Question 1

Suppose the price elasticity of demand is 3.0 and the price elasticity of supply is 0.08. The incidence of an excise tax

Accepted Answer

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

Question 2

The current equilibrium price in the market is $12.50, while the equilibrium quantity is 7,500 units. Suppose the government places a $5 per unit tax on the market, leading to a new equilibrium demanded price of $15 and equilibrium quantity of 5,000 units. Using the midpoint method, the price elasticity of demand will be

Accepted Answer

A)  0.46. 
B)  1.8. 
C)  1.01. 
D)  2.2. 
A)  0.46. 
B)  1.8. 
C)  1.01. 
D)  2.2.

Question 3

(Figure) The figure shows two demand curves for two different periods for the same product. Based on the information in the graph, which statement is TRUE?

Accepted Answer

A)  The flatter long-run demand curve implies that consumers have more time to adjust their behavior and find substitute goods. 
B)  The flatter long-run demand curve implies that more consumers find the product a necessity in the long run compared to the short run. 
C)  The steeper short-run demand curve implies that consumers spend a larger share of their income in the short run compared to the long run. 
D)  The steeper short-run demand curve implies consumers are more price sensitive in the short run compared to the long run. 
A)  The flatter long-run demand curve implies that consumers have more time to adjust their behavior and find substitute goods. 
B)  The flatter long-run demand curve implies that more consumers find the product a necessity in the long run compared to the short run. 
C)  The steeper short-run demand curve implies that consumers spend a larger share of their income in the short run compared to the long run. 
D)  The steeper short-run demand curve implies consumers are more price sensitive in the short run compared to the long run.

Question 4

Suppose that the price of unlimited monthly wireless data plans increases from $80 to $120, and as a result, the quantity demanded of this plan decreases by 10%. Using the midpoint method, the price elasticity of demand is

Accepted Answer

A)  0.20. 
B)  0.25. 
C)  4. 
D)  5. 
A)  0.20. 
B)  0.25. 
C)  4. 
D)  5.

Question 5

The current equilibrium price and quantity in the market for walnuts are $5 per pound with 10,000 pounds supplied. Supermarkets are expecting to see sales rise to 15,000 pounds due to an unusually large crop of walnuts. If the price elasticity of demand is 1.8, what is the new price per pound of walnuts?

Accepted Answer

A)  $7 
B)  $5 
C)  $6 
D)  $4 
A)  $7 
B)  $5 
C)  $6 
D)  $4

Question 6

If the income elasticity of demand for tea is 0.50, tea is a

Accepted Answer

A)  substitute for coffee. 
B)  luxury good. 
C)  normal good. 
D)  complement of coffee. 
A)  substitute for coffee. 
B)  luxury good. 
C)  normal good. 
D)  complement of coffee.

Question 7

Why is elasticity measured using percentage changes?

Accepted Answer

Percentage changes allow us to focus on

Question 8

Moving upward along a linear demand curve, responsiveness to a change in price becomes more elastic.

Accepted Answer

A) True 
 B)False

Question 9

A vertical demand curve represents demand that is

Accepted Answer

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

Question 10

A positive cross elasticity of demand between two goods suggests that the goods are

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  complements. 
D)  substitutes. 
A)  inelastic. 
B)  elastic. 
C)  complements. 
D)  substitutes.

Question 11

A tax that falls in percentage of income as income increases is a

Accepted Answer

A)  flat tax. 
B)  progressive tax. 
C)  regressive tax. 
D)  tariff. 
A)  flat tax. 
B)  progressive tax. 
C)  regressive tax. 
D)  tariff.

Question 12

Which of these could be a possible cross elasticity of demand measure for butter and margarine?

Accepted Answer

A)  0 
B)  0.8 
C)  -1.8 
D)  -0.8 
A)  0 
B)  0.8 
C)  -1.8 
D)  -0.8

Question 13

If the price increases by 100% and the quantity demanded decreases by 50%, then the elasticity of demand is

Accepted Answer

A)  0.5. 
B)  2. 
C)  1. 
D)  5. 
A)  0.5. 
B)  2. 
C)  1. 
D)  5.

Question 14

Which U.S. federal tax is a flat tax?

Accepted Answer

A)  payroll 
B)  Medicare 
C)  sales 
D)  individual income 
A)  payroll 
B)  Medicare 
C)  sales 
D)  individual income

Question 15

If the price elasticity of demand is 1.5, then the demand curve is inelastic.

Accepted Answer

A) True 
 B)False

Question 16

The tax incidence falls more heavily on producers when demand is relatively more price inelastic than supply.

