Question 1

The existence of substitutes for a good and the percentage of one's budget spent on the good are among the factors that determine how elastic the demand for the good will be.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following would result in higher price elasticity of good X?

Accepted Answer

A) more substitutes for good X 
B) a shorter period of time has passed since the change in the price of good X 
C) lower costs of labor in the production of good X 
D) good X is more of a necessity than a luxury 
A) more substitutes for good X 
B) a shorter period of time has passed since the change in the price of good X 
C) lower costs of labor in the production of good X 
D) good X is more of a necessity than a luxury A

Question 3

All other things being equal, the __________ the percentage of a consumer's budget spent on a good, the __________ the good's price elasticity of ____________.

Accepted Answer

A) greater; higher; demand 
B) smaller; lower; supply 
C) greater; lower; demand 
D) smaller; higher; supply 
A) greater; higher; demand 
B) smaller; lower; supply 
C) greater; lower; demand 
D) smaller; higher; supply A

Question 4

From the sellers' perspective, it is most desirable for a product to be perfectly elastic in demand.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 19-7 ​
 
Refer to Exhibit 19-7. If the government wants to impose a per-unit tax in order to raise revenues, which of the depicted markets should it choose in order to maximize tax revenues?

Accepted Answer

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

Question 6

Exhibit 19-8 ​
 
Refer to Exhibit 19-8. The market for good X is initially at point A. A tax is then placed on the production of good X. At the new equilibrium, point __________, buyers end up paying __________ of the tax and sellers end up paying __________ of the tax.

Accepted Answer

A) B; one-half; one-half 
B) D; one-half; one-half 
C) C; one-half; one-half 
D) B; one-quarter; three-quarters 
A) B; one-half; one-half 
B) D; one-half; one-half 
C) C; one-half; one-half 
D) B; one-quarter; three-quarters

Question 7

If the price of good A decreases by 10 percent and the quantity demanded of good B increases by 10 percent, this is evidence that goods A and B are

Accepted Answer

A) substitute for one another. 
B) complement goods to one another. 
C) both inferior goods. 
D) both normal goods. 
E) not related. 
A) substitute for one another. 
B) complement goods to one another. 
C) both inferior goods. 
D) both normal goods. 
E) not related.

Question 8

Exhibit 19-2 ​
 
Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. As a result, the equilibrium price

Accepted Answer

A) rises from $5.00 to $6.25. 
B) falls from $5.00 to $4.00. 
C) remains constant at $5.00. 
D) falls from $6.25 to $5.00. 
A) rises from $5.00 to $6.25. 
B) falls from $5.00 to $4.00. 
C) remains constant at $5.00. 
D) falls from $6.25 to $5.00.

Question 9

If a 7 percent increase in the price of a commodity results in a 12 percent increase in the quantity supplied, supply is said to be

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 10

The quantity supplied of land is constant regardless of price. Suppose a tax is imposed on the rental price of land. Who will pay the greater share of such a tax?

Accepted Answer

A) The buyers will pay the entire share. 
B) The sellers will pay the entire share. 
C) The buyers and the sellers will pay equal shares. 
D) The buyers will bear the greater share of the tax. 
A) The buyers will pay the entire share. 
B) The sellers will pay the entire share. 
C) The buyers and the sellers will pay equal shares. 
D) The buyers will bear the greater share of the tax.

Question 11

List and describe four factors that are relevant to the determination of price elasticity of demand.

Accepted Answer

1)Number of substitutes - The more subst

Question 12

If demand for a given good is elastic, then a given percentage change in price will bring about a(n)__________ percentage change in quantity __________.

Accepted Answer

A) larger; demanded 
B) smaller; demanded 
C) equal; supplied 
D) smaller; supplied 
E) equal; demanded 
A) larger; demanded 
B) smaller; demanded 
C) equal; supplied 
D) smaller; supplied 
E) equal; demanded

Question 13

Income elasticity of demand for good A is -0.22. Good A is income __________ and is a(n)__________ good.

Accepted Answer

A) unit elastic; normal 
B) elastic; inferior 
C) inelastic; normal 
D) elastic; normal 
E) inelastic; inferior 
A) unit elastic; normal 
B) elastic; inferior 
C) inelastic; normal 
D) elastic; normal 
E) inelastic; inferior

Question 14

Exhibit 19-3   Refer to Exhibit 19-3. If price increases from $2.50 to $3.50, total revenue along the demand curve

Accepted Answer

A) increases to $67.50. 
B) increases to $87.50. 
C) remains at $87.50. 
D) decreases to $67.50. 
A) increases to $67.50. 
B) increases to $87.50. 
C) remains at $87.50. 
D) decreases to $67.50.

Question 15

Exhibit 19-2 ​
 
Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. As a result,

Accepted Answer

A) consumers end up paying $6.25 per unit, and producers end up receiving $5.00 per unit, but keeping only $4.00 per unit. 
B) consumers end up paying $6.25 per unit, and producers end up receiving and keeping $4.00 per unit. 
C) consumers end up paying $5.00 per unit, and producers end up receiving and keeping $5.00 per unit. 
D) consumers end up paying $6.25 per unit, and producers end up receiving $6.25 per unit, but keeping only $4.00 per unit. 
A) consumers end up paying $6.25 per unit, and producers end up receiving $5.00 per unit, but keeping only $4.00 per unit. 
B) consumers end up paying $6.25 per unit, and producers end up receiving and keeping $4.00 per unit. 
C) consumers end up paying $5.00 per unit, and producers end up receiving and keeping $5.00 per unit. 
D) consumers end up paying $6.25 per unit, and producers end up receiving $6.25 per unit, but keeping only $4.00 per unit.

Question 16

Suppose a producer decides that if the price of her product is $42, the quantity supplied will be 1,000 units, and if the price is $45, the quantity supplied will be 1,300. The price elasticity of supply for the good is approximately

Accepted Answer

A) +1.9. 
B) -0.26. 
C) +0.26. 
D) -3.8. 
E) +3.8. 
A) +1.9. 
B) -0.26. 
C) +0.26. 
D) -3.8. 
E) +3.8.

Question 17

Exhibit 19-4 ​
 
Refer to Exhibit 19-4. As a consequence of the depicted change in the supply of X, the demand curve for Y shifted from D1 to D2. It follows that

Accepted Answer

A) X and Y are substitutes. 
B) X and Y are complements. 
C) X and Y are inferior goods. 
D) demand for Y is price elastic. 
A) X and Y are substitutes. 
B) X and Y are complements. 
C) X and Y are inferior goods. 
D) demand for Y is price elastic.

Question 18

Explain how and why price elasticity of demand changes as a product is defined more narrowly or more broadly.  Cite an example to help support your answer.

Accepted Answer

When a good is defined more broadly dema

Question 19

The price elasticity of demand would most likely be highest for which of the following goods?

Accepted Answer

A) food (in general) 
B) cars (in general) 
C) clothing (in general) 
D) Ford cars 
A) food (in general) 
B) cars (in general) 
C) clothing (in general) 
D) Ford cars

Question 20

Which of the following is true?

Accepted Answer

A) The price elasticity of demand for Royal Crown Cola is higher than the price elasticity of demand for soft drinks in general. 
B) The price elasticity of demand for Royal Crown Cola is lower than the price elasticity of demand for soft drinks in general. 
C) The price elasticity of demand for Royal Crown Cola is equal to the price elasticity of demand for soft drinks in general. 
D) It is invalid to make interproduct elasticity comparisons. 
A) The price elasticity of demand for Royal Crown Cola is higher than the price elasticity of demand for soft drinks in general. 
B) The price elasticity of demand for Royal Crown Cola is lower than the price elasticity of demand for soft drinks in general. 
C) The price elasticity of demand for Royal Crown Cola is equal to the price elasticity of demand for soft drinks in general. 
D) It is invalid to make interproduct elasticity comparisons.

Exam 6: Elasticity

The existence of substitutes for a good and the percentage of one's budget spent on the good are among the factors that determine how elastic the demand for the good will be.

Which of the following would result in higher price elasticity of good X?

All other things being equal, the __________ the percentage of a consumer's budget spent on a good, the __________ the good's price elasticity of ____________.

From the sellers' perspective, it is most desirable for a product to be perfectly elastic in demand.

Exhibit 19-7 ​ Refer to Exhibit 19-7. If the government wants to impose a per-unit tax in order to raise revenues, which of the depicted markets should it choose in order to maximize tax revenues?

Exhibit 19-8 ​ Refer to Exhibit 19-8. The market for good X is initially at point A. A tax is then placed on the production of good X. At the new equilibrium, point __________, buyers end up paying __________ of the tax and sellers end up paying __________ of the tax.

If the price of good A decreases by 10 percent and the quantity demanded of good B increases by 10 percent, this is evidence that goods A and B are

Exhibit 19-2 ​ Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. As a result, the equilibrium price

If a 7 percent increase in the price of a commodity results in a 12 percent increase in the quantity supplied, supply is said to be

The quantity supplied of land is constant regardless of price. Suppose a tax is imposed on the rental price of land. Who will pay the greater share of such a tax?

List and describe four factors that are relevant to the determination of price elasticity of demand.

If demand for a given good is elastic, then a given percentage change in price will bring about a(n)__________ percentage change in quantity __________.

Income elasticity of demand for good A is -0.22. Good A is income __________ and is a(n)__________ good.

Exhibit 19-3 Refer to Exhibit 19-3. If price increases from $2.50 to $3.50, total revenue along the demand curve

Exhibit 19-2 ​ Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. As a result,

Suppose a producer decides that if the price of her product is $42, the quantity supplied will be 1,000 units, and if the price is $45, the quantity supplied will be 1,300. The price elasticity of supply for the good is approximately

Exhibit 19-4 ​ Refer to Exhibit 19-4. As a consequence of the depicted change in the supply of X, the demand curve for Y shifted from D1 to D2. It follows that

Explain how and why price elasticity of demand changes as a product is defined more narrowly or more broadly. Cite an example to help support your answer.

The price elasticity of demand would most likely be highest for which of the following goods?

Which of the following is true?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages, Union, and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Filters

All other things being equal, the the percentage of a consumer's budget spent on a good, the the good's price elasticity of ____.

Exhibit 19-7 Refer to Exhibit 19-7. If the government wants to impose a per-unit tax in order to raise revenues, which of the depicted markets should it choose in order to maximize tax revenues?

Exhibit 19-8 Refer to Exhibit 19-8. The market for good X is initially at point A. A tax is then placed on the production of good X. At the new equilibrium, point , buyers end up paying of the tax and sellers end up paying __ of the tax.

Exhibit 19-2 Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S₁ to S₂. As a result, the equilibrium price

If demand for a given good is elastic, then a given percentage change in price will bring about a(n) percentage change in quantity .

Income elasticity of demand for good A is -0.22. Good A is income and is a(n) good.

Exhibit 19-2 Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S₁ to S₂. As a result,

Exhibit 19-4 Refer to Exhibit 19-4. As a consequence of the depicted change in the supply of X, the demand curve for Y shifted from D₁ to D₂. It follows that