Question 1

If price elasticity of supply is less than 1,

Accepted Answer

A) supply is elastic. 
B) demand is elastic. 
C) demand is inelastic. 
D) supply is inelastic. 
A) supply is elastic. 
B) demand is elastic. 
C) demand is inelastic. 
D) supply is inelastic.

Question 2

-In the above table, the cross price elasticity of demand (using averages)for Z with good X, when PX increases from $12 to $15, is approximately equal to

Accepted Answer

A) +1.03 
B) +2.26. 
C) +0.44. 
D) -0.44. 
A) +1.03 
B) +2.26. 
C) +0.44. 
D) -0.44.

Question 3

If demand is unit elastic, then

Accepted Answer

A) a ten percent increase in price leads to a one percent decrease in quantity demanded. 
B) the percentage change in quantity demanded equals the percentage change in price. 
C) a two percent increase in price leads to a two percent decrease in quantity demanded. 
D) an increase in price of any amount leads to quantity demanded falling to zero. 
A) a ten percent increase in price leads to a one percent decrease in quantity demanded. 
B) the percentage change in quantity demanded equals the percentage change in price. 
C) a two percent increase in price leads to a two percent decrease in quantity demanded. 
D) an increase in price of any amount leads to quantity demanded falling to zero.

Question 4

-Refer to the above table. Suppose the price of Y rises from $18 to $20. What is the cross price elasticity of demand between X and Y?

Accepted Answer

A) -2 
B) -1 
C) 0 
D) +1 
A) -2 
B) -1 
C) 0 
D) +1

Question 5

-Use the above table. The income elasticity of artisan bread is

Accepted Answer

A) 1.285. 
B) 0.780. 
C) 0.012. 
D) 8.330. 
A) 1.285. 
B) 0.780. 
C) 0.012. 
D) 8.330.

Question 6

If the supply of a good is perfectly inelastic, the price elasticity of supply will equal

Accepted Answer

A) positive infinity. 
B) one. 
C) zero. 
D) none of the above. 
A) positive infinity. 
B) one. 
C) zero. 
D) none of the above.

Question 7

A decrease in total revenue will result if

Accepted Answer

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

Question 8

The price elasticity of demand measures

Accepted Answer

A) the consumers' sensitivity to a price change. 
B) the producers' sensitivity to a price change. 
C) how much the market price changes in response to a change in demand. 
D) how much the demand changes in response to a change in income. 
A) the consumers' sensitivity to a price change. 
B) the producers' sensitivity to a price change. 
C) how much the market price changes in response to a change in demand. 
D) how much the demand changes in response to a change in income.

Question 9

When numerous but imperfect substitutes exist for a good, the demand for the good will tend to be

Accepted Answer

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

Question 10

Other things being equal, the longer a price change persists,

Accepted Answer

A) the less is the elasticity of demand. 
B) the less chance a consumer will be able to adjust. 
C) the more the consumer will be willing to pay. 
D) the greater is the elasticity of demand. 
A) the less is the elasticity of demand. 
B) the less chance a consumer will be able to adjust. 
C) the more the consumer will be willing to pay. 
D) the greater is the elasticity of demand.

Question 11

The more sensitive people are to a change in price, the

Accepted Answer

A) greater a change in price must be to induce a certain change in quantity demanded. 
B) greater is the price elasticity of demand. 
C) smaller the price elasticity of demand. 
D) closer the price elasticity of demand is to one. 
A) greater a change in price must be to induce a certain change in quantity demanded. 
B) greater is the price elasticity of demand. 
C) smaller the price elasticity of demand. 
D) closer the price elasticity of demand is to one.

Question 12

When the price of a textbook is $100, 60 copies are demanded; and when the price of that textbook goes up to $120, 30 copies are demanded. In the price range between $100 and $120, the demand for the textbook is

Accepted Answer

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

Question 13

"The income elasticity of a good is positive if a consumer increases the total spending on that good as a result of an increase in its market price." Do you agree or disagree? Why?

Accepted Answer

Disagree. If a consumer increases the to

Question 14

When total revenue and price are inversely related, demand is

Accepted Answer

A) unit-elastic. 
B) inelastic. 
C) elastic. 
D) not related. 
A) unit-elastic. 
B) inelastic. 
C) elastic. 
D) not related.

Question 15

An 18 percent increase in the price of small cars results in a 10 percent expansion in the quantity supplied. The supply elasticity in this range equals ________.

Accepted Answer

A) 9/5 
B) 5/9 
C) 7/10 
D) 4/10 
A) 9/5 
B) 5/9 
C) 7/10 
D) 4/10

Question 16

-Refer to the above table. What is the absolute price elasticity of demand when price changes from $5.50 to $5.00?

Accepted Answer

A) 0.72 
B) 0.79 
C) 1.38 
D) 5.0 
A) 0.72 
B) 0.79 
C) 1.38 
D) 5.0

Question 17

If a seller lowers the price of a product when demand is price inelastic, the seller can expect revenues to

Accepted Answer

A) rise. 
B) fall. 
C) stay the same. 
D) either rise or fall, but it is impossible to determine which. 
A) rise. 
B) fall. 
C) stay the same. 
D) either rise or fall, but it is impossible to determine which.

Question 18

If the demand curve for a product is vertical, then

Accepted Answer

A) the demand for the good is perfectly elastic. 
B) consumers are highly responsive to price changes. 
C) its price elasticity of demand is equal to zero. 
D) consumers may purchase all they want to at the established market price. 
A) the demand for the good is perfectly elastic. 
B) consumers are highly responsive to price changes. 
C) its price elasticity of demand is equal to zero. 
D) consumers may purchase all they want to at the established market price.

Question 19

Relative percentage changes are used in measuring price elasticity of demand, so that

Accepted Answer

A) it does not matter whether price increases or decreases when calculating the elasticity. 
B) it does not matter what units are used to measure prices or quantities. 
C) we always obtain a positive number. 
D) larger numbers indicate greater responsiveness. 
A) it does not matter whether price increases or decreases when calculating the elasticity. 
B) it does not matter what units are used to measure prices or quantities. 
C) we always obtain a positive number. 
D) larger numbers indicate greater responsiveness.

Question 20

A 3 percent increase in the price of cotton leads to a 6 percent decrease in the quantity demanded of cotton. The absolute price elasticity of demand is

Accepted Answer

A) 3. 
B) 2. 
C) 0.5. 
D) 0.33. 
A) 3. 
B) 2. 
C) 0.5. 
D) 0.33.

Exam 19: Demand and Supply Elasticity

If price elasticity of supply is less than 1,

-In the above table, the cross price elasticity of demand (using averages)for Z with good X, when PX increases from $12 to $15, is approximately equal to

If demand is unit elastic, then

-Refer to the above table. Suppose the price of Y rises from $18 to $20. What is the cross price elasticity of demand between X and Y?

-Use the above table. The income elasticity of artisan bread is

If the supply of a good is perfectly inelastic, the price elasticity of supply will equal

A decrease in total revenue will result if

The price elasticity of demand measures

When numerous but imperfect substitutes exist for a good, the demand for the good will tend to be

Other things being equal, the longer a price change persists,

The more sensitive people are to a change in price, the

When the price of a textbook is $100, 60 copies are demanded; and when the price of that textbook goes up to $120, 30 copies are demanded. In the price range between $100 and $120, the demand for the textbook is

"The income elasticity of a good is positive if a consumer increases the total spending on that good as a result of an increase in its market price." Do you agree or disagree? Why?

When total revenue and price are inversely related, demand is

An 18 percent increase in the price of small cars results in a 10 percent expansion in the quantity supplied. The supply elasticity in this range equals ________.

-Refer to the above table. What is the absolute price elasticity of demand when price changes from $5.50 to $5.00?

If a seller lowers the price of a product when demand is price inelastic, the seller can expect revenues to

If the demand curve for a product is vertical, then

Relative percentage changes are used in measuring price elasticity of demand, so that

A 3 percent increase in the price of cotton leads to a 6 percent decrease in the quantity demanded of cotton. The absolute price elasticity of demand 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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