Question 1

A perfectly elastic supply curve is

Accepted Answer

A) an upward sloping straight line that intersects the origin. 
B) horizontal. 
C) vertical. 
D) downward sloping. 
A) an upward sloping straight line that intersects the origin. 
B) horizontal. 
C) vertical. 
D) downward sloping.

Question 2

A university raises annual tuition by 10 percent. No other events have occurred, and the university's revenues have increased. It must be true that

Accepted Answer

A) the associated change in quantity demanded was smaller than 10 percent. 
B) the associated change in quantity demanded was equal to 10 percent. 
C) the associated change in quantity demanded was greater than 10 percent. 
D) there was no associated change in quantity demanded. 
A) the associated change in quantity demanded was smaller than 10 percent. 
B) the associated change in quantity demanded was equal to 10 percent. 
C) the associated change in quantity demanded was greater than 10 percent. 
D) there was no associated change in quantity demanded.

Question 3

Generally, expenses on a sport utility vehicle are a large part of a consumer's budget, so the demand for sport utility vehicles is more likely to be

Accepted Answer

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

Question 4

The price elasticity of supply is higher when

Accepted Answer

A) the number of producers in the market increases over time. 
B) the product in question is a complementary good. 
C) the number of buyers in the market increases. 
D) producers have less time to adjust to price changes. 
A) the number of producers in the market increases over time. 
B) the product in question is a complementary good. 
C) the number of buyers in the market increases. 
D) producers have less time to adjust to price changes.

Question 5

-Refer to the above figure. Demand will be elastic when quantity is between

Accepted Answer

A) 0 and A. 
B) 0 and B. 
C) A and B. 
D) B and C. 
A) 0 and A. 
B) 0 and B. 
C) A and B. 
D) B and C.

Question 6

If a 5 percent change in the price of a good elicited a 5 percent change in the quantity demanded of the good, we would say that over this range of prices the good has a(n)

Accepted Answer

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

Question 7

-The supply curve for housing in the very short run is likely to be

Accepted Answer

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

Question 8

When the price of a soft drink from the campus vending machine was $0.60 per can, 100 cans were sold each day. After the price increased to $0.75 per can, sales dropped to 85 cans per day. Over this range, the absolute price elasticity of demand for soft drinks was approximately equal to

Accepted Answer

A) 0.15. 
B) 0.60. 
C) 0.73. 
D) 1.67. 
A) 0.15. 
B) 0.60. 
C) 0.73. 
D) 1.67.

Question 9

If the absolute price elasticity of demand is 2, a 10 percent increase in the price will cause

Accepted Answer

A) the quantity demanded to decrease by 2 percent. 
B) the quantity demanded to decrease by 20 percent. 
C) the quantity demanded to decrease by 5 percent. 
D) the quantity demanded to decrease by 0.2 percent. 
A) the quantity demanded to decrease by 2 percent. 
B) the quantity demanded to decrease by 20 percent. 
C) the quantity demanded to decrease by 5 percent. 
D) the quantity demanded to decrease by 0.2 percent.

Question 10

-Refer to the above table. Suppose the price of X increases from $10 to $12. What is the cross price elasticity of demand between X and Y?

Accepted Answer

A) -1.833 
B) +0.545 
C) +0.579 
D) +1.833 
A) -1.833 
B) +0.545 
C) +0.579 
D) +1.833

Question 11

Why can cross price elasticity of demand be positive or negative, unlike the price elasticity of demand with respect to the item's own price?

Accepted Answer

Cross price elasticity of demand is the

Question 12

If the price of one good increases, and as a result the demand for another good increases, the goods are

Accepted Answer

A) substitutes. 
B) normal goods. 
C) complements. 
D) inferior goods. 
A) substitutes. 
B) normal goods. 
C) complements. 
D) inferior goods.

Question 13

Demand is said to be inelastic when

Accepted Answer

A) a given percentage change in price will result in a less than proportionate percentage change in the quantity demanded. 
B) demand exhibits zero responsiveness to price changes. 
C) small price increases will lead to zero quantity demanded. 
D) a given percentage change in price will result in a greater than proportionate percentage change in the quantity demanded. 
A) a given percentage change in price will result in a less than proportionate percentage change in the quantity demanded. 
B) demand exhibits zero responsiveness to price changes. 
C) small price increases will lead to zero quantity demanded. 
D) a given percentage change in price will result in a greater than proportionate percentage change in the quantity demanded.

