Question 1

Which good is MOST likely to have a vertical supply curve?

Accepted Answer

A) pepper 
B) olive oil 
C) prescription drugs 
D) sculptures by Michelangelo 
A) pepper 
B) olive oil 
C) prescription drugs 
D) sculptures by Michelangelo

Question 2

If someone regarded health care as very important, for instance, going to the clinic whenever there is an issue, his or her demand curve for health care will likely be more _____ than that of other people.

Accepted Answer

A) elastic 
B) inelastic 
C) upward-sloping 
D) unit-elastic 
A) elastic 
B) inelastic 
C) upward-sloping 
D) unit-elastic

Question 3

Suppose the price elasticity of demand for Baconators at Wendy's is 0.6. This means that the demand for Baconators is:

Accepted Answer

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

Question 4

(Figure: Jane's Demand for Medication) It is mandatory for Jane to take several pills of a certain medication each day in order to remain healthy. The medication has no substitutes and is produced by only one pharmaceutical company. Which of the following demand curves represents Jane's demand for the medication?
​

Accepted Answer

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

Question 5

(Figure: Supply Curves) The figure shows four different supply curves for four products: A, B, C and D. Which of the supply curves most likely shows a product that uses variable inputs that are the most readily available?

Accepted Answer

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

Question 6

If income rises by 10% and the quantity demanded of an item falls by 30%, the income elasticity of demand for this item is:

Accepted Answer

A) 0.67. 
B) -0.33. 
C) 0.33. 
D) -3. 
A) 0.67. 
B) -0.33. 
C) 0.33. 
D) -3.

Question 7

Using the midpoint formula, calculate the price elasticity of supply for the following three products.
 $$\begin{array} { | l | l | l | l | } 
\hline & \text { Milk } & \text { Cheese } & \text { Sour Cream } \
\hline \text { P1 } & 1 & 3 & 2 \
\hline \text { P2 } & 1.5 & 5 & 2.5 \
\hline \text { Q1 } & 400 & 950 & 550 \
\hline \text { Q2 } & 300 & 500 & 500 \
\hline
\end{array}$$

Accepted Answer

The answer of Using the midpoint formula, calculate the price...

Question 8

In general, for price increases or decreases, the price elasticity of demand can be found by:

Accepted Answer

A) examining only the slope of the demand curve and its position relative to price. 
B) measuring absolute changes in price and quantity demanded. 
C) comparing the percentage change in quantity demanded to the percentage change in price. 
D) knowing that when a price increases, quantity demanded decreases. 
A) examining only the slope of the demand curve and its position relative to price. 
B) measuring absolute changes in price and quantity demanded. 
C) comparing the percentage change in quantity demanded to the percentage change in price. 
D) knowing that when a price increases, quantity demanded decreases.

Question 9

Which statement is TRUE regarding a price-inelastic demand curve?

Accepted Answer

A) Total revenue increases when the price falls. 
B) The absolute value of the price elasticity is a fraction greater than 0 but less than 1. 
C) The absolute value of the price elasticity is greater than 1. 
D) The percentage change in quantity demanded exceeds the percentage change in price for a small change in price. 
A) Total revenue increases when the price falls. 
B) The absolute value of the price elasticity is a fraction greater than 0 but less than 1. 
C) The absolute value of the price elasticity is greater than 1. 
D) The percentage change in quantity demanded exceeds the percentage change in price for a small change in price.

Question 10

Good M has an income elasticity of demand of -0.7. Which of the following items might good M be?

Accepted Answer

A) champagne 
B) cognac 
C) organic, fresh juice 
D) generic-brand toothpaste 
A) champagne 
B) cognac 
C) organic, fresh juice 
D) generic-brand toothpaste

Question 11

Drew recently received a promotion at his job, increasing his income from $940 per week to $1,060 per week. As a result, he decides to purchase 9% more Kobe steaks per week. Computed using the midpoint method, his income elasticity for Kobe steaks is _____, and Kobe steaks are a(n) _____ good.

Accepted Answer

A) 0.75; normal 
B) -0.75; inferior 
C) 0.71; normal 
D) -0.71; inferior 
A) 0.75; normal 
B) -0.75; inferior 
C) 0.71; normal 
D) -0.71; inferior

Question 12

The long-run price elasticity of supply of automobiles is _____ the short-run price elasticity of supply of automobiles.

Accepted Answer

A) less than 
B) greater than 
C) equal to 
D) not comparable to 
A) less than 
B) greater than 
C) equal to 
D) not comparable to

Question 13

If a good (like most fruit) has elastic demand, then which statement is NOT likely to be true?

Accepted Answer

A) It is a luxury good and represents a large proportion of the household budget. 
B) It has many substitutes. 
C) Consumers spend a small percentage of their income on it. 
D) Consumers have time to adjust to market changes. 
A) It is a luxury good and represents a large proportion of the household budget. 
B) It has many substitutes. 
C) Consumers spend a small percentage of their income on it. 
D) Consumers have time to adjust to market changes.

Question 14

Because of declining stocks in the Caspian Sea, Beluga caviar prices recently increased by a whopping 25% (to about $700 per ounce). As a result, purchases of Beluga caviar decreased by 5%. The price elasticity of demand for Beluga caviar is:

Accepted Answer

A) 5. 
B) 2. 
C) 0.2. 
D) 0.5. 
A) 5. 
B) 2. 
C) 0.2. 
D) 0.5.

Question 15

The price of gluten-free buns falls by 7%. In response, the quantity supplied of gluten-free buns falls by 3.5%. The price elasticity of supply for gluten-free buns is:

Accepted Answer

A) 2. 
B) 0.5. 
C) -0.5. 
D) 0.33. 
A) 2. 
B) 0.5. 
C) -0.5. 
D) 0.33.

