Question 1

Moving down a straight-line demand curve, the absolute price elasticity of demand

Accepted Answer

A) increases. 
B) is constant. 
C) decreases. 
D) varies in uncertain ways. 
A) increases. 
B) is constant. 
C) decreases. 
D) varies in uncertain ways.

Question 2

Suppose that the number of units of good X consumed falls 12 percent when the price of good Y falls 8 percent. The cross price elasticity of demand between goods X and Y is

Accepted Answer

A) 0.66. 
B) 1.75. 
C) 2.0. 
D) 1.5. 
A) 0.66. 
B) 1.75. 
C) 2.0. 
D) 1.5.

Question 3

Price elasticity of supply is always

Accepted Answer

A) positive because of the law of supply. 
B) negative because of the law of supply. 
C) positive because of diminishing marginal utility. 
D) negative because percentages can only be negative. 
A) positive because of the law of supply. 
B) negative because of the law of supply. 
C) positive because of diminishing marginal utility. 
D) negative because percentages can only be negative.

Question 4

-In the above figure, through which range would the demand for this good be most inelastic?

Accepted Answer

A) A-B 
B) B-E 
C) E-F 
D) G-H 
A) A-B 
B) B-E 
C) E-F 
D) G-H

Question 5

The actual value of price elasticity of demand

Accepted Answer

A) measures the relative change in quantity demanded when there is a change in price. 
B) will change when the units good is measured in changes. 
C) varies with changes in supply. 
D) is always negative. 
A) measures the relative change in quantity demanded when there is a change in price. 
B) will change when the units good is measured in changes. 
C) varies with changes in supply. 
D) is always negative.

Question 6

-Use the above table. Based on the information in the table, jam is a(n)

Accepted Answer

A) normal good. 
B) necessary good. 
C) inferior good. 
D) negative good. 
A) normal good. 
B) necessary good. 
C) inferior good. 
D) negative good.

Question 7

The cross-price elasticity of demand of products "M" and "N" is zero. This implies that "M" and "N" are

Accepted Answer

A) substitute products. 
B) complementary products. 
C) independent products. 
D) unique goods, as the price elasticity of demand for one of them is zero. 
A) substitute products. 
B) complementary products. 
C) independent products. 
D) unique goods, as the price elasticity of demand for one of them is zero.

Question 8

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

Accepted Answer

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

Question 9

-Refer to the above figure. The supply curve is

Accepted Answer

A) elastic at high prices and inelastic at low prices. 
B) unitary for all prices. 
C) perfectly elastic. 
D) perfectly inelastic. 
A) elastic at high prices and inelastic at low prices. 
B) unitary for all prices. 
C) perfectly elastic. 
D) perfectly inelastic.

Question 10

If an individual's income rises 40 percent and his clothing purchases increase 50 percent in response, the income elasticity for clothing by the individual is

Accepted Answer

A) -0.8. 
B) 0.8. 
C) 1.25. 
D) -1.25. 
A) -0.8. 
B) 0.8. 
C) 1.25. 
D) -1.25.

Question 11

If the absolute price elasticity of demand for a product is greater than 1, then

Accepted Answer

A) consumers are relatively insensitive to price changes. 
B) consumers are relatively sensitive to price changes. 
C) there is a positive relationship between price changes and total revenue. 
D) producers are relatively insensitive to price changes. 
A) consumers are relatively insensitive to price changes. 
B) consumers are relatively sensitive to price changes. 
C) there is a positive relationship between price changes and total revenue. 
D) producers are relatively insensitive to price changes.

Question 12

Inelastic demand implies

Accepted Answer

A) that a one percent increase in price results in a smaller than one percent decrease in quantity demanded. 
B) that a one percent increase in price results in a larger than one percent decrease in quantity demanded. 
C) that a one percent cut in price results in a larger than one percent increase in quantity demanded. 
D) that a one percent decrease or increase in price induces no change in total revenue. 
A) that a one percent increase in price results in a smaller than one percent decrease in quantity demanded. 
B) that a one percent increase in price results in a larger than one percent decrease in quantity demanded. 
C) that a one percent cut in price results in a larger than one percent increase in quantity demanded. 
D) that a one percent decrease or increase in price induces no change in total revenue.

Question 13

The absolute price elasticity of demand would be the lowest for

Accepted Answer

A) automobiles. 
B) Pizza Hut pizza. 
C) salt. 
D) movie tickets. 
A) automobiles. 
B) Pizza Hut pizza. 
C) salt. 
D) movie tickets.

