Question 1

The elasticity of supply for a given commodity is calculated as

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 2

Consider the following data for a hypothetical economy.
   TABLE 4-3
-Refer to Table 4-3.The income elasticity of demand for gasoline in this economy is

Accepted Answer

A) 6.0. 
B) 0.5. 
C) 0.6. 
D) 8.3. 
E) 1.2. 
A) 6.0. 
B) 0.5. 
C) 0.6. 
D) 8.3. 
E) 1.2.

Question 3

FIGURE 4-2
-Refer to Figure 4-2.In diagram 3,the elasticity of demand between prices $10 and $20 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 4

Suppose that the quantity demanded of a good rises from 40 units to 60 units per month when the price falls from $1.05 to 95 cents per unit.The price elasticity of demand for this product is

Accepted Answer

A) 0.5. 
B) 1.0. 
C) 1.5. 
D) 2.0. 
E) 4.0. 
A) 0.5. 
B) 1.0. 
C) 1.5. 
D) 2.0. 
E) 4.0.

Question 5

Rania is selling boxes of cookies door to door in her neighbourhood.At a price of $10 per box she sold 40 boxes per day.When the price was reduced to $4 per box she sold 100 boxes per day.Assuming that the demand conditions were unchanged,what is the price elasticity of demand for Rania's cookies?

Accepted Answer

A) -1.7 
B) 0 
C) 0.85 
D) 1 
E) 1.17 
A) -1.7 
B) 0 
C) 0.85 
D) 1 
E) 1.17

Question 6

Which of the following tends to be true of the income elasticity of demand for food?

Accepted Answer

A) It tends to be well below unity only at low levels of income. 
B) It tends to be well above unity only at high levels of income. 
C) At low levels of income,it tends to be fairly high; but as the level of income rises,it tends to fall. 
D) It tends to remain fairly constant at all levels of income. 
E) It is usually zero,since we can only eat so much. 
A) It tends to be well below unity only at low levels of income. 
B) It tends to be well above unity only at high levels of income. 
C) At low levels of income,it tends to be fairly high; but as the level of income rises,it tends to fall. 
D) It tends to remain fairly constant at all levels of income. 
E) It is usually zero,since we can only eat so much.

Question 7

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 $8 and $10,the 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 8

If pizza and beer are complementary goods,we can conclude that

Accepted Answer

A) the income elasticity of demand is positive. 
B) their cross-elasticity of demand is positive. 
C) both goods are inferior goods. 
D) the income elasticity of demand is negative. 
E) their cross-elasticity of demand is negative. 
A) the income elasticity of demand is positive. 
B) their cross-elasticity of demand is positive. 
C) both goods are inferior goods. 
D) the income elasticity of demand is negative. 
E) their cross-elasticity of demand is negative.

Question 9

Suppose an increase in world demand for potash (used in the production of fertilizer)increases the price by 22 percent.Annual Canadian production increases by 33 percent.What is the elasticity of supply of Canadian potash?

Accepted Answer

A) 0.22 
B) 0.33 
C) 0.67 
D) 1.0 
E) 1.5 
A) 0.22 
B) 0.33 
C) 0.67 
D) 1.0 
E) 1.5

Question 10

Which of the following illustrates elastic demand?

Accepted Answer

A) A 10% increase in price causes a 5% decrease in quantity demanded. 
B) A 10% increase in price causes a 20% 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 10% increase in price causes a 5% decrease in quantity demanded. 
B) A 10% increase in price causes a 20% 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 11

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 $8 and $6 the price elasticity of demand is

Accepted Answer

A) 0.5. 
B) 0.71. 
C) 1.00. 
D) 1.40. 
E) 0.40. 
A) 0.5. 
B) 0.71. 
C) 1.00. 
D) 1.40. 
E) 0.40.

Question 12

Suppose a decrease in world demand for potash (used in the production of fertilizer)decreases the price by 5 percent.Annual Canadian production decreases by 2 percent.What is the elasticity of supply of Canadian potash?

Accepted Answer

A) 0.2 
B) 0.4 
C) 0.5 
D) 1.0 
E) 2.5 
A) 0.2 
B) 0.4 
C) 0.5 
D) 1.0 
E) 2.5

Question 13

Suppose the cross elasticity of demand between two goods,X and Y,is negative.If the price of X decreases,the quantity demanded will

Accepted Answer

A) rise for both goods. 
B) fall for both goods. 
C) rise for X and fall for Y. 
D) fall for X and rise for Y. 
E) not change. 
A) rise for both goods. 
B) fall for both goods. 
C) rise for X and fall for Y. 
D) fall for X and rise for Y. 
E) not change.

Question 14

The elasticity of supply for some product will tend to be larger

Accepted Answer

A) the higher is the elasticity of demand for the product. 
B) the lower is the elasticity of demand for the product. 
C) the harder it is for firms to shift from the production of this product to another. 
D) the easier it is for firms to shift from the production of this product to another. 
E) the less time firms have to adjust to price changes. 
A) the higher is the elasticity of demand for the product. 
B) the lower is the elasticity of demand for the product. 
C) the harder it is for firms to shift from the production of this product to another. 
D) the easier it is for firms to shift from the production of this product to another. 
E) the less time firms have to adjust to price changes.

Question 15

The price of apples at a local market rises from $2.95 to $3.05 per kilogram,and as a result the quantity of oranges that households purchase increases from 3950 to 4050 kilograms per week.The cross-price elasticity is

Accepted Answer

A) -1.33. 
B) -0.75. 
C) 0.75. 
D) 1.33. 
E) 1.5. 
A) -1.33. 
B) -0.75. 
C) 0.75. 
D) 1.33. 
E) 1.5.

Question 16

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 change in total expenditure on soft drinks is

Accepted Answer

A) a decrease of $80. 
B) a decrease of $160. 
C) an increase of $320. 
D) an increase of $480. 
E) No change in total expenditure. 
A) a decrease of $80. 
B) a decrease of $160. 
C) an increase of $320. 
D) an increase of $480. 
E) No change in total expenditure.

Question 17

Suppose an analysis of the possible effects of increases in university tuition fees predicts that a 10% increase in tuition fees will result in a 3% decline in enrolment.What is the implied price elasticity of demand for university attendance?

Accepted Answer

A) 0 
B) 0.3 
C) 3 
D) 7 
E) 10 
A) 0 
B) 0.3 
C) 3 
D) 7 
E) 10

Question 18

Suppose egg producers succeed in permanently raising the price of their product by 15%,and as a result the quantity demanded falls by 15% in the short run.In the long run we can expect the quantity demanded to fall by

Accepted Answer

A) 0%. 
B) 15%. 
C) between 0 and 15%. 
D) more than 15%. 
E) 100%. 
A) 0%. 
B) 15%. 
C) between 0 and 15%. 
D) more than 15%. 
E) 100%.

Question 19

What does the following statement imply about price elasticity of demand? "Consumers unfazed by 400 percent increase in price of table salt - grocers see no change in sales!"

Accepted Answer

A) elasticity of demand for salt is equal to one 
B) demand for salt is elastic 
C) salt is too narrowly defined to determine price elasticity of demand 
D) demand for salt is almost perfectly inelastic in the relevant price range 
E) salt is too broadly defined to determine price elasticity of demand 
A) elasticity of demand for salt is equal to one 
B) demand for salt is elastic 
C) salt is too narrowly defined to determine price elasticity of demand 
D) demand for salt is almost perfectly inelastic in the relevant price range 
E) salt is too broadly defined to determine price elasticity of demand

Question 20

FIGURE 4-2
-Refer to Figure 4-2.Demand is inelastic

Accepted Answer

A) over the entire demand curve in diagram 1. 
B) over the entire demand curve in diagram 3. 
C) over section (a)of the demand curve in diagram 1. 
D) over section (b)of the demand curve in diagram 1. 
E) at the midpoint between sections (a)and (b)of the demand curve in diagram 1. 
A) over the entire demand curve in diagram 1. 
B) over the entire demand curve in diagram 3. 
C) over section (a)of the demand curve in diagram 1. 
D) over section (b)of the demand curve in diagram 1. 
E) at the midpoint between sections (a)and (b)of the demand curve in diagram 1.

Exam 4: Elasticity

The elasticity of supply for a given commodity is calculated as

Consider the following data for a hypothetical economy. TABLE 4-3 -Refer to Table 4-3.The income elasticity of demand for gasoline in this economy is

FIGURE 4-2 -Refer to Figure 4-2.In diagram 3,the elasticity of demand between prices $10 and $20 is

Suppose that the quantity demanded of a good rises from 40 units to 60 units per month when the price falls from $1.05 to 95 cents per unit.The price elasticity of demand for this product is

Rania is selling boxes of cookies door to door in her neighbourhood.At a price of $10 per box she sold 40 boxes per day.When the price was reduced to $4 per box she sold 100 boxes per day.Assuming that the demand conditions were unchanged,what is the price elasticity of demand for Rania's cookies?

Which of the following tends to be true of the income elasticity of demand for food?

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 $8 and $10,the elasticity of demand is

If pizza and beer are complementary goods,we can conclude that

Suppose an increase in world demand for potash (used in the production of fertilizer)increases the price by 22 percent.Annual Canadian production increases by 33 percent.What is the elasticity of supply of Canadian potash?

Which of the following illustrates elastic demand?

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 $8 and $6 the price elasticity of demand is

Suppose a decrease in world demand for potash (used in the production of fertilizer)decreases the price by 5 percent.Annual Canadian production decreases by 2 percent.What is the elasticity of supply of Canadian potash?

Suppose the cross elasticity of demand between two goods,X and Y,is negative.If the price of X decreases,the quantity demanded will

The elasticity of supply for some product will tend to be larger

The price of apples at a local market rises from $2.95 to $3.05 per kilogram,and as a result the quantity of oranges that households purchase increases from 3950 to 4050 kilograms per week.The cross-price elasticity is

Suppose an analysis of the possible effects of increases in university tuition fees predicts that a 10% increase in tuition fees will result in a 3% decline in enrolment.What is the implied price elasticity of demand for university attendance?

Suppose egg producers succeed in permanently raising the price of their product by 15%,and as a result the quantity demanded falls by 15% in the short run.In the long run we can expect the quantity demanded to fall by

What does the following statement imply about price elasticity of demand? "Consumers unfazed by 400 percent increase in price of table salt - grocers see no change in sales!"

FIGURE 4-2 -Refer to Figure 4-2.Demand is inelastic

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