Question 1

In which case is the deadweight loss of a tax the smallest?

Accepted Answer

A)  Demand and supply are both relatively elastic. 
B)  Demand is relatively elastic and supply is relatively inelastic. 
C)  Demand is relatively inelastic and supply is perfectly elastic. 
D)  Demand and supply are both relatively inelastic. 
A)  Demand and supply are both relatively elastic. 
B)  Demand is relatively elastic and supply is relatively inelastic. 
C)  Demand is relatively inelastic and supply is perfectly elastic. 
D)  Demand and supply are both relatively inelastic.

Question 2

During the long run, all assets or resources are variable.

Accepted Answer

A) True 
 B)False

Question 3

Jack owns a pumpkin patch and has been selling pumpkins for $10. As Halloween approaches, he worries about having too many unsold pumpkins, so he lowers the price by 20%. If the price elasticity of demand for pumpkins is 1.5, how many more pumpkins will Jack sell?

Accepted Answer

A)  10% more 
B)  13.3% more 
C)  25% more 
D)  30% more 
A)  10% more 
B)  13.3% more 
C)  25% more 
D)  30% more

Question 4

Supply is highly elastic in the market period but tends to become more inelastic in the long run.

Accepted Answer

A) True 
 B)False

Question 5

In the United States, the federal individual income tax is a progressive tax.

Accepted Answer

A) True 
 B)False

Question 6

In general, the flatter the supply curve, the

Accepted Answer

A)  fewer substitutes are available for the good. 
B)  more substitutes are available for the good. 
C)  less responsive producers are to the price. 
D)  more responsive producers are to the price. 
A)  fewer substitutes are available for the good. 
B)  more substitutes are available for the good. 
C)  less responsive producers are to the price. 
D)  more responsive producers are to the price.

Question 7

The owner of a kayak tour business has been looking over the latest data from the Census, which reported that income in the area where she is based has increased by 20%. Assuming that participating in a kayak tour is a normal good, which of these would be an accurate prediction of what could happen to kayak tour sales, ceteris paribus?

Accepted Answer

A)  Since incomes have increased by 20% in the area, the owner can expect to see a decrease in sales, ceteris paribus. 
B)  Since incomes have increased by 20% in the area, the owner can expect to see no change in sales, ceteris paribus. 
C)  Since incomes have increased in the area, the owner can expect to see a 20% increase in sales, ceteris paribus. 
D)  Since incomes have increased by 20% in the area, the owner can expect to see an increase in sales, ceteris paribus. 
A)  Since incomes have increased by 20% in the area, the owner can expect to see a decrease in sales, ceteris paribus. 
B)  Since incomes have increased by 20% in the area, the owner can expect to see no change in sales, ceteris paribus. 
C)  Since incomes have increased in the area, the owner can expect to see a 20% increase in sales, ceteris paribus. 
D)  Since incomes have increased by 20% in the area, the owner can expect to see an increase in sales, ceteris paribus.

Question 8

If the managers of the Miami Transit Authority (MTA) raise the fare from $2.00 to $2.25 per ride and, as a result, total revenue increases, then we know that the demand for rides is

Accepted Answer

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

Question 9

If demand is inelastic, a reduction in price

Accepted Answer

A)  decreases the quantity demanded. 
B)  decreases total revenue. 
C)  increases total revenue. 
D)  leaves total revenue unaffected. 
A)  decreases the quantity demanded. 
B)  decreases total revenue. 
C)  increases total revenue. 
D)  leaves total revenue unaffected.

Question 10

A poultry rancher discovered that when she increased the price of organic eggs from $0.75 to $1.00 per dozen, the sales of her eggs fell from 300 dozen per week to 200 dozen per week. Her price elasticity of demand (using the midpoint method) would be

Accepted Answer

A)  2.60. 
B)  1.40. 
C)  0.75. 
D)  1.00. 
A)  2.60. 
B)  1.40. 
C)  0.75. 
D)  1.00.

Question 11

If the cross elasticity of demand for good A with respect to good B is 2.3, then good A is a(n)

Accepted Answer

A)  substitute for good 
B)  complement for good 
C)  normal good. 
D)  inferior good. 
A)  substitute for good 
B)  complement for good 
C)  normal good. 
D)  inferior good.

Question 12

One practical reason that economists use percentages to measure elasticity is to

Accepted Answer

A)  predict consumer preferences. 
B)  compare characteristics of unrelated products. 
C)  convert units to the metric system. 
D)  convert elasticities into dollars. 
A)  predict consumer preferences. 
B)  compare characteristics of unrelated products. 
C)  convert units to the metric system. 
D)  convert elasticities into dollars.

Question 13

If the price of Citgo gasoline increases by 10% and the quantity demanded decreases by 20%, then the demand for gasoline is

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  unitary elastic. 
D)  a perfect substitute. 
A)  inelastic. 
B)  elastic. 
C)  unitary elastic. 
D)  a perfect substitute.

Question 14

A demand curve that is elastic

Accepted Answer

A)  implies that buyers are very sensitive to price changes. 
B)  has an elasticity value of zero. 
C)  has a positive slope. 
D)  has an elasticity value less than one. 
A)  implies that buyers are very sensitive to price changes. 
B)  has an elasticity value of zero. 
C)  has a positive slope. 
D)  has an elasticity value less than one.

Question 15

Cross elasticity of demand is defined as the percentage change in the _____ divided by the percentage change in the _____.

Accepted Answer

A)  quantity demanded of one product; price of another product 
B)  quantity demanded of one product; price of the same product 
C)  price of one product; quantity demanded of another product 
D)  price of one product; quantity demanded of the same product 
A)  quantity demanded of one product; price of another product 
B)  quantity demanded of one product; price of the same product 
C)  price of one product; quantity demanded of another product 
D)  price of one product; quantity demanded of the same product

Question 16

If demand is elastic, a reduction in price causes total revenue to rise because the percentage _____ exceeds the percentage _____.

Accepted Answer

A)  increase in quantity demanded; decrease in price 
B)  decrease in price; increase in quantity demanded 
C)  decrease in quantity demanded; decrease in price 
D)  decrease in price; decrease in quantity demanded 
A)  increase in quantity demanded; decrease in price 
B)  decrease in price; increase in quantity demanded 
C)  decrease in quantity demanded; decrease in price 
D)  decrease in price; decrease in quantity demanded

Question 17

As the owner of a kayak tour business was looking over her financial records, she noticed that when the shop down the street increased the price of stand-up paddleboard tours by 10%, kayak tour sales increased by 15%. Which of these is a TRUE statement?

Accepted Answer

A)  The cross elasticity of demand would be 15%/10% = 1.5, implying that the products are substitutes. 
B)  The income elasticity of demand would be 15%/10% = 1.5, implying that the products are normal goods. 
C)  The cross elasticity of demand would be 10%/15% = 0.67, implying that the products are substitutes. 
D)  The income elasticity of demand would be 10%/15% = 0.67, implying that the products are normal goods. 
A)  The cross elasticity of demand would be 15%/10% = 1.5, implying that the products are substitutes. 
B)  The income elasticity of demand would be 15%/10% = 1.5, implying that the products are normal goods. 
C)  The cross elasticity of demand would be 10%/15% = 0.67, implying that the products are substitutes. 
D)  The income elasticity of demand would be 10%/15% = 0.67, implying that the products are normal goods.

Question 18

Due to a drought in Georgia, the market price for peanuts rises by 20% nationwide. If the price elasticity of demand for peanuts is 0.8, what would happen to total revenue for peanut farmers who were not affected by the drought?

Accepted Answer

A)  Total revenue would fall as quantity demanded falls by 16%. 
B)  Total revenue would rise as quantity demanded falls by 16%. 
C)  Total revenue would fall as quantity demanded falls by 25%. 
D)  Total revenue would rise as quantity demanded falls by 25%. 
A)  Total revenue would fall as quantity demanded falls by 16%. 
B)  Total revenue would rise as quantity demanded falls by 16%. 
C)  Total revenue would fall as quantity demanded falls by 25%. 
D)  Total revenue would rise as quantity demanded falls by 25%.

Question 19

If demand is perfectly inelastic and supply is relatively elastic, the incidence of an excise tax

Accepted Answer

A)  falls primarily on producers. 
B)  is shared evenly by consumers and producers. 
C)  falls entirely on producers. 
D)  falls entirely on consumers. 
A)  falls primarily on producers. 
B)  is shared evenly by consumers and producers. 
C)  falls entirely on producers. 
D)  falls entirely on consumers.

Question 20

The primary determinant of the elasticity of supply is time.

Accepted Answer

A) True 
 B)False

In which case is the deadweight loss of a tax the smallest?

During the long run, all assets or resources are variable.

Jack owns a pumpkin patch and has been selling pumpkins for $10. As Halloween approaches, he worries about having too many unsold pumpkins, so he lowers the price by 20%. If the price elasticity of demand for pumpkins is 1.5, how many more pumpkins will Jack sell?

Supply is highly elastic in the market period but tends to become more inelastic in the long run.

In the United States, the federal individual income tax is a progressive tax.

In general, the flatter the supply curve, the

If the managers of the Miami Transit Authority (MTA) raise the fare from $2.00 to $2.25 per ride and, as a result, total revenue increases, then we know that the demand for rides is

If demand is inelastic, a reduction in price

A poultry rancher discovered that when she increased the price of organic eggs from $0.75 to $1.00 per dozen, the sales of her eggs fell from 300 dozen per week to 200 dozen per week. Her price elasticity of demand (using the midpoint method) would be

If the cross elasticity of demand for good A with respect to good B is 2.3, then good A is a(n)

One practical reason that economists use percentages to measure elasticity is to

If the price of Citgo gasoline increases by 10% and the quantity demanded decreases by 20%, then the demand for gasoline is

A demand curve that is elastic

Cross elasticity of demand is defined as the percentage change in the _ divided by the percentage change in the _.

If demand is elastic, a reduction in price causes total revenue to rise because the percentage _ exceeds the percentage _.

As the owner of a kayak tour business was looking over her financial records, she noticed that when the shop down the street increased the price of stand-up paddleboard tours by 10%, kayak tour sales increased by 15%. Which of these is a TRUE statement?

Due to a drought in Georgia, the market price for peanuts rises by 20% nationwide. If the price elasticity of demand for peanuts is 0.8, what would happen to total revenue for peanut farmers who were not affected by the drought?

If demand is perfectly inelastic and supply is relatively elastic, the incidence of an excise tax

The primary determinant of the elasticity of supply is time.

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Exam 5: Elasticity

In which case is the deadweight loss of a tax the smallest?

During the long run, all assets or resources are variable.

Jack owns a pumpkin patch and has been selling pumpkins for $10. As Halloween approaches, he worries about having too many unsold pumpkins, so he lowers the price by 20%. If the price elasticity of demand for pumpkins is 1.5, how many more pumpkins will Jack sell?

Supply is highly elastic in the market period but tends to become more inelastic in the long run.

In the United States, the federal individual income tax is a progressive tax.

In general, the flatter the supply curve, the

If the managers of the Miami Transit Authority (MTA) raise the fare from $2.00 to $2.25 per ride and, as a result, total revenue increases, then we know that the demand for rides is

If demand is inelastic, a reduction in price

A poultry rancher discovered that when she increased the price of organic eggs from $0.75 to $1.00 per dozen, the sales of her eggs fell from 300 dozen per week to 200 dozen per week. Her price elasticity of demand (using the midpoint method) would be

If the cross elasticity of demand for good A with respect to good B is 2.3, then good A is a(n)

One practical reason that economists use percentages to measure elasticity is to

If the price of Citgo gasoline increases by 10% and the quantity demanded decreases by 20%, then the demand for gasoline is

A demand curve that is elastic

Cross elasticity of demand is defined as the percentage change in the _____ divided by the percentage change in the _____.

If demand is elastic, a reduction in price causes total revenue to rise because the percentage _____ exceeds the percentage _____.

As the owner of a kayak tour business was looking over her financial records, she noticed that when the shop down the street increased the price of stand-up paddleboard tours by 10%, kayak tour sales increased by 15%. Which of these is a TRUE statement?

Due to a drought in Georgia, the market price for peanuts rises by 20% nationwide. If the price elasticity of demand for peanuts is 0.8, what would happen to total revenue for peanut farmers who were not affected by the drought?

If demand is perfectly inelastic and supply is relatively elastic, the incidence of an excise tax

The primary determinant of the elasticity of supply is time.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Consumer Choice and Demand

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

The Labor Market

Land, Capital Markets, and Innovation

Externalities and Public Goods

Network Goods

Poverty and Income Distribution

International Trade

Filters

Cross elasticity of demand is defined as the percentage change in the _ divided by the percentage change in the _.

If demand is elastic, a reduction in price causes total revenue to rise because the percentage _ exceeds the percentage _.