Question 1

An increase in demand will increase equilibrium price to a greater extent

Accepted Answer

A) if the product is a normal good. 
B) if the product is an inferior good. 
C) the less elastic the supply curve. 
D) the more elastic the supply curve. 
A) if the product is a normal good. 
B) if the product is an inferior good. 
C) the less elastic the supply curve. 
D) the more elastic the supply curve.

Question 2

Income elasticity measures the effect of a change in income on the purchases of some good or service.

Accepted Answer

A) True 
 B)False

Question 3

If the coefficient of cross elasticity of demand is positive, the two products are complementary goods.Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 03 Hard
Learning Objective: 06-05 Apply cross elasticity of demand and income elasticity of demand.Topic: Cross Elasticity and Income Elasticity of Demand

Accepted Answer

A) True 
 B)False

Question 4

A supply curve that is a vertical straight line indicates that

Accepted Answer

A) production costs for this product cannot be calculated. 
B) the relationship between price and quantity supplied is inverse. 
C) a change in price will have no effect on the quantity supplied. 
D) an unlimited amount of the product will be supplied at a constant price. 
A) production costs for this product cannot be calculated. 
B) the relationship between price and quantity supplied is inverse. 
C) a change in price will have no effect on the quantity supplied. 
D) an unlimited amount of the product will be supplied at a constant price.

Question 5

If a 10 percent increase in the price of one good results in no change in the quantity demanded of another good, then it can be concluded that the two goods are

Accepted Answer

A) complementary goods. 
B) substitute goods. 
C) independent goods. 
D) normal goods. 
A) complementary goods. 
B) substitute goods. 
C) independent goods. 
D) normal goods.

Question 6

Generally speaking, the demand for luxury goods is more price elastic than is the demand for necessities.

Accepted Answer

A) True 
 B)False

Question 7

For an increase in demand, the price effect is smallest and the quantity effect is largest

Accepted Answer

A) when supply is least elastic. 
B) in the long run. 
C) in the short run. 
D) in the immediate market period. 
A) when supply is least elastic. 
B) in the long run. 
C) in the short run. 
D) in the immediate market period.

Question 8

A state government wants to increase the taxes on cigarettes to increase tax revenue.Because cigarettes are addictive, we would expect its demand to be

Accepted Answer

A) elastic.Thus, the government's cigarette-tax revenues would rise with a tax increase. 
B) elastic.Thus, the government's cigarette-tax revenues would fall with a tax increase. 
C) inelastic.Thus,the government's cigarette-tax revenues would fall with a tax increase. 
D) inelastic.Thus,the government's cigarette-tax revenues would rise with a tax increase. 
A) elastic.Thus, the government's cigarette-tax revenues would rise with a tax increase. 
B) elastic.Thus, the government's cigarette-tax revenues would fall with a tax increase. 
C) inelastic.Thus,the government's cigarette-tax revenues would fall with a tax increase. 
D) inelastic.Thus,the government's cigarette-tax revenues would rise with a tax increase.

Question 9

The narrower the definition of a product,

Accepted Answer

A) the larger the number of substitutes and the greater the price elasticity of demand. 
B) the smaller the number of substitutes and the greater the price elasticity of demand. 
C) the larger the number of substitutes and the smaller the price elasticity of demand. 
D) the smaller the number of substitutes and the smaller the price elasticity of demand. 
A) the larger the number of substitutes and the greater the price elasticity of demand. 
B) the smaller the number of substitutes and the greater the price elasticity of demand. 
C) the larger the number of substitutes and the smaller the price elasticity of demand. 
D) the smaller the number of substitutes and the smaller the price elasticity of demand.

Question 10

If in the short run the demand for mass transit is inelastic and in the long run the demand is elastic, then a price

Accepted Answer

A) increase will decrease total revenue in the short run but increase total revenue in the long run. 
B) increase will increase total revenue in the short run but decrease total revenue in the long run. 
C) decrease will increase total revenue in the short run but decrease total revenue in the long run. 
D) decrease will decrease total revenue in the short run and decrease total revenue in the long run. 
A) increase will decrease total revenue in the short run but increase total revenue in the long run. 
B) increase will increase total revenue in the short run but decrease total revenue in the long run. 
C) decrease will increase total revenue in the short run but decrease total revenue in the long run. 
D) decrease will decrease total revenue in the short run and decrease total revenue in the long run.

Question 11

The supply of known Monet paintings is

Accepted Answer

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

Question 12

The price elasticity of demand of a straight-line demand curve is

Accepted Answer

A) elastic in high-price ranges and inelastic in low-price ranges. 
B) elastic but does not change at various points on the curve. 
C) inelastic but does not change at various points on the curve. 
D) 1 at all points on the curve. 
A) elastic in high-price ranges and inelastic in low-price ranges. 
B) elastic but does not change at various points on the curve. 
C) inelastic but does not change at various points on the curve. 
D) 1 at all points on the curve.

Question 13

A 4 percent reduction in the price of a product has zero effect on the dollar amount of consumer expenditure on the product.The price elasticity of demand is

Accepted Answer

A) zero. 
B) greater than zero. 
C) greater than zero but less than 1. 
D) equal to 1. 
A) zero. 
B) greater than zero. 
C) greater than zero but less than 1. 
D) equal to 1.

