Question 1

When quantity demanded responds substantially to changes in price,what is demand said to be

Accepted Answer

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

Question 2

In January,the price of widgets was $2.00 and Wendy's Widgets produced 100 widgets.In February,the price of widgets was $2.50 and Wendy's Widgets produced 150 widgets.In March,the price of widgets was $3.00 and Wendy's Widgets produced 200 widgets.What is the price elasticity of supply of Wendy's Widgets

Accepted Answer

A) 0.56 when the price increased from $2.00 to $2.50 and 0.64 when the price increased from $2.50 to $3.00 
B) 1.66 when the price increased from $2.00 to $2.50 and 1.50 when the price increased from $2.50 to $3.00 
C) 1.80 when the price increased from $2.00 to $2.50 and 1.57 when the price increased from $2.50 to $3.00 
D) 2.00 when the price increased from $2.00 to $2.50 and 1.66 when the price increased from $2.50 to $3.00 
A) 0.56 when the price increased from $2.00 to $2.50 and 0.64 when the price increased from $2.50 to $3.00 
B) 1.66 when the price increased from $2.00 to $2.50 and 1.50 when the price increased from $2.50 to $3.00 
C) 1.80 when the price increased from $2.00 to $2.50 and 1.57 when the price increased from $2.50 to $3.00 
D) 2.00 when the price increased from $2.00 to $2.50 and 1.66 when the price increased from $2.50 to $3.00 C

Question 3

If the elasticity of supply of a product is greater than 1,then what is supply

Accepted Answer

A) inelastic 
B) elastic 
C) unit elastic 
D) not very sensitive to a change in price 
A) inelastic 
B) elastic 
C) unit elastic 
D) not very sensitive to a change in price B

Question 4

When the price of knee braces increased by 25 percent,the Brace Yourself Company increased their quantity supplied of knee braces per week by 75 percent.BYC's price elasticity of supply of knee braces is 0.33.

Accepted Answer

A) True 
 B)False

Question 5

What happens when demand is elastic in the current price range

Accepted Answer

A) An increase in price would increase total revenue because the decrease in quantity demanded is less than the increase in price. 
B) An increase in price would decrease total revenue because the decrease in quantity demanded is greater than the increase in price. 
C) A decrease in price would decrease total revenue because the increase in quantity demanded is smaller than the decrease in price. 
D) A decrease in price would not affect the total revenue. 
A) An increase in price would increase total revenue because the decrease in quantity demanded is less than the increase in price. 
B) An increase in price would decrease total revenue because the decrease in quantity demanded is greater than the increase in price. 
C) A decrease in price would decrease total revenue because the increase in quantity demanded is smaller than the decrease in price. 
D) A decrease in price would not affect the total revenue.

Question 6

Assume that a three percent increase in income results in a four percent decrease in the quantity demanded of a good.What is the income elasticity of demand for the good,and what type of good is it

Accepted Answer

A) negative, and therefore the good is an inferior good 
B) negative, and therefore the good is a normal good 
C) positive, and therefore the good is an inferior good 
D) positive, and therefore the good is a normal good 
A) negative, and therefore the good is an inferior good 
B) negative, and therefore the good is a normal good 
C) positive, and therefore the good is an inferior good 
D) positive, and therefore the good is a normal good

Question 7

What type of demand does a person who has high cholesterol,and must exercise for an hour every day,have for exercise equipment

Accepted Answer

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

Question 8

What does cross-price elasticity of demand measure

Accepted Answer

A) how the quantity demanded of a good changes as price changes 
B) how the quantity demanded of a good changes as income changes 
C) how the quantity demanded of one good changes as the price of another good changes 
D) how the price of a good is affected as the price of another good changes 
A) how the quantity demanded of a good changes as price changes 
B) how the quantity demanded of a good changes as income changes 
C) how the quantity demanded of one good changes as the price of another good changes 
D) how the price of a good is affected as the price of another good changes

Question 9

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

A) True 
 B)False

Question 10

What does the price elasticity of demand measure

Accepted Answer

A) how responsive buyers are to a change in income 
B) how responsive sellers are to a change in price 
C) how responsive buyers are to a change in price 
D) how responsive sellers are to a change in buyers' incomes 
A) how responsive buyers are to a change in income 
B) how responsive sellers are to a change in price 
C) how responsive buyers are to a change in price 
D) how responsive sellers are to a change in buyers' incomes

Question 11

When the local used bookstore prices economics books at $100 each,they generally sell 70 per month.If they lower the price to $70 each,they sell 90.Given this,what is the elasticity of demand for economics books,and what action should the store take

Accepted Answer

A) 2.91; the store should lower prices to raise total revenue. 
B) 2.91; the store should raise prices to raise total revenue. 
C) 0.714; the store should lower prices to raise total revenue. 
D) 0.714; the store should raise prices to raise total revenue. 
A) 2.91; the store should lower prices to raise total revenue. 
B) 2.91; the store should raise prices to raise total revenue. 
C) 0.714; the store should lower prices to raise total revenue. 
D) 0.714; the store should raise prices to raise total revenue.

Question 12

What would be the absolute value of the elasticity if demand is inelastic

Accepted Answer

A) less than 1 
B) equal to 1 
C) greater than 1 
D) equal to 0 
A) less than 1 
B) equal to 1 
C) greater than 1 
D) equal to 0

Question 13

When will a good have a more inelastic demand

Accepted Answer

A) when the availability of close substitutes is greater 
B) when the definition of the market is narrower 
C) when the period of time is longer 
D) when the good is considered a necessity 
A) when the availability of close substitutes is greater 
B) when the definition of the market is narrower 
C) when the period of time is longer 
D) when the good is considered a necessity

Question 14

Holding all other forces constant,when the price of gasoline rises,why would the number of litres of gasoline demanded fall substantially over a 10-year period

Accepted Answer

A) Buyers tend to be much less sensitive to a change in price when given more time to react. 
B) Buyers will have substantially more income over a ten-year period. 
C) Buyers tend to be much more sensitive to a change in price when given more time to react. 
D) Gasoline has no substitutes. 
A) Buyers tend to be much less sensitive to a change in price when given more time to react. 
B) Buyers will have substantially more income over a ten-year period. 
C) Buyers tend to be much more sensitive to a change in price when given more time to react. 
D) Gasoline has no substitutes.

Question 15

If two supply curves pass through the same point and one is steep and the other is flat,which of the following statements is correct

Accepted Answer

A) The flatter supply curve is more inelastic. 
B) The steeper supply curve is more inelastic. 
C) The steeper supply curve is more elastic 
D) The elasticity of supply will be the same for both curves. 
A) The flatter supply curve is more inelastic. 
B) The steeper supply curve is more inelastic. 
C) The steeper supply curve is more elastic 
D) The elasticity of supply will be the same for both curves.

Question 16

If a demand curve is vertical,what are its slope and elasticity

Accepted Answer

A) undefined and elasticity equals 0 
B) 0 and elasticity is undefined 
C) undefined, as is elasticity 
D) 0, as is elasticity 
A) undefined and elasticity equals 0 
B) 0 and elasticity is undefined 
C) undefined, as is elasticity 
D) 0, as is elasticity

Question 17

If the quantity supplied is the same regardless of price,what would the supply curve be

Accepted Answer

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

Question 18

In the long run,how does the quantity supplied of most goods respond

Accepted Answer

A) It cannot respond at all to a change in price. 
B) It cannot respond much to a change in price. 
C) It can respond substantially to a change in price. 
D) It will tend to increase regardless of what happens to price. 
A) It cannot respond at all to a change in price. 
B) It cannot respond much to a change in price. 
C) It can respond substantially to a change in price. 
D) It will tend to increase regardless of what happens to price.

Question 19

Figure 5-6
  
-Refer to Figure 5-6.What is the price elasticity of this demand curve between $10 and $15

Accepted Answer

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

Question 20

When will a decrease in supply cause the smallest increase in price

Accepted Answer

A) when both supply and demand are inelastic 
B) when demand is elastic and supply is inelastic 
C) when both supply and demand are elastic 
D) when demand is inelastic and supply is elastic 
A) when both supply and demand are inelastic 
B) when demand is elastic and supply is inelastic 
C) when both supply and demand are elastic 
D) when demand is inelastic and supply is elastic

Exam 5: Elasticity and Its Application

When quantity demanded responds substantially to changes in price,what is demand said to be

If the elasticity of supply of a product is greater than 1,then what is supply

When the price of knee braces increased by 25 percent,the Brace Yourself Company increased their quantity supplied of knee braces per week by 75 percent.BYC's price elasticity of supply of knee braces is 0.33.

What happens when demand is elastic in the current price range

Assume that a three percent increase in income results in a four percent decrease in the quantity demanded of a good.What is the income elasticity of demand for the good,and what type of good is it

What type of demand does a person who has high cholesterol,and must exercise for an hour every day,have for exercise equipment

What does cross-price elasticity of demand measure

A government program that reduces land under cultivation hurts farmers but helps consumers.

What does the price elasticity of demand measure

When the local used bookstore prices economics books at $100 each,they generally sell 70 per month.If they lower the price to $70 each,they sell 90.Given this,what is the elasticity of demand for economics books,and what action should the store take

What would be the absolute value of the elasticity if demand is inelastic

When will a good have a more inelastic demand

Holding all other forces constant,when the price of gasoline rises,why would the number of litres of gasoline demanded fall substantially over a 10-year period

If two supply curves pass through the same point and one is steep and the other is flat,which of the following statements is correct

If a demand curve is vertical,what are its slope and elasticity

If the quantity supplied is the same regardless of price,what would the supply curve be

In the long run,how does the quantity supplied of most goods respond

Figure 5-6 -Refer to Figure 5-6.What is the price elasticity of this demand curve between $10 and $15

When will a decrease in supply cause the smallest increase in price

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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