Question 1

Which of the following is likely to be associated with inelastic supply?

Accepted Answer

A)  The time under consideration is very short. 
B)  The inputs necessary for production cannot readily be increased. 
C)  The good is necessary for survival (e.g., a life-saving drug). 
D)  The time under consideration is very short and the inputs necessary for production cannot readily be increased. 
A)  The time under consideration is very short. 
B)  The inputs necessary for production cannot readily be increased. 
C)  The good is necessary for survival (e.g., a life-saving drug). 
D)  The time under consideration is very short and the inputs necessary for production cannot readily be increased.

Question 2

If the price elasticity of demand equals 0, the demand curve is:

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  upward-sloping. 
D)  unit-elastic. 
A)  horizontal. 
B)  vertical. 
C)  upward-sloping. 
D)  unit-elastic.

Question 3

The price elasticity of supply measures:

Accepted Answer

A)  the response of a supply shift to changes in technology. 
B)  how much supply changes when the prices of inputs change. 
C)  the responsiveness of the quantity supplied to changes in the price of the good. 
D)  the response of a supply shift to changes in technology and to changes in prices. 
A)  the response of a supply shift to changes in technology. 
B)  how much supply changes when the prices of inputs change. 
C)  the responsiveness of the quantity supplied to changes in the price of the good. 
D)  the response of a supply shift to changes in technology and to changes in prices.

Question 4

Sarah has been told she has only one week to finish some pottery for a show. Sarah has exhausted her supply of clay, and new clay is absolutely necessary for finishing her products. For Sarah, the price elasticity of demand for new clay is elastic.

Accepted Answer

A) True 
 B)False

Question 5

A newspaper typically consumes a smaller fraction of a consumer's budget than a home entertainment system. Therefore, you would expect the demand for:

Accepted Answer

A)  a home entertainment system to be more price-elastic. 
B)  a home entertainment system to be more price-inelastic. 
C)  newspapers to be more price-elastic. 
D)  the two to be equally price-elastic. 
A)  a home entertainment system to be more price-elastic. 
B)  a home entertainment system to be more price-inelastic. 
C)  newspapers to be more price-elastic. 
D)  the two to be equally price-elastic.

Question 6

When the absolute value of the percentage change in quantity demanded is less than the absolute value of the percentage change in price, demand is:

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  unit-elastic. 
D)  unknown. 
A)  inelastic. 
B)  elastic. 
C)  unit-elastic. 
D)  unknown.

Question 7

The price elasticity of demand for lettuce has been estimated to be 2.58. If an insect infestation destroys 10% of the nation's lettuce crop, how will that affect total revenue from lettuce, all other things unchanged?

Accepted Answer

A)  Total revenue will remain unchanged. 
B)  Total revenue will fall. 
C)  Total revenue will rise. 
D)  The information is insufficient to answer the question. 
A)  Total revenue will remain unchanged. 
B)  Total revenue will fall. 
C)  Total revenue will rise. 
D)  The information is insufficient to answer the question.

Question 8

Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity demanded increases to 130. The price elasticity of demand between $10 and $8, by the midpoint method, is approximately:

Accepted Answer

A)  1.17. 
B)  1.50. 
C)  0.85. 
D)  1.00. 
A)  1.17. 
B)  1.50. 
C)  0.85. 
D)  1.00.

Question 9

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total expenditures on gasoline in the short run, all other things equal?

Accepted Answer

A)  Quantity demanded will stay the same, but total expenditures will fall. 
B)  Quantity demanded will decrease, but total expenditures will rise. 
C)  Total expenditures will remain unchanged. 
D)  Quantity demanded will not change much, but total expenditures will rise. 
A)  Quantity demanded will stay the same, but total expenditures will fall. 
B)  Quantity demanded will decrease, but total expenditures will rise. 
C)  Total expenditures will remain unchanged. 
D)  Quantity demanded will not change much, but total expenditures will rise.

