Question 1

Which good below might be expected to have the most inelastic demand curve?

Accepted Answer

A)  salt 
B)  women's blouses from Walmart 
C)  potato chips 
D)  Tylenol 
A)  salt 
B)  women's blouses from Walmart 
C)  potato chips 
D)  Tylenol

Question 2

Discuss the effectiveness of slave redemption programs when it is assumed that the elasticity of the supply of slaves is perfectly inelastic. Use a supply and demand diagram to help illustrate your response.

Accepted Answer

[Note: Students will likely use varying

Question 3

If a rising price leads to falling revenues, then demand is elastic.

Accepted Answer

A) True 
 B)False

Question 4

Accepted Answer

A)  X; Y 
B)  Z; Y 
C)  X; Z 
D)  Y; X 
A)  X; Y 
B)  Z; Y 
C)  X; Z 
D)  Y; X

Question 5

The per-unit cost of producing Tic Tac candy does not change with increases in production, which means the:

Accepted Answer

A)  demand for Tic Tac candy is elastic. 
B)  demand for Tic Tac candy is inelastic. 
C)  supply of Tic Tac candy is elastic. 
D)  supply of Tic Tac candy is inelastic. 
A)  demand for Tic Tac candy is elastic. 
B)  demand for Tic Tac candy is inelastic. 
C)  supply of Tic Tac candy is elastic. 
D)  supply of Tic Tac candy is inelastic.

Question 6

In general, the flatter the demand curve the:

Accepted Answer

A)  less the demand elasticity. 
B)  greater the demand elasticity. 
C)  greater the change in price needed to induce a change in quantity demanded. 
D)  less the change in total revenue given a price change. 
A)  less the demand elasticity. 
B)  greater the demand elasticity. 
C)  greater the change in price needed to induce a change in quantity demanded. 
D)  less the change in total revenue given a price change.

Question 7

A perfectly elastic supply curve is:

Accepted Answer

A)  never feasible in reality. 
B)  vertical. 
C)  upward sloped. 
D)  horizontal. 
A)  never feasible in reality. 
B)  vertical. 
C)  upward sloped. 
D)  horizontal.

Question 8

(Figure: Elasticity and Total Revenue) Refer to the figure. If price falls from $60 to $40, total revenue changes by ________, so demand is ________.

Accepted Answer

A)  $120; inelastic 
B)  $480; elastic 
C)  $360; inelastic 
D)  $120; elastic 
A)  $120; inelastic 
B)  $480; elastic 
C)  $360; inelastic 
D)  $120; elastic

Question 9

The price of cigars is $10, with a quantity demanded of 1,000 per day. If the price increases to $12, the quantity demanded declines to 800 per day. What is the absolute value of elasticity of demand?

Accepted Answer

A)  1.00 
B)  0.82 
C)  1.22 
D)  12.2 
A)  1.00 
B)  0.82 
C)  1.22 
D)  12.2

Question 10

Which of the following statements about the price elasticity of supply for slaves is correct?

Accepted Answer

A)  When the supply curve is more elastic every slave bought by the redeemers is one fewer slave held in captivity. 
B)  When the supply curve is perfectly inelastic every slave bought by the redeemers is one fewer slave held in captivity. 
C)  When the supply curve is less elastic every slave bought by the redeemers is one additional enslaved person. 
D)  When the supply curve is more inelastic every slave bought by the redeemers is one additional enslaved person. 
A)  When the supply curve is more elastic every slave bought by the redeemers is one fewer slave held in captivity. 
B)  When the supply curve is perfectly inelastic every slave bought by the redeemers is one fewer slave held in captivity. 
C)  When the supply curve is less elastic every slave bought by the redeemers is one additional enslaved person. 
D)  When the supply curve is more inelastic every slave bought by the redeemers is one additional enslaved person.

Question 11

Reference: Ref 5-1 (Figure: Elasticity of Supply) Refer to the figure. Which supply curve is the most inelastic?

Accepted Answer

A)  S1 
B)  S2 
C)  S3 
D)  S4 
A)  S1 
B)  S2 
C)  S3 
D)  S4

Question 12

(Figure: Price Decrease and Elasticity) Refer to the figure. If price decreases from $20 to $10, total revenue will: Figure: Price Decrease and Elasticity

Accepted Answer

A)  decrease by $1,500, so the demand curve is inelastic. 
B)  decrease by $2,500, so the demand curve is inelastic. 
C)  increase by $1,500, so the demand curve is elastic. 
D)  increase by $2,500, so the demand curve is elastic. 
A)  decrease by $1,500, so the demand curve is inelastic. 
B)  decrease by $2,500, so the demand curve is inelastic. 
C)  increase by $1,500, so the demand curve is elastic. 
D)  increase by $2,500, so the demand curve is elastic.

Question 13

Economic theory suggests that gun buyback programs:

Accepted Answer

A)  are effective in reducing the number of guns on city streets. 
B)  do not reduce the number of guns on city streets. 
C)  are most effective if the supply curve of guns is perfectly elastic. 
D)  reduce the demand for new and better functioning guns. 
A)  are effective in reducing the number of guns on city streets. 
B)  do not reduce the number of guns on city streets. 
C)  are most effective if the supply curve of guns is perfectly elastic. 
D)  reduce the demand for new and better functioning guns.

