concluded that the president thinks that demand to attend this college is:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

Exam 5: Price Elasticity of Demand and Supply

In response to a price change for good Y, if the cross-elasticity of demand for good Y is negative, good X and good Y are substitutes. ​ ​

Exhibit 5-9 Supply and demand curves for good X ​ -As shown in Exhibit 5-9, assuming good X is a normal good, an increase in consumer income, other factors held constant, could move the equilibrium from point E to point: ​

An inferior good is:

When the government imposes a tax, sellers raise their price by the full amount of the tax. ​ ​ ​

If the income elasticity of demand for a good is positive, the good is a normal good. ​

Exhibit 5-8 Supply and demand curves for good X ​ -As shown in Exhibit 5-8, assuming good X is an inferior good, a decrease in consumer income, other factors held constant, will move the equilibrium from point E to point:

If the supply of a good is inelastic, a decrease in price must increase total revenue. ​

If a tripling of price triples the quantity of a good supplied, the price elasticity of supply for this good is:

Along the elastic range of a demand curve, a price change causes:

We would expect the cross elasticity between tennis racquets and tennis balls to be:

Exhibit 5-8 Supply and demand curves for good X ​ -As shown in Exhibit 5-8, the price elasticity of supply for good X between points E and X is:

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then according to the averaging equation, the value of price elasticity of demand in absolute terms is:

If the short-run price elasticity of demand for hospital care is .27, then the long-run price elasticity is expected to be:

It is Valentine's Day and Jason is desperately looking all over town for a dozen roses to give to Judy. Most likely, Jason's price elasticity of demand is:

If automobiles and gasoline are complements, then their cross-elasticity coefficient will be:

An increase in total revenue results occurs from which of the following?

Suppose the president of a textbook publisher argues that a 10 percent increase in the price of textbooks will raise total revenue for the publisher. It can be concluded that the company president thinks that demand for textbooks is:

If a good is inferior in an economic sense, income elasticity will:

Suppose the president of a college argues that a 25 percent tuition increase will raise revenues for the college. It can be concluded that the president thinks that demand to attend this college is:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

In response to a price change for good Y, if the cross-elasticity of demand for good Y is negative, good X and good Y are substitutes.

Exhibit 5-9 Supply and demand curves for good X -As shown in Exhibit 5-9, assuming good X is a normal good, an increase in consumer income, other factors held constant, could move the equilibrium from point E to point:

When the government imposes a tax, sellers raise their price by the full amount of the tax.

If the income elasticity of demand for a good is positive, the good is a normal good.

Exhibit 5-8 Supply and demand curves for good X -As shown in Exhibit 5-8, assuming good X is an inferior good, a decrease in consumer income, other factors held constant, will move the equilibrium from point E to point:

If the supply of a good is inelastic, a decrease in price must increase total revenue.

Exhibit 5-8 Supply and demand curves for good X -As shown in Exhibit 5-8, the price elasticity of supply for good X between points E and X is: