Question 1

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 2

Any change in price along a perfectly inelastic demand curve produces:

Accepted Answer

A)  greater change in the quantity demanded. 
B)  less change in the quantity demanded. 
C)  no change in the quantity demanded. 
D)  infinite change in the quantity demanded. 
A)  greater change in the quantity demanded. 
B)  less change in the quantity demanded. 
C)  no change in the quantity demanded. 
D)  infinite change in the quantity demanded.

Question 3

Exhibit 5-9 Supply and Demand Curves for Good X
  
In Exhibit 5-9, assume the government places a $200 per unit sales tax on Good X. The percentage of the burden of taxation paid by consumers of Good X is:

Accepted Answer

A)  zero. 
B)  25 percent. 
C)  50 percent. 
D)  100 percent. 
A)  zero. 
B)  25 percent. 
C)  50 percent. 
D)  100 percent.

Question 4

Along the elastic range of a demand curve, a price change causes:

Accepted Answer

A)  a change in total revenue in the opposite direction. 
B)  a change in total revenue in the same direction. 
C)  no change in total revenue. 
D)  an unpredictable change in the total revenue. 
A)  a change in total revenue in the opposite direction. 
B)  a change in total revenue in the same direction. 
C)  no change in total revenue. 
D)  an unpredictable change in the total revenue.

Question 5

Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?

Accepted Answer

A)  0.25. 
B)  0.50. 
C)  0.80. 
D)  1.25 
A)  0.25. 
B)  0.50. 
C)  0.80. 
D)  1.25

Question 6

Suppose the quantity demanded is 1,000 million bushels of peaches per year when the price is $3 per bushel and 1,500 million bushels when the price is $1 per bushel. The price elasticity of demand in this range of the demand curve is:

Accepted Answer

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

Question 7

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.

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

Which of the following statements is not true?

Accepted Answer

A)  Price elasticity of demand for basic foods is low. 
B)  When price elasticity of demand is very high, we say there is brand loyalty. 
C)  The availability and price of substitutes affect the elasticity of demand for a good or service. 
D)  When goods have very low prices, the elasticity of demand is usually quite low. 
A)  Price elasticity of demand for basic foods is low. 
B)  When price elasticity of demand is very high, we say there is brand loyalty. 
C)  The availability and price of substitutes affect the elasticity of demand for a good or service. 
D)  When goods have very low prices, the elasticity of demand is usually quite low.

Question 10

If a 5 percent decrease in the price of a good produces a 5 percent increase in the quantity demanded, the price elasticity of demand is:

Accepted Answer

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

Question 11

Which statement about price elasticity of demand along a linear demand curve is true ?

Accepted Answer

A)  As the quantity demanded increases, so does the buyer's sensitivity to price. 
B)  When price elasticity of demand is equal to 1, consumers are indifferent to subtle price changes. 
C)  The ratio of current price to quantity demanded is a good estimate of the elasticity of demand. 
D)  As the prices of goods increase, the elasticity of demand increases. 
A)  As the quantity demanded increases, so does the buyer's sensitivity to price. 
B)  When price elasticity of demand is equal to 1, consumers are indifferent to subtle price changes. 
C)  The ratio of current price to quantity demanded is a good estimate of the elasticity of demand. 
D)  As the prices of goods increase, the elasticity of demand increases.

Question 12

If the short-run price elasticity of demand for hospital care is .27, then the long-run price elasticity is expected to be:

Accepted Answer

A)  greater than .27. 
B)  perfectly inelastic. 
C)  less than .27. 
D)  equal to .27. 
A)  greater than .27. 
B)  perfectly inelastic. 
C)  less than .27. 
D)  equal to .27.

Question 13

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a:

Accepted Answer

A)  flat (elastic) demand curve and a steep (inelastic) supply curve. 
B)  steep (inelastic) demand curve and a flat (elastic) supply curve. 
C)  steep (inelastic) demand curve and steep (inelastic) demand curve. 
D)  flat (elastic) demand curve and a flat (elastic) supply curve. 
A)  flat (elastic) demand curve and a steep (inelastic) supply curve. 
B)  steep (inelastic) demand curve and a flat (elastic) supply curve. 
C)  steep (inelastic) demand curve and steep (inelastic) demand curve. 
D)  flat (elastic) demand curve and a flat (elastic) supply curve.