Question 10

Sometimes airlines raise ticket prices as the flight departure date approaches in the hope of increasing revenue on the assumption that consumer demand is:

Accepted Answer

A)  more price-elastic as departure time approaches. 
B)  less price-elastic as departure time approaches. 
C)  always unit elastic. 
D)  very sensitive to price changes as the time of departure approaches. 
A)  more price-elastic as departure time approaches. 
B)  less price-elastic as departure time approaches. 
C)  always unit elastic. 
D)  very sensitive to price changes as the time of departure approaches.

Question 11

Use the following to answer questions:
Figure: The Demand Curve for Crossings  
-(Figure: The Demand Curve for Bridge Crossings) Look at the figure The Demand Curve for Bridge Crossings. By the midpoint method, the price elasticity of demand between $0.90 and $1.10 in the figure is _____, since the price elasticity is _____.

Accepted Answer

A)  price-elastic; less than 1 
B)  price unit-elastic; equal to 1 
C)  price-elastic; a negative number 
D)  price-inelastic; less than 1 
A)  price-elastic; less than 1 
B)  price unit-elastic; equal to 1 
C)  price-elastic; a negative number 
D)  price-inelastic; less than 1

Question 12

If your purchases of shoes increase from 9 pairs per year to 11 pairs per year when the price of shirts increases from $8 to $12, for you, shoes and shirts are considered:

Accepted Answer

A)  inferior goods. 
B)  luxury goods. 
C)  substitute goods. 
D)  complementary goods. 
A)  inferior goods. 
B)  luxury goods. 
C)  substitute goods. 
D)  complementary goods.

Question 13

The demand for textbooks is price-inelastic. Which of the following would explain this?

Accepted Answer

A)  Many alternative textbooks can be used as substitutes. 
B)  Students have a lot of time to adjust to price changes. 
C)  Textbook purchases consume a large portion of most students' income. 
D)  Textbooks are a necessity. 
A)  Many alternative textbooks can be used as substitutes. 
B)  Students have a lot of time to adjust to price changes. 
C)  Textbook purchases consume a large portion of most students' income. 
D)  Textbooks are a necessity.

Question 14

Use the following to answer questions:
Table: Price Elasticity  
-(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $1.00 and $0.75?

Accepted Answer

A)  0.54 
B)  0.66 
C)  0.75 
D)  1.00 
A)  0.54 
B)  0.66 
C)  0.75 
D)  1.00

Question 15

If the price of a good increases by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:

Accepted Answer

A)  0.75. 
B)  approximately 0.33. 
C)  approximately 1.33. 
D)  1. 
A)  0.75. 
B)  approximately 0.33. 
C)  approximately 1.33. 
D)  1.

Question 16

Which factor is important in determining the price elasticity of supply?

Accepted Answer

A)  the time the producer has to adjust inputs and outputs 
B)  the number of close substitutes 
C)  the intensity of the need of consumers 
D)  the number of alternative uses of the good 
A)  the time the producer has to adjust inputs and outputs 
B)  the number of close substitutes 
C)  the intensity of the need of consumers 
D)  the number of alternative uses of the good

Question 17

Use the following to answer questions:
Figure: The Demand for Notebook Computers  
-(Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. Total revenue at point S equals the:

Accepted Answer

A)  distance 0P. 
B)  distance MS. 
C)  area 0TUM. 
D)  area 0PSM. 
A)  distance 0P. 
B)  distance MS. 
C)  area 0TUM. 
D)  area 0PSM.

Question 18

Use the following to answer questions:
Figure: The Demand Curve  
-(Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $8 and $9 is approximately:

Accepted Answer

A)  0.18. 
B)  0.56. 
C)  1.80. 
D)  5.67. 
A)  0.18. 
B)  0.56. 
C)  1.80. 
D)  5.67.

Question 19

The price elasticity of demand can be found by:

Accepted Answer

A)  examining only the slope of the demand curve. 
B)  measuring absolute changes in price and quantity demanded. 
C)  comparing the percentage change in quantity demanded to the percentage change in price. 
D)  knowing that when price changes, quantity demanded goes in the opposite direction. 
A)  examining only the slope of the demand curve. 
B)  measuring absolute changes in price and quantity demanded. 
C)  comparing the percentage change in quantity demanded to the percentage change in price. 
D)  knowing that when price changes, quantity demanded goes in the opposite direction.

Question 20

The ratio of the percentage change in quantity demanded to the percentage change in price is the _____ elasticity of demand.

Accepted Answer

A)  price 
B)  quantity 
C)  income 
D)  cross-price 
A)  price 
B)  quantity 
C)  income 
D)  cross-price

Which of the following is likely to be associated with inelastic supply?

If the price elasticity of demand equals 0, the demand curve is:

The price elasticity of supply measures:

Sarah has been told she has only one week to finish some pottery for a show. Sarah has exhausted her supply of clay, and new clay is absolutely necessary for finishing her products. For Sarah, the price elasticity of demand for new clay is elastic.

A newspaper typically consumes a smaller fraction of a consumer's budget than a home entertainment system. Therefore, you would expect the demand for:

When the absolute value of the percentage change in quantity demanded is less than the absolute value of the percentage change in price, demand is:

The price elasticity of demand for lettuce has been estimated to be 2.58. If an insect infestation destroys 10% of the nation's lettuce crop, how will that affect total revenue from lettuce, all other things unchanged?

Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity demanded increases to 130. The price elasticity of demand between $10 and $8, by the midpoint method, is approximately:

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total expenditures on gasoline in the short run, all other things equal?

Sometimes airlines raise ticket prices as the flight departure date approaches in the hope of increasing revenue on the assumption that consumer demand is:

If your purchases of shoes increase from 9 pairs per year to 11 pairs per year when the price of shirts increases from $8 to $12, for you, shoes and shirts are considered:

The demand for textbooks is price-inelastic. Which of the following would explain this?

Use the following to answer questions: Table: Price Elasticity -(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $1.00 and $0.75?

If the price of a good increases by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:

Which factor is important in determining the price elasticity of supply?

Use the following to answer questions: Figure: The Demand for Notebook Computers -(Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. Total revenue at point S equals the:

Use the following to answer questions: Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $8 and $9 is approximately:

The price elasticity of demand can be found by:

The ratio of the percentage change in quantity demanded to the percentage change in price is the _____ elasticity of demand.

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 6: Elasticity

Which of the following is likely to be associated with inelastic supply?

If the price elasticity of demand equals 0, the demand curve is:

The price elasticity of supply measures:

Sarah has been told she has only one week to finish some pottery for a show. Sarah has exhausted her supply of clay, and new clay is absolutely necessary for finishing her products. For Sarah, the price elasticity of demand for new clay is elastic.

A newspaper typically consumes a smaller fraction of a consumer's budget than a home entertainment system. Therefore, you would expect the demand for:

When the absolute value of the percentage change in quantity demanded is less than the absolute value of the percentage change in price, demand is:

The price elasticity of demand for lettuce has been estimated to be 2.58. If an insect infestation destroys 10% of the nation's lettuce crop, how will that affect total revenue from lettuce, all other things unchanged?

Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity demanded increases to 130. The price elasticity of demand between $10 and $8, by the midpoint method, is approximately:

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total expenditures on gasoline in the short run, all other things equal?

Sometimes airlines raise ticket prices as the flight departure date approaches in the hope of increasing revenue on the assumption that consumer demand is:

If your purchases of shoes increase from 9 pairs per year to 11 pairs per year when the price of shirts increases from $8 to $12, for you, shoes and shirts are considered:

The demand for textbooks is price-inelastic. Which of the following would explain this?

Use the following to answer questions: Table: Price Elasticity -(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $1.00 and $0.75?

If the price of a good increases by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:

Which factor is important in determining the price elasticity of supply?

Use the following to answer questions: Figure: The Demand for Notebook Computers -(Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. Total revenue at point S equals the:

Use the following to answer questions: Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $8 and $9 is approximately:

The price elasticity of demand can be found by:

The ratio of the percentage change in quantity demanded to the percentage change in price is the _____ elasticity of demand.

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters