Question 1

When OPEC raises the price of petroleum, American expenditures on oil imports increase, suggesting that

Accepted Answer

A)  the United States' elasticity of demand for imported oil is greater than one. 
B)  the United States' elasticity of demand for imported oil is less than one. 
C)  imported oil and domestically produced oil are complementary goods. 
D)  the short-run elasticity of demand for oil is greater than the long-run elasticity. 
A)  the United States' elasticity of demand for imported oil is greater than one. 
B)  the United States' elasticity of demand for imported oil is less than one. 
C)  imported oil and domestically produced oil are complementary goods. 
D)  the short-run elasticity of demand for oil is greater than the long-run elasticity.

Question 2

Historical demand curves are always suspect because their demand curves are likely to have shifted over time.

Accepted Answer

A) True 
 B)False

Question 3

If a demand curve is unit elastic, then P times Q will remain constant when P changes.

Accepted Answer

A) True 
 B)False

Question 4

A demand curve with unit elasticity can never touch either the vertical or horizontal axes.

Accepted Answer

A) True 
 B)False

Question 5

The current price of concert t-shirts is $20 each, and the company has been selling 400 per week.If price elasticity is 2.5 and the price changes to $21, how many t-shirts will be sold per week?

Accepted Answer

The percentage change in price is 1/20.5

Question 6

Figure 6-4
  
-In Figure 6-4, total expenditure ____ as price falls from P = 12 to P = 10.

Accepted Answer

A)  falls 
B)  stays constant 
C)  rises 
D)  rises by more than $12 
A)  falls 
B)  stays constant 
C)  rises 
D)  rises by more than $12

Question 7

What does cross elasticity of demand between goods reveal about the nature of relationship between them?

Accepted Answer

Its sign reveals whether the goods are s

Question 8

Price elasticity of demand is a numerical measure of how much quantity demanded rises as price falls or quantity demanded falls as price rises.

Accepted Answer

A) True 
 B)False

Question 9

How might a court use cross elasticity in an antitrust case?

Accepted Answer

One major issue a court must settle is t

Question 10

A 10 percent increase in the cost of restaurant meals, which are a luxury, will most likely

Accepted Answer

A)  increase the purchase of meals by 10 percent. 
B)  increase the purchase of meals by less than 10 percent. 
C)  decrease the purchase of meals by more than 10 percent. 
D)  decrease the purchase of meals by less than 10 percent. 
A)  increase the purchase of meals by 10 percent. 
B)  increase the purchase of meals by less than 10 percent. 
C)  decrease the purchase of meals by more than 10 percent. 
D)  decrease the purchase of meals by less than 10 percent.

Question 11

The elasticity of a straight-line demand curve is the same as its slope.

Accepted Answer

A) True 
 B)False

Question 12

Total expenditure by a buyer is equal to the

Accepted Answer

A)  slope at any point along the demand curve. 
B)  price times quantity demanded at any point along the demand curve. 
C)  elasticity times price at any point along the demand curve. 
D)  elasticity times quantity demanded at any point along the demand curve. 
A)  slope at any point along the demand curve. 
B)  price times quantity demanded at any point along the demand curve. 
C)  elasticity times price at any point along the demand curve. 
D)  elasticity times quantity demanded at any point along the demand curve.

Question 13

A unit-elastic demand curve never touches or crosses either of the axes.Why?

Accepted Answer

When demand is unit-elastic, total expen

Question 14

The elasticity measure which has been employed by the courts to assess the degree of market competition is

Accepted Answer

A)  price elasticity of demand. 
B)  income elasticity of demand. 
C)  cross elasticity of demand. 
D)  inverse elasticity of demand. 
A)  price elasticity of demand. 
B)  income elasticity of demand. 
C)  cross elasticity of demand. 
D)  inverse elasticity of demand.

Question 15

Figure 6-7
  
-In Figure 6-7, which total expenditure curve belongs to a demand curve that is unit elastic throughout?

Accepted Answer

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

Question 16

The price elasticity of a horizontal demand curve is always

Accepted Answer

A)  infinitely large. 
B)  zero. 
C)  one. 
D)  increasing as price increases. 
A)  infinitely large. 
B)  zero. 
C)  one. 
D)  increasing as price increases.

Question 17

Elasticity

Accepted Answer

A)  deals with percentage changes in price and quantity demanded. 
B)  employs percentage changes calculated in terms of average values of the prices and quantities at issue. 
C)  is generally stated in absolute value. 
D)  All of the above are correct. 
A)  deals with percentage changes in price and quantity demanded. 
B)  employs percentage changes calculated in terms of average values of the prices and quantities at issue. 
C)  is generally stated in absolute value. 
D)  All of the above are correct.

Question 18

If the demand curve is vertical, the elasticity is

Accepted Answer

A)  1.0. 
B)  0.0. 
C)  0.5. 
D)  infinite. 
A)  1.0. 
B)  0.0. 
C)  0.5. 
D)  infinite.

Question 19

Figure 6-9
  
-In 1983, government price supports raised the price of sugar above its equilibrium value.Which graph in Figure 6-9 illustrates the impact of sugar price supports on the sugar substitute fructose?

Accepted Answer

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

Question 20

Elasticity of demand equals the ratio of the percentage change in quantity demanded to the percentage change in the price of the good.

Accepted Answer

A) True 
 B)False

Exam 6: Demand and Elasticity

When OPEC raises the price of petroleum, American expenditures on oil imports increase, suggesting that

Historical demand curves are always suspect because their demand curves are likely to have shifted over time.

If a demand curve is unit elastic, then P times Q will remain constant when P changes.

A demand curve with unit elasticity can never touch either the vertical or horizontal axes.

The current price of concert t-shirts is $20 each, and the company has been selling 400 per week.If price elasticity is 2.5 and the price changes to $21, how many t-shirts will be sold per week?

Figure 6-4 -In Figure 6-4, total expenditure ____ as price falls from P = 12 to P = 10.

What does cross elasticity of demand between goods reveal about the nature of relationship between them?

Price elasticity of demand is a numerical measure of how much quantity demanded rises as price falls or quantity demanded falls as price rises.

How might a court use cross elasticity in an antitrust case?

A 10 percent increase in the cost of restaurant meals, which are a luxury, will most likely

The elasticity of a straight-line demand curve is the same as its slope.

Total expenditure by a buyer is equal to the

A unit-elastic demand curve never touches or crosses either of the axes.Why?

The elasticity measure which has been employed by the courts to assess the degree of market competition is

Figure 6-7 -In Figure 6-7, which total expenditure curve belongs to a demand curve that is unit elastic throughout?

The price elasticity of a horizontal demand curve is always

Elasticity

If the demand curve is vertical, the elasticity is

Figure 6-9 -In 1983, government price supports raised the price of sugar above its equilibrium value.Which graph in Figure 6-9 illustrates the impact of sugar price supports on the sugar substitute fructose?

Elasticity of demand equals the ratio of the percentage change in quantity demanded to the percentage change in the price of the good.

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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