Question 14

Suppose that the demand for men's ties is price inelastic for the range of prices between $10 and $12. If Joe raises the price of the ties in his shop from $10 to $12, what will happen to Joe's total revenues?

Accepted Answer

A) Total revenues will decrease. 
B) Total revenues will increase. 
C) Total revenues will not change. 
D) Total revenues will have no relationship to the quantity of ties demanded. 
A) Total revenues will decrease. 
B) Total revenues will increase. 
C) Total revenues will not change. 
D) Total revenues will have no relationship to the quantity of ties demanded.

Question 15

When quantity supplied is very responsive to a change in price, supply is

Accepted Answer

A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) income sensitive. 
A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) income sensitive.

Question 16

Other things being equal, demand is more elastic the

Accepted Answer

A) less expensive the good. 
B) shorter the time period for adjustment. 
C) larger the percentage of a total budget that a family spends on the good. 
D) more unique the good is. 
A) less expensive the good. 
B) shorter the time period for adjustment. 
C) larger the percentage of a total budget that a family spends on the good. 
D) more unique the good is.

Question 17

If total revenues rise when the market price increases, then we know that

Accepted Answer

A) demand is inelastic. 
B) demand is elastic. 
C) demand is unit-elastic. 
D) its demand has zero elasticity. 
A) demand is inelastic. 
B) demand is elastic. 
C) demand is unit-elastic. 
D) its demand has zero elasticity.

Question 18

Compared to the short-run price elasticity of demand, the long-run price elasticity of demand is

Accepted Answer

A) smaller. 
B) the same. 
C) greater. 
D) either greater than or less, depending on the number of substitutes the good has. 
A) smaller. 
B) the same. 
C) greater. 
D) either greater than or less, depending on the number of substitutes the good has.

Question 19

If the demand curve for a product is horizontal, then

Accepted Answer

A) the demand for the product is perfectly inelastic. 
B) the demand for the product is perfectly elastic. 
C) only a certain amount of the product will be consumed regardless of price. 
D) the price elasticity of the product approaches zero. 
A) the demand for the product is perfectly inelastic. 
B) the demand for the product is perfectly elastic. 
C) only a certain amount of the product will be consumed regardless of price. 
D) the price elasticity of the product approaches zero.

Question 20

If an item has an absolute price elasticity of demand that is greater than 1, we say the demand for the item is

Accepted Answer

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

Exam 19: Demand and Supply Elasticity

A perfectly elastic supply curve is

A university raises annual tuition by 10 percent. No other events have occurred, and the university's revenues have increased. It must be true that

Generally, expenses on a sport utility vehicle are a large part of a consumer's budget, so the demand for sport utility vehicles is more likely to be

The price elasticity of supply is higher when

-Refer to the above figure. Demand will be elastic when quantity is between

If a 5 percent change in the price of a good elicited a 5 percent change in the quantity demanded of the good, we would say that over this range of prices the good has a(n)

-The supply curve for housing in the very short run is likely to be

When the price of a soft drink from the campus vending machine was $0.60 per can, 100 cans were sold each day. After the price increased to $0.75 per can, sales dropped to 85 cans per day. Over this range, the absolute price elasticity of demand for soft drinks was approximately equal to

If the absolute price elasticity of demand is 2, a 10 percent increase in the price will cause

-Refer to the above table. Suppose the price of X increases from $10 to $12. What is the cross price elasticity of demand between X and Y?

Why can cross price elasticity of demand be positive or negative, unlike the price elasticity of demand with respect to the item's own price?

If the price of one good increases, and as a result the demand for another good increases, the goods are

Demand is said to be inelastic when

Suppose that the demand for men's ties is price inelastic for the range of prices between $10 and $12. If Joe raises the price of the ties in his shop from $10 to $12, what will happen to Joe's total revenues?

When quantity supplied is very responsive to a change in price, supply is

Other things being equal, demand is more elastic the

If total revenues rise when the market price increases, then we know that

Compared to the short-run price elasticity of demand, the long-run price elasticity of demand is

If the demand curve for a product is horizontal, then

If an item has an absolute price elasticity of demand that is greater than 1, we say the demand for the item is

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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