Question 1

The table below shows the demand schedule for museum admissions in a small city.
   TABLE 4-1
-Refer to Table 4-1.Between the prices of $2 and $4 the price elasticity of demand is

Accepted Answer

A) 1/3. 
B) 2/3. 
C) 1. 
D) 2. 
E) 3. 
A) 1/3. 
B) 2/3. 
C) 1. 
D) 2. 
E) 3.

Question 2

The table below shows the demand schedule for museum admissions in a small city.
   TABLE 4-1
-Refer to Table 4-1.Between the prices of $4 and $6 the price elasticity of demand is

Accepted Answer

A) 0.50. 
B) 0.71. 
C) 1.00. 
D) 1.40. 
E) 0.40. 
A) 0.50. 
B) 0.71. 
C) 1.00. 
D) 1.40. 
E) 0.40.

Question 3

If household expenditures on electricity remain constant when the price of electricity increases,the price elasticity for electricity is

Accepted Answer

A) greater than one (demand is elastic). 
B) less than one (demand is inelastic). 
C) one (demand is unit elastic). 
D) exactly zero. 
E) not determinable from the information given. 
A) greater than one (demand is elastic). 
B) less than one (demand is inelastic). 
C) one (demand is unit elastic). 
D) exactly zero. 
E) not determinable from the information given.

Question 4

If the price elasticity of demand is 0.5,then a 10% increase in price results in a

Accepted Answer

A) 50% reduction in quantity demanded. 
B) 5% increase in quantity demanded. 
C) 5% decrease in total revenues. 
D) 5% decrease in quantity demanded. 
E) 0.5% decrease in quantity demanded. 
A) 50% reduction in quantity demanded. 
B) 5% increase in quantity demanded. 
C) 5% decrease in total revenues. 
D) 5% decrease in quantity demanded. 
E) 0.5% decrease in quantity demanded.

Question 5

A perfectly horizontal demand curve shows that the price elasticity of demand is

Accepted Answer

A) zero. 
B) unity. 
C) less than one. 
D) infinite. 
E) not defined. 
A) zero. 
B) unity. 
C) less than one. 
D) infinite. 
E) not defined.

Question 6

If the total expenditure on perfume increases when the price of perfume falls,the price elasticity of demand is

Accepted Answer

A) greater than one (demand is elastic). 
B) less than one (demand is inelastic). 
C) unity (demand is unit elastic). 
D) exactly zero. 
E) not determinable from the information given. 
A) greater than one (demand is elastic). 
B) less than one (demand is inelastic). 
C) unity (demand is unit elastic). 
D) exactly zero. 
E) not determinable from the information given.

Question 7

There have been proposals that a tax be imposed on sugar-laden soft drinks in an attempt to reduce their consumption.Assume for simplicity that all bottled soft drinks are the same size.Suppose the initial market equilibrium is P = $2.00 and Q = 1000.   FIGURE 4-4
-Refer to Figure 4-4.Suppose the government imposes a tax of $0.60 per soft drink purchased.Given the change in total expenditure on soft drinks after imposition of the excise tax,what do we know about the price elasticity of demand (η)for soft drinks?

Accepted Answer

A) η is equal to 1 
B) η is equal to 0 
C) η is greater than 1 
D) η is less than 1 
E) There is not enough information to determine. 
A) η is equal to 1 
B) η is equal to 0 
C) η is greater than 1 
D) η is less than 1 
E) There is not enough information to determine.

Question 8

FIGURE 4-2
-Refer to Figure 4-2.In diagram 2,the price elasticity of demand is

Accepted Answer

A) 0. 
B) less than -1. 
C) exactly 1. 
D) greater than 1. 
E) infinity. 
A) 0. 
B) less than -1. 
C) exactly 1. 
D) greater than 1. 
E) infinity.

Question 9

The price elasticity of demand measures the responsiveness of

Accepted Answer

A) quantity demanded to changes in the price. 
B) the price to changes in quantity demanded. 
C) demand to supply changes. 
D) supply to demand changes. 
E) equilibrium changes. 
A) quantity demanded to changes in the price. 
B) the price to changes in quantity demanded. 
C) demand to supply changes. 
D) supply to demand changes. 
E) equilibrium changes.

