Question 1

Elasticity provides a guide to both

Accepted Answer

A) market stability and change in revenue as price changes. 
B) responsiveness of quantity demanded to a change in price and market stability. 
C) responsiveness of quantity demanded to a change in price and change in revenue as price changes. 
D) technological change and change in revenue as price changes. 
A) market stability and change in revenue as price changes. 
B) responsiveness of quantity demanded to a change in price and market stability. 
C) responsiveness of quantity demanded to a change in price and change in revenue as price changes. 
D) technological change and change in revenue as price changes.

Question 2

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 3

As we move down a straight-line demand curve, the price elasticity becomes

Accepted Answer

A) larger. 
B) smaller. 
C) larger and then smaller. 
D) smaller and then larger. 
A) larger. 
B) smaller. 
C) larger and then smaller. 
D) smaller and then larger.

Question 4

The elasticity of supply is calculated by

Accepted Answer

A) determining the slope of the supply curve. 
B) dividing the absolute change in quantity supplied by the absolute change in price. 
C) dividing the percentage change in quantity supplied by the percentage change in price. 
D) dividing the percentage change in price by the percentage change in quantity demanded. 
A) determining the slope of the supply curve. 
B) dividing the absolute change in quantity supplied by the absolute change in price. 
C) dividing the percentage change in quantity supplied by the percentage change in price. 
D) dividing the percentage change in price by the percentage change in quantity demanded.

Question 5

Total expenditure equals price times elasticity.

Accepted Answer

A) True 
 B)False

Question 6

Necessities, such as food and shelter, are product purchases that consumers are sensitive to, so the demand is elastic for these goods.

Accepted Answer

A) True 
 B)False

Question 7

At $6 per steak, consumers are willing to buy two steaks. At a price of $2, consumers are willing to buy six steaks. The elasticity of the market demand curve between P = $6 and P = $2 (dropping all minus signs)is

Accepted Answer

A) 0.33. 
B) 1 
C) 2 
D) 4 
A) 0.33. 
B) 1 
C) 2 
D) 4

Question 8

The demand for potatoes at current prices is likely to be

Accepted Answer

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

Question 9

The local symphony recently raised its price for tickets to their summer concerts in the park. At the end of the summer season, the symphony was surprised to see that total revenue had actually decreased. The reason was that the elasticity of demand for tickets was

Accepted Answer

A) unit elastic. 
B) inelastic. 
C) elastic. 
D) Not enough information is given. 
A) unit elastic. 
B) inelastic. 
C) elastic. 
D) Not enough information is given.

Question 10

If a study shows that two goods have a high negative cross elasticity of demand value, then the two goods are competing in the same market.

Accepted Answer

A) True 
 B)False

Question 11

When Scuba, Inc., lowered the price of a tank of compressed air by 20 percent, it sold 10 percent more tankfuls. The price elasticity for compressed air is

Accepted Answer

A) 2 
B) 1\2. 
C) 1 
D) 20 
A) 2 
B) 1\2. 
C) 1 
D) 20

Question 12

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 13

Two economists from Ohio University estimated that the demand curve for kerosene in Indonesia was such that a 10 percent increase in the price reduced the quantity demanded by 2.2 percent and that a 10 percent increase in the price of electricity increased the demand for kerosene by 1.6 percent. This indicates that (i)the demand for kerosene is price inelastic and (ii)kerosene and electricity are substitutes. Which of these two statements is correct?

Accepted Answer

A) i and ii 
B) i not ii 
C) ii not i 
D) neither i nor ii 
A) i and ii 
B) i not ii 
C) ii not i 
D) neither i nor ii

Question 14

Elasticity of demand is calculated by dividing the change in quantity by the change in the price of a good.

Accepted Answer

A) True 
 B)False

Question 15

If the demand for gasoline becomes more elastic over time,

Accepted Answer

A) the demand curve will shift out. 
B) the demand curve will become flatter. 
C) other things being equal, the equilibrium price of gasoline must fall. 
D) other things being equal, the equilibrium quantity of gasoline must fall. 
A) the demand curve will shift out. 
B) the demand curve will become flatter. 
C) other things being equal, the equilibrium price of gasoline must fall. 
D) other things being equal, the equilibrium quantity of gasoline must fall.

Question 16

A straight-line demand curve has an elasticity that becomes smaller as we move from left to right along the schedule.

Accepted Answer

A) True 
 B)False

Question 17

As one moves down a straight-line demand curve, the elasticity increases.

Accepted Answer

A) True 
 B)False

Question 18

If goods X and Y are complements, the

Accepted Answer

A) quantities demanded of X and Y tend to move in opposite directions. 
B) quantities demanded of X and Y tend to move in the same direction. 
C) prices of X and Y tend to move in the same direction. 
D) supply curves for X and Y tend to move in the same direction. 
A) quantities demanded of X and Y tend to move in opposite directions. 
B) quantities demanded of X and Y tend to move in the same direction. 
C) prices of X and Y tend to move in the same direction. 
D) supply curves for X and Y tend to move in the same direction.

Question 19

If the price elasticity of demand for smart watches is 1.4 (dropping the minus sign), then a 50 percent increase in the price of smart watches will lead to

Accepted Answer

A) the sale of 200 additional smart watches. 
B) the sale of 125 percent fewer smart watches than before. 
C) the sale of 70 percent fewer smart watches than before. 
D) the sale of 25 percent fewer smart watches than before. 
A) the sale of 200 additional smart watches. 
B) the sale of 125 percent fewer smart watches than before. 
C) the sale of 70 percent fewer smart watches than before. 
D) the sale of 25 percent fewer smart watches than before.

Question 20

The emigration of some of Whoville's workers reduces the quantity of thingamabobs supplied at every price by 50. The new supply curve will ____ the old supply curve.

Accepted Answer

A) be steeper and less elastic at every price than 
B) have the same slope and the same elasticity at every price as 
C) have the same slope and be more elastic at every price than 
D) More information is needed to predict the relationship between the elasticities of the two supply curves. 
A) be steeper and less elastic at every price than 
B) have the same slope and the same elasticity at every price as 
C) have the same slope and be more elastic at every price than 
D) More information is needed to predict the relationship between the elasticities of the two supply curves.

Exam 6: Demand and Elasticity

Elasticity provides a guide to both

The price elasticity of a horizontal demand curve is always

As we move down a straight-line demand curve, the price elasticity becomes

The elasticity of supply is calculated by

Total expenditure equals price times elasticity.

Necessities, such as food and shelter, are product purchases that consumers are sensitive to, so the demand is elastic for these goods.

At $6 per steak, consumers are willing to buy two steaks. At a price of $2, consumers are willing to buy six steaks. The elasticity of the market demand curve between P = $6 and P = $2 (dropping all minus signs)is

The demand for potatoes at current prices is likely to be

The local symphony recently raised its price for tickets to their summer concerts in the park. At the end of the summer season, the symphony was surprised to see that total revenue had actually decreased. The reason was that the elasticity of demand for tickets was

If a study shows that two goods have a high negative cross elasticity of demand value, then the two goods are competing in the same market.

When Scuba, Inc., lowered the price of a tank of compressed air by 20 percent, it sold 10 percent more tankfuls. The price elasticity for compressed air is

If the demand curve is vertical, the elasticity is

Elasticity of demand is calculated by dividing the change in quantity by the change in the price of a good.

If the demand for gasoline becomes more elastic over time,

A straight-line demand curve has an elasticity that becomes smaller as we move from left to right along the schedule.

As one moves down a straight-line demand curve, the elasticity increases.

If goods X and Y are complements, the

If the price elasticity of demand for smart watches is 1.4 (dropping the minus sign), then a 50 percent increase in the price of smart watches will lead to

The emigration of some of Whoville's workers reduces the quantity of thingamabobs supplied at every price by 50. The new supply curve will ____ the old supply curve.

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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

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