Exam 6: Elasticity

A perfectly elastic supply curve is: A.horizontal. B.downward sloping. C.upward sloping. D.vertical.

The price elasticity of demand for soft drinks has been estimated to be 0.55.If the government enacts a major increase in the tax on imported sugar (a major ingredient in soft drink manufacture), how will that affect total expenditures on soft drinks, all other things equal? A.Total expenditures will remain unchanged. B.Total expenditures will fall. C.Total expenditures will rise. D.People will buy Pepsi instead of Coke.

There are several close substitutes for Bayer aspirin but fewer substitutes for a complete medical examination.Therefore, you would expect the demand for: A.medical exams to be more price-elastic. B.Bayer aspirin to be more price-elastic. C.Bayer aspirin to be more price-inelastic.

If the quantity demanded is 5,000 gallons at $3.00 per gallon, the price elasticity of demand for gasoline is 0.5, and the price rises to $3.15 per gallon, how many gallons of gas will be sold at this higher price?

If a good is a luxury item that looms large in the household budget, then demand will tend to: A.be more price-elastic. B.be less price-elastic. C.have price elasticity equal to 1. D.be the same as that of a good that is a necessity.

There is one gas station in a small rural town.The owner of the station claims that he will sell the same quantity of gas no matter how high or low the price.If he is correct in this assertion, what must be true about the demand curve for gas at his station? A.It must be vertical with a price elasticity of zero. B.It must be vertical with a price elasticity of infinity. C.It must be horizontal with a price elasticity of zero. D.It must be horizontal with a price elasticity of infinity.

Assume the price elasticity of demand for corn has been estimated to be 2.33.Flash floods destroy 10% of the nation's crop of corn.Which of the following best describes how this will affect total expenditures on beans, all other things equal? A.Total expenditures will remain unchanged. B.Total expenditures will fall. C.Total expenditures will rise. D.There is not enough information is given to answer the question.

If the income elasticity of demand for a good is _______, the good is said to be _. A.negative; an inferior good B.negative; a negative good C.positive; a positive good D.negative; a normal good

(Table: Prices, Quantity Demanded, and Income for Jeremy) Look at the table Prices, Quantity Demanded, and Income for Jeremy.Between the two years listed, Jeremy's income elasticity of demand for coffee equals ________ and donuts are a(n) good. A.0.20; inferior good B.2; normal good C.2; inferior good D.0.20; normal good

Figure: The Demand Curve (Figure: The Demand Curve) Between the prices of $4 and $5, demand is , and total revenue will if price increases. A.elastic; increase B.elastic; decrease C.inelastic; increase D.inelastic; decrease

An attorney supplies 40 hours of work per week when her fee is $100 per hour but supplies 60 hours of work per week when her fee rises to $120 per hour.Using the midpoint formula, her elasticity of supply is equal to:

(Table: Johnson's Income and Expenditures) Look again at the table Johnson's Income and Expenditures.Johnson's income elasticity of demand for movies is:

If the estimated price elasticity of demand for foreign travel is 4, then: A.a 20% decrease in the price of foreign travel will increase the quantity demanded by 80%. B.the demand for foreign travel is inelastic. C.a 10% increase in the price of foreign travel will increase the quantity demanded by 40% D.a 20% increase in the price of foreign travel will increase the quantity demanded by 80%.

If total revenue goes up when the price falls, demand is said to:

The price elasticity of supply for a good is 3 if a: A.1% increase in price leads to a 3% decrease in the quantity supplied. B.1% decrease in price leads to a 3% decrease in the quantity supplied. C.9% decrease in price leads to a 3% decrease in the quantity supplied. D.9% increase in price leads to a 3% decrease in the quantity supplied.

A perfectly price-inelastic demand curve is: A.horizontal. B.downward sloping. C.upward sloping. D.vertical.

If two goods are substitutes, their cross-price elasticity of demand should be:

Which of the following is not true regarding a price-elastic demand curve? A.Total revenue increases when the price falls. B.The absolute value of the price elasticity is a fraction less than 1. C.The absolute value of the price elasticity is greater than 1. D.The percent changes in the quantity exceed the percent changes in the price for any small change in price.

Supply curves tend to be more the greater the time facing producers. A.price-inelastic B.price-elastic C.steeply sloped D.inflexible

The supply curve for a good will be more elastic if: A.spending on the good accounts for a large share of a consumer's income. B.the good is a luxury item. C.production inputs are readily available at a relatively low cost. D.there is very little time for producers to respond to a price change.