Question 14

A perfectly elastic demand curve has a price elasticity of demand coefficient of:

Accepted Answer

A)  zero. 
B)  infinity. 
C)  greater than 1, but less than infinity. 
D)  less than 1, but greater than zero. 
A)  zero. 
B)  infinity. 
C)  greater than 1, but less than infinity. 
D)  less than 1, but greater than zero.

Question 15

The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:

Accepted Answer

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

Question 16

If the quantity of bananas sold increases by 5 percent when the price decreases by 10 percent, the price change occurs in the

Accepted Answer

A)  bottom half of the downward-sloping straight-line demand curve and total revenue decreases from this price change. 
B)  bottom half of the downward-sloping straight-line demand curve and total revenue increases from this price change. 
C)  top half of the downward-sloping straight-line demand curve and total revenue decreases from this price change. 
D)  top half of the downward-sloping straight-line demand curve and total revenue increases from this price change. 
A)  bottom half of the downward-sloping straight-line demand curve and total revenue decreases from this price change. 
B)  bottom half of the downward-sloping straight-line demand curve and total revenue increases from this price change. 
C)  top half of the downward-sloping straight-line demand curve and total revenue decreases from this price change. 
D)  top half of the downward-sloping straight-line demand curve and total revenue increases from this price change.

Question 17

Suppose an increase in symphony tickets prices reduces the total revenue. This is evidence that demand is:

Accepted Answer

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

Question 18

Which of the following describes a situation in which demand must be inelastic?

Accepted Answer

A)  Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of spats rises by $10. 
A)  Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of spats rises by $10.

Question 19

Exhibit 5-1 Demand curve
 
If demand price elasticity is 2, consumers would:

Accepted Answer

A)  buy twice as much of the product in response to a 10 percent decrease in prie. 
B)  require a 2 percent drop in price to increase their purchases by 1 percent. 
C)  buy 2 percent more of the product in response to a 1 percent decrease in price. 
D)  buy twice as much of the product in response to a 1 percent decrease in price. 
A)  buy twice as much of the product in response to a 10 percent decrease in prie. 
B)  require a 2 percent drop in price to increase their purchases by 1 percent. 
C)  buy 2 percent more of the product in response to a 1 percent decrease in price. 
D)  buy twice as much of the product in response to a 1 percent decrease in price.

Question 20

Other things constant, the price elasticity of demand for a product will be smaller (more inelastic) if:

Accepted Answer

A)  people spend a large share of their income on the product. 
B)  people spend an insignificant share of their income on the product. 
C)  the population in the market area is large. 
D)  there are many good substitutes for the product. 
A)  people spend a large share of their income on the product. 
B)  people spend an insignificant share of their income on the product. 
C)  the population in the market area is large. 
D)  there are many good substitutes for the product.

Exam 5: Price Elasticity of Demand and Supply

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

Any change in price along a perfectly inelastic demand curve produces:

Exhibit 5-9 Supply and Demand Curves for Good X In Exhibit 5-9, assume the government places a $200 per unit sales tax on Good X. The percentage of the burden of taxation paid by consumers of Good X is:

Along the elastic range of a demand curve, a price change causes:

Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?

Suppose the quantity demanded is 1,000 million bushels of peaches per year when the price is $3 per bushel and 1,500 million bushels when the price is $1 per bushel. The price elasticity of demand in this range of the demand curve is:

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

Which of the following statements is not true?

If a 5 percent decrease in the price of a good produces a 5 percent increase in the quantity demanded, the price elasticity of demand is:

Which statement about price elasticity of demand along a linear demand curve is true ?

If the short-run price elasticity of demand for hospital care is .27, then the long-run price elasticity is expected to be:

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a:

A perfectly elastic demand curve has a price elasticity of demand coefficient of:

The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:

If the quantity of bananas sold increases by 5 percent when the price decreases by 10 percent, the price change occurs in the

Suppose an increase in symphony tickets prices reduces the total revenue. This is evidence that demand is:

Which of the following describes a situation in which demand must be inelastic?

Exhibit 5-1 Demand curve If demand price elasticity is 2, consumers would:

Other things constant, the price elasticity of demand for a product will be smaller (more inelastic) if:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

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

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

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