Question 1

If a straight-line demand curve slopes down, price elasticity will:

Accepted Answer

A)  remain the same at all points on the demand curve. 
B)  change between any two points along the demand curve. 
C)  always be greater than one. 
D)  always equal one. 
E)  always be less than one. 
A)  remain the same at all points on the demand curve. 
B)  change between any two points along the demand curve. 
C)  always be greater than one. 
D)  always equal one. 
E)  always be less than one.

Question 2

If the price elasticity of demand is elastic, then:

Accepted Answer

A)  Ed < 1. 
B)  consumers are relatively not very responsive to a price increase. 
C)  an increase in the price will increase total revenue. 
D)  there are likely a large number of substitute products available. 
A)  Ed < 1. 
B)  consumers are relatively not very responsive to a price increase. 
C)  an increase in the price will increase total revenue. 
D)  there are likely a large number of substitute products available.

Question 3

Which of the following describes a situation in which demand must be inelastic?

Accepted Answer

A)  Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of spats rises by $10. 
E)  Total revenue decreases by more than $10 when the price of spats rises by $10. 
A)  Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of spats rises by $10. 
E)  Total revenue decreases by more than $10 when the price of spats rises by $10.

Question 4

A public transit company finds that when it reduces the price of a bus ticket, total revenues remain the same. One can conclude from this that:

Accepted Answer

A)  the demand curve is horizontal, reflecting infinite price elasticity. 
B)  the company sells the same number of bus tickets both before and after the price change. 
C)  the demand curve for bus tickets must have shifted to the right. 
D)  the firm is operating in a range of the demand curve that is unit elastic. 
E)  the price should be lowered further so that a larger quantity can be sold. 
A)  the demand curve is horizontal, reflecting infinite price elasticity. 
B)  the company sells the same number of bus tickets both before and after the price change. 
C)  the demand curve for bus tickets must have shifted to the right. 
D)  the firm is operating in a range of the demand curve that is unit elastic. 
E)  the price should be lowered further so that a larger quantity can be sold.

Question 5

Which statement about price elasticity of demand along a linear demand curve is true?

Accepted Answer

A)  As the quantity demanded increases, so does the buyer's sensitivity to price. 
B)  When price elasticity of demand is equal to 1, consumers are indifferent to subtle price changes. 
C)  The ratio of current price to quantity demanded is a good estimate of the elasticity of demand. 
D)  As the prices of goods increase, the elasticity of demand increases. 
E)  When an individual buys 4 units of a good his/her elasticity of demand for each unit increases. 
A)  As the quantity demanded increases, so does the buyer's sensitivity to price. 
B)  When price elasticity of demand is equal to 1, consumers are indifferent to subtle price changes. 
C)  The ratio of current price to quantity demanded is a good estimate of the elasticity of demand. 
D)  As the prices of goods increase, the elasticity of demand increases. 
E)  When an individual buys 4 units of a good his/her elasticity of demand for each unit increases.

Question 6

If the cross-elasticity of demand for two goods is negative, this means that:

Accepted Answer

A)  only the poor will buy the goods. 
B)  they are normal goods. 
C)  the goods are substitutes. 
D)  the goods are complements. 
A)  only the poor will buy the goods. 
B)  they are normal goods. 
C)  the goods are substitutes. 
D)  the goods are complements.

Question 7

If John purchases 10 percent more compact discs when his income increases 5 percent, then:

Accepted Answer

A)  his total expenditure on compact discs will fall as his income increases. 
B)  compact discs would be classified as an inferior good. 
C)  compact discs would be price elastic. 
D)  compact discs would be income inelastic. 
E)  compact discs would be income elastic. 
A)  his total expenditure on compact discs will fall as his income increases. 
B)  compact discs would be classified as an inferior good. 
C)  compact discs would be price elastic. 
D)  compact discs would be income inelastic. 
E)  compact discs would be income elastic.

Question 8

If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect:

Accepted Answer

A)  no change in his total revenues. 
B)  everyone to begin buying his product. 
C)  a complete loss of revenues. 
D)  a new demand curve. 
E)  a relative increase in income. 
A)  no change in his total revenues. 
B)  everyone to begin buying his product. 
C)  a complete loss of revenues. 
D)  a new demand curve. 
E)  a relative increase in income.

