Question 1

Which of the following concerning the relationship between elasticity and total revenue is true?

Accepted Answer

A)  Price elasticity and total revenue are not related. 
B)  When demand for a good is unit elastic, any price change within the unit elastic price range changes total revenue by one. 
C)  When demand for a good is price inelastic, total revenue increases when price increases. 
D)  When demand for a good is price elastic, total revenue increases when price increases. 
E)  Total revenue is maximized when the price elasticity of demand is zero. 
A)  Price elasticity and total revenue are not related. 
B)  When demand for a good is unit elastic, any price change within the unit elastic price range changes total revenue by one. 
C)  When demand for a good is price inelastic, total revenue increases when price increases. 
D)  When demand for a good is price elastic, total revenue increases when price increases. 
E)  Total revenue is maximized when the price elasticity of demand is zero. C

Question 2

For suppliers, the ________________ elasticity is greater than the _____________elasticity because they have ______________.

Accepted Answer

A)  short run supply; long run supply; no time to adjust 
B)  short run price; long run supply; time to adjust 
C)  long run supply; short run price; no time to adjust 
D)  short run supply; long run price; time to adjust 
E)  long run supply; short run supply; time to adjust 
A)  short run supply; long run supply; no time to adjust 
B)  short run price; long run supply; time to adjust 
C)  long run supply; short run price; no time to adjust 
D)  short run supply; long run price; time to adjust 
E)  long run supply; short run supply; time to adjust E

Question 3

Price elasticity of demand is measured by the percentage change in quantity demanded divided by the percentage change in income.

Accepted Answer

A) True 
 B)False  False

Question 4

Which one of these economists studied the relationship between income and food consumption?

Accepted Answer

A)  Schumpeter 
B)  Friedman 
C)  Jevons 
D)  Malthus 
E)  Engel 
A)  Schumpeter 
B)  Friedman 
C)  Jevons 
D)  Malthus 
E)  Engel

Question 5

In the country of Bora Bora, consumers buy large quantities of alcohol, tobacco, and coffee. Last year, the prices of these goods each increased by 10 percent. The quantities demanded for these goods fell by 10, 3, and 8 percent, respectively. If the government is thinking about imposing a unit tax on one of these goods, which good should they choose to tax to raise the most tax revenue, and why?

Accepted Answer

A)  alcohol; because the price elasticity is highest 
B)  tobacco; because the price elasticity is lowest 
C)  coffee; because it will have the lowest tax elasticity 
D)  tobacco; because it will have the highest tax elasticity 
E)  alcohol; because the burden of taxation would be more even 
A)  alcohol; because the price elasticity is highest 
B)  tobacco; because the price elasticity is lowest 
C)  coffee; because it will have the lowest tax elasticity 
D)  tobacco; because it will have the highest tax elasticity 
E)  alcohol; because the burden of taxation would be more even

Question 6

The long-run price elasticity of demand for a good is usually larger than its short-run price elasticity because

Accepted Answer

A)  as the saying goes, "out of sight, out of mind" 
B)  more goods are demanded in the long run than in the short run 
C)  people have more time to find substitute goods 
D)  incomes tend to rise over time 
E)  supply curves shift outward over time 
A)  as the saying goes, "out of sight, out of mind" 
B)  more goods are demanded in the long run than in the short run 
C)  people have more time to find substitute goods 
D)  incomes tend to rise over time 
E)  supply curves shift outward over time

Question 7

If the purpose of a tax is to raise revenue, it would be best for government to place the tax on which of the following goods?

Accepted Answer

A)  a non-essential good, such as holiday travel 
B)  a good whose demand curve is highly elastic 
C)  a good that has several close substitutes 
D)  a good whose demand curve is highly inelastic 
E)  a good whose demand curve is unit elastic 
A)  a non-essential good, such as holiday travel 
B)  a good whose demand curve is highly elastic 
C)  a good that has several close substitutes 
D)  a good whose demand curve is highly inelastic 
E)  a good whose demand curve is unit elastic

Question 8

If new substitutes for a good appear on the market, we would expect the price elasticity of demand for that product to increase.

Accepted Answer

A) True 
 B)False

Question 9

If Joshua buys 10 percent more compact discs when his income increases by 5 percent, then, for Joshua

Accepted Answer

A)  price elasticity of demand for compact discs is greater than one 
B)  compact discs are inferior goods 
C)  compact discs are price inelastic 
D)  compact discs are income inelastic 
E)  compact discs are income elastic 
A)  price elasticity of demand for compact discs is greater than one 
B)  compact discs are inferior goods 
C)  compact discs are price inelastic 
D)  compact discs are income inelastic 
E)  compact discs are income elastic

Question 10

If an excise tax is placed on a product that has a price elasticity of demand equal to zero, then the

Accepted Answer

A)  entire tax will be paid by the consumer 
B)  entire tax will be paid by the producer 
C)  consumer and producer will each pay a share of the tax 
D)  incidence of the tax cannot be determined unless we know the coefficient of price elasticity of supply 
E)  tax is progressive 
A)  entire tax will be paid by the consumer 
B)  entire tax will be paid by the producer 
C)  consumer and producer will each pay a share of the tax 
D)  incidence of the tax cannot be determined unless we know the coefficient of price elasticity of supply 
E)  tax is progressive

Question 11

We know that increases in population increase the market demand for various goods. The prices of those goods will increase the most if the elasticity of supply is

Accepted Answer

A)  very large 
B)  equal to one 
C)  greater than 3 
D)  very small 
E)  finite 
A)  very large 
B)  equal to one 
C)  greater than 3 
D)  very small 
E)  finite

Question 12

The cross price elasticities among substitute goods will be extremely high when

Accepted Answer

A)  b and d 
B)  they are very similar to each other 
C)  people are consuming them frequently 
D)  people consume them in equal quantities 
E)  they are imperfect substitutes 
A)  b and d 
B)  they are very similar to each other 
C)  people are consuming them frequently 
D)  people consume them in equal quantities 
E)  they are imperfect substitutes

Question 13

Short-run elasticity of supply is greater than long-run elasticity of supply.

Accepted Answer

A) True 
 B)False

Question 14

If a 10 percent decrease in the price of one good generates a 3 percent increase in the quantity demanded for another good, then the

Accepted Answer

A)  two goods are complementary 
B)  cross elasticity between the two goods is positive 
C)  two goods are substitutes 
D)  price elasticity of demand for the good whose quantity demanded increased must be inelastic 
E)  price elasticity of demand for the good whose quantity demanded increased must be elastic 
A)  two goods are complementary 
B)  cross elasticity between the two goods is positive 
C)  two goods are substitutes 
D)  price elasticity of demand for the good whose quantity demanded increased must be inelastic 
E)  price elasticity of demand for the good whose quantity demanded increased must be elastic

Question 15

Dana is an art historian who needs to travel to Italy to do research. Art historians usually don't have a lot of money, and therefore are very sensitive to price changes. If the price of the hotel she is staying in decreases from 150 euros per night to 100 euros per night, Dana will increase the length of her stay from 20 days to 40 days. What is Dana's price elasticity of demand for nights spent in Italy?

Accepted Answer

A)  0.5 
B)  6 
C)  2 
D)  0.667 
E)  1.5 
A)  0.5 
B)  6 
C)  2 
D)  0.667 
E)  1.5

Question 16

If a 1 percent change in income generates a greater than 1 percent change in quantity demanded for boat rentals, then the demand for boat rentals

Accepted Answer

A)  is a good illustration of Engel's law 
B)  reflects the demand for an inferior good 
C)  has a price elasticity greater than one 
D)  is income elastic 
E)  is income inelastic 
A)  is a good illustration of Engel's law 
B)  reflects the demand for an inferior good 
C)  has a price elasticity greater than one 
D)  is income elastic 
E)  is income inelastic

Question 17

If the demand for a good is price inelastic, a tax on it will

Accepted Answer

A)  raise price, raise tax revenue, shift the supply curve to the right 
B)  lower price, lower tax revenue, shift the supply curve to the right 
C)  Raise price, raise tax revenue, shift the supply curve to the right 
D)  raise price, raise tax revenue, shift the supply curve to the left 
E)  Lower price, raise tax revenue, shift the demand curve to the left 
A)  raise price, raise tax revenue, shift the supply curve to the right 
B)  lower price, lower tax revenue, shift the supply curve to the right 
C)  Raise price, raise tax revenue, shift the supply curve to the right 
D)  raise price, raise tax revenue, shift the supply curve to the left 
E)  Lower price, raise tax revenue, shift the demand curve to the left

Question 18

Which answer ranks the elasticities of supply from highest to lowest?

Accepted Answer

A)  market-day, short-run, long-run 
B)  short-run, long-run, market-day 
C)  long-run, short-run, market-day 
D)  short-run, market-day, long-run 
E)  long-run, market-day, short-run 
A)  market-day, short-run, long-run 
B)  short-run, long-run, market-day 
C)  long-run, short-run, market-day 
D)  short-run, market-day, long-run 
E)  long-run, market-day, short-run

Question 19

Picture a linear downward-sloping demand curve. The price elasticity of demand

Accepted Answer

A)  remains the same for all price ranges on that demand curve 
B)  varies among the price ranges on that demand curve 
C)  varies but is always greater than one whatever the price range on that demand curve 
D)  is always 1.0 for any price range where the price difference is $1, such as $10 and $9 
E)  is always zero 
A)  remains the same for all price ranges on that demand curve 
B)  varies among the price ranges on that demand curve 
C)  varies but is always greater than one whatever the price range on that demand curve 
D)  is always 1.0 for any price range where the price difference is $1, such as $10 and $9 
E)  is always zero

Question 20

The U.S. Department of Agriculture and Ernst Engel have confirmed, separately, that there is an inverse relationship between income changes and food consumption.

Accepted Answer

A) True 
 B)False

Which of the following concerning the relationship between elasticity and total revenue is true?

For suppliers, the __________ elasticity is greater than the _elasticity because they have ________.

Price elasticity of demand is measured by the percentage change in quantity demanded divided by the percentage change in income.

Which one of these economists studied the relationship between income and food consumption?

The long-run price elasticity of demand for a good is usually larger than its short-run price elasticity because

If the purpose of a tax is to raise revenue, it would be best for government to place the tax on which of the following goods?

If new substitutes for a good appear on the market, we would expect the price elasticity of demand for that product to increase.

If Joshua buys 10 percent more compact discs when his income increases by 5 percent, then, for Joshua

If an excise tax is placed on a product that has a price elasticity of demand equal to zero, then the

We know that increases in population increase the market demand for various goods. The prices of those goods will increase the most if the elasticity of supply is

The cross price elasticities among substitute goods will be extremely high when

Short-run elasticity of supply is greater than long-run elasticity of supply.

If a 10 percent decrease in the price of one good generates a 3 percent increase in the quantity demanded for another good, then the

If a 1 percent change in income generates a greater than 1 percent change in quantity demanded for boat rentals, then the demand for boat rentals

If the demand for a good is price inelastic, a tax on it will

Which answer ranks the elasticities of supply from highest to lowest?

Picture a linear downward-sloping demand curve. The price elasticity of demand

The U.S. Department of Agriculture and Ernst Engel have confirmed, separately, that there is an inverse relationship between income changes and food consumption.

Introduction

Production Possibilities and Opportunity Costs

Demand and Supply

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Maximizing Profit

Identifying Markets and Market Structures

Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

Price and Output Determination Under Oligopoly

Antitrust and Regulation

Externalities, Market Failure, and Public Choice

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

Filters

Exam 4: Elasticity

Which of the following concerning the relationship between elasticity and total revenue is true?

For suppliers, the ________________ elasticity is greater than the _____________elasticity because they have ______________.

Price elasticity of demand is measured by the percentage change in quantity demanded divided by the percentage change in income.

Which one of these economists studied the relationship between income and food consumption?

The long-run price elasticity of demand for a good is usually larger than its short-run price elasticity because

If the purpose of a tax is to raise revenue, it would be best for government to place the tax on which of the following goods?

If new substitutes for a good appear on the market, we would expect the price elasticity of demand for that product to increase.

If Joshua buys 10 percent more compact discs when his income increases by 5 percent, then, for Joshua

If an excise tax is placed on a product that has a price elasticity of demand equal to zero, then the

We know that increases in population increase the market demand for various goods. The prices of those goods will increase the most if the elasticity of supply is

The cross price elasticities among substitute goods will be extremely high when

Short-run elasticity of supply is greater than long-run elasticity of supply.

If a 10 percent decrease in the price of one good generates a 3 percent increase in the quantity demanded for another good, then the

If a 1 percent change in income generates a greater than 1 percent change in quantity demanded for boat rentals, then the demand for boat rentals

If the demand for a good is price inelastic, a tax on it will

Which answer ranks the elasticities of supply from highest to lowest?

Picture a linear downward-sloping demand curve. The price elasticity of demand

The U.S. Department of Agriculture and Ernst Engel have confirmed, separately, that there is an inverse relationship between income changes and food consumption.

Introduction

Production Possibilities and Opportunity Costs

Demand and Supply

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Maximizing Profit

Identifying Markets and Market Structures

Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

Price and Output Determination Under Oligopoly

Antitrust and Regulation

Externalities, Market Failure, and Public Choice

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

Filters

For suppliers, the __________ elasticity is greater than the _elasticity because they have ________.