Question 1

When the price of going to a movie rises 5 percent, the quantity of DVDs demanded increases 10 percent.The cross elasticity of demand equals

Accepted Answer

A) 10.0. 
B) 0.50. 
C) -0.50. 
D) -2.0. 
E) 2.0. 
A) 10.0. 
B) 0.50. 
C) -0.50. 
D) -2.0. 
E) 2.0.

Question 2

You are more sensitive to a change in price if you

Accepted Answer

A) spend a lot of your income on the good. 
B) spend a small percentage of your income on the good. 
C) buy very little of the good. 
D) do not buy the good regularly. 
E) have a very inelastic demand for the good. 
A) spend a lot of your income on the good. 
B) spend a small percentage of your income on the good. 
C) buy very little of the good. 
D) do not buy the good regularly. 
E) have a very inelastic demand for the good.

Question 3

If a 20 percent increase in the price of a good does not change the quantity supplied, the

Accepted Answer

A) supply is perfectly inelastic. 
B) supply is unit elastic. 
C) supply is perfectly elastic. 
D) supply is elastic. 
E) None of the above answers is correct. 
A) supply is perfectly inelastic. 
B) supply is unit elastic. 
C) supply is perfectly elastic. 
D) supply is elastic. 
E) None of the above answers is correct.

Question 4

If a 10 percent increase in income leads to a 5 percent decrease in the demand for a good, the income elasticity of demand equals ________ and the good is ________ good.

Accepted Answer

A) 1/2; a normal 
B) -1/2; an inferior 
C) 2; a normal 
D) -2; a normal 
E) -5; an inferior 
A) 1/2; a normal 
B) -1/2; an inferior 
C) 2; a normal 
D) -2; a normal 
E) -5; an inferior

Question 5

The price elasticity of supply measures

Accepted Answer

A) the percentage change in supply from a percentage change in demand. 
B) the extent to which the quantity supplied of a good changes when the price of a good changes, other things remaining the same. 
C) the slope of the supply curve. 
D) how the equilibrium price changes in response to a change in the equilibrium quantity supplied. 
E) Both answers B and C are correct. 
A) the percentage change in supply from a percentage change in demand. 
B) the extent to which the quantity supplied of a good changes when the price of a good changes, other things remaining the same. 
C) the slope of the supply curve. 
D) how the equilibrium price changes in response to a change in the equilibrium quantity supplied. 
E) Both answers B and C are correct.

Question 6

If the price elasticity of demand for gasoline equals 0.3, then an increase in the price of a gallon of gasoline from $3.70 to $3.90

Accepted Answer

A) decreases total revenue. 
B) increases total revenue. 
C) leads to no change in total revenue. 
D) makes the demand for gasoline elastic. 
E) Both answers B and D are correct. 
A) decreases total revenue. 
B) increases total revenue. 
C) leads to no change in total revenue. 
D) makes the demand for gasoline elastic. 
E) Both answers B and D are correct.

Question 7

If the price elasticity of supply for a good is 10, then supply is

Accepted Answer

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

Question 8

The income elasticity of demand for foreign travel

Accepted Answer

A) is likely to be smaller than the income elasticity of demand for food. 
B) is likely to be larger than the income elasticity of demand for food. 
C) cannot be compared to the income elasticity of demand for food. 
D) is likely to be inelastic. 
E) is likely to be negative. 
A) is likely to be smaller than the income elasticity of demand for food. 
B) is likely to be larger than the income elasticity of demand for food. 
C) cannot be compared to the income elasticity of demand for food. 
D) is likely to be inelastic. 
E) is likely to be negative.

Question 9

The extent to which the demand for a good changes when the price of a substitute or complement changes, other things remaining the same, is measured as the

Accepted Answer

A) income elasticity of demand. 
B) cross elasticity of demand. 
C) price elasticity of demand. 
D) price elasticity of supply. 
E) cross income elasticity of demand. 
A) income elasticity of demand. 
B) cross elasticity of demand. 
C) price elasticity of demand. 
D) price elasticity of supply. 
E) cross income elasticity of demand.

Question 10

If you spend a large portion of your income on a good,

Accepted Answer

A) supply of that good would be price elastic. 
B) demand for that good is more elastic than if you spent a smaller portion of your income on the good. 
C) supply of that good is price inelastic. 
D) demand for that good is less elastic than if you spent a smaller portion of your income on the good. 
E) the good must be able to be produced at a constant (or gently rising)opportunity cost. 
A) supply of that good would be price elastic. 
B) demand for that good is more elastic than if you spent a smaller portion of your income on the good. 
C) supply of that good is price inelastic. 
D) demand for that good is less elastic than if you spent a smaller portion of your income on the good. 
E) the good must be able to be produced at a constant (or gently rising)opportunity cost.

Question 11

If the cross elasticity of demand is negative, that means the goods

Accepted Answer

A) have elastic demands. 
B) have inelastic demands. 
C) are complements. 
D) are substitutes. 
E) are inferior. 
A) have elastic demands. 
B) have inelastic demands. 
C) are complements. 
D) are substitutes. 
E) are inferior.

Question 12

-Suppose a decrease in supply raises the price from $4.00 to $5.50 and decreases the quantity demanded from 2,000 to 1,500.Using the midpoint method, the elasticity of demand equals

Accepted Answer

A) 2.10. 
B) 1.11. 
C) 0.90. 
D) 0.72. 
E) None of the above answers is correct. 
A) 2.10. 
B) 1.11. 
C) 0.90. 
D) 0.72. 
E) None of the above answers is correct.

Question 13

Supply is unit elastic when the

Accepted Answer

A) supply curve is upward sloping. 
B) price elasticity of supply is positive. 
C) percentage change in the quantity supplied equals the percentage change in price. 
D) supply curve is horizontal. 
E) supply curve is vertical. 
A) supply curve is upward sloping. 
B) price elasticity of supply is positive. 
C) percentage change in the quantity supplied equals the percentage change in price. 
D) supply curve is horizontal. 
E) supply curve is vertical.

Question 14

If the quantity supplied and the price change by the same percentage, then supply is

Accepted Answer

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

Question 15

What are the three cases for the price elasticity of demand? Briefly define each.

Accepted Answer

Demand can be elastic, inelastic, or uni

Question 16

If demand is inelastic and the price falls, the total revenue

Accepted Answer

A) rises. 
B) falls. 
C) remains constant. 
D) might rise, fall, or remain constant. 
E) becomes negative. 
A) rises. 
B) falls. 
C) remains constant. 
D) might rise, fall, or remain constant. 
E) becomes negative.

Question 17

Which of the following is true?
I∙The demand for a good is elastic if when its price changes, the percentage change in the quantity demanded exceeds the percentage change in price.
II∙Price elasticity of demand equals the percentage change in price divided by the percentage change in the quantity demanded.
III∙If demand is price inelastic, a rise in price leads to a decrease in total revenue.

Accepted Answer

A) Only I 
B) Only II 
C) Only III 
D) I and II 
E) II and III 
A) Only I 
B) Only II 
C) Only III 
D) I and II 
E) II and III

Question 18

For a product with a constant or gently increasing opportunity cost of producing additional units, as more is produced, we expect that

Accepted Answer

A) demand is price elastic. 
B) supply is price elastic. 
C) demand is price inelastic. 
D) supply is price inelastic. 
E) demand is unit elastic. 
A) demand is price elastic. 
B) supply is price elastic. 
C) demand is price inelastic. 
D) supply is price inelastic. 
E) demand is unit elastic.

Question 19

-In the figure above, using the midpoint method, what is the price elasticity of demand when the price falls from $8 to $7?

Accepted Answer

A) 4.0 
B) 5.0 
C) 0.5 
D) 0.4 
E) 0.25 
A) 4.0 
B) 5.0 
C) 0.5 
D) 0.4 
E) 0.25

Question 20

Assume that it is predicted that for the years after you graduate from college, the entire economy will experience a long period of prosperity when incomes grow rapidly.What type of industry would be the best for you to find employment if this prediction is correct? An industry that produces a product that is

Accepted Answer

A) income elastic. 
B) income inelastic. 
C) inferior. 
D) a substitute good. 
E) none of these industries 
A) income elastic. 
B) income inelastic. 
C) inferior. 
D) a substitute good. 
E) none of these industries

When the price of going to a movie rises 5 percent, the quantity of DVDs demanded increases 10 percent.The cross elasticity of demand equals

You are more sensitive to a change in price if you

If a 20 percent increase in the price of a good does not change the quantity supplied, the

If a 10 percent increase in income leads to a 5 percent decrease in the demand for a good, the income elasticity of demand equals and the good is good.

The price elasticity of supply measures

If the price elasticity of demand for gasoline equals 0.3, then an increase in the price of a gallon of gasoline from $3.70 to $3.90

If the price elasticity of supply for a good is 10, then supply is

The income elasticity of demand for foreign travel

The extent to which the demand for a good changes when the price of a substitute or complement changes, other things remaining the same, is measured as the

If you spend a large portion of your income on a good,

If the cross elasticity of demand is negative, that means the goods

-Suppose a decrease in supply raises the price from $4.00 to $5.50 and decreases the quantity demanded from 2,000 to 1,500.Using the midpoint method, the elasticity of demand equals

Supply is unit elastic when the

If the quantity supplied and the price change by the same percentage, then supply is

What are the three cases for the price elasticity of demand? Briefly define each.

If demand is inelastic and the price falls, the total revenue

For a product with a constant or gently increasing opportunity cost of producing additional units, as more is produced, we expect that

-In the figure above, using the midpoint method, what is the price elasticity of demand when the price falls from $8 to $7?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 5: Elasticities of Demand and Supply

When the price of going to a movie rises 5 percent, the quantity of DVDs demanded increases 10 percent.The cross elasticity of demand equals

You are more sensitive to a change in price if you

If a 20 percent increase in the price of a good does not change the quantity supplied, the

If a 10 percent increase in income leads to a 5 percent decrease in the demand for a good, the income elasticity of demand equals ________ and the good is ________ good.

The price elasticity of supply measures

If the price elasticity of demand for gasoline equals 0.3, then an increase in the price of a gallon of gasoline from $3.70 to $3.90

If the price elasticity of supply for a good is 10, then supply is

The income elasticity of demand for foreign travel

The extent to which the demand for a good changes when the price of a substitute or complement changes, other things remaining the same, is measured as the

If you spend a large portion of your income on a good,

If the cross elasticity of demand is negative, that means the goods

-Suppose a decrease in supply raises the price from $4.00 to $5.50 and decreases the quantity demanded from 2,000 to 1,500.Using the midpoint method, the elasticity of demand equals

Supply is unit elastic when the

If the quantity supplied and the price change by the same percentage, then supply is

What are the three cases for the price elasticity of demand? Briefly define each.

If demand is inelastic and the price falls, the total revenue

For a product with a constant or gently increasing opportunity cost of producing additional units, as more is produced, we expect that

-In the figure above, using the midpoint method, what is the price elasticity of demand when the price falls from $8 to $7?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

If a 10 percent increase in income leads to a 5 percent decrease in the demand for a good, the income elasticity of demand equals and the good is good.