Question 1

Food and clothing tend to have

Accepted Answer

A)  small income elasticities because consumers,regardless of their incomes,choose to buy relatively constant quantities of these goods. 
B)  small income elasticities because consumers buy proportionately more of both goods at higher income levels than they buy at low income levels. 
C)  large income elasticities because they are necessities. 
D)  large income elasticities because they are relatively inexpensive. 
A)  small income elasticities because consumers,regardless of their incomes,choose to buy relatively constant quantities of these goods. 
B)  small income elasticities because consumers buy proportionately more of both goods at higher income levels than they buy at low income levels. 
C)  large income elasticities because they are necessities. 
D)  large income elasticities because they are relatively inexpensive.

Question 2

A decrease in supply will cause the largest increase in price when

Accepted Answer

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

Question 3

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

A) True 
 B)False

Question 4

If a 30 percent change in price causes a 15 percent change in quantity supplied,then the price elasticity of supply is about

Accepted Answer

A)  0.5,and supply is elastic. 
B)  0.5,and supply is inelastic. 
C)  2,and supply is inelastic. 
D)  2,and supply is elastic. 
A)  0.5,and supply is elastic. 
B)  0.5,and supply is inelastic. 
C)  2,and supply is inelastic. 
D)  2,and supply is elastic.

Question 5

The case of perfectly elastic demand is illustrated by a demand curve that is

Accepted Answer

A)  vertical. 
B)  horizontal. 
C)  downward-sloping but relatively steep. 
D)  downward-sloping but relatively flat. 
A)  vertical. 
B)  horizontal. 
C)  downward-sloping but relatively steep. 
D)  downward-sloping but relatively flat.

Question 6

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

Accepted Answer

A)  raises prices and total revenue in the drug market. 
B)  can increase drug-related crime. 
C)  shifts the demand curve for drugs to the left. 
D)  shifts the supply curve of drugs to the left. 
A)  raises prices and total revenue in the drug market. 
B)  can increase drug-related crime. 
C)  shifts the demand curve for drugs to the left. 
D)  shifts the supply curve of drugs to the left.

Question 7

If two goods are substitutes,their cross-price elasticity will be

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  equal to the difference between the income elasticities of demand for the two goods. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  equal to the difference between the income elasticities of demand for the two goods.

Question 8

Necessities tend to have inelastic demands,whereas luxuries tend to have elastic demands.

Accepted Answer

A) True 
 B)False

Question 9

The price elasticity of demand is defined as the percentage change in price divided by the percentage change in quantity demanded.

Accepted Answer

A) True 
 B)False

Question 10

Table 5-1
  
-Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

Accepted Answer

A)  A is root beer,and B is carbonated beverages. 
B)  A is bicycles,and B is mopeds. 
C)  A is airline tickets in the short run,and B is airline tickets in the long run. 
D)  A is gourmet coffee,and B is dentist's visits. 
A)  A is root beer,and B is carbonated beverages. 
B)  A is bicycles,and B is mopeds. 
C)  A is airline tickets in the short run,and B is airline tickets in the long run. 
D)  A is gourmet coffee,and B is dentist's visits.

Question 11

If the price elasticity of supply is 0.2,and a price increase led to a 3% increase in quantity supplied,then the price increase is about

Accepted Answer

A)  0.07%. 
B)  0.60%. 
C)  6%. 
D)  15%. 
A)  0.07%. 
B)  0.60%. 
C)  6%. 
D)  15%.

Question 12

Because the demand for wheat tends to be inelastic,the development of a new,more productive hybrid wheat would tend to

Accepted Answer

A)  increase the total revenue of wheat farmers. 
B)  decrease the total revenue of wheat farmers. 
C)  decrease the demand for wheat. 
D)  decrease the supply of wheat. 
A)  increase the total revenue of wheat farmers. 
B)  decrease the total revenue of wheat farmers. 
C)  decrease the demand for wheat. 
D)  decrease the supply of wheat.