Question 14

If the price of coffee falls by 10 percent and the quantity supplied of coffee falls by 1.5 percent then the elasticity of supply of coffee is:

Accepted Answer

A)  10. 
B)  1.5. 
C)  0.15. 
D)  6.67. 
A)  10. 
B)  1.5. 
C)  0.15. 
D)  6.67.

Question 15

The demand for oil is inelastic because there are:

Accepted Answer

A)  many complements for oil in its major use. 
B)  few complements for oil in its major use. 
C)  many substitutes for oil in its major use. 
D)  few substitutes for oil in its major use. 
A)  many complements for oil in its major use. 
B)  few complements for oil in its major use. 
C)  many substitutes for oil in its major use. 
D)  few substitutes for oil in its major use.

Question 16

If the elasticity of demand for cigarettes is 0.75 and the elasticity of supply for cigarettes is 1.25, then a 5 percent decrease in the demand for cigarettes would cause the price of cigarettes to:

Accepted Answer

A)  increase by 2.5 percent. 
B)  increase by 5 percent. 
C)  decrease by 2.5 percent. 
D)  decrease by 5 percent. 
A)  increase by 2.5 percent. 
B)  increase by 5 percent. 
C)  decrease by 2.5 percent. 
D)  decrease by 5 percent.

Question 17

All of the following conditions would cause the demand curve for a good to be more elastic EXCEPT:

Accepted Answer

A)  a longer time horizon. 
B)  the good is considered a luxury good. 
C)  the price of the good falls. 
D)  the good has many substitutes. 
A)  a longer time horizon. 
B)  the good is considered a luxury good. 
C)  the price of the good falls. 
D)  the good has many substitutes.

Question 18

The supply curve for oil is ________ because ________.

Accepted Answer

A)  elastic; per unit costs do not increase when the quantity supplied increases 
B)  elastic; oil exploration and drilling is not expensive relative to revenues earned 
C)  inelastic; per-unit costs rise quickly when the quantity supplied increases 
D)  inelastic; oil exploration and drilling is not expensive relative to revenues earned 
A)  elastic; per unit costs do not increase when the quantity supplied increases 
B)  elastic; oil exploration and drilling is not expensive relative to revenues earned 
C)  inelastic; per-unit costs rise quickly when the quantity supplied increases 
D)  inelastic; oil exploration and drilling is not expensive relative to revenues earned

Question 19

If the government raises the minimum wage by 6 percent, the number of people employed falls by 2%. What is the elasticity of employment with respect to the minimum wage?

Accepted Answer

A)  -3.0 
B)  -0.33 
C)  -12 
D)  -0.0012 
A)  -3.0 
B)  -0.33 
C)  -12 
D)  -0.0012

Question 20

The demand curve is elastic if an increase in price reduces the quantity demanded by only a little.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Applications

Which good below might be expected to have the most inelastic demand curve?

Discuss the effectiveness of slave redemption programs when it is assumed that the elasticity of the supply of slaves is perfectly inelastic. Use a supply and demand diagram to help illustrate your response.

If a rising price leads to falling revenues, then demand is elastic.

The per-unit cost of producing Tic Tac candy does not change with increases in production, which means the:

In general, the flatter the demand curve the:

A perfectly elastic supply curve is:

(Figure: Elasticity and Total Revenue) Refer to the figure. If price falls from $60 to $40, total revenue changes by ________, so demand is ________.

The price of cigars is $10, with a quantity demanded of 1,000 per day. If the price increases to $12, the quantity demanded declines to 800 per day. What is the absolute value of elasticity of demand?

Which of the following statements about the price elasticity of supply for slaves is correct?

Reference: Ref 5-1 (Figure: Elasticity of Supply) Refer to the figure. Which supply curve is the most inelastic?

(Figure: Price Decrease and Elasticity) Refer to the figure. If price decreases from $20 to $10, total revenue will: Figure: Price Decrease and Elasticity

Economic theory suggests that gun buyback programs:

If the price of coffee falls by 10 percent and the quantity supplied of coffee falls by 1.5 percent then the elasticity of supply of coffee is:

The demand for oil is inelastic because there are:

If the elasticity of demand for cigarettes is 0.75 and the elasticity of supply for cigarettes is 1.25, then a 5 percent decrease in the demand for cigarettes would cause the price of cigarettes to:

All of the following conditions would cause the demand curve for a good to be more elastic EXCEPT:

The supply curve for oil is ________ because ________.

If the government raises the minimum wage by 6 percent, the number of people employed falls by 2%. What is the elasticity of employment with respect to the minimum wage?

The demand curve is elastic if an increase in price reduces the quantity demanded by only a little.

The Big Ideas in Economics

The Power of Trade and Comparative Advantage

Business Fluctuations: Aggregate Demand and Supply

Equilibrium: How Supply and Demand Determine Prices

Taxes and Subsidies

The Price System: Signals, Speculation, and Prediction

Price Ceilings and Floors

International Trade

Externalities: When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination and Pricing Strategy

Oligopoly and Game Theory

Competing for Monopoly: the Economics of Network Goods

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Asymmetric Information: Moral Hazard and Adverse Selection

Consumer Choice

Gdp and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation, and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Supply and Demand

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

Filters

(Figure: Elasticity and Total Revenue) Refer to the figure. If price falls from $60 to $40, total revenue changes by , so demand is .

The supply curve for oil is because .