Question 9

Other things constant, the price elasticity of demand for a product will be smaller (more inelastic) if:

Accepted Answer

A)  people spend a large share of their income on the product. 
B)  people spend an insignificant share of their income on the product. 
C)  the population in the market area is large. 
D)  there are many good substitutes for the product. 
A)  people spend a large share of their income on the product. 
B)  people spend an insignificant share of their income on the product. 
C)  the population in the market area is large. 
D)  there are many good substitutes for the product.

Question 10

If the quantity of tickets to the fair sold decreases by 10 percent when the price increases by 5 percent, the price elasticity of demand over this range of the demand curve is:

Accepted Answer

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

Question 11

Price elasticity of demand refers to the ratio of the:

Accepted Answer

A)  percentage change in price of a good in response to a percentage change in quantity demanded. 
B)  percentage change in price of a good to a percentage increase in income. 
C)  percentage change in the quantity demanded of a good to a percentage change in its price. 
D)  none of these. 
A)  percentage change in price of a good in response to a percentage change in quantity demanded. 
B)  percentage change in price of a good to a percentage increase in income. 
C)  percentage change in the quantity demanded of a good to a percentage change in its price. 
D)  none of these.

Question 12

A perfectly elastic demand curve has an elasticity coefficient of:

Accepted Answer

A)  0. 
B)  1. 
C)  less than 1. 
D)  infinity. 
A)  0. 
B)  1. 
C)  less than 1. 
D)  infinity.

Question 13

The more inelastic the demand for a product, the more the actual burden of a tax on the product will:

Accepted Answer

A)  fall on sellers. 
B)  fall on buyers. 
C)  fall equally on both buyers and sellers. 
D)  create a larger deadweight loss (or excess burden). 
A)  fall on sellers. 
B)  fall on buyers. 
C)  fall equally on both buyers and sellers. 
D)  create a larger deadweight loss (or excess burden).

Question 14

Exhibit 5-3 Demand curves for gallons of orange juice $$\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Price } & \text { Albert } & \text { Betty } & \text { Carl } & \text { Dana } & \text { Edward } \
\hline 10 & 0 & 1 & 2 & 0 & 0 \
9 & 0 & 1.5 & 2 & 0.5 & 0 \
8 & 0 & 2 & 2 & 2 & 4 \
7 & 0 & 2.5 & 2 & 3.5 & 8 \
6 & 1 & 3 & 3 & 5 & 12 \
5 & 3 & 3.5 & 3 & 6.5 & 16 \
4 & 5 & 4 & 3 & 8 & 20 \
3 & 7 & 4.5 & 3 & 9.5 & 24 \
2 & 9 & 5 & 3 & 11 & 28 \
1 & 11 & 5.5 & 3 & 12.5 & 32 \
\hline
\end{array}$$
-Using Exhibit 5-3, in general, whose demand for orange juice is the most inelastic?

Accepted Answer

A)  Albert 
B)  Betty 
C)  Carl 
D)  Dana 
E)  Edward 
A)  Albert 
B)  Betty 
C)  Carl 
D)  Dana 
E)  Edward

Question 15

When economists look at the percentage change in quantity demanded generated by a change in income, they are looking at:

Accepted Answer

A)  price elasticity of demand. 
B)  income elasticity of demand. 
C)  price elasticity of supply. 
D)  cross elasticity of demand. 
E)  cross elasticity of supply. 
A)  price elasticity of demand. 
B)  income elasticity of demand. 
C)  price elasticity of supply. 
D)  cross elasticity of demand. 
E)  cross elasticity of supply.

Question 16

Sally is an average shopper, with average income. When she is in the store she buys a few items which cost more than $20, several items which cost between $5 and $20, and many items which cost less than $1. The price elasticity of Sally's demand for these goods most likely ____.

Accepted Answer

A)  increases as the price decreases 
B)  decreases as the price decreases 
C)  increases as the price increases 
D)  decreases as the price increases 
E)  remains constant over all price ranges 
A)  increases as the price decreases 
B)  decreases as the price decreases 
C)  increases as the price increases 
D)  decreases as the price increases 
E)  remains constant over all price ranges

Question 17

Price elasticity remains constant along a straight-line demand curve.
​

Accepted Answer

A) True 
 B)False

Question 18

The number of cases of Coca-Cola bought increased by 50 percent when the price of pretzels declined by 10 percent. Assuming other factors are held constant, Coca-Cola and pretzels are classified as:

Accepted Answer

A)  complements. 
B)  unrelated goods. 
C)  substitutes. 
D)  social goods. 
A)  complements. 
B)  unrelated goods. 
C)  substitutes. 
D)  social goods.