Question 16

The elasticity of demand measures the responsiveness of quantity demanded to changes in:

Accepted Answer

A) price. 
B) supply. 
C) income. 
D) demand. 
A) price. 
B) supply. 
C) income. 
D) demand.

Question 17

The price elasticity of demand for gasoline tends to be rather inelastic as:

Accepted Answer

A) there are many available substitutes. 
B) it takes up a large part of a consumer's budget. 
C) we are in the long run instead of the short run. 
D) there are few or no available substitutes. 
A) there are many available substitutes. 
B) it takes up a large part of a consumer's budget. 
C) we are in the long run instead of the short run. 
D) there are few or no available substitutes.

Question 18

(Figure: Market for Movie Tickets) The figure shows the market for movie tickets. If the movie theater changes the price per ticket from $12 to $13.50, the change in total revenue is:

Accepted Answer

A) $180,000 
B) $-18,000 
C) $162,000 
D) $18,000 
A) $180,000 
B) $-18,000 
C) $162,000 
D) $18,000

Question 19

You are given some data for four different products - dryer sheets, shampoo, soap, and laundry detergent. The absolute value of the price elasticity of demand for dryer sheets is 4. The absolute value of the price elasticity of demand for shampoo is 0.2. The absolute value of the price elasticity of demand for soap is 0.5. The absolute value of the price elasticity of demand for laundry detergent is 2. Which product has the most elastic demand?

Accepted Answer

A) dryer sheets 
B) shampoo 
C) soap 
D) laundry detergent 
A) dryer sheets 
B) shampoo 
C) soap 
D) laundry detergent

Question 20

(Figure: Demand Curves) The figure shows four different demand curves for four products: A, B, C and D. Which of the products has the most elastic demand curve?

Accepted Answer

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

Exam 5: Elasticity: Measuring Responsiveness

Which good is MOST likely to have a vertical supply curve?

If someone regarded health care as very important, for instance, going to the clinic whenever there is an issue, his or her demand curve for health care will likely be more _____ than that of other people.

Suppose the price elasticity of demand for Baconators at Wendy's is 0.6. This means that the demand for Baconators is:

(Figure: Supply Curves) The figure shows four different supply curves for four products: A, B, C and D. Which of the supply curves most likely shows a product that uses variable inputs that are the most readily available?

If income rises by 10% and the quantity demanded of an item falls by 30%, the income elasticity of demand for this item is:

Using the midpoint formula, calculate the price elasticity of supply for the following three products. Milk Cheese Sour Cream P1 1 3 2 P2 1.5 5 2.5 Q1 400 950 550 Q2 300 500 500

In general, for price increases or decreases, the price elasticity of demand can be found by:

Which statement is TRUE regarding a price-inelastic demand curve?

Good M has an income elasticity of demand of -0.7. Which of the following items might good M be?

Drew recently received a promotion at his job, increasing his income from $940 per week to $1,060 per week. As a result, he decides to purchase 9% more Kobe steaks per week. Computed using the midpoint method, his income elasticity for Kobe steaks is _____, and Kobe steaks are a(n) _____ good.

The long-run price elasticity of supply of automobiles is _____ the short-run price elasticity of supply of automobiles.

If a good (like most fruit) has elastic demand, then which statement is NOT likely to be true?

Because of declining stocks in the Caspian Sea, Beluga caviar prices recently increased by a whopping 25% (to about $700 per ounce). As a result, purchases of Beluga caviar decreased by 5%. The price elasticity of demand for Beluga caviar is:

The price of gluten-free buns falls by 7%. In response, the quantity supplied of gluten-free buns falls by 3.5%. The price elasticity of supply for gluten-free buns is:

The elasticity of demand measures the responsiveness of quantity demanded to changes in:

The price elasticity of demand for gasoline tends to be rather inelastic as:

(Figure: Market for Movie Tickets) The figure shows the market for movie tickets. If the movie theater changes the price per ticket from $12 to $13.50, the change in total revenue is:

(Figure: Demand Curves) The figure shows four different demand curves for four products: A, B, C and D. Which of the products has the most elastic demand curve?

The Core Principles of Economics

Demand: Thinking Like a Buyer

Supply: Thinking Like a Seller

Equilibrium: Where Supply Meets Demand

When Governments Intervene in Markets

Welfare and Efficiency

Gains From Trade

International Trade

Externalities and Public Goods

Labor Demand and Supply

Wages, Workers, and Management

Inequality, Social Insurance, and Redistribution

Market Structure and Market Power

Entry, Exit, and Long-Run Profitability

Business Strategy

Sophisticated Pricing Strategies

Game Theory and Strategic Choices

Decisions Involving Uncertainty

Decisions With Private Information

Sizing up the Economy Using Gdp

Economic Growth

Unemployment

Inflation and Money

Consumption and Saving

Investment

The Financial Sector

International Finance and the Exchange Rate

Business Cycles

IS-MP Analysis: Interest Rates and Output

Phillips Curve

The Fed Model: Linking Interest Rates, Output, and Inflation

Aggregate Demand and Aggregate Supply

Monetary Policy

Government Spending, Taxes, and Fiscal Policy

Appendix: Aggregate Expenditure and the Multiplier

Filters

Drew recently received a promotion at his job, increasing his income from $940 per week to $1,060 per week. As a result, he decides to purchase 9% more Kobe steaks per week. Computed using the midpoint method, his income elasticity for Kobe steaks is _, and Kobe steaks are a(n) _ good.