Question 1

The primary difference between a sales tax and an excise tax is that sales taxes are ____ and excise taxes are _____.

Accepted Answer

A)  always paid by buyers; paid exclusively by sellers 
B)  on specific goods; on all goods 
C)  temporary; permanent 
D)  on a wide variety of goods; on specific goods 
A)  always paid by buyers; paid exclusively by sellers 
B)  on specific goods; on all goods 
C)  temporary; permanent 
D)  on a wide variety of goods; on specific goods

Question 2

A policymaker wants to tax a good but wants the incidence of that tax to fall more heavily on sellers than on buyers. What should be true about the price elasticity of supply and the price elasticity of demand in order to do this?

Accepted Answer

A)  The price elasticity of demand and the price elasticity of supply should be equal. 
B)  The price elasticity of demand should be more elastic than the price elasticity of supply. 
C)  The price elasticity of demand should be less elastic than the price elasticity of supply. 
D)  Any value of price elasticity of demand or price elasticity of supply will meet this objective. 
A)  The price elasticity of demand and the price elasticity of supply should be equal. 
B)  The price elasticity of demand should be more elastic than the price elasticity of supply. 
C)  The price elasticity of demand should be less elastic than the price elasticity of supply. 
D)  Any value of price elasticity of demand or price elasticity of supply will meet this objective.

Question 3

An economist determines that the income elasticity of demand for healthcare is 0.4. How should she interpret this finding?

Accepted Answer

A)  Health care is a normal good and a necessity. 
B)  Health care is a normal good and a luxury. 
C)  Health care is an inferior good and a complement. 
D)  Health care is an inferior good. 
A)  Health care is a normal good and a necessity. 
B)  Health care is a normal good and a luxury. 
C)  Health care is an inferior good and a complement. 
D)  Health care is an inferior good.

Question 4

Demand is typically elastic for goods that are:

Accepted Answer

A)  necessities. 
B)  luxuries. 
C)  last-minute purchases. 
D)  very cheap. 
A)  necessities. 
B)  luxuries. 
C)  last-minute purchases. 
D)  very cheap.

Question 5

The _____ elasticity of demand is a measure of how responsive buyers are to changes in income, and a _____ value indicates that a good is inferior.

Accepted Answer

A)  price; negative 
B)  income; positive 
C)  price; positive 
D)  income; inferior 
A)  price; negative 
B)  income; positive 
C)  price; positive 
D)  income; inferior

Question 6

The price elasticity of demand for a good is 0.5, and the price elasticity of supply is 3. What happens if a $10 per unit tax is placed on buyers of this good?

Accepted Answer

A)  Sellers will have a larger tax incidence than buyers have. 
B)  Sellers will have a smaller tax incidence than buyers have. 
C)  The buyers' tax incidence is greater than $10. 
D)  The buyers' tax incidence is $10. 
A)  Sellers will have a larger tax incidence than buyers have. 
B)  Sellers will have a smaller tax incidence than buyers have. 
C)  The buyers' tax incidence is greater than $10. 
D)  The buyers' tax incidence is $10.

Question 7

Astra increases the price of her good by 10 percent, but her total revenue does not change. What kind of demand does Astra have for her good?

Accepted Answer

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

Question 8

Gerald sells 10 faucets at a price of $20 each. It costs him $15 to produce each faucet. What is Gerald's total revenue?

Accepted Answer

A)  $200 
B)  $100 
C)  $150 
D)  $50 
A)  $200 
B)  $100 
C)  $150 
D)  $50

Question 9

The price elasticity of demand is:

Accepted Answer

A)  the amount that price will change in response to a change in buyers' income. 
B)  a measure of how responsive a market is to changes in quantity. 
C)  a measure of consumers' sensitivity to price changes. 
D)  a measure of consumers' sensitivity to changes in supply. 
A)  the amount that price will change in response to a change in buyers' income. 
B)  a measure of how responsive a market is to changes in quantity. 
C)  a measure of consumers' sensitivity to price changes. 
D)  a measure of consumers' sensitivity to changes in supply.

Question 10

The cross-price elasticity of demand is a measure of how responsive the:

Accepted Answer

A)  quantity demanded of a good is to a change in its own price. 
B)  price of one good affects the quantity demanded of another. 
C)  quantity demanded of a good is to a change in consumers' income. 
D)  sellers of a good are to a change in its price. 
A)  quantity demanded of a good is to a change in its own price. 
B)  price of one good affects the quantity demanded of another. 
C)  quantity demanded of a good is to a change in consumers' income. 
D)  sellers of a good are to a change in its price.

Question 11

If an economist wants to know how a change in the price of one good affects the quantity demanded of another good, she would use the:

Accepted Answer

A)  cross-price elasticity of demand. 
B)  price elasticity of demand. 
C)  elasticity of supply. 
D)  income elasticity of demand. 
A)  cross-price elasticity of demand. 
B)  price elasticity of demand. 
C)  elasticity of supply. 
D)  income elasticity of demand.

Question 12

Use the figure A Tax on the Demand for a Good. Which area represents the buyer's burden of this tax?
​
Figure: A Tax on the Demand for a Good

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 13

Use the table Price Elasticities of Demand for Four Goods II. If the price of each of these goods increases by 1 percent, which good will have the largest percentage decrease in quantity demanded?

Accepted Answer

A)  cheeseburgers 
B)  nachos 
C)  churros 
D)  hot dogs 
A)  cheeseburgers 
B)  nachos 
C)  churros 
D)  hot dogs

Question 14

Use the figure A Tax on the Demand for a Good II. A $6 excise tax has been placed on this market. How much of this $6 tax does the buyer pay?
​
Figure: A Tax on the Demand for a Good II

Accepted Answer

A)  $4 
B)  $6 
C)  $10 
D)  $3 
A)  $4 
B)  $6 
C)  $10 
D)  $3

Question 15

Use the table Price Elasticities of Demand for Four Goods I. How are these goods ranked from most responsive to a price change to least responsive to a price change?

Accepted Answer

A)  ice cream, boba tea, funnel cakes, curly fries 
B)  curly fries, boba tea, ice cream, funnel cakes 
C)  funnel cakes, curly fries, boba tea, ice cream 
D)  funnel cakes, ice cream, boba tea, curly fries 
A)  ice cream, boba tea, funnel cakes, curly fries 
B)  curly fries, boba tea, ice cream, funnel cakes 
C)  funnel cakes, curly fries, boba tea, ice cream 
D)  funnel cakes, ice cream, boba tea, curly fries

Question 16

If consumers demand the same quantity of a good regardless of the price, the demand for that good is:

Accepted Answer

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

Question 17

When the price of chocolate increases by 10 percent, the quantity demanded of crackers increases by 5 percent. Calculate the appropriate elasticity based on this information, and interpret your results.

Accepted Answer

Mathematically, this is expres

Question 18

If any price increase causes the quantity demanded to fall to zero, the demand for that good is:

Accepted Answer

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

Question 19

When demand is a downward-sloping straight line, at what point does the price elasticity of demand equal zero?

Accepted Answer

A)  at the point where the demand curve intersects the horizontal axis 
B)  at every point along the demand curve 
C)  at the midpoint of the demand curve 
D)  at the point where the demand curve intersects the vertical axis 
A)  at the point where the demand curve intersects the horizontal axis 
B)  at every point along the demand curve 
C)  at the midpoint of the demand curve 
D)  at the point where the demand curve intersects the vertical axis

Question 20

Use the figure A Demand Curve. Describe what would happen to total revenue if a firm facing this demand curve tries to decrease the price of this good by $1. Explain.
​
Figure: A Demand Curve II

Accepted Answer

The firm's total revenue would fall to z

The primary difference between a sales tax and an excise tax is that sales taxes are and excise taxes are _.

A policymaker wants to tax a good but wants the incidence of that tax to fall more heavily on sellers than on buyers. What should be true about the price elasticity of supply and the price elasticity of demand in order to do this?

An economist determines that the income elasticity of demand for healthcare is 0.4. How should she interpret this finding?

Demand is typically elastic for goods that are:

The _ elasticity of demand is a measure of how responsive buyers are to changes in income, and a _ value indicates that a good is inferior.

The price elasticity of demand for a good is 0.5, and the price elasticity of supply is 3. What happens if a $10 per unit tax is placed on buyers of this good?

Astra increases the price of her good by 10 percent, but her total revenue does not change. What kind of demand does Astra have for her good?

Gerald sells 10 faucets at a price of $20 each. It costs him $15 to produce each faucet. What is Gerald's total revenue?

The price elasticity of demand is:

The cross-price elasticity of demand is a measure of how responsive the:

If an economist wants to know how a change in the price of one good affects the quantity demanded of another good, she would use the:

Use the figure A Tax on the Demand for a Good. Which area represents the buyer's burden of this tax? Figure: A Tax on the Demand for a Good

Use the table Price Elasticities of Demand for Four Goods II. If the price of each of these goods increases by 1 percent, which good will have the largest percentage decrease in quantity demanded?

Use the figure A Tax on the Demand for a Good II. A $6 excise tax has been placed on this market. How much of this $6 tax does the buyer pay? Figure: A Tax on the Demand for a Good II

Use the table Price Elasticities of Demand for Four Goods I. How are these goods ranked from most responsive to a price change to least responsive to a price change?

If consumers demand the same quantity of a good regardless of the price, the demand for that good is:

When the price of chocolate increases by 10 percent, the quantity demanded of crackers increases by 5 percent. Calculate the appropriate elasticity based on this information, and interpret your results.

If any price increase causes the quantity demanded to fall to zero, the demand for that good is:

When demand is a downward-sloping straight line, at what point does the price elasticity of demand equal zero?

Use the figure A Demand Curve. Describe what would happen to total revenue if a firm facing this demand curve tries to decrease the price of this good by $1. Explain. Figure: A Demand Curve II

Foundations of Economics

Extension: Understanding Graphs

Markets and Economies

Demand

Supply

Market Equilibrium

Consumer Behavior

Production Costs

Perfect Competition

Market Power

Factor Markets

Market Failure and Government Failure

Measuring an Economys Performance

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money and Banking

Monetary Policy

Economic Growth and Development

International Trade and Finance

Filters

Exam 6: Elasticity

The primary difference between a sales tax and an excise tax is that sales taxes are ____ and excise taxes are _____.

A policymaker wants to tax a good but wants the incidence of that tax to fall more heavily on sellers than on buyers. What should be true about the price elasticity of supply and the price elasticity of demand in order to do this?

An economist determines that the income elasticity of demand for healthcare is 0.4. How should she interpret this finding?

Demand is typically elastic for goods that are:

The _____ elasticity of demand is a measure of how responsive buyers are to changes in income, and a _____ value indicates that a good is inferior.

The price elasticity of demand for a good is 0.5, and the price elasticity of supply is 3. What happens if a $10 per unit tax is placed on buyers of this good?

Astra increases the price of her good by 10 percent, but her total revenue does not change. What kind of demand does Astra have for her good?

Gerald sells 10 faucets at a price of $20 each. It costs him $15 to produce each faucet. What is Gerald's total revenue?

The price elasticity of demand is:

The cross-price elasticity of demand is a measure of how responsive the:

If an economist wants to know how a change in the price of one good affects the quantity demanded of another good, she would use the:

Use the figure A Tax on the Demand for a Good. Which area represents the buyer's burden of this tax? ​ Figure: A Tax on the Demand for a Good

Use the table Price Elasticities of Demand for Four Goods II. If the price of each of these goods increases by 1 percent, which good will have the largest percentage decrease in quantity demanded?

Use the figure A Tax on the Demand for a Good II. A $6 excise tax has been placed on this market. How much of this $6 tax does the buyer pay? ​ Figure: A Tax on the Demand for a Good II

Use the table Price Elasticities of Demand for Four Goods I. How are these goods ranked from most responsive to a price change to least responsive to a price change?

If consumers demand the same quantity of a good regardless of the price, the demand for that good is:

When the price of chocolate increases by 10 percent, the quantity demanded of crackers increases by 5 percent. Calculate the appropriate elasticity based on this information, and interpret your results.

If any price increase causes the quantity demanded to fall to zero, the demand for that good is:

When demand is a downward-sloping straight line, at what point does the price elasticity of demand equal zero?

Use the figure A Demand Curve. Describe what would happen to total revenue if a firm facing this demand curve tries to decrease the price of this good by $1. Explain. ​ Figure: A Demand Curve II

Foundations of Economics

Extension: Understanding Graphs

Markets and Economies

Demand

Supply

Market Equilibrium

Consumer Behavior

Production Costs

Perfect Competition

Market Power

Factor Markets

Market Failure and Government Failure

Measuring an Economys Performance

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money and Banking

Monetary Policy

Economic Growth and Development

International Trade and Finance

Filters

The primary difference between a sales tax and an excise tax is that sales taxes are and excise taxes are _.

The _ elasticity of demand is a measure of how responsive buyers are to changes in income, and a _ value indicates that a good is inferior.

Use the figure A Tax on the Demand for a Good. Which area represents the buyer's burden of this tax? Figure: A Tax on the Demand for a Good

Use the figure A Tax on the Demand for a Good II. A $6 excise tax has been placed on this market. How much of this $6 tax does the buyer pay? Figure: A Tax on the Demand for a Good II

Use the figure A Demand Curve. Describe what would happen to total revenue if a firm facing this demand curve tries to decrease the price of this good by $1. Explain. Figure: A Demand Curve II