Question 1

Price elasticity of demand is useful because it measures __________responsiveness to changes in __________.

Accepted Answer

A) taxpayers'; demand 
B) producers'; supply 
C) consumers'; price 
D) consumers'; demand 
E) producers'; income 
A) taxpayers'; demand 
B) producers'; supply 
C) consumers'; price 
D) consumers'; demand 
E) producers'; income

Question 2

Which of the following describes a situation in which demand must beinelastic?

Accepted Answer

A) Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B) Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C) Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D) Total revenue decreases by $10 when the price of spats rises by $10. 
E) Total revenue decreases by more than $10 when the price of spats rises by $10. 
A) Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B) Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C) Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D) Total revenue decreases by $10 when the price of spats rises by $10. 
E) Total revenue decreases by more than $10 when the price of spats rises by $10.

Question 3

If the value of the price elasticity of demand is ­0.2, this means that a

Accepted Answer

A) 20 percent decrease in price causes a 1 percent increase in quantity demanded 
B) 0.2 percent decrease in price causes a 1 percent increase in quantity demanded 
C) 5 percent decrease in price causes a 1 percent increase in quantity demanded 
D) 0.2 percent decrease in price causes a 0.2 percent increase in quantity demanded 
E) 100 percent decrease in price causes a 200 percent increase in quantity demanded 
A) 20 percent decrease in price causes a 1 percent increase in quantity demanded 
B) 0.2 percent decrease in price causes a 1 percent increase in quantity demanded 
C) 5 percent decrease in price causes a 1 percent increase in quantity demanded 
D) 0.2 percent decrease in price causes a 0.2 percent increase in quantity demanded 
E) 100 percent decrease in price causes a 200 percent increase in quantity demanded

Question 4

Exhibit 5­7   Which of the following is true between points g and h in Exhibit 5­7?

Accepted Answer

A) Total revenue remains constant at $180. 
B) Total revenue falls by $12. 
C) Total revenue falls by $60. 
D) Total revenue falls by $180. 
E) Demand is elastic. 
A) Total revenue remains constant at $180. 
B) Total revenue falls by $12. 
C) Total revenue falls by $60. 
D) Total revenue falls by $180. 
E) Demand is elastic.

Question 5

Another word for elasticity is

Accepted Answer

A) responsiveness 
B) happiness 
C) bonus 
D) profit 
E) surplus 
A) responsiveness 
B) happiness 
C) bonus 
D) profit 
E) surplus

Question 6

Elasticity measures

Accepted Answer

A) whether a price increase causes quantity demanded to increase or decrease 
B) the strength of an economy's tendency to recover from recession 
C) the responsiveness of decision makers to changes in prices, income, or other variables 
D) the profitability of investment in an industry 
E) the long­run flexibility of prices in the economy 
A) whether a price increase causes quantity demanded to increase or decrease 
B) the strength of an economy's tendency to recover from recession 
C) the responsiveness of decision makers to changes in prices, income, or other variables 
D) the profitability of investment in an industry 
E) the long­run flexibility of prices in the economy

Question 7

Along a linear demand curve,

Accepted Answer

A) both the slope and price elasticity are constant 
B) the price elasticity is constant, but the slope varies 
C) total revenues are constant 
D) the slope is constant, but the price elasticity varies 
E) total revenues are negative 
A) both the slope and price elasticity are constant 
B) the price elasticity is constant, but the slope varies 
C) total revenues are constant 
D) the slope is constant, but the price elasticity varies 
E) total revenues are negative

Question 8

)Elasticity is always

Accepted Answer

A) measured in dollars 
B) measured in dollars per unit of quantity 
C) measured in units of quantity 
D) measured in units of quantity per dollar 
E) independent of the units of measurement 
A) measured in dollars 
B) measured in dollars per unit of quantity 
C) measured in units of quantity 
D) measured in units of quantity per dollar 
E) independent of the units of measurement

Question 9

)   Refer to Exhibit 5­11.What can be said of the price elasticity of demand forthis good?

Accepted Answer

A) Demand is inelastic. 
B) Demand is unit elastic. 
C) Demand is elastic. 
D) Demand is perfectly elastic. 
E) Not enough information is given to determine elasticity. 
A) Demand is inelastic. 
B) Demand is unit elastic. 
C) Demand is elastic. 
D) Demand is perfectly elastic. 
E) Not enough information is given to determine elasticity.

Question 10

Suppose that you allow yourself $50 per month to spend on compact disks.You spend exactly this much every month regardless of the price ofcompact disks.Therefore, your demand for CDs

Accepted Answer

A) is elastic 
B) is inelastic 
C) is unit elastic 
D) cannot be characterized unless we know the price of a disk 
E) cannot be characterized unless we know the price and quantity of compact disks purchased 
A) is elastic 
B) is inelastic 
C) is unit elastic 
D) cannot be characterized unless we know the price of a disk 
E) cannot be characterized unless we know the price and quantity of compact disks purchased

Question 11

Which of the following describes a situation in which demand must beelastic?

Accepted Answer

A) Total revenue increases by 15 percent when the price of corndogs rises by 15 percent. 
B) Total revenue increases by less than 15 percent when the price of corndogs rises by 15 percent. 
C) Total revenue decreases by more than 15 percent when the price of corndogs rises by 15 percent. 
D) Total revenue increases by $15 when the price of corndogs rises by $15. 
E) Total revenue increases by more than $15 when the price of corndogs rises by $15. 
A) Total revenue increases by 15 percent when the price of corndogs rises by 15 percent. 
B) Total revenue increases by less than 15 percent when the price of corndogs rises by 15 percent. 
C) Total revenue decreases by more than 15 percent when the price of corndogs rises by 15 percent. 
D) Total revenue increases by $15 when the price of corndogs rises by $15. 
E) Total revenue increases by more than $15 when the price of corndogs rises by $15.