Question 19

Exhibit 5-6 Demand curve for concert tickets
​  
-In Exhibit 5-6, the demand curve for concert tickets shown above is classified as:

Accepted Answer

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

Question 20

Larissa is a famous attorney with a great reputation in court. She charges her clients $300 for each hour she spends working on their cases. If she earned $450,000 in hourly wages last year, and by raising her rates to $350 per hour her income increased to $490,000 what can we say about the elasticity of demand for Larissa's legal services?

Accepted Answer

A)  It is approximately equal to 2.3. 
B)  It is approximately equal to 1.6. 
C)  It is approximately equal to 1.0. 
D)  It is approximately equal to 0.45. 
E)  It is approximately equal to 0.1. 
A)  It is approximately equal to 2.3. 
B)  It is approximately equal to 1.6. 
C)  It is approximately equal to 1.0. 
D)  It is approximately equal to 0.45. 
E)  It is approximately equal to 0.1.

If a straight-line demand curve slopes down, price elasticity will:

If the price elasticity of demand is elastic, then:

Which of the following describes a situation in which demand must be inelastic?

A public transit company finds that when it reduces the price of a bus ticket, total revenues remain the same. One can conclude from this that:

Which statement about price elasticity of demand along a linear demand curve is true?

If the cross-elasticity of demand for two goods is negative, this means that:

If John purchases 10 percent more compact discs when his income increases 5 percent, then:

If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect:

Other things constant, the price elasticity of demand for a product will be smaller (more inelastic) if:

If the quantity of tickets to the fair sold decreases by 10 percent when the price increases by 5 percent, the price elasticity of demand over this range of the demand curve is:

Price elasticity of demand refers to the ratio of the:

A perfectly elastic demand curve has an elasticity coefficient of:

The more inelastic the demand for a product, the more the actual burden of a tax on the product will:

When economists look at the percentage change in quantity demanded generated by a change in income, they are looking at:

Sally is an average shopper, with average income. When she is in the store she buys a few items which cost more than $20, several items which cost between $5 and $20, and many items which cost less than $1. The price elasticity of Sally's demand for these goods most likely ____.

Price elasticity remains constant along a straight-line demand curve.

The number of cases of Coca-Cola bought increased by 50 percent when the price of pretzels declined by 10 percent. Assuming other factors are held constant, Coca-Cola and pretzels are classified as:

Exhibit 5-6 Demand curve for concert tickets -In Exhibit 5-6, the demand curve for concert tickets shown above is classified as:

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

If a straight-line demand curve slopes down, price elasticity will:

If the price elasticity of demand is elastic, then:

Which of the following describes a situation in which demand must be inelastic?

A public transit company finds that when it reduces the price of a bus ticket, total revenues remain the same. One can conclude from this that:

Which statement about price elasticity of demand along a linear demand curve is true?

If the cross-elasticity of demand for two goods is negative, this means that:

If John purchases 10 percent more compact discs when his income increases 5 percent, then:

If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect:

Other things constant, the price elasticity of demand for a product will be smaller (more inelastic) if:

If the quantity of tickets to the fair sold decreases by 10 percent when the price increases by 5 percent, the price elasticity of demand over this range of the demand curve is:

Price elasticity of demand refers to the ratio of the:

A perfectly elastic demand curve has an elasticity coefficient of:

The more inelastic the demand for a product, the more the actual burden of a tax on the product will:

When economists look at the percentage change in quantity demanded generated by a change in income, they are looking at:

Sally is an average shopper, with average income. When she is in the store she buys a few items which cost more than $20, several items which cost between $5 and $20, and many items which cost less than $1. The price elasticity of Sally's demand for these goods most likely ____.

Price elasticity remains constant along a straight-line demand curve. ​

The number of cases of Coca-Cola bought increased by 50 percent when the price of pretzels declined by 10 percent. Assuming other factors are held constant, Coca-Cola and pretzels are classified as:

Exhibit 5-6 Demand curve for concert tickets ​ -In Exhibit 5-6, the demand curve for concert tickets shown above is classified as:

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

Price elasticity remains constant along a straight-line demand curve.

Exhibit 5-6 Demand curve for concert tickets -In Exhibit 5-6, the demand curve for concert tickets shown above is classified as: