Question 1

Suppose that when price is $10, quantity supplied is 20. When price is $6, quantity supplied is 12 units. The price elasticity of supply is:

Accepted Answer

A)  0.5. 
B)  0.8. 
C)  1.0. 
D)  1.5. 
A)  0.5. 
B)  0.8. 
C)  1.0. 
D)  1.5. C

Question 2

Avital and Joshua each have their own business selling lemonade in front of their houses. When they each charge 25 cents per glass, their total revenues are equal. However, when they each charge 40 cents per glass, Avital's revenues are bigger than Joshua's revenues. This is because:

Accepted Answer

A)  Joshua faces a more inelastic demand curve. 
B)  Avital faces a more elastic demand curve. 
C)  Joshua faces a more elastic demand curve. 
D)  Avital faces a less inelastic demand curve. 
A)  Joshua faces a more inelastic demand curve. 
B)  Avital faces a more elastic demand curve. 
C)  Joshua faces a more elastic demand curve. 
D)  Avital faces a less inelastic demand curve. C

Question 3

The price elasticity of demand coefficient for a good will be greater:

Accepted Answer

A)  if close substitutes exist. 
B)  if minor complements exist. 
C)  in the short-run. 
D)  if a small portion of the budget will be spent on it. 
A)  if close substitutes exist. 
B)  if minor complements exist. 
C)  in the short-run. 
D)  if a small portion of the budget will be spent on it. A

Question 4

If Stimpson University increases tuition in order to increase its revenue, it will:

Accepted Answer

A)  not be successful if the demand curve slopes downward. 
B)  be successful if demand is elastic. 
C)  be successful if demand is inelastic. 
D)  be successful if supply is elastic. 
A)  not be successful if the demand curve slopes downward. 
B)  be successful if demand is elastic. 
C)  be successful if demand is inelastic. 
D)  be successful if supply is elastic.

Question 5

The more inelastic the demand for a product, the more the actual burden of a tax on the product will:

Accepted Answer

A)  fall on sellers. 
B)  fall on buyers. 
C)  fall equally on both buyers and sellers. 
D)  create a larger deadweight loss (or excess burden). 
A)  fall on sellers. 
B)  fall on buyers. 
C)  fall equally on both buyers and sellers. 
D)  create a larger deadweight loss (or excess burden).

Question 6

Which of the following comparisons is  true  regarding price elasticity of demand?

Accepted Answer

A)  The demand for monthly car payments is less elastic than the demand for a monthly gym membership because the car payments require a greater share of the consumer's income. 
B)  The demand for gasoline a year after a price change is less elastic than the demand for gasoline a week after a price change because consumers have had time to adjust. 
C)  The demand for water is less elastic than the demand for diamonds because water is a necessity but diamonds are a luxury. 
D)  The demand for cough syrup is less elastic than the demand for insulin because there are no close substitutes for insulin. 
A)  The demand for monthly car payments is less elastic than the demand for a monthly gym membership because the car payments require a greater share of the consumer's income. 
B)  The demand for gasoline a year after a price change is less elastic than the demand for gasoline a week after a price change because consumers have had time to adjust. 
C)  The demand for water is less elastic than the demand for diamonds because water is a necessity but diamonds are a luxury. 
D)  The demand for cough syrup is less elastic than the demand for insulin because there are no close substitutes for insulin.

Question 7

Exhibit 5-6 Demand curve for concert tickets
​
 
In Exhibit 5-6, the demand curve for concert tickets shown above between the prices of $20 and $30 is

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  unitary elastic. 
D)  cross elastic. 
A)  inelastic. 
B)  elastic. 
C)  unitary elastic. 
D)  cross elastic.

Question 8

Exhibit 5-4 Demand curves for silver
​
 
Assume that a wealthy buyer, Mr. Hunt, declares that he will purchase any amount of silver at a price of $125 an ounce. In Exhibit 5-4, which graph illustrates the shape of the demand curve for silver?

Accepted Answer

A)  Graph A. 
B)  Graph B. 
C)  Graph C. 
D)  Graph D. 
A)  Graph A. 
B)  Graph B. 
C)  Graph C. 
D)  Graph D.

Question 9

Suppose the value of income elasticity of demand for a private college education is equal to 1.5. This means that:

Accepted Answer

A)  every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education. 
B)  a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent. 
C)  a 10 percent increase in income causes a 15 percent increase in the quantity of private college education purchased. 
D)  a 15 percent increase in income causes a 10 percent increase in the quantity of private college education purchased. 
A)  every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education. 
B)  a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent. 
C)  a 10 percent increase in income causes a 15 percent increase in the quantity of private college education purchased. 
D)  a 15 percent increase in income causes a 10 percent increase in the quantity of private college education purchased.

Question 10

If the federal government placed a 50 cent per pack excise tax on cigarette manufacturers, and if as a result, the price to consumers of a pack of cigarettes went up by 40 cents, the:

Accepted Answer

A)  actual burden of this tax falls mostly on consumers. 
B)  actual burden of this tax falls mostly on manufacturers. 
C)  actual burden of the tax would be shared equally by producers and consumers. 
D)  tax would clearly be a progressive tax. 
A)  actual burden of this tax falls mostly on consumers. 
B)  actual burden of this tax falls mostly on manufacturers. 
C)  actual burden of the tax would be shared equally by producers and consumers. 
D)  tax would clearly be a progressive tax.

Question 11

We would expect the cross elasticity between tennis racquets and tennis balls to be:

Accepted Answer

A)  negative. 
B)  positive. 
C)  zero. 
D)  one. 
A)  negative. 
B)  positive. 
C)  zero. 
D)  one.

Question 12

In a market with a downward-sloping demand curve and an upward-sloping supply curve, a law requiring sellers to pay the government a tax of $1.00 per pack on cigarettes has the effect of:

Accepted Answer

A)  shifting the supply curve to the right and increasing the price buyers pay by $1.00. 
B)  shifting the demand curve to the right and increasing the price buyers pay by $1.00. 
C)  shifting the supply curve to the left and increasing the price buyers pay by less than $1.00. 
D)  shifting the demand curve to the left and increasing the price buyers pay by less than $1.00. 
A)  shifting the supply curve to the right and increasing the price buyers pay by $1.00. 
B)  shifting the demand curve to the right and increasing the price buyers pay by $1.00. 
C)  shifting the supply curve to the left and increasing the price buyers pay by less than $1.00. 
D)  shifting the demand curve to the left and increasing the price buyers pay by less than $1.00.

Question 13

If the price elasticity of demand for a luxury is 2.6, then the price elasticity of demand for a necessity is expected to be

Accepted Answer

A)  greater than 2.6. 
B)  equal to 2.6. 
C)  less than 2.6. 
D)  perfectly elastic. 
A)  greater than 2.6. 
B)  equal to 2.6. 
C)  less than 2.6. 
D)  perfectly elastic.

Question 14

A perfectly inelastic demand curve has an elasticity coefficient of:

Accepted Answer

A)  0. 
B)  1. 
C)  less than 1. 
D)  infinity. 
A)  0. 
B)  1. 
C)  less than 1. 
D)  infinity.

Question 15

If a tripling of price triples the quantity of a good supplied, the price elasticity of supply for this good is:

Accepted Answer

A)  3. 
B)  300. 
C)  1. 
D)  − 1. 
A)  3. 
B)  300. 
C)  1. 
D)  − 1.

Question 16

If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:

Accepted Answer

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

Question 17

Suppose that a jewelry store found that when it increased prices by 10 percent, sales revenue increased by 3 percent. Which of the following is true about the price elasticity of demand for the store's goods?

Accepted Answer

A)  Demand is perfectly inelastic. 
B)  Demand is inelastic, but not perfectly. 
C)  Demand is perfectly elastic 
D)  Demand is elastic, but not perfectly. 
A)  Demand is perfectly inelastic. 
B)  Demand is inelastic, but not perfectly. 
C)  Demand is perfectly elastic 
D)  Demand is elastic, but not perfectly.