Question 12

In Exhibit 5­10, between the two equilibrium prices shown, demand is

Accepted Answer

A) price elastic 
B) price inelastic 
C) unit elastic 
D) perfectly elastic 
E) perfectly inelastic 
A) price elastic 
B) price inelastic 
C) unit elastic 
D) perfectly elastic 
E) perfectly inelastic

Question 13

If a 5% increase in price leads to an 8% decrease in quantity demanded,demand is

Accepted Answer

A) perfectly elastic 
B) elastic 
C) unit elastic 
D) inelastic 
E) perfectly inelastic 
A) perfectly elastic 
B) elastic 
C) unit elastic 
D) inelastic 
E) perfectly inelastic

Question 14

Demand is inelastic if

Accepted Answer

A) the percentage change in price is greater than the percentage change in quantity demanded 
B) the percentage change in price is less than the percentage change in quantity demanded 
C) the percentage change in price is equal to the percentage change in quantity demanded 
D) the value of price elasticity is equal to ­1 
E) the value of price elasticity is less than ­1 
A) the percentage change in price is greater than the percentage change in quantity demanded 
B) the percentage change in price is less than the percentage change in quantity demanded 
C) the percentage change in price is equal to the percentage change in quantity demanded 
D) the value of price elasticity is equal to ­1 
E) the value of price elasticity is less than ­1

Question 15

Demand is unit elastic whenever

Accepted Answer

A) price elasticity has an absolute value of 1 
B) price elasticity has an absolute value greater than 1 
C) price elasticity has an absolute value less than 1 
D) price elasticity is negative 
E) consumers always respond to a one­dollar change in price by decreasing their quantity demanded by one
Unit 
A) price elasticity has an absolute value of 1 
B) price elasticity has an absolute value greater than 1 
C) price elasticity has an absolute value less than 1 
D) price elasticity is negative 
E) consumers always respond to a one­dollar change in price by decreasing their quantity demanded by one
Unit

Question 16

If the supply curve slopes upward and a $3 per unit tax on suppliers raisesthe profit­maximizing price by $3, demand must be perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 17

If the demand for a product is price inelastic,

Accepted Answer

A) producers' revenues will increase if supply increases 
B) producers' revenues will increase if supply decreases 
C) a small change in price will cause a large shift in the demand curve 
D) a large change in price will cause a small shift in the demand curve 
E) a small change in price will cause a small shift in the demand curve 
A) producers' revenues will increase if supply increases 
B) producers' revenues will increase if supply decreases 
C) a small change in price will cause a large shift in the demand curve 
D) a large change in price will cause a small shift in the demand curve 
E) a small change in price will cause a small shift in the demand curve

Question 18

)   Which of the following statements is true in the range of the total revenuecurve labeled B in Exhibit 5­8?

Accepted Answer

A) Demand is elastic. 
B) Demand is inelastic. 
C) Demand is unit elastic. 
D) We cannot tell anything about elasticity of demand because this is a total revenue curve. 
E) Demand is perfectly elastic. 
A) Demand is elastic. 
B) Demand is inelastic. 
C) Demand is unit elastic. 
D) We cannot tell anything about elasticity of demand because this is a total revenue curve. 
E) Demand is perfectly elastic.

Question 19

Along a downward­sloping linear demand curve,

Accepted Answer

A) slope is constant and elasticity is changing 
B) slope is changing and elasticity is constant 
C) both slope and elasticity are constant 
D) both slope and elasticity are changing 
E) no generalizations can be made about slope 
A) slope is constant and elasticity is changing 
B) slope is changing and elasticity is constant 
C) both slope and elasticity are constant 
D) both slope and elasticity are changing 
E) no generalizations can be made about slope

Question 20

Total revenue is maximized where demand is inelastic.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity of Demand and Supply

Price elasticity of demand is useful because it measures __________responsiveness to changes in __________.

Which of the following describes a situation in which demand must beinelastic?

If the value of the price elasticity of demand is ­0.2, this means that a

Exhibit 5­7 Which of the following is true between points g and h in Exhibit 5­7?

Another word for elasticity is

Elasticity measures

Along a linear demand curve,

)Elasticity is always

) Refer to Exhibit 5­11.What can be said of the price elasticity of demand forthis good?

Suppose that you allow yourself $50 per month to spend on compact disks.You spend exactly this much every month regardless of the price ofcompact disks.Therefore, your demand for CDs

Which of the following describes a situation in which demand must beelastic?

In Exhibit 5­10, between the two equilibrium prices shown, demand is

If a 5% increase in price leads to an 8% decrease in quantity demanded,demand is

Demand is inelastic if

Demand is unit elastic whenever

If the supply curve slopes upward and a $3 per unit tax on suppliers raisesthe profit­maximizing price by $3, demand must be perfectly inelastic.

If the demand for a product is price inelastic,

) Which of the following statements is true in the range of the total revenuecurve labeled B in Exhibit 5­8?

Along a downward­sloping linear demand curve,

Total revenue is maximized where demand is inelastic.

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Price elasticity of demand is useful because it measures responsiveness to changes in .

If the value of the price elasticity of demand is 0.2, this means that a

Exhibit 57 Which of the following is true between points g and h in Exhibit 57?

) Refer to Exhibit 511.What can be said of the price elasticity of demand forthis good?

In Exhibit 510, between the two equilibrium prices shown, demand is

If the supply curve slopes upward and a $3 per unit tax on suppliers raisesthe profitmaximizing price by $3, demand must be perfectly inelastic.

) Which of the following statements is true in the range of the total revenuecurve labeled B in Exhibit 58?

Along a downwardsloping linear demand curve,