Question 14

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4.It was also found that total revenue decreased when price was raised from $5 to $6.Thus,

Accepted Answer

A) the demand for pizza is elastic above $5 and inelastic below $5. 
B) the demand for pizza is elastic both above and below $5. 
C) the demand for pizza is inelastic above $5 and elastic below $5. 
D) $5 is not the equilibrium price of pizza. 
A) the demand for pizza is elastic above $5 and inelastic below $5. 
B) the demand for pizza is elastic both above and below $5. 
C) the demand for pizza is inelastic above $5 and elastic below $5. 
D) $5 is not the equilibrium price of pizza.

Question 15

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent.The price-elasticity of demand coefficient for this product is

Accepted Answer

A) 1.5. 
B) 0.15. 
C) 0.67. 
D) 67. 
A) 1.5. 
B) 0.15. 
C) 0.67. 
D) 67.

Question 16

We use the midpoint formula in computing the price elasticity of demand coefficient in order to

Accepted Answer

A) make the coefficient value become independent of whether price goes up or down. 
B) convert absolute changes into percentage changes. 
C) eliminate the negative sign of the coefficient. 
D) make the coefficient become equal to the slope of the demand curve. 
A) make the coefficient value become independent of whether price goes up or down. 
B) convert absolute changes into percentage changes. 
C) eliminate the negative sign of the coefficient. 
D) make the coefficient become equal to the slope of the demand curve.

Question 17

If the government tightens up on drug dealers and raises the costs of dealing illegal drugs, then the drug addicts' dollar expenditures to feed their addiction will tend to

Accepted Answer

A) increase because their demand is price-elastic. 
B) decrease because their demand is price-Inelastic. 
C) decrease because their demand is price-elastic. 
D) increase because their demand is price-Inelastic. 
A) increase because their demand is price-elastic. 
B) decrease because their demand is price-Inelastic. 
C) decrease because their demand is price-elastic. 
D) increase because their demand is price-Inelastic.

Question 18

We use percentage changes in the formula for estimating the price elasticity of demand coefficient in order to

Accepted Answer

A) make the coefficient's value become independent of whether price goes up or down. 
B) take the midpoints of P and of Q in the computation. 
C) eliminate the negative sign of the coefficient. 
D) make it irrelevant how we measure price: be it in cents, in dollars, or in thousands of dollars. 
A) make the coefficient's value become independent of whether price goes up or down. 
B) take the midpoints of P and of Q in the computation. 
C) eliminate the negative sign of the coefficient. 
D) make it irrelevant how we measure price: be it in cents, in dollars, or in thousands of dollars.

Question 19

The demand for Cheerios cereal is more price-elastic than the demand for cereals as a whole.This is best explained by the fact that

Accepted Answer

A) Cheerios are a luxury. 
B) Cereals are a necessity. 
C) there are more substitutes for Cheerios than for cereals as a whole. 
D) consumption of cereals as a whole is greater than consumption of Cheerios. 
A) Cheerios are a luxury. 
B) Cereals are a necessity. 
C) there are more substitutes for Cheerios than for cereals as a whole. 
D) consumption of cereals as a whole is greater than consumption of Cheerios.

Question 20

If 100 shirts are sold when the unit price is $10, while 75 shirts are sold when the unit price is $15, one can conclude that in this price range,

Accepted Answer

A) demand for the shirts is elastic. 
B) demand for the shirts is inelastic. 
C) demand for the shirts has shifted to the right. 
D) consumers are quite sensitive to changes in the price of the shirt. 
A) demand for the shirts is elastic. 
B) demand for the shirts is inelastic. 
C) demand for the shirts has shifted to the right. 
D) consumers are quite sensitive to changes in the price of the shirt.

Exam 6: Elasticity

An increase in demand will increase equilibrium price to a greater extent

Income elasticity measures the effect of a change in income on the purchases of some good or service.

A supply curve that is a vertical straight line indicates that

If a 10 percent increase in the price of one good results in no change in the quantity demanded of another good, then it can be concluded that the two goods are

Generally speaking, the demand for luxury goods is more price elastic than is the demand for necessities.

For an increase in demand, the price effect is smallest and the quantity effect is largest

A state government wants to increase the taxes on cigarettes to increase tax revenue.Because cigarettes are addictive, we would expect its demand to be

The narrower the definition of a product,

If in the short run the demand for mass transit is inelastic and in the long run the demand is elastic, then a price

The supply of known Monet paintings is

The price elasticity of demand of a straight-line demand curve is

A 4 percent reduction in the price of a product has zero effect on the dollar amount of consumer expenditure on the product.The price elasticity of demand is

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4.It was also found that total revenue decreased when price was raised from $5 to $6.Thus,

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent.The price-elasticity of demand coefficient for this product is

We use the midpoint formula in computing the price elasticity of demand coefficient in order to

If the government tightens up on drug dealers and raises the costs of dealing illegal drugs, then the drug addicts' dollar expenditures to feed their addiction will tend to

We use percentage changes in the formula for estimating the price elasticity of demand coefficient in order to

The demand for Cheerios cereal is more price-elastic than the demand for cereals as a whole.This is best explained by the fact that

If 100 shirts are sold when the unit price is $10, while 75 shirts are sold when the unit price is $15, one can conclude that in this price range,

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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