Question 10

There have been proposals that a tax be imposed on sugar-laden soft drinks in an attempt to reduce their consumption.Assume for simplicity that all bottled soft drinks are the same size.Suppose the initial market equilibrium is P = $2.00 and Q = 1000.   FIGURE 4-4
-Refer to Figure 4-4.Suppose the government imposes a tax of $0.60 per soft drink purchased.The price paid by the consumer becomes

Accepted Answer

A) $1.80. 
B) $2.00. 
C) $2.20. 
D) $2.40. 
E) $2.60. 
A) $1.80. 
B) $2.00. 
C) $2.20. 
D) $2.40. 
E) $2.60.

Question 11

Which of the following statements about price elasticity of demand is true?

Accepted Answer

A) It is greater than one if the percentage increase in the commodity's price is greater than the percentage decline in quantity demanded. 
B) It is very small when good substitutes are readily available for the commodity. 
C) It usually increases over time. 
D) It is a positive number because price and quantity demanded move in the same direction. 
E) It is higher for an entire group of related products than it is for a particular product in that group. 
A) It is greater than one if the percentage increase in the commodity's price is greater than the percentage decline in quantity demanded. 
B) It is very small when good substitutes are readily available for the commodity. 
C) It usually increases over time. 
D) It is a positive number because price and quantity demanded move in the same direction. 
E) It is higher for an entire group of related products than it is for a particular product in that group.

Question 12

Which of the following illustrates elastic demand?

Accepted Answer

A) A 5% increase in price causes a 2.5% decrease in quantity demanded. 
B) A 5% increase in price causes a 10% decrease in quantity demanded. 
C) a price elasticity of 0.8 
D) a price elasticity of 1.0 
E) A 10% increase in price causes a 10% reduction in quantity demanded. 
A) A 5% increase in price causes a 2.5% decrease in quantity demanded. 
B) A 5% increase in price causes a 10% decrease in quantity demanded. 
C) a price elasticity of 0.8 
D) a price elasticity of 1.0 
E) A 10% increase in price causes a 10% reduction in quantity demanded.

Question 13

The imposition of an excise tax usually causes the price paid by consumers to ________,while the price received by sellers ________.

Accepted Answer

A) rise; remains unchanged 
B) rise; falls 
C) rise; rises 
D) fall; remains unchanged 
E) fall; falls 
A) rise; remains unchanged 
B) rise; falls 
C) rise; rises 
D) fall; remains unchanged 
E) fall; falls

Question 14

The imposition of an excise tax will cause the least burden on consumers when demand is

Accepted Answer

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

Question 15

If the total expenditure on clothing decreases when the price of clothing falls,the price elasticity of demand is

Accepted Answer

A) greater than one (demand is elastic). 
B) less than one (demand is inelastic). 
C) unity (demand is unit elastic). 
D) exactly zero. 
E) not determinable from the information given. 
A) greater than one (demand is elastic). 
B) less than one (demand is inelastic). 
C) unity (demand is unit elastic). 
D) exactly zero. 
E) not determinable from the information given.

Question 16

If the income elasticity of demand for a good is 0.75,a 25% increase in income results in

Accepted Answer

A) an 18.75% increase in quantity demanded. 
B) a 3% increase in quantity demanded. 
C) a 0.1875% increase in quantity demanded. 
D) a 3% decrease in quantity demanded. 
E) There is not enough information to answer. 
A) an 18.75% increase in quantity demanded. 
B) a 3% increase in quantity demanded. 
C) a 0.1875% increase in quantity demanded. 
D) a 3% decrease in quantity demanded. 
E) There is not enough information to answer.

Question 17

Suppose you are advising the government on changes in the gasoline market.The current price is $1.00 per litre and the quantity demanded is 2.5 million litres per day.Long-run price elasticity of demand is constant at 0.8.If the supply of gasoline is reduced so that the price rises to $1.50 per litre,then quantity demanded is predicted to fall in the long run by

Accepted Answer

A) 12%,and total expenditure will fall. 
B) 32%,and total expenditure will rise. 
C) 15%,and total expenditure will rise. 
D) 15%,and total expenditure will fall. 
E) 50%,and total expenditure will rise. 
A) 12%,and total expenditure will fall. 
B) 32%,and total expenditure will rise. 
C) 15%,and total expenditure will rise. 
D) 15%,and total expenditure will fall. 
E) 50%,and total expenditure will rise.

