Question 1

-Use the above figure. Which graph depicts substitute goods?

Accepted Answer

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

Question 2

A supply curve that is parallel to the quantity axis is

Accepted Answer

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

Question 3

The longer any price change lasts over time, the

Accepted Answer

A) more difficult it is to alter quantity demanded. 
B) the more quickly quantity demanded will return to its original level. 
C) the longer the short-run equilibrium will continue to be the short-run equilibrium. 
D) more quantity demanded will change. 
A) more difficult it is to alter quantity demanded. 
B) the more quickly quantity demanded will return to its original level. 
C) the longer the short-run equilibrium will continue to be the short-run equilibrium. 
D) more quantity demanded will change.

Question 4

The value of the absolute price elasticity of demand for good X is 3. The absolute price elasticity for good Y is 2. Which good's quantity demanded is less responsive to a change in price?

Accepted Answer

A) Good X. 
B) Good Y. 
C) They are equally responsive. 
D) Not enough information is given. 
A) Good X. 
B) Good Y. 
C) They are equally responsive. 
D) Not enough information is given.

Question 5

In which of the following situations is the absolute price elasticity of demand for an item most likely to exceed a value of 1?

Accepted Answer

A) when there are very few close substitutes for the item 
B) when there are very few producers of the item 
C) when the item's share of expenses in consumers' budgets is very small 
D) when there is considerable time to adjust to a change in the price of the item 
A) when there are very few close substitutes for the item 
B) when there are very few producers of the item 
C) when the item's share of expenses in consumers' budgets is very small 
D) when there is considerable time to adjust to a change in the price of the item

Question 6

An increase in total revenue will result if

Accepted Answer

A) demand is inelastic and price increases. 
B) demand is elastic and price increases. 
C) demand is inelastic and price decreases. 
D) demand is unitary elastic and price decreases. 
A) demand is inelastic and price increases. 
B) demand is elastic and price increases. 
C) demand is inelastic and price decreases. 
D) demand is unitary elastic and price decreases.

Question 7

When the calculated price elasticity of demand is -0.45, demand is

Accepted Answer

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

Question 8

Suppose that the price of eggs increases from 75 cents to $1.00 per dozen and as a result a typical farmer experiences a decrease in egg sales from 300 to 200 dozen per week. Using the method of average values, the absolute price elasticity of demand is

Accepted Answer

A) 1.4. 
B) 0.8. 
C) 3.0. 
D) 1.75. 
A) 1.4. 
B) 0.8. 
C) 3.0. 
D) 1.75.

Question 9

Which of the following is NOT a factor that determines the price elasticity of demand?

Accepted Answer

A) The amount that suppliers have made available 
B) The percentage of a consumer's total budget spent on the good 
C) The existence of substitutes 
D) The length of time allowed for adjustments to change in the price of the commodities 
A) The amount that suppliers have made available 
B) The percentage of a consumer's total budget spent on the good 
C) The existence of substitutes 
D) The length of time allowed for adjustments to change in the price of the commodities

Question 10

-Refer to the above table. At a price below $5, the absolute price elasticity of demand is

Accepted Answer

A) 1.0. 
B) below 1. 
C) between 0.8 and 1.0. 
D) greater than 1. 
A) 1.0. 
B) below 1. 
C) between 0.8 and 1.0. 
D) greater than 1.

Question 11

-Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7.50 to $7?

Accepted Answer

A) 10 
B) 1.38 
C) 0.724 
D) 0.1 
A) 10 
B) 1.38 
C) 0.724 
D) 0.1

Question 12

When the consumer spends less than 3% of his income on a good, demand will be

Accepted Answer

A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) elastic, unit-elastic or inelastic depending upon supply. 
A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) elastic, unit-elastic or inelastic depending upon supply.

Question 13

Robert must always have cream in his coffee. For Robert, the cross price elasticity of demand for coffee and cream is

Accepted Answer

A) equal to 0. 
B) negative. 
C) positive. 
D) impossible to determine without more information. 
A) equal to 0. 
B) negative. 
C) positive. 
D) impossible to determine without more information.

Question 14

If price decreases by 10 percent and quantity demanded increases by 30 percent, the price elasticity of demand will be

Accepted Answer

A) 0.333. 
B) 3. 
C) 30. 
D) 300. 
A) 0.333. 
B) 3. 
C) 30. 
D) 300.

Question 15

When demand is elastic,

Accepted Answer

A) quantity demanded is very responsive to a change in price. 
B) quantity demanded is not very responsive to a change in price. 
C) the proportional change in quantity demanded is equal to the proportional change in price. 
D) producers react quickly to price changes. 
A) quantity demanded is very responsive to a change in price. 
B) quantity demanded is not very responsive to a change in price. 
C) the proportional change in quantity demanded is equal to the proportional change in price. 
D) producers react quickly to price changes.

Question 16

A value of the absolute price elasticity of demand equal to 0.5 indicates that

Accepted Answer

A) a 0.5% decrease in price leads to a 1% increase in quantity demanded. 
B) a 2% decrease in price leads to a 25% increase in quantity demanded. 
C) a 1% increase in price leads to a 5% decrease in quantity demanded. 
D) a 1% increase in price leads to a 0.5% decrease in quantity demanded. 
A) a 0.5% decrease in price leads to a 1% increase in quantity demanded. 
B) a 2% decrease in price leads to a 25% increase in quantity demanded. 
C) a 1% increase in price leads to a 5% decrease in quantity demanded. 
D) a 1% increase in price leads to a 0.5% decrease in quantity demanded.

Question 17

"Unit elasticity of demand can be found everywhere along a straight-line demand curve with a slope of -1." Do you agree or disagree? Explain.

Accepted Answer

Disagree. A vertical demand curve implie

Question 18

A demand relationship in which a given percentage change in price will result in a less than proportionate percentage change in quantity demanded is

Accepted Answer

A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) consistent with zero elasticity. 
A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) consistent with zero elasticity.

Question 19

The price elasticity of supply is

Accepted Answer

A) negative. 
B) zero. 
C) positive. 
D) unknown, depending on other factors. 
A) negative. 
B) zero. 
C) positive. 
D) unknown, depending on other factors.

Question 20

If the price of a good increases and the total revenue also increases, the good has a(n)

Accepted Answer

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

Exam 19: Demand and Supply Elasticity

-Use the above figure. Which graph depicts substitute goods?

A supply curve that is parallel to the quantity axis is

The longer any price change lasts over time, the

The value of the absolute price elasticity of demand for good X is 3. The absolute price elasticity for good Y is 2. Which good's quantity demanded is less responsive to a change in price?

In which of the following situations is the absolute price elasticity of demand for an item most likely to exceed a value of 1?

An increase in total revenue will result if

When the calculated price elasticity of demand is -0.45, demand is

Suppose that the price of eggs increases from 75 cents to $1.00 per dozen and as a result a typical farmer experiences a decrease in egg sales from 300 to 200 dozen per week. Using the method of average values, the absolute price elasticity of demand is

Which of the following is NOT a factor that determines the price elasticity of demand?

-Refer to the above table. At a price below $5, the absolute price elasticity of demand is

-Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7.50 to $7?

When the consumer spends less than 3% of his income on a good, demand will be

Robert must always have cream in his coffee. For Robert, the cross price elasticity of demand for coffee and cream is

If price decreases by 10 percent and quantity demanded increases by 30 percent, the price elasticity of demand will be

When demand is elastic,

A value of the absolute price elasticity of demand equal to 0.5 indicates that

"Unit elasticity of demand can be found everywhere along a straight-line demand curve with a slope of -1." Do you agree or disagree? Explain.

A demand relationship in which a given percentage change in price will result in a less than proportionate percentage change in quantity demanded is

The price elasticity of supply is

If the price of a good increases and the total revenue also increases, the good has a(n)

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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