Accepted Answer

A) True 
 B)False

Question 17

The economist Henry George proposed that all tax revenue be collected via taxes on land. If land were perfectly inelastic in supply, then a property tax on land would

Accepted Answer

A)  have no effect on the supply of land available to society. 
B)  tax farmland out of existence. 
C)  result in no revenues collected. 
D)  make it prohibitively expensive to sell land. 
A)  have no effect on the supply of land available to society. 
B)  tax farmland out of existence. 
C)  result in no revenues collected. 
D)  make it prohibitively expensive to sell land.

Question 18

If the price of electricity falls by 10% per kilowatt hour, and the quantity demanded of electricity subsequently increases by 8%, the price elasticity of demand for electricity is _____, and it would be classified as _____.

Accepted Answer

A)  0.8; inelastic 
B)  0.8; elastic 
C)  1.25; inelastic 
D)  1.25; elastic 
A)  0.8; inelastic 
B)  0.8; elastic 
C)  1.25; inelastic 
D)  1.25; elastic

Question 19

Elasticity of supply measures the responsiveness of buyers to a change in price.

Accepted Answer

A) True 
 B)False

Question 20

Inelastic supply curves, if linear, will always

Accepted Answer

A)  cross the price axis. 
B)  cross through the origin. 
C)  have a price elasticity greater than or equal to 1. 
D)  cross the quantity axis. 
A)  cross the price axis. 
B)  cross through the origin. 
C)  have a price elasticity greater than or equal to 1. 
D)  cross the quantity axis.

Suppose the price elasticity of demand is 3.0 and the price elasticity of supply is 0.08. The incidence of an excise tax

(Figure) The figure shows two demand curves for two different periods for the same product. Based on the information in the graph, which statement is TRUE?

Suppose that the price of unlimited monthly wireless data plans increases from $80 to $120, and as a result, the quantity demanded of this plan decreases by 10%. Using the midpoint method, the price elasticity of demand is

If the income elasticity of demand for tea is 0.50, tea is a

Why is elasticity measured using percentage changes?

Moving upward along a linear demand curve, responsiveness to a change in price becomes more elastic.

A vertical demand curve represents demand that is

A positive cross elasticity of demand between two goods suggests that the goods are

A tax that falls in percentage of income as income increases is a

Which of these could be a possible cross elasticity of demand measure for butter and margarine?

If the price increases by 100% and the quantity demanded decreases by 50%, then the elasticity of demand is

Which U.S. federal tax is a flat tax?

If the price elasticity of demand is 1.5, then the demand curve is inelastic.

The tax incidence falls more heavily on producers when demand is relatively more price inelastic than supply.

The economist Henry George proposed that all tax revenue be collected via taxes on land. If land were perfectly inelastic in supply, then a property tax on land would

If the price of electricity falls by 10% per kilowatt hour, and the quantity demanded of electricity subsequently increases by 8%, the price elasticity of demand for electricity is _, and it would be classified as _.

Elasticity of supply measures the responsiveness of buyers to a change in price.

Inelastic supply curves, if linear, will always

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Exam 5: Elasticity

Suppose the price elasticity of demand is 3.0 and the price elasticity of supply is 0.08. The incidence of an excise tax

(Figure) The figure shows two demand curves for two different periods for the same product. Based on the information in the graph, which statement is TRUE?

Suppose that the price of unlimited monthly wireless data plans increases from $80 to $120, and as a result, the quantity demanded of this plan decreases by 10%. Using the midpoint method, the price elasticity of demand is

If the income elasticity of demand for tea is 0.50, tea is a

Why is elasticity measured using percentage changes?

Moving upward along a linear demand curve, responsiveness to a change in price becomes more elastic.

A vertical demand curve represents demand that is

A positive cross elasticity of demand between two goods suggests that the goods are

A tax that falls in percentage of income as income increases is a

Which of these could be a possible cross elasticity of demand measure for butter and margarine?

If the price increases by 100% and the quantity demanded decreases by 50%, then the elasticity of demand is

Which U.S. federal tax is a flat tax?

If the price elasticity of demand is 1.5, then the demand curve is inelastic.

The tax incidence falls more heavily on producers when demand is relatively more price inelastic than supply.

The economist Henry George proposed that all tax revenue be collected via taxes on land. If land were perfectly inelastic in supply, then a property tax on land would

If the price of electricity falls by 10% per kilowatt hour, and the quantity demanded of electricity subsequently increases by 8%, the price elasticity of demand for electricity is _____, and it would be classified as _____.

Elasticity of supply measures the responsiveness of buyers to a change in price.

Inelastic supply curves, if linear, will always

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

If the price of electricity falls by 10% per kilowatt hour, and the quantity demanded of electricity subsequently increases by 8%, the price elasticity of demand for electricity is _, and it would be classified as _.