Question 18

Suppose a fast-food chain determines that the price elasticity of demand for its hamburgers is 1.7,and the price of the hamburger is currently $4.00.What will be the effect on quantity demanded and total expenditure on this chain's hamburgers if the price is increased to $6.00?

Accepted Answer

A) Quantity demanded will fall by 68% and total expenditure will decrease. 
B) Quantity demanded will fall by 11.76% and total expenditure will decrease. 
C) Quantity demanded will fall by 17% and total expenditure will increase. 
D) Quantity demanded will fall by 1.7% and total expenditure will increase. 
E) Quantity demanded will fall by 34% and total expenditure will decrease. 
A) Quantity demanded will fall by 68% and total expenditure will decrease. 
B) Quantity demanded will fall by 11.76% and total expenditure will decrease. 
C) Quantity demanded will fall by 17% and total expenditure will increase. 
D) Quantity demanded will fall by 1.7% and total expenditure will increase. 
E) Quantity demanded will fall by 34% and total expenditure will decrease.

Question 19

Demand Schedule for Ski Tickets
   TABLE 4-2
-Refer to Table 4-2.Total expenditure for ski tickets reaches a maximum at a price/quantity demanded combination of

Accepted Answer

A) $30/90. 
B) $60/600. 
C) $100/200. 
D) $20/1000. 
E) $80/400. 
A) $30/90. 
B) $60/600. 
C) $100/200. 
D) $20/1000. 
E) $80/400.

Question 20

When a product's price has an inverse relationship with total expenditure,then demand has a price elasticity of

Accepted Answer

A) zero. 
B) less than one. 
C) greater than one. 
D) one. 
E) inverse proportions. 
A) zero. 
B) less than one. 
C) greater than one. 
D) one. 
E) inverse proportions.

Exam 4: Elasticity

The table below shows the demand schedule for museum admissions in a small city. TABLE 4-1 -Refer to Table 4-1.Between the prices of $2 and $4 the price elasticity of demand is

The table below shows the demand schedule for museum admissions in a small city. TABLE 4-1 -Refer to Table 4-1.Between the prices of $4 and $6 the price elasticity of demand is

If household expenditures on electricity remain constant when the price of electricity increases,the price elasticity for electricity is

If the price elasticity of demand is 0.5,then a 10% increase in price results in a

A perfectly horizontal demand curve shows that the price elasticity of demand is

If the total expenditure on perfume increases when the price of perfume falls,the price elasticity of demand is

FIGURE 4-2 -Refer to Figure 4-2.In diagram 2,the price elasticity of demand is

The price elasticity of demand measures the responsiveness of

Which of the following statements about price elasticity of demand is true?

Which of the following illustrates elastic demand?

The imposition of an excise tax usually causes the price paid by consumers to ________,while the price received by sellers ________.

The imposition of an excise tax will cause the least burden on consumers when demand is

If the total expenditure on clothing decreases when the price of clothing falls,the price elasticity of demand is

If the income elasticity of demand for a good is 0.75,a 25% increase in income results in

Suppose a fast-food chain determines that the price elasticity of demand for its hamburgers is 1.7,and the price of the hamburger is currently $4.00.What will be the effect on quantity demanded and total expenditure on this chain's hamburgers if the price is increased to $6.00?

Demand Schedule for Ski Tickets TABLE 4-2 -Refer to Table 4-2.Total expenditure for ski tickets reaches a maximum at a price/quantity demanded combination of

When a product's price has an inverse relationship with total expenditure,then demand has a price elasticity of

Economic Issues and Concepts

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Price Controls and Market Efficiency

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From the Short Run to the Long Run: The Adjustment of Factor Prices

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The imposition of an excise tax usually causes the price paid by consumers to ,while the price received by sellers .