Question 14

Price elasticities are calculated for four goods, and the values are: 4.1; 3.7; 1.0; 0.002. Which price elasticity is most elastic?

Accepted Answer

A) 4.1 
B) 3.7 
C) 1.0 
D) 0.002 
A) 4.1 
B) 3.7 
C) 1.0 
D) 0.002

Question 15

The demand curve for petroleum should be

Accepted Answer

A) more elastic in the long run than in the short run. 
B) less elastic in the long run than in the short run. 
C) as elastic in the long run as it is in the short run. 
D) more or less elastic in the long run versus the short run depending upon supply conditions. 
A) more elastic in the long run than in the short run. 
B) less elastic in the long run than in the short run. 
C) as elastic in the long run as it is in the short run. 
D) more or less elastic in the long run versus the short run depending upon supply conditions.

Question 16

The absolute price elasticity of demand for good X is 1.2 when price is measured in dollars. If price were measured in cents, the price elasticity elasticity of demand would equal

Accepted Answer

A) 1200 
B) 12 
C) 1.2 
D) 0.012 
A) 1200 
B) 12 
C) 1.2 
D) 0.012

Question 17

A cafeteria is willing to produce 100 cups of coffee when the price is $1 and 150 cups of coffee when the price is $1.30, other things being equal. The price elasticity of supply of coffee is

Accepted Answer

A) 1.53. 
B) 0.67. 
C) 0.10. 
D) 0.50. 
A) 1.53. 
B) 0.67. 
C) 0.10. 
D) 0.50.

Question 18

When the price of sausages is $2.00 per pound, consumers buy 50 pounds of hamburger. When the price of sausages rises to $3.00 per pound, 60 pounds of hamburger are purchased. The cross price elasticity of demand between sausages and hamburger is approximately equal to

Accepted Answer

A) +0.04. 
B) -0.45. 
C) +2.20. 
D) +0.45. 
A) +0.04. 
B) -0.45. 
C) +2.20. 
D) +0.45.

Question 19

-Use the above table. The income elasticity of jam is

Accepted Answer

A) -0.33. 
B) 0.33. 
C) 3.00. 
D) -3.00. 
A) -0.33. 
B) 0.33. 
C) 3.00. 
D) -3.00.

Question 20

If demand is elastic and the price of a product decreases by 10 percent, then

Accepted Answer

A) the change in quantity demanded is less than 10 percent. 
B) the change in quantity demanded is equal to 10 percent. 
C) the change in quantity demanded is greater than 10 percent. 
D) the decrease in quantity demanded is greater than 0 percent. 
A) the change in quantity demanded is less than 10 percent. 
B) the change in quantity demanded is equal to 10 percent. 
C) the change in quantity demanded is greater than 10 percent. 
D) the decrease in quantity demanded is greater than 0 percent.

Exam 19: Demand and Supply Elasticity

Moving down a straight-line demand curve, the absolute price elasticity of demand

Suppose that the number of units of good X consumed falls 12 percent when the price of good Y falls 8 percent. The cross price elasticity of demand between goods X and Y is

Price elasticity of supply is always

-In the above figure, through which range would the demand for this good be most inelastic?

The actual value of price elasticity of demand

-Use the above table. Based on the information in the table, jam is a(n)

The cross-price elasticity of demand of products "M" and "N" is zero. This implies that "M" and "N" are

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

-Refer to the above figure. The supply curve is

If an individual's income rises 40 percent and his clothing purchases increase 50 percent in response, the income elasticity for clothing by the individual is

If the absolute price elasticity of demand for a product is greater than 1, then

Inelastic demand implies

The absolute price elasticity of demand would be the lowest for

Price elasticities are calculated for four goods, and the values are: 4.1; 3.7; 1.0; 0.002. Which price elasticity is most elastic?

The demand curve for petroleum should be

The absolute price elasticity of demand for good X is 1.2 when price is measured in dollars. If price were measured in cents, the price elasticity elasticity of demand would equal

A cafeteria is willing to produce 100 cups of coffee when the price is $1 and 150 cups of coffee when the price is $1.30, other things being equal. The price elasticity of supply of coffee is

When the price of sausages is $2.00 per pound, consumers buy 50 pounds of hamburger. When the price of sausages rises to $3.00 per pound, 60 pounds of hamburger are purchased. The cross price elasticity of demand between sausages and hamburger is approximately equal to

-Use the above table. The income elasticity of jam is

If demand is elastic and the price of a product decreases by 10 percent, then

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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