Question 18

If a 10 percent increase in the price of product A brings about a 3 percent increase in the sales of product B, then:

Accepted Answer

A)  products A and B are complementary. 
B)  the cross elasticity of demand between these two products is positive. 
C)  products A and B are substitutes. 
D)  the demand for these products is inelastic. 
A)  products A and B are complementary. 
B)  the cross elasticity of demand between these two products is positive. 
C)  products A and B are substitutes. 
D)  the demand for these products is inelastic.

Question 19

If a revenue-maximizing firm is told that the price elasticity of demand is equal to one, it should:

Accepted Answer

A)  raise prices 1 percent. 
B)  lower prices 1 percent. 
C)  raise prices until the elasticity becomes very high. 
D)  keep the price where it is. 
A)  raise prices 1 percent. 
B)  lower prices 1 percent. 
C)  raise prices until the elasticity becomes very high. 
D)  keep the price where it is.

Question 20

Exhibit 5-1 Demand curve
​
 
In Exhibit 5-1, the demand curve between points a and b is:

Accepted Answer

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

Exam 5: Price Elasticity of Demand and Supply

Suppose that when price is $10, quantity supplied is 20. When price is $6, quantity supplied is 12 units. The price elasticity of supply is:

Avital and Joshua each have their own business selling lemonade in front of their houses. When they each charge 25 cents per glass, their total revenues are equal. However, when they each charge 40 cents per glass, Avital's revenues are bigger than Joshua's revenues. This is because:

The price elasticity of demand coefficient for a good will be greater:

If Stimpson University increases tuition in order to increase its revenue, it will:

The more inelastic the demand for a product, the more the actual burden of a tax on the product will:

Which of the following comparisons is true regarding price elasticity of demand?

Exhibit 5-6 Demand curve for concert tickets ​ In Exhibit 5-6, the demand curve for concert tickets shown above between the prices of $20 and $30 is

Exhibit 5-4 Demand curves for silver ​ Assume that a wealthy buyer, Mr. Hunt, declares that he will purchase any amount of silver at a price of $125 an ounce. In Exhibit 5-4, which graph illustrates the shape of the demand curve for silver?

Suppose the value of income elasticity of demand for a private college education is equal to 1.5. This means that:

If the federal government placed a 50 cent per pack excise tax on cigarette manufacturers, and if as a result, the price to consumers of a pack of cigarettes went up by 40 cents, the:

We would expect the cross elasticity between tennis racquets and tennis balls to be:

In a market with a downward-sloping demand curve and an upward-sloping supply curve, a law requiring sellers to pay the government a tax of $1.00 per pack on cigarettes has the effect of:

If the price elasticity of demand for a luxury is 2.6, then the price elasticity of demand for a necessity is expected to be

A perfectly inelastic demand curve has an elasticity coefficient of:

If a tripling of price triples the quantity of a good supplied, the price elasticity of supply for this good is:

If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:

Suppose that a jewelry store found that when it increased prices by 10 percent, sales revenue increased by 3 percent. Which of the following is true about the price elasticity of demand for the store's goods?

If a 10 percent increase in the price of product A brings about a 3 percent increase in the sales of product B, then:

If a revenue-maximizing firm is told that the price elasticity of demand is equal to one, it should:

Exhibit 5-1 Demand curve ​ In Exhibit 5-1, the demand curve between points a and b is:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Understanding Direct and Inverse Relationships between Variables

Filters

Exhibit 5-6 Demand curve for concert tickets In Exhibit 5-6, the demand curve for concert tickets shown above between the prices of $20 and $30 is

Exhibit 5-4 Demand curves for silver Assume that a wealthy buyer, Mr. Hunt, declares that he will purchase any amount of silver at a price of $125 an ounce. In Exhibit 5-4, which graph illustrates the shape of the demand curve for silver?

Exhibit 5-1 Demand curve In Exhibit 5-1, the demand curve between points a and b is: