Question 1

The larger the proportion of income spent on a product, the larger is the price elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 2

Which of these is likely to have the lowest price elasticity of demand?

Accepted Answer

A)  hamburgers 
B)  Budweiser beer 
C)  gasoline 
D)  tickets to a rodeo 
A)  hamburgers 
B)  Budweiser beer 
C)  gasoline 
D)  tickets to a rodeo

Question 3

The price elasticity of supply measures how responsive

Accepted Answer

A)  consumers are to a change in price. 
B)  producers are to a change in price. 
C)  producers are to a change in resource costs. 
D)  producers are to consumers. 
A)  consumers are to a change in price. 
B)  producers are to a change in price. 
C)  producers are to a change in resource costs. 
D)  producers are to consumers.

Question 4

Describe why the slope of a demand curve is not the same as the elasticity of demand.

Accepted Answer

The slope of a demand curve provides the

Question 5

If the price of a product with inelastic demand is increased, the _____ in revenue from selling fewer units.

Accepted Answer

A)  gain in revenue from the higher price is greater than the loss 
B)  gain in revenue from the higher price is greater than the gain 
C)  loss in revenue from the higher price is smaller than the loss 
D)  gain in revenue from the higher price is smaller than the loss 
A)  gain in revenue from the higher price is greater than the loss 
B)  gain in revenue from the higher price is greater than the gain 
C)  loss in revenue from the higher price is smaller than the loss 
D)  gain in revenue from the higher price is smaller than the loss

Question 6

If the price of a product falls by 15% and the quantity supplied falls by 25%, the elasticity of supply is 0.40.

Accepted Answer

A) True 
 B)False

Question 7

Moving down a linear demand curve, price elasticity of demand

Accepted Answer

A)  decreases. 
B)  varies in uncertain ways. 
C)  increases. 
D)  is constant. 
A)  decreases. 
B)  varies in uncertain ways. 
C)  increases. 
D)  is constant.

Question 8

All of these are basic determinants of a product's price elasticity of demand EXCEPT the

Accepted Answer

A)  availability of complementary products. 
B)  availability of substitute products. 
C)  percentage of income spent on the product. 
D)  time period being examined. 
A)  availability of complementary products. 
B)  availability of substitute products. 
C)  percentage of income spent on the product. 
D)  time period being examined.

Question 9

A sales tax applied to a specific product, such as gasoline, is called a(n) _____ tax.

Accepted Answer

A)  specific 
B)  excise 
C)  income 
D)  property 
A)  specific 
B)  excise 
C)  income 
D)  property

Question 10

State sales taxes are considered to be regressive because low-income households spend a larger share of their incomes on taxable goods and services.

Accepted Answer

A) True 
 B)False

Question 11

What happens to total revenue for a product that has many substitutes when the price is increased?

Accepted Answer

A)  Total revenue increases. 
B)  Total revenue decreases. 
C)  Total revenue stays the same. 
D)  The impact on total revenue cannot be determined from the information provided. 
A)  Total revenue increases. 
B)  Total revenue decreases. 
C)  Total revenue stays the same. 
D)  The impact on total revenue cannot be determined from the information provided.

Question 12

If the elasticity of supply is greater than 1, supply is inelastic.

Accepted Answer

A) True 
 B)False

Question 13

If a firm sells a product that has a perfectly inelastic demand curve, then if price doubles, it can be expected that

Accepted Answer

A)  total revenue will fall by one-half. 
B)  total revenue will double. 
C)  total revenue will remain unchanged. 
D)  supply will decrease. 
A)  total revenue will fall by one-half. 
B)  total revenue will double. 
C)  total revenue will remain unchanged. 
D)  supply will decrease.

Question 14

If the state government charges an 8% tax rate on the first $50,000 of income earned, and then a 6% tax rate on all income above $50,000, this tax structure would be described as

Accepted Answer

A)  progressive. 
B)  regressive. 
C)  flat. 
D)  lump-sum. 
A)  progressive. 
B)  regressive. 
C)  flat. 
D)  lump-sum.

Question 15

A(n) _____ is a good that consumers will use in place of another good, depending on the relative prices of the goods.

Accepted Answer

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

Question 16

Using the midpoint method, what is the price elasticity of demand for a product whose price increased from $2 to $4 and whose quantity demanded decreased from 10 to 5 units?

Accepted Answer

A)  0.4 
B)  1.0 
C)  0.5 
D)  2.0 
A)  0.4 
B)  1.0 
C)  0.5 
D)  2.0

Question 17

If a price increase leads to a reduction in total revenue, then the price elasticity of demand due to the price change is

Accepted Answer

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

Question 18

Which of these would MOST likely reflect the cross elasticity of demand between honey and sugar?

Accepted Answer

A)  -10 
B)  -1 
C)  0 
D)  2 
A)  -10 
B)  -1 
C)  0 
D)  2

Question 19

Luxury goods have an income elasticity less than one.

Accepted Answer

A) True 
 B)False

Question 20

The cross elasticity of demand is calculated by the percentage change in _____ divided by the percentage change in _____.

Accepted Answer

A)  quantity demanded of good A; price of good B 
B)  price of good A; quantity demanded of good B 
C)  income; quantity demanded 
D)  quantity demanded of good A; price of good A 
A)  quantity demanded of good A; price of good B 
B)  price of good A; quantity demanded of good B 
C)  income; quantity demanded 
D)  quantity demanded of good A; price of good A

The larger the proportion of income spent on a product, the larger is the price elasticity of demand.

Which of these is likely to have the lowest price elasticity of demand?

The price elasticity of supply measures how responsive

Describe why the slope of a demand curve is not the same as the elasticity of demand.

If the price of a product with inelastic demand is increased, the _____ in revenue from selling fewer units.

If the price of a product falls by 15% and the quantity supplied falls by 25%, the elasticity of supply is 0.40.

Moving down a linear demand curve, price elasticity of demand

All of these are basic determinants of a product's price elasticity of demand EXCEPT the

A sales tax applied to a specific product, such as gasoline, is called a(n) _____ tax.

State sales taxes are considered to be regressive because low-income households spend a larger share of their incomes on taxable goods and services.

What happens to total revenue for a product that has many substitutes when the price is increased?

If the elasticity of supply is greater than 1, supply is inelastic.

If a firm sells a product that has a perfectly inelastic demand curve, then if price doubles, it can be expected that

If the state government charges an 8% tax rate on the first $50,000 of income earned, and then a 6% tax rate on all income above $50,000, this tax structure would be described as

A(n) _____ is a good that consumers will use in place of another good, depending on the relative prices of the goods.

Using the midpoint method, what is the price elasticity of demand for a product whose price increased from $2 to $4 and whose quantity demanded decreased from 10 to 5 units?

If a price increase leads to a reduction in total revenue, then the price elasticity of demand due to the price change is

Which of these would MOST likely reflect the cross elasticity of demand between honey and sugar?

Luxury goods have an income elasticity less than one.

The cross elasticity of demand is calculated by the percentage change in _ divided by the percentage change in _.

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Exam 5: Elasticity

The larger the proportion of income spent on a product, the larger is the price elasticity of demand.

Which of these is likely to have the lowest price elasticity of demand?

The price elasticity of supply measures how responsive

Describe why the slope of a demand curve is not the same as the elasticity of demand.

If the price of a product with inelastic demand is increased, the _____ in revenue from selling fewer units.

If the price of a product falls by 15% and the quantity supplied falls by 25%, the elasticity of supply is 0.40.

Moving down a linear demand curve, price elasticity of demand

All of these are basic determinants of a product's price elasticity of demand EXCEPT the

A sales tax applied to a specific product, such as gasoline, is called a(n) _____ tax.

State sales taxes are considered to be regressive because low-income households spend a larger share of their incomes on taxable goods and services.

What happens to total revenue for a product that has many substitutes when the price is increased?

If the elasticity of supply is greater than 1, supply is inelastic.

If a firm sells a product that has a perfectly inelastic demand curve, then if price doubles, it can be expected that

If the state government charges an 8% tax rate on the first $50,000 of income earned, and then a 6% tax rate on all income above $50,000, this tax structure would be described as

A(n) _____ is a good that consumers will use in place of another good, depending on the relative prices of the goods.

Using the midpoint method, what is the price elasticity of demand for a product whose price increased from $2 to $4 and whose quantity demanded decreased from 10 to 5 units?

If a price increase leads to a reduction in total revenue, then the price elasticity of demand due to the price change is

Which of these would MOST likely reflect the cross elasticity of demand between honey and sugar?

Luxury goods have an income elasticity less than one.

The cross elasticity of demand is calculated by the percentage change in _____ divided by the percentage change in _____.

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

The cross elasticity of demand is calculated by the percentage change in _ divided by the percentage change in _.