Question 13

If we observe that when the price of ice cream rises by 10%,ice cream manufacturers increase the quantity supplied of ice cream by 20%,then the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 14

Cross-price elasticity of demand measures how

Accepted Answer

A)  the price of one good changes in response to a change in the price of another good. 
B)  the quantity demanded of one good changes in response to a change in the quantity demanded of another good. 
C)  the quantity demanded of one good changes in response to a change in the price of another good. 
D)  strongly normal or inferior a good is. 
A)  the price of one good changes in response to a change in the price of another good. 
B)  the quantity demanded of one good changes in response to a change in the quantity demanded of another good. 
C)  the quantity demanded of one good changes in response to a change in the price of another good. 
D)  strongly normal or inferior a good is.

Question 15

The flatter the demand curve through a given point,the

Accepted Answer

A)  greater the price elasticity of demand at that point. 
B)  smaller the price elasticity of demand at that point. 
C)  closer the price elasticity of demand will be to the slope of the curve. 
D)  greater the absolute value of the change in total revenue when there is a movement from that point upward and to the left along the demand curve. 
A)  greater the price elasticity of demand at that point. 
B)  smaller the price elasticity of demand at that point. 
C)  closer the price elasticity of demand will be to the slope of the curve. 
D)  greater the absolute value of the change in total revenue when there is a movement from that point upward and to the left along the demand curve.

Question 16

The smaller the price elasticity of demand,the

Accepted Answer

A)  steeper the demand curve will be through a given point. 
B)  flatter the demand curve will be through a given point. 
C)  more strongly buyers respond to a change in price between any two prices P1 and P2. 
D)  smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2. 
A)  steeper the demand curve will be through a given point. 
B)  flatter the demand curve will be through a given point. 
C)  more strongly buyers respond to a change in price between any two prices P1 and P2. 
D)  smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2.

Question 17

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following expressions is valid for the price elasticity of demand?

Accepted Answer

The answer of Which of the following expressions is valid...

Question 19

If the quantity demanded of a certain good responds only slightly to a change in the price of the good,then the

Accepted Answer

A)  demand for the good is said to be elastic. 
B)  demand for the good is said to be inelastic. 
C)  law of demand does not apply to the good. 
D)  demand curve for the good shifts only slightly in response to a change in price. 
A)  demand for the good is said to be elastic. 
B)  demand for the good is said to be inelastic. 
C)  law of demand does not apply to the good. 
D)  demand curve for the good shifts only slightly in response to a change in price.

Question 20

The midpoint method is used to compute elasticity because it

Accepted Answer

A)  automatically computes a positive number instead of a negative number. 
B)  results in an elasticity that is the same as the slope of the demand curve. 
C)  gives the same answer regardless of the direction of change. 
D)  automatically rounds quantities to the nearest whole unit. 
A)  automatically computes a positive number instead of a negative number. 
B)  results in an elasticity that is the same as the slope of the demand curve. 
C)  gives the same answer regardless of the direction of change. 
D)  automatically rounds quantities to the nearest whole unit.

Exam 5: Elasticity and Its Application

Food and clothing tend to have

A decrease in supply will cause the largest increase in price when

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

If a 30 percent change in price causes a 15 percent change in quantity supplied,then the price elasticity of supply is about

The case of perfectly elastic demand is illustrated by a demand curve that is

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

If two goods are substitutes,their cross-price elasticity will be

Necessities tend to have inelastic demands,whereas luxuries tend to have elastic demands.

The price elasticity of demand is defined as the percentage change in price divided by the percentage change in quantity demanded.

Table 5-1 -Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

If the price elasticity of supply is 0.2,and a price increase led to a 3% increase in quantity supplied,then the price increase is about

Because the demand for wheat tends to be inelastic,the development of a new,more productive hybrid wheat would tend to

If we observe that when the price of ice cream rises by 10%,ice cream manufacturers increase the quantity supplied of ice cream by 20%,then the price elasticity of supply is 2.

Cross-price elasticity of demand measures how

The flatter the demand curve through a given point,the

The smaller the price elasticity of demand,the

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Which of the following expressions is valid for the price elasticity of demand?

If the quantity demanded of a certain good responds only slightly to a change in the price of the good,then the

The midpoint method is used to compute elasticity because it

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 Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving,investment,and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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