Question 1

The price elasticity of demand measures how responsive:

Accepted Answer

A) buyers are to a change in price 
B) buyers are to a change in advertising by sellers 
C) sellers are to a change in price 
D) buyers are to a change in their tastes 
A) buyers are to a change in price 
B) buyers are to a change in advertising by sellers 
C) sellers are to a change in price 
D) buyers are to a change in their tastes

Question 2

Graph 5-5   
-In Graph 5-5, which supply curve is most likely the long-run supply curve?

Accepted Answer

A) S1 
B) S2 
C) S3 
D) all of the above are equally likely to be the long-run supply curve 
A) S1 
B) S2 
C) S3 
D) all of the above are equally likely to be the long-run supply curve

Question 3

If the elasticity of supply of a product is greater than zero, then supply is:

Accepted Answer

A) elastic 
B) inelastic 
C) unit elastic 
D) there is not enough information to answer the question 
A) elastic 
B) inelastic 
C) unit elastic 
D) there is not enough information to answer the question

Question 4

In any market, total revenue is the price:

Accepted Answer

A) divided by the price elasticity of demand 
B) multiplied by the quantity 
C) plus the quantity 
D) multiplied by the quantity minus the costs of production 
A) divided by the price elasticity of demand 
B) multiplied by the quantity 
C) plus the quantity 
D) multiplied by the quantity minus the costs of production

Question 5

The demand for apples is generally more elastic than the demand for Australian apples.

Accepted Answer

A) True 
 B)False

Question 6

If an increase in the demand for Monet paintings increases their equilibrium price but not the equilibrium quantity, this means that:

Accepted Answer

A) the supply of Monet paintings is perfectly elastic 
B) the supply of Monet paintings is perfectly inelastic 
C) the price elasticity of demand for Monet paintings is perfectly elastic 
D) the price elasticity of supply for Monet paintings is perfectly inelastic 
A) the supply of Monet paintings is perfectly elastic 
B) the supply of Monet paintings is perfectly inelastic 
C) the price elasticity of demand for Monet paintings is perfectly elastic 
D) the price elasticity of supply for Monet paintings is perfectly inelastic

Question 7

Demand is said to be unit elastic if:

Accepted Answer

A) the demand curve shifts by the same percentage amount as the price 
B) quantity demanded changes by a larger percentage than the price 
C) quantity demanded changes by the same percentage as the price 
D) quantity demanded does not respond to a change in price 
A) the demand curve shifts by the same percentage amount as the price 
B) quantity demanded changes by a larger percentage than the price 
C) quantity demanded changes by the same percentage as the price 
D) quantity demanded does not respond to a change in price

Question 8

Over three years the elasticity of demand for oil heaters will be greater than over ten years.

Accepted Answer

A) True 
 B)False

Question 9

If the cross-price elasticity of demand between goods X and Y is 0.9 this means:

Accepted Answer

A) the two goods are complements and demand is elastic 
B) the two goods are complements and the demand is inelastic 
C) the two goods are substitutes and the demand is elastic 
D) the two goods are substitutes and the demand is inelastic 
A) the two goods are complements and demand is elastic 
B) the two goods are complements and the demand is inelastic 
C) the two goods are substitutes and the demand is elastic 
D) the two goods are substitutes and the demand is inelastic

Question 10

The supply of farmland is more elastic than is the supply of wheat.

Accepted Answer

A) True 
 B)False

Question 11

If two demand curves with different slopes pass through the same point, which demand curve will have the greater price elasticity of demand if the price falls from that point?

Accepted Answer

The curve with the s

Question 12

The income elasticity of demand measures how hours worked changes when the hourly wage changes.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that you are in charge of pricing at a local surf rental shop.The business needs to increase revenue and your job is on the line.If the supply of surf boards is elastic, you:

Accepted Answer

A) should increase the rental price of surf boards 
B) should decrease the rental price of surf boards 
C) should not change the rental price of surf boards 
D) cannot determine what to do with rental price until you determine whether demand is elastic or inelastic 
A) should increase the rental price of surf boards 
B) should decrease the rental price of surf boards 
C) should not change the rental price of surf boards 
D) cannot determine what to do with rental price until you determine whether demand is elastic or inelastic

Question 14

How does the price elasticity of demand affect total revenue? In what case will a change in price cause no change in total revenue?

Accepted Answer

The elasticity of demand determines how

Question 15

If the demand for illegal drugs is inelastic, drug education campaigns should:

Accepted Answer

A) reduce both drug use and drug-related crime 
B) reduce drug use and increase drug-related crime 
C) increase both drug use and drug-related crime unchanged 
D) increase drug use and reduce drug-related crime 
A) reduce both drug use and drug-related crime 
B) reduce drug use and increase drug-related crime 
C) increase both drug use and drug-related crime unchanged 
D) increase drug use and reduce drug-related crime

Question 16

Consider the following pairs of goods.Which would you expect to have the more elastic demand? Why?
a.water or diamonds
b.insulin or nasal decongestant spray
c.food in general or breakfast cereal
d.gasoline over the course of a week or gasoline over the course of a year
e.personal computers or IBM personal computers

Accepted Answer

a.Diamonds are luxuries and water is a n

Question 17

Rate the supply curves on the graph shown from shortest time frame to longest time frame.Which curve is the most inelastic? Which curve is the most elastic?

Accepted Answer

The order from shortest time f

Question 18

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Accepted Answer

A) True 
 B)False

Question 19

The price elasticity of demand for a product will tend to be higher if fewer good substitutes for it are available.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following was NOT a reason why OPEC failed to keep the price of oil high?

Accepted Answer

A) over the long run, producers of oil outside of OPEC responded to high prices by increasing oil exploration and by building new extraction capacity 
B) consumers responded to higher prices with greater conservation 
C) consumers replaced old inefficient cars with newer efficient ones 
D) the agreement OPEC members signed allowed each country to produce as much oil as each wanted 
A) over the long run, producers of oil outside of OPEC responded to high prices by increasing oil exploration and by building new extraction capacity 
B) consumers responded to higher prices with greater conservation 
C) consumers replaced old inefficient cars with newer efficient ones 
D) the agreement OPEC members signed allowed each country to produce as much oil as each wanted

Exam 5: Elasticity and Its Application

The price elasticity of demand measures how responsive:

Graph 5-5 -In Graph 5-5, which supply curve is most likely the long-run supply curve?

If the elasticity of supply of a product is greater than zero, then supply is:

In any market, total revenue is the price:

The demand for apples is generally more elastic than the demand for Australian apples.

If an increase in the demand for Monet paintings increases their equilibrium price but not the equilibrium quantity, this means that:

Demand is said to be unit elastic if:

Over three years the elasticity of demand for oil heaters will be greater than over ten years.

If the cross-price elasticity of demand between goods X and Y is 0.9 this means:

The supply of farmland is more elastic than is the supply of wheat.

If two demand curves with different slopes pass through the same point, which demand curve will have the greater price elasticity of demand if the price falls from that point?

The income elasticity of demand measures how hours worked changes when the hourly wage changes.

Suppose that you are in charge of pricing at a local surf rental shop.The business needs to increase revenue and your job is on the line.If the supply of surf boards is elastic, you:

How does the price elasticity of demand affect total revenue? In what case will a change in price cause no change in total revenue?

If the demand for illegal drugs is inelastic, drug education campaigns should:

Rate the supply curves on the graph shown from shortest time frame to longest time frame.Which curve is the most inelastic? Which curve is the most elastic?

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

The price elasticity of demand for a product will tend to be higher if fewer good substitutes for it are available.

Which of the following was NOT a reason why OPEC failed to keep the price of oil high?

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Supply, Demand and Government Policies

Consumers, Producers and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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