Question 1

A demand curve with an elasticity of 1.0 is a unit-elastic demand curve.

Accepted Answer

A) True 
 B)False

Question 2

The difference between slope and elasticity is that slope measures absolute change and elasticity measures percentage change.

Accepted Answer

A) True 
 B)False

Question 3

The elasticity of demand is determined partly by whether the good is a necessity or a luxury.

Accepted Answer

A) True 
 B)False

Question 4

Demand is said to be elastic when percentage changes in quantity demanded are

Accepted Answer

A)  less than the percentage changes in price. 
B)  higher than the percentage changes in price. 
C)  equal to the percentage changes in price. 
D)  zero when price changes. 
A)  less than the percentage changes in price. 
B)  higher than the percentage changes in price. 
C)  equal to the percentage changes in price. 
D)  zero when price changes.

Question 5

Julia knows the price elasticity of movie rentals is 3.She knows, therefore, that if she raises her price from $2 to $2.50, her rentals will drop by approximately

Accepted Answer

A)  150 percent. 
B)  100 percent. 
C)  75 percent. 
D)  33 percent. 
A)  150 percent. 
B)  100 percent. 
C)  75 percent. 
D)  33 percent.

Question 6

A price cut will decrease the revenue a firm receives if the demand for its product is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  of unit elasticity. 
D)  straight elastic. 
A)  elastic. 
B)  inelastic. 
C)  of unit elasticity. 
D)  straight elastic.

Question 7

A unit-elastic demand curve will be concave toward the origin.

Accepted Answer

A) True 
 B)False

Question 8

Suppose that the supply of insulin is perfectly elastic and the demand for insulin perfectly inelastic.Then the result of an excise tax would be

Accepted Answer

A)  a significant increase in government revenue and a significant decrease in the quantity consumed. 
B)  a significant decrease in the quantity consumed with no change in government revenue. 
C)  a significant increase in government revenue and no change in the quantity consumed. 
D)  no increase in government revenue and no change in the quantity consumed. 
A)  a significant increase in government revenue and a significant decrease in the quantity consumed. 
B)  a significant decrease in the quantity consumed with no change in government revenue. 
C)  a significant increase in government revenue and no change in the quantity consumed. 
D)  no increase in government revenue and no change in the quantity consumed.

Question 9

If the price elasticity of supply of doodads equals 0.50 and the price rises by 3 percent, then the quantity supplied of doodads will rise by ____.

Accepted Answer

A)  0.50 percent. 
B)  1.50 percent. 
C)  6.00 percent. 
D)  15 percent. 
A)  0.50 percent. 
B)  1.50 percent. 
C)  6.00 percent. 
D)  15 percent.

Question 10

Along a straight-line demand curve, why does the price elasticity of demand grow steadily smaller as we move from left to right?

Accepted Answer

As we move from left to right, the quant

Question 11

To avoid an increase in the local property tax, Sullivan County, New York, proposed a 2 percent hotel tax, which presumably would be passed on to tourists.The hotel industry argued that the tax would hurt hotel business.They are really arguing that

Accepted Answer

A)  tourist and convention demand is inelastic, so hotel bookings will decline. 
B)  tourist and convention demand is very elastic, so hotel bookings will decline. 
C)  they would prefer a property tax increase instead. 
D)  it is unfair to tax people who do not live in the area. 
A)  tourist and convention demand is inelastic, so hotel bookings will decline. 
B)  tourist and convention demand is very elastic, so hotel bookings will decline. 
C)  they would prefer a property tax increase instead. 
D)  it is unfair to tax people who do not live in the area.

Question 12

In an attempt to raise sales, Hannah cut prices in her bookstore by 20 percent.If the dollar value of her sales remained constant, that indicates

Accepted Answer

A)  old customers bought no more books. 
B)  no new customers bought books. 
C)  the quantity of books sold increased 20 percent. 
D)  the demand curve is vertical. 
A)  old customers bought no more books. 
B)  no new customers bought books. 
C)  the quantity of books sold increased 20 percent. 
D)  the demand curve is vertical.

Question 13

What is the shape of a perfectly elastic demand curve? Explain its significance for a seller.

Accepted Answer

The perfectly elastic demand curve is ho

Question 14

When price falls, demand rises.

Accepted Answer

A) True 
 B)False

Question 15

Cross-elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good.

Accepted Answer

A) True 
 B)False

Question 16

Figure 6-8
  
-Libya sold more crude oil in 1985 than it sold five years earlier, but revenues were 17 percent less.Which graph in Figure 6-8 is consistent with this set of facts?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 17

Price elasticity of demand can be written as percentage change in Q divided by percentage change in P.

Accepted Answer

A) True 
 B)False

Question 18

The demand for Exxon gasoline is ____ the demand for all gasoline.

Accepted Answer

A)  exactly as elastic as, and of a different slope from 
B)  more elastic than 
C)  less elastic than 
D)  exactly as elastic and of a different slope from 
A)  exactly as elastic as, and of a different slope from 
B)  more elastic than 
C)  less elastic than 
D)  exactly as elastic and of a different slope from

Question 19

The market demand curve shows how the quantity demanded of a product, during a specified time period, changes as the price of that product changes.

Accepted Answer

A) True 
 B)False

Question 20

A line that is perfectly elastic has an elasticity of demand of zero.

Accepted Answer

A) True 
 B)False

Exam 6: Demand and Elasticity

A demand curve with an elasticity of 1.0 is a unit-elastic demand curve.

The difference between slope and elasticity is that slope measures absolute change and elasticity measures percentage change.

The elasticity of demand is determined partly by whether the good is a necessity or a luxury.

Demand is said to be elastic when percentage changes in quantity demanded are

Julia knows the price elasticity of movie rentals is 3.She knows, therefore, that if she raises her price from $2 to $2.50, her rentals will drop by approximately

A price cut will decrease the revenue a firm receives if the demand for its product is

A unit-elastic demand curve will be concave toward the origin.

Suppose that the supply of insulin is perfectly elastic and the demand for insulin perfectly inelastic.Then the result of an excise tax would be

If the price elasticity of supply of doodads equals 0.50 and the price rises by 3 percent, then the quantity supplied of doodads will rise by ____.

Along a straight-line demand curve, why does the price elasticity of demand grow steadily smaller as we move from left to right?

To avoid an increase in the local property tax, Sullivan County, New York, proposed a 2 percent hotel tax, which presumably would be passed on to tourists.The hotel industry argued that the tax would hurt hotel business.They are really arguing that

In an attempt to raise sales, Hannah cut prices in her bookstore by 20 percent.If the dollar value of her sales remained constant, that indicates

What is the shape of a perfectly elastic demand curve? Explain its significance for a seller.

When price falls, demand rises.

Cross-elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good.

Figure 6-8 -Libya sold more crude oil in 1985 than it sold five years earlier, but revenues were 17 percent less.Which graph in Figure 6-8 is consistent with this set of facts?

Price elasticity of demand can be written as percentage change in Q divided by percentage change in P.

The demand for Exxon gasoline is ____ the demand for all gasoline.

The market demand curve shows how the quantity demanded of a product, during a specified time period, changes as the price of that product changes.

A line that is perfectly elastic has an elasticity of demand of zero.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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