Question 1

Suppose the total-revenue curve is derived from a particular linear demand curve. That demand curve must be

Accepted Answer

A) inelastic for price declines that increase quantity demanded from 2 units to 3 units. 
B) elastic for price declines that increase quantity demanded from 5 units to 6 units. 
C) unit elastic for price increases that reduce quantity demanded from 5 units to 4 units. 
D) inelastic for price increases that reduce quantity demanded from 4 units to 3 units. 
A) inelastic for price declines that increase quantity demanded from 2 units to 3 units. 
B) elastic for price declines that increase quantity demanded from 5 units to 6 units. 
C) unit elastic for price increases that reduce quantity demanded from 5 units to 4 units. 
D) inelastic for price increases that reduce quantity demanded from 4 units to 3 units.

Question 2

Supply curves for antiques tend to be highly inelastic.

Accepted Answer

A) True 
 B)False

Question 3

A union argues that a price cut will boost the revenues of the firm, while management argues that the opposite is true. This suggests that the price elasticity of demand is

Accepted Answer

A) unit-elastic from the union's perspective and unit-inelastic from management's perspective. 
B) perfectly inelastic from the union's perspective and perfectly elastic from management's perspective. 
C) elastic from the union's perspective, inelastic from management's perspective. 
D) inelastic from the union's perspective, elastic from management's perspective. 
A) unit-elastic from the union's perspective and unit-inelastic from management's perspective. 
B) perfectly inelastic from the union's perspective and perfectly elastic from management's perspective. 
C) elastic from the union's perspective, inelastic from management's perspective. 
D) inelastic from the union's perspective, elastic from management's perspective.

Question 4

A 4 percent reduction in the price of a product has zero effect on the dollar amount of consumer expenditure on the product. The price elasticity of demand is

Accepted Answer

A) zero. 
B) greater than zero. 
C) greater than zero but less than 1. 
D) equal to 1. 
A) zero. 
B) greater than zero. 
C) greater than zero but less than 1. 
D) equal to 1.

Question 5

In the immediate market period for a highly perishable crop like tomatoes, the individual farmer's supply curve tends to be

Accepted Answer

A) perfectly inelastic. 
B) perfectly elastic. 
C) quite flat. 
D) downward-sloping. 
A) perfectly inelastic. 
B) perfectly elastic. 
C) quite flat. 
D) downward-sloping.

Question 6

Discuss the pros and cons of legalizing drugs such as heroin or cocaine from an economic perspective using the concept of elasticity.

Accepted Answer

Proponents of legalization contend that

Question 7

Demand is said to be inelastic when

Accepted Answer

A) an increase in price results in a reduction in total revenue. 
B) a reduction in price results in an increase in total revenue. 
C) a reduction in price results in a decrease in total revenue. 
D) the elasticity coefficient exceeds one. 
A) an increase in price results in a reduction in total revenue. 
B) a reduction in price results in an increase in total revenue. 
C) a reduction in price results in a decrease in total revenue. 
D) the elasticity coefficient exceeds one.

Question 8

Which of the following is not characteristic of a product with relatively inelastic demand?

Accepted Answer

A) The good is regarded by consumers as a necessity. 
B) There are a large number of good substitutes for the good. 
C) Buyers spend a small percentage of their total income on the product. 
D) Consumers have had only a short time period to adjust to changes in price. 
A) The good is regarded by consumers as a necessity. 
B) There are a large number of good substitutes for the good. 
C) Buyers spend a small percentage of their total income on the product. 
D) Consumers have had only a short time period to adjust to changes in price.

Question 9

If a firm's demand for labor is elastic, a union-negotiated wage increase will

Accepted Answer

A) necessarily be inflationary. 
B) cause the firm's total payroll to increase. 
C) cause the firm's total payroll to decline. 
D) cause a shortage of labor. 
A) necessarily be inflationary. 
B) cause the firm's total payroll to increase. 
C) cause the firm's total payroll to decline. 
D) cause a shortage of labor.

Question 10

Suppose that as the price of Y falls from$2.00 to $1.90, the quantity of Y demanded increases from110 to 118. Then the absolute value of the price elasticity (using the midpoint formula)is approximately

Accepted Answer

A) 4. 
B) 2.09. 
C) 1.37. 
D) 3.94. 
A) 4. 
B) 2.09. 
C) 1.37. 
D) 3.94.

Question 11

Which of these pairs of concepts can be positively, as well as negatively, related?

Accepted Answer

A) the income of consumers and the demand for a product 
B) the price of a product and the quantity of that product demanded 
C) the price of a product and the demand for a complementary product 
D) the cost of resources required to make a product and its supply 
A) the income of consumers and the demand for a product 
B) the price of a product and the quantity of that product demanded 
C) the price of a product and the demand for a complementary product 
D) the cost of resources required to make a product and its supply

Question 12

An increase in demand will increase equilibrium price to a greater extent

Accepted Answer

A) if the product is a normal good. 
B) if the product is an inferior good. 
C) the less elastic the supply curve. 
D) the more elastic the supply curve. 
A) if the product is a normal good. 
B) if the product is an inferior good. 
C) the less elastic the supply curve. 
D) the more elastic the supply curve.

Question 13

In which price range of the accompanying demand schedule is demand elastic?

Accepted Answer

A) $4-$3 
B) $3-$2 
C) $2-$1 
D) below $1 
A) $4-$3 
B) $3-$2 
C) $2-$1 
D) below $1

Question 14

The basic formula for the price elasticity of demand coefficient is

Accepted Answer

A) absolute decline in quantity demanded/absolute increase in price. 
B) percentage change in quantity demanded/percentage change in price. 
C) absolute decline in price/absolute increase in quantity demanded. 
D) percentage change in price/percentage change in quantity demanded. 
A) absolute decline in quantity demanded/absolute increase in price. 
B) percentage change in quantity demanded/percentage change in price. 
C) absolute decline in price/absolute increase in quantity demanded. 
D) percentage change in price/percentage change in quantity demanded.

Question 15

Explain the differences between the immediate market period, the short run, and the long run as they relate to price elasticity of supply.

Accepted Answer

The immediate market period is a length

Question 16

Refer to the diagram. In the P₁P₂ price range, demand is

Accepted Answer

A) of unit elasticity. 
B) relatively inelastic. 
C) relatively elastic. 
D) perfectly elastic. 
A) of unit elasticity. 
B) relatively inelastic. 
C) relatively elastic. 
D) perfectly elastic.

Question 17

If the government tightens up on drug dealers and raises the costs of dealing illegal drugs, then the drug addicts' dollar expenditures to feed their addiction will tend to

Accepted Answer

A) increase because their demand is price-elastic. 
B) decrease because their demand is price-Inelastic. 
C) decrease because their demand is price-elastic. 
D) increase because their demand is price-Inelastic. 
A) increase because their demand is price-elastic. 
B) decrease because their demand is price-Inelastic. 
C) decrease because their demand is price-elastic. 
D) increase because their demand is price-Inelastic.

Question 18

Which of the following statements is inconsistent with an elastic demand curve?

Accepted Answer

A) The price-elasticity coefficient is greater than 1. 
B) Total revenue increases when price increases. 
C) Buyers are relatively sensitive to price changes. 
D) The relative change in quantity exceeds the relative change in price. 
A) The price-elasticity coefficient is greater than 1. 
B) Total revenue increases when price increases. 
C) Buyers are relatively sensitive to price changes. 
D) The relative change in quantity exceeds the relative change in price.

Question 19

For which product is the income elasticity of demand most likely to be negative?

Accepted Answer

A) computer software 
B) used clothing 
C) apps for iPhones 
D) bread 
A) computer software 
B) used clothing 
C) apps for iPhones 
D) bread

Question 20

The following data table relates to the supply schedule of a product.   Over which of the following price ranges is the price-elasticity of supply less than 1?

Accepted Answer

A) $5 to $10 
B) $25 to $30 
C) It is less than one over all price ranges. 
D) $20 to $25 
A) $5 to $10 
B) $25 to $30 
C) It is less than one over all price ranges. 
D) $20 to $25

Exam 6: Elasticity

Suppose the total-revenue curve is derived from a particular linear demand curve. That demand curve must be

Supply curves for antiques tend to be highly inelastic.

A union argues that a price cut will boost the revenues of the firm, while management argues that the opposite is true. This suggests that the price elasticity of demand is

A 4 percent reduction in the price of a product has zero effect on the dollar amount of consumer expenditure on the product. The price elasticity of demand is

In the immediate market period for a highly perishable crop like tomatoes, the individual farmer's supply curve tends to be

Discuss the pros and cons of legalizing drugs such as heroin or cocaine from an economic perspective using the concept of elasticity.

Demand is said to be inelastic when

Which of the following is not characteristic of a product with relatively inelastic demand?

If a firm's demand for labor is elastic, a union-negotiated wage increase will

Suppose that as the price of Y falls from$2.00 to $1.90, the quantity of Y demanded increases from110 to 118. Then the absolute value of the price elasticity (using the midpoint formula)is approximately

Which of these pairs of concepts can be positively, as well as negatively, related?

An increase in demand will increase equilibrium price to a greater extent

In which price range of the accompanying demand schedule is demand elastic?

The basic formula for the price elasticity of demand coefficient is

Explain the differences between the immediate market period, the short run, and the long run as they relate to price elasticity of supply.

Refer to the diagram. In the P₁P₂ price range, demand is

If the government tightens up on drug dealers and raises the costs of dealing illegal drugs, then the drug addicts' dollar expenditures to feed their addiction will tend to

Which of the following statements is inconsistent with an elastic demand curve?

For which product is the income elasticity of demand most likely to be negative?

The following data table relates to the supply schedule of a product. Over which of the following price ranges is the price-elasticity of supply less than 1?

Limits, Alternatives, and Choices

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