Question 1

The price elasticity of demand depends on the

Accepted Answer

A)  proportion of consumers' budgets spent on the good. 
B)  number of available substitutes. 
C)  extent to which the commodity is a luxury. 
D)  all of the above. 
A)  proportion of consumers' budgets spent on the good. 
B)  number of available substitutes. 
C)  extent to which the commodity is a luxury. 
D)  all of the above.

Question 2

-The figure above illustrates a linear demand curve. By comparing the price elasticity in the $2 to $4 price range with the elasticity in the $8 to $10 range, you can conclude that the elasticity is

Accepted Answer

A)  greater in the $8 to $10 range. 
B)  greater in the $2 to $4 range. 
C)  the same in both price ranges. 
D)  greater in the $8 to $10 range when the price rises but greater in the $2 to $4 range when the price falls. 
A)  greater in the $8 to $10 range. 
B)  greater in the $2 to $4 range. 
C)  the same in both price ranges. 
D)  greater in the $8 to $10 range when the price rises but greater in the $2 to $4 range when the price falls.

Question 3

The price elasticity of demand for oil is estimated at 0.05. This value means a 10 percent increase in the

Accepted Answer

A)  quantity of oil demanded will result from a 0.5 percent increase in the price of oil. 
B)  quantity of oil demanded will result from a 0.5 percent decrease in the price of oil. 
C)  price of oil will increase the quantity of oil demanded by 0.5 percent. 
D)  price of oil will decrease the quantity of oil demanded by 0.5 percent. 
A)  quantity of oil demanded will result from a 0.5 percent increase in the price of oil. 
B)  quantity of oil demanded will result from a 0.5 percent decrease in the price of oil. 
C)  price of oil will increase the quantity of oil demanded by 0.5 percent. 
D)  price of oil will decrease the quantity of oil demanded by 0.5 percent.

Question 4

When the price of oil is $80 per barrel, the quantity of oil supplied is 74 million barrels per day. When the price of oil is $60 per barrel, the quantity of oil supplied is 71 million barrels per day. What is the elasticity of supply of oil? (Use the midpoint method.)

Accepted Answer

The price elasticity of supply = (percen

Question 5

If the price of a soda increases from 75¢ to $1.00 and as a result the quantity demanded of sodas decreases from 10 to 9 per week, the elasticity of demand for sodas equals

Accepted Answer

A)  2.72. 
B)  0.37. 
C)  0.83. 
D)  1.20. 
A)  2.72. 
B)  0.37. 
C)  0.83. 
D)  1.20.

Question 6

A straight-line demand curve with negative slope intersects the horizontal axis at 200 tons per week. The point on the demand curve at which the price elasticity of demand is 1 corresponds to a quantity demanded

Accepted Answer

A)  of 0 tons. 
B)  of 100 tons. 
C)  of 200 tons. 
D)  that would be negative if a negative quantity demanded were possible. 
A)  of 0 tons. 
B)  of 100 tons. 
C)  of 200 tons. 
D)  that would be negative if a negative quantity demanded were possible.

Question 7

If the elasticity of demand for peaches is 1.76 and the elasticity of demand for apples is 1.59, then consumers are

Accepted Answer

A)  more sensitive to a change in the price of peaches than they are to a change in the price of apples. 
B)  less sensitive to a change in the price of peaches than they are to a change in the price of apples. 
C)  more sensitive to a change in the quantity of peaches than they are to a change in the quantity of apples. 
D)  less sensitive to a change in the quantity of peaches than they are to a change in the quantity of apples. 
A)  more sensitive to a change in the price of peaches than they are to a change in the price of apples. 
B)  less sensitive to a change in the price of peaches than they are to a change in the price of apples. 
C)  more sensitive to a change in the quantity of peaches than they are to a change in the quantity of apples. 
D)  less sensitive to a change in the quantity of peaches than they are to a change in the quantity of apples.

Question 8

An important determinant of the price elasticity of supply is

Accepted Answer

A)  whether the good is a durable or a nondurable. 
B)  the time period firms have to adjust to a new price. 
C)  how well consumers like the commodity. 
D)  the proportion of the consumer's total budget spent on the good. 
A)  whether the good is a durable or a nondurable. 
B)  the time period firms have to adjust to a new price. 
C)  how well consumers like the commodity. 
D)  the proportion of the consumer's total budget spent on the good.

Question 9

-Price elasticity of demand is a units-free measure.

Accepted Answer

A) True 
 B)False

Question 10

If addiction makes cigarettes such a necessity, is it correct to think that cigarettes are perfectly inelastic in both supply and demand.

Accepted Answer

Cigarettes might be perfectly inelastic

Question 11

The price elasticity of demand for cigarettes is 0.4. If government wants to reduce smoking by 10 percent, by how much should it raise the price of cigarettes by imposing a tax?

Accepted Answer

A)  by 10 percent 
B)  by 20 percent 
C)  by 25 percent 
D)  by 50 percent 
A)  by 10 percent 
B)  by 20 percent 
C)  by 25 percent 
D)  by 50 percent

Question 12

Which of the following factors will make the demand for a product more elastic?

Accepted Answer

A)  The product has no close substitutes. 
B)  A very small proportion of income is spent on the good. 
C)  A long time period has elapsed since the product's price changed. 
D)  The change in the product's price was unexpected. 
A)  The product has no close substitutes. 
B)  A very small proportion of income is spent on the good. 
C)  A long time period has elapsed since the product's price changed. 
D)  The change in the product's price was unexpected.

Question 13

The income elasticity of demand for bicycles is +10, which implies that bicycles are

Accepted Answer

A)  an inferior good. 
B)  a normal good. 
C)  a substitute good for motorbikes. 
D)  a complement good for motorbikes. 
A)  an inferior good. 
B)  a normal good. 
C)  a substitute good for motorbikes. 
D)  a complement good for motorbikes.

Question 14

For inferior goods, the income elasticity of demand is negative.

Accepted Answer

A) True 
 B)False

Question 15

If the elasticity of supply of TV sets is equal to 3, then a 10 percent increase in the price of a TV will

Accepted Answer

A)  increase the quantity supplied by 3.33 percent. 
B)  increase the quantity supplied by 30.0 percent. 
C)  increase the quantity supplied by 0.33 percent. 
D)  decrease the quantity supplied by 30.0 percent. 
A)  increase the quantity supplied by 3.33 percent. 
B)  increase the quantity supplied by 30.0 percent. 
C)  increase the quantity supplied by 0.33 percent. 
D)  decrease the quantity supplied by 30.0 percent.

Question 16

The demand for a good is more price inelastic if

Accepted Answer

A)  its price is higher. 
B)  the percentage of income spent on it is larger. 
C)  it is a luxury good. 
D)  it has no close substitutes. 
A)  its price is higher. 
B)  the percentage of income spent on it is larger. 
C)  it is a luxury good. 
D)  it has no close substitutes.

Question 17

-The demand curve in the figure above illustrates the demand for a product with a price elasticity of demand

Accepted Answer

A)  equal to zero at all prices. 
B)  equal to infinite at all prices. 
C)  equal to one at all prices. 
D)  that is different at all prices. 
A)  equal to zero at all prices. 
B)  equal to infinite at all prices. 
C)  equal to one at all prices. 
D)  that is different at all prices.

Question 18

Joe's monthly income increases from $1,000 to $2,000. As a result, he decreases the number of his fast food meals from 20 to 5 per month. To Joe, are fast-food meals a normal or an inferior good? What kind of elasticity can tell the answer? Explain.

Accepted Answer

Fast-food meals are an inferio

Question 19

If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price inelastic, she should

Accepted Answer

A)  lower her price to increase the demand and shift the demand curve rightward. 
B)  raise her price because she knows that the quantity demanded will also increase. 
C)  raise her price because she knows that the percentage decrease in the quantity demanded will be smaller than the percentage increase in price. 
D)  lower her price because she knows that the percentage increase in the quantity demanded will be greater than the percentage decrease in price. 
A)  lower her price to increase the demand and shift the demand curve rightward. 
B)  raise her price because she knows that the quantity demanded will also increase. 
C)  raise her price because she knows that the percentage decrease in the quantity demanded will be smaller than the percentage increase in price. 
D)  lower her price because she knows that the percentage increase in the quantity demanded will be greater than the percentage decrease in price.

Question 20

The demand for movies is unit elastic if

Accepted Answer

A)  a 5 percent decrease in the price leads to an infinite increase in the quantity demanded. 
B)  a 5 percent increase in the price leads to a 5 percent decrease in the quantity demanded. 
C)  any increase in the price leads to a 1 percent decrease in the quantity demanded. 
D)  a 5 percent increase in the price leads to a 5 percent increase in total revenue. 
A)  a 5 percent decrease in the price leads to an infinite increase in the quantity demanded. 
B)  a 5 percent increase in the price leads to a 5 percent decrease in the quantity demanded. 
C)  any increase in the price leads to a 1 percent decrease in the quantity demanded. 
D)  a 5 percent increase in the price leads to a 5 percent increase in total revenue.

The price elasticity of demand depends on the

-The figure above illustrates a linear demand curve. By comparing the price elasticity in the $2 to $4 price range with the elasticity in the $8 to $10 range, you can conclude that the elasticity is

The price elasticity of demand for oil is estimated at 0.05. This value means a 10 percent increase in the

When the price of oil is $80 per barrel, the quantity of oil supplied is 74 million barrels per day. When the price of oil is $60 per barrel, the quantity of oil supplied is 71 million barrels per day. What is the elasticity of supply of oil? (Use the midpoint method.)

If the price of a soda increases from 75¢ to $1.00 and as a result the quantity demanded of sodas decreases from 10 to 9 per week, the elasticity of demand for sodas equals

A straight-line demand curve with negative slope intersects the horizontal axis at 200 tons per week. The point on the demand curve at which the price elasticity of demand is 1 corresponds to a quantity demanded

If the elasticity of demand for peaches is 1.76 and the elasticity of demand for apples is 1.59, then consumers are

An important determinant of the price elasticity of supply is

-Price elasticity of demand is a units-free measure.

If addiction makes cigarettes such a necessity, is it correct to think that cigarettes are perfectly inelastic in both supply and demand.

The price elasticity of demand for cigarettes is 0.4. If government wants to reduce smoking by 10 percent, by how much should it raise the price of cigarettes by imposing a tax?

Which of the following factors will make the demand for a product more elastic?

The income elasticity of demand for bicycles is +10, which implies that bicycles are

For inferior goods, the income elasticity of demand is negative.

If the elasticity of supply of TV sets is equal to 3, then a 10 percent increase in the price of a TV will

The demand for a good is more price inelastic if

-The demand curve in the figure above illustrates the demand for a product with a price elasticity of demand

Joe's monthly income increases from $1,000 to $2,000. As a result, he decreases the number of his fast food meals from 20 to 5 per month. To Joe, are fast-food meals a normal or an inferior good? What kind of elasticity can tell the answer? Explain.

If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price inelastic, she should

The demand for movies is unit elastic if

What Is Economics

The Economic Problem

Demand and Supply

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 4: Elasticity

The price elasticity of demand depends on the

-The figure above illustrates a linear demand curve. By comparing the price elasticity in the $2 to $4 price range with the elasticity in the $8 to $10 range, you can conclude that the elasticity is

The price elasticity of demand for oil is estimated at 0.05. This value means a 10 percent increase in the

When the price of oil is $80 per barrel, the quantity of oil supplied is 74 million barrels per day. When the price of oil is $60 per barrel, the quantity of oil supplied is 71 million barrels per day. What is the elasticity of supply of oil? (Use the midpoint method.)

If the price of a soda increases from 75¢ to $1.00 and as a result the quantity demanded of sodas decreases from 10 to 9 per week, the elasticity of demand for sodas equals

A straight-line demand curve with negative slope intersects the horizontal axis at 200 tons per week. The point on the demand curve at which the price elasticity of demand is 1 corresponds to a quantity demanded

If the elasticity of demand for peaches is 1.76 and the elasticity of demand for apples is 1.59, then consumers are

An important determinant of the price elasticity of supply is

-Price elasticity of demand is a units-free measure.

If addiction makes cigarettes such a necessity, is it correct to think that cigarettes are perfectly inelastic in both supply and demand.

The price elasticity of demand for cigarettes is 0.4. If government wants to reduce smoking by 10 percent, by how much should it raise the price of cigarettes by imposing a tax?

Which of the following factors will make the demand for a product more elastic?

The income elasticity of demand for bicycles is +10, which implies that bicycles are

For inferior goods, the income elasticity of demand is negative.

If the elasticity of supply of TV sets is equal to 3, then a 10 percent increase in the price of a TV will

The demand for a good is more price inelastic if

-The demand curve in the figure above illustrates the demand for a product with a price elasticity of demand

Joe's monthly income increases from $1,000 to $2,000. As a result, he decreases the number of his fast food meals from 20 to 5 per month. To Joe, are fast-food meals a normal or an inferior good? What kind of elasticity can tell the answer? Explain.

If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price inelastic, she should

The demand for movies is unit elastic if

What Is Economics

The Economic Problem

Demand and Supply

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters