Question 1

The elasticity of supply is defined as the ____ change in quantity supplied divided by the ____ change in price.

Accepted Answer

A)  total; percentage 
B)  percentage; marginal 
C)  marginal; percentage 
D)  percentage; percentage 
A)  total; percentage 
B)  percentage; marginal 
C)  marginal; percentage 
D)  percentage; percentage D

Question 2

Among the following pairs,which is likely to have the greatest price elasticity of demand? Why?
a.cars or Toyotas
b.electricity usage during a month or during a year
c.cable television or an apartment rental

Accepted Answer

a.The price elasticity of demand is likely greater for Toyotas.The more and better the available substitutes,the greater is the price elasticity of demand.There are many more close substitutes for Toyotas than there are close substitutes for cars in the marketplace.
b.The price elasticity of demand is likely greater for electricity usage over a one-year period than it is over one month's time.Over time,consumers are better able to adjust their habits and thus their energy usage.
c.The price elasticity of demand is higher for an apartment rental than for cable television because rent on an apartment comprises a much greater share of a consumer's budget.

Question 3

A "war on drugs" is waged,and,as a result,a larger quantity of drugs flowing into the United States is seized and more drug traffickers are arrested.If demand for drugs is inelastic,one would expect the total expenditure on drugs to:

Accepted Answer

A)  decrease. 
B)  increase. 
C)  stay constant. 
D)  There is not enough information available to make a determination. 
A)  decrease. 
B)  increase. 
C)  stay constant. 
D)  There is not enough information available to make a determination. B

Question 4

A positive income elasticity of demand for a good

Accepted Answer

A)  means it is a substitute. 
B)  means it is a complement. 
C)  it is a normal good. 
D)  it is an inferior good. 
A)  means it is a substitute. 
B)  means it is a complement. 
C)  it is a normal good. 
D)  it is an inferior good.

Question 5

When demand is relatively inelastic,a 5% increase in price will:

Accepted Answer

A)  increase total revenue by more than 5%. 
B)  increase total revenue by less than 5%. 
C)  decrease total revenue by more than 5%. 
A)  increase total revenue by more than 5%. 
B)  increase total revenue by less than 5%. 
C)  decrease total revenue by more than 5%.

Question 6

The long run demand curve for wheat is likely to be:

Accepted Answer

A)  more elastic than the short run demand curve for wheat. 
B)  more inelastic the short run demand curve for wheat. 
C)  the same as the short run demand curve for wheat. 
D)  more inelastic than the short run supply of wheat. 
A)  more elastic than the short run demand curve for wheat. 
B)  more inelastic the short run demand curve for wheat. 
C)  the same as the short run demand curve for wheat. 
D)  more inelastic than the short run supply of wheat.

Question 7

Arrange the following goods from least to most elastic,explaining your ordering: gasoline,Shell gasoline,and Shell gasoline at a particular gas station.

Accepted Answer

Gasoline is least elastic,since there ar

Question 8

If 400 apple pies are sold at $4 per pie,but 600 apple pies are sold at $3 per pie,we know:

Accepted Answer

A)  that the demand for pies is elastic over that price range. 
B)  that the demand for pies is inelastic over that price range. 
C)  that the demand for pies is unit elastic over that price range. 
D)  nothing about the elasticity of demand. 
A)  that the demand for pies is elastic over that price range. 
B)  that the demand for pies is inelastic over that price range. 
C)  that the demand for pies is unit elastic over that price range. 
D)  nothing about the elasticity of demand.

Question 9

Ceteris paribus,if a 4% increase in price leads to a 6% increase in the quantity supplied,then:

Accepted Answer

A)  supply is elastic. 
B)  supply is unit elastic. 
C)  supply is inelastic. 
D)  the supply curve is perfectly vertical. 
A)  supply is elastic. 
B)  supply is unit elastic. 
C)  supply is inelastic. 
D)  the supply curve is perfectly vertical.

Question 10

A positive income elasticity of demand for a good means:

Accepted Answer

A)  it is a substitute. 
B)  it is a complement. 
C)  it is a normal good. 
D)  it is an inferior good. 
A)  it is a substitute. 
B)  it is a complement. 
C)  it is a normal good. 
D)  it is an inferior good.

Question 11

A recent study at a liberal arts college concluded that demand elasticity is 0.91 for college courses.The administration is considering a tuition increase to help balance the budget.An economist might advise the school to:

Accepted Answer

A)  decrease tuition in order to increase revenue by boosting enrollment. 
B)  increase tuition in order to increase revenue. 
C)  leave tuition unchanged as a change in tuition is unlikely to enhance the school's budget by increasing revenue. 
D)  decrease tuition because demand for courses is elastic. 
A)  decrease tuition in order to increase revenue by boosting enrollment. 
B)  increase tuition in order to increase revenue. 
C)  leave tuition unchanged as a change in tuition is unlikely to enhance the school's budget by increasing revenue. 
D)  decrease tuition because demand for courses is elastic.

Question 12

The income elasticities of Products A and B and their cross-price elasticities with respect to Product C are as follows:   From this information,one can conclude that:

Accepted Answer

A) Product A is inferior,Product B is normal,Product A is a complement to Product C,and Product B is a substitute for Product C. 
B) Product A is normal,Product B is inferior,Product A is a complement to Product C,and Product B is a substitute for Product C. 
C) Product A is normal,Product B is inferior,Product A is a substitute for Product C,and Product B is a complement to Product C. 
D) Product A is inferior,Product B is normal,Product A is a substitute for Product C,and Product B is a complement to Product C. 
A) Product A is inferior,Product B is normal,Product A is a complement to Product C,and Product B is a substitute for Product C. 
B) Product A is normal,Product B is inferior,Product A is a complement to Product C,and Product B is a substitute for Product C. 
C) Product A is normal,Product B is inferior,Product A is a substitute for Product C,and Product B is a complement to Product C. 
D) Product A is inferior,Product B is normal,Product A is a substitute for Product C,and Product B is a complement to Product C.

Question 13

If the supply curve for aspirin is perfectly elastic,a reduction in demand will cause the equilibrium price to:

Accepted Answer

A)  rise and the equilibrium quantity to fall. 
B)  rise and the equilibrium quantity to stay the same. 
C)  fall and the equilibrium quantity to fall. 
D)  stay the same and the equilibrium quantity to fall. 
A)  rise and the equilibrium quantity to fall. 
B)  rise and the equilibrium quantity to stay the same. 
C)  fall and the equilibrium quantity to fall. 
D)  stay the same and the equilibrium quantity to fall.

Question 14

If one is interested in knowing whether or not a product is a normal good,one would be interested in the value of the:

Accepted Answer

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

Question 15

If a small change in price will lead to an infinite change in the quantity demanded,then the demand curve is:

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  inclined. 
D)  non-linear 
A)  horizontal. 
B)  vertical. 
C)  inclined. 
D)  non-linear

Question 16

If the cross price elasticity of demand for fries with respect to hamburgers equals -1.2,then:

Accepted Answer

A)  a 1% increase in the quantity of hamburgers purchased will lead to a 1.2% increase in the price of fries. 
B)  a 10% increase in the price of a hamburger will lead to a 12% increase in the quantity of fries demanded at a given price. 
C)  a 1% decrease in the price of a hamburger will lead to a 1.2% increase in the quantity of fries demanded at a given price. 
D)  a 10% increase in the quantity of hamburgers purchased will lead to a 12% increase in the price of fries. 
A)  a 1% increase in the quantity of hamburgers purchased will lead to a 1.2% increase in the price of fries. 
B)  a 10% increase in the price of a hamburger will lead to a 12% increase in the quantity of fries demanded at a given price. 
C)  a 1% decrease in the price of a hamburger will lead to a 1.2% increase in the quantity of fries demanded at a given price. 
D)  a 10% increase in the quantity of hamburgers purchased will lead to a 12% increase in the price of fries.

Question 17

The price elasticity of demand coefficient for gourmet coffee is estimated to be equal to 1.6.It is expected,therefore,that a 5% increase in price would lead to:

Accepted Answer

A)  a 16% decrease in the quantity of gourmet coffee demanded. 
B)  a 16% increase in the quantity of gourmet coffee demanded. 
C)  an 8% decrease in the quantity of gourmet coffee demanded. 
D)  an 8% increase in the quantity of gourmet coffee demanded. 
A)  a 16% decrease in the quantity of gourmet coffee demanded. 
B)  a 16% increase in the quantity of gourmet coffee demanded. 
C)  an 8% decrease in the quantity of gourmet coffee demanded. 
D)  an 8% increase in the quantity of gourmet coffee demanded.

Question 18

Exhibit 6-4   Refer to Exhibit 6-4.With reference to Graph B,at a price of $5,total revenue equals:

Accepted Answer

A)  $200. 
B)  $300. 
C)  $250. 
D)  $150. 
A)  $200. 
B)  $300. 
C)  $250. 
D)  $150.

Question 19

Exhibit 6-3   Refer to Exhibit 6-3.The graph that best illustrates a perfectly inelastic demand curve is:

Accepted Answer

A) Graph A. 
B) Graph B. 
C) Graph C. 
D) Graph D. 
A) Graph A. 
B) Graph B. 
C) Graph C. 
D) Graph D.

Question 20

The price of a new toy increases from $5 to $7 and the quantity demanded decreases from 12,000 to 6,000 per month as a result.Based on this information,the price elasticity of demand (in absolute terms)is estimated to be equal to:

Accepted Answer

A)  0.5, indicating relatively elastic demand. 
B)  0.5, indicating relatively inelastic demand. 
C)  2.0, indicating relatively elastic demand. 
D)  2.0, indicating relatively inelastic demand. 
A)  0.5, indicating relatively elastic demand. 
B)  0.5, indicating relatively inelastic demand. 
C)  2.0, indicating relatively elastic demand. 
D)  2.0, indicating relatively inelastic demand.

Exam 6: Elasticities

The elasticity of supply is defined as the ____ change in quantity supplied divided by the ____ change in price.

Among the following pairs,which is likely to have the greatest price elasticity of demand? Why? a.cars or Toyotas b.electricity usage during a month or during a year c.cable television or an apartment rental

A "war on drugs" is waged,and,as a result,a larger quantity of drugs flowing into the United States is seized and more drug traffickers are arrested.If demand for drugs is inelastic,one would expect the total expenditure on drugs to:

A positive income elasticity of demand for a good

When demand is relatively inelastic,a 5% increase in price will:

The long run demand curve for wheat is likely to be:

Arrange the following goods from least to most elastic,explaining your ordering: gasoline,Shell gasoline,and Shell gasoline at a particular gas station.

If 400 apple pies are sold at $4 per pie,but 600 apple pies are sold at $3 per pie,we know:

Ceteris paribus,if a 4% increase in price leads to a 6% increase in the quantity supplied,then:

A positive income elasticity of demand for a good means:

A recent study at a liberal arts college concluded that demand elasticity is 0.91 for college courses.The administration is considering a tuition increase to help balance the budget.An economist might advise the school to:

The income elasticities of Products A and B and their cross-price elasticities with respect to Product C are as follows: From this information,one can conclude that:

If the supply curve for aspirin is perfectly elastic,a reduction in demand will cause the equilibrium price to:

If one is interested in knowing whether or not a product is a normal good,one would be interested in the value of the:

If a small change in price will lead to an infinite change in the quantity demanded,then the demand curve is:

If the cross price elasticity of demand for fries with respect to hamburgers equals -1.2,then:

The price elasticity of demand coefficient for gourmet coffee is estimated to be equal to 1.6.It is expected,therefore,that a 5% increase in price would lead to:

Exhibit 6-4 Refer to Exhibit 6-4.With reference to Graph B,at a price of $5,total revenue equals:

Exhibit 6-3 Refer to Exhibit 6-3.The graph that best illustrates a perfectly inelastic demand curve is:

The price of a new toy increases from $5 to $7 and the quantity demanded decreases from 12,000 to 6,000 per month as a result.Based on this information,the price elasticity of demand (in absolute terms)is estimated to be equal to:

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

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The elasticity of supply is defined as the change in quantity supplied divided by the change in price.