Question 1

When the supply elasticity of a product is 2.5,a 10 percent decrease in price will _____ the quantity supplied of the product by _____ percent.

Accepted Answer

A) increase; 25 
B) decrease; 25 
C) increase; 2.5 
D) decrease; 2.5 
E) decrease; 4 
A) increase; 25 
B) decrease; 25 
C) increase; 2.5 
D) decrease; 2.5 
E) decrease; 4

Question 2

The actual or chronological time for the short and the long run does not vary from industry to industry.

Accepted Answer

A) True 
 B)False

Question 3

Income elasticity of demand is expected to be _____.

Accepted Answer

A) relatively high for necessities 
B) positive for most products 
C) relatively low for luxuries 
D) negative for most products 
E) zero for most products 
A) relatively high for necessities 
B) positive for most products 
C) relatively low for luxuries 
D) negative for most products 
E) zero for most products

Question 4

A 0.5% increase in the price of a particular product causes the quantity demanded of the product to drop to zero.This means that the price elasticity of demand for the product is:

Accepted Answer

A) moderately inelastic. 
B) highly inelastic. 
C) unitary elastic. 
D) perfectly inelastic. 
E) perfectly elastic. 
A) moderately inelastic. 
B) highly inelastic. 
C) unitary elastic. 
D) perfectly inelastic. 
E) perfectly elastic.

Question 5

Acme Tools manufactures anvils,a forging tool.When the price of anvils was increased from $7 to $13,Acme Tools was willing and able to increase production from 1 to 4 units per day.Using the midpoint formula,what is Acme's price elasticity of supply for anvils?

Accepted Answer

A) 2 
B) 1 
C) 0.5 
D) 4 
E) 3.5 
A) 2 
B) 1 
C) 0.5 
D) 4 
E) 3.5

Question 6

When the income elasticity of demand for a good is negative,the good is called a luxury good.

Accepted Answer

A) True 
 B)False

Question 7

As income levels rose moderately last year in the San Jose area,it was observed by local realtors that housing sales increased substantially.It is clear from this information that,everything else held constant,the income elasticity of demand for houses is _____.

Accepted Answer

A) negative and relatively low 
B) negative and relatively high 
C) positive and relatively low 
D) positive and relatively high 
E) neither positive nor negative 
A) negative and relatively low 
B) negative and relatively high 
C) positive and relatively low 
D) positive and relatively high 
E) neither positive nor negative

Question 8

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2PS1U1B1xS1U1B0.Assume that P = $8,I = 200,and PS1U1B1xS1U1B0S1U1B1 S1U1B0= $10.
-Given the above equation,the price elasticity of demand for noodles is _____.

Accepted Answer

A) 4 
B) 0.5 
C) 2 
D) 2.5 
E) 1.6 
A) 4 
B) 0.5 
C) 2 
D) 2.5 
E) 1.6

Question 9

In which of the following cases will an effective price floor lead to the largest surplus in a market?

Accepted Answer

A) When demand is elastic and supply is inelastic 
B) When demand is inelastic and supply is elastic 
C) When both demand and supply are elastic 
D) When both demand and supply are inelastic 
E) When demand is inelastic and supply is perfectly inelastic 
A) When demand is elastic and supply is inelastic 
B) When demand is inelastic and supply is elastic 
C) When both demand and supply are elastic 
D) When both demand and supply are inelastic 
E) When demand is inelastic and supply is perfectly inelastic

Question 10

If the demand for product R increases as the price of product S increases,then _____.

Accepted Answer

A) consumer preferences for S have increased 
B) R and S are not related goods 
C) R and S are substitutes 
D) R and S are complements 
E) R is an inferior good 
A) consumer preferences for S have increased 
B) R and S are not related goods 
C) R and S are substitutes 
D) R and S are complements 
E) R is an inferior good

Question 11

The figure given below shows the demand curves for five products: A,B,C,D,andE. Figure 5.1
 
- Refer to Figure 5.1.The demand curve E is most likely to represent the demand for:

Accepted Answer

A) alcohol by an alcoholic. 
B) a life-saving drug. 
C) holiday travel packages. 
D) a particular brand of breakfast cereal. 
E) air conditioning during a hot summer. 
A) alcohol by an alcoholic. 
B) a life-saving drug. 
C) holiday travel packages. 
D) a particular brand of breakfast cereal. 
E) air conditioning during a hot summer.

Question 12

Goods whose income elasticity of demand is greater than zero are _____.

Accepted Answer

A) inferior goods 
B) normal goods 
C) luxury goods 
D) superior goods 
E) public goods 
A) inferior goods 
B) normal goods 
C) luxury goods 
D) superior goods 
E) public goods

Question 13

If   = 1.50,and price decreases by 20 percent,then:

Accepted Answer

A) quantity demanded will decrease by 30 percent. 
B) quantity demanded will increase by 30 percent. 
C) total revenue will remain unchanged. 
D) total revenue will decrease. 
E) quantity demanded will increase by 3 percent. 
A) quantity demanded will decrease by 30 percent. 
B) quantity demanded will increase by 30 percent. 
C) total revenue will remain unchanged. 
D) total revenue will decrease. 
E) quantity demanded will increase by 3 percent.

Question 14

Since an expensive sports car constitutes a greater portion of the consumer's budget than does laundry soap,the elasticity of demand for an expensive sports car is _____.

Accepted Answer

A) relatively less elastic 
B) a vertical line 
C) a downward sloping straight line 
D) relatively more elastic 
E) not subject to elasticity because of the income level of the consumers who purchase expensive sports cars 
A) relatively less elastic 
B) a vertical line 
C) a downward sloping straight line 
D) relatively more elastic 
E) not subject to elasticity because of the income level of the consumers who purchase expensive sports cars

Question 15

If consumer income increases,then the demand shifts right for an inferior good.

Accepted Answer

A) True 
 B)False

Question 16

Tax incidence explains how taxes are shared between producers and consumers.

Accepted Answer

A) True 
 B)False

Question 17

The table given below reports the price and quantity demanded of a commodity. Table 5.1
 
- According to Table 5.1,when the price increases from $5 to $6,the price elasticity of demand is _____.

Accepted Answer

A) 0.25 
B) 1.0 
C) 1.3 
D) 1.8 
E) 1.67 
A) 0.25 
B) 1.0 
C) 1.3 
D) 1.8 
E) 1.67

Question 18

Other things remaining unchanged,the longer the time period under consideration the greater will be the price elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 19

Since demand curves aremostly downward sloping,economists tend to ignore the negative sign when calculating the price elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 20

A fall in the average income of consumers,say during a recession,is represented by:

Accepted Answer

A) an upward movement along the demand curve for product A. 
B) a movement along the demand curve for product A that may be up or down,depending on the direction of the price change. 
C) a shift of the demand curve for product A. 
D) a rotation of the demand curve for product A. 
E) a shift of the demand curve for the related good or service. 
A) an upward movement along the demand curve for product A. 
B) a movement along the demand curve for product A that may be up or down,depending on the direction of the price change. 
C) a shift of the demand curve for product A. 
D) a rotation of the demand curve for product A. 
E) a shift of the demand curve for the related good or service.

Exam 5: Elasticity: Demand and Supply

When the supply elasticity of a product is 2.5,a 10 percent decrease in price will _____ the quantity supplied of the product by _____ percent.

The actual or chronological time for the short and the long run does not vary from industry to industry.

Income elasticity of demand is expected to be _____.

A 0.5% increase in the price of a particular product causes the quantity demanded of the product to drop to zero.This means that the price elasticity of demand for the product is:

Acme Tools manufactures anvils,a forging tool.When the price of anvils was increased from $7 to $13,Acme Tools was willing and able to increase production from 1 to 4 units per day.Using the midpoint formula,what is Acme's price elasticity of supply for anvils?

When the income elasticity of demand for a good is negative,the good is called a luxury good.

As income levels rose moderately last year in the San Jose area,it was observed by local realtors that housing sales increased substantially.It is clear from this information that,everything else held constant,the income elasticity of demand for houses is _____.

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px.Assume that P = $8,I = 200,and Px = $10. -Given the above equation,the price elasticity of demand for noodles is _____.

In which of the following cases will an effective price floor lead to the largest surplus in a market?

If the demand for product R increases as the price of product S increases,then _____.

The figure given below shows the demand curves for five products: A,B,C,D,andE. Figure 5.1 - Refer to Figure 5.1.The demand curve E is most likely to represent the demand for:

Goods whose income elasticity of demand is greater than zero are _____.

If = 1.50,and price decreases by 20 percent,then:

Since an expensive sports car constitutes a greater portion of the consumer's budget than does laundry soap,the elasticity of demand for an expensive sports car is _____.

If consumer income increases,then the demand shifts right for an inferior good.

Tax incidence explains how taxes are shared between producers and consumers.

The table given below reports the price and quantity demanded of a commodity. Table 5.1 - According to Table 5.1,when the price increases from $5 to $6,the price elasticity of demand is _____.

Other things remaining unchanged,the longer the time period under consideration the greater will be the price elasticity of demand.

Since demand curves aremostly downward sloping,economists tend to ignore the negative sign when calculating the price elasticity of demand.

A fall in the average income of consumers,say during a recession,is represented by:

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

When the supply elasticity of a product is 2.5,a 10 percent decrease in price will _ the quantity supplied of the product by _ percent.

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x.Assume that P = $8,I = 200,and P_x= $10. -Given the above equation,the price elasticity of demand for noodles is _____.