Question 1

A change in consumers' income levels:

Accepted Answer

A) changes demand. 
B) changes supply. 
C) changes price. 
D) creates cross-price elasticity. 
A) changes demand. 
B) changes supply. 
C) changes price. 
D) creates cross-price elasticity. A

Question 2

If the slope of the demand curve is -0.167,price is $8 and quantity demanded is 12 units,then demand for this good is:

Accepted Answer

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

Question 3

Suppose that the company that owns all of the vending machines on your campus has doubled the price of a can of soda.They notice that they are selling approximately 15% fewer sodas.Price elasticity of demand for sodas from the campus vending machines is:

Accepted Answer

A) inelastic 
B) unitary elastic 
C) elastic 
D) infinite 
A) inelastic 
B) unitary elastic 
C) elastic 
D) infinite A

Question 4

In surveying their alumni,State U's economics department discovered that ramen noodle consumption declined as soon as students graduated and found jobs.One conclusion the survey team might draw from this result is that:

Accepted Answer

A) there is excess demand for ramen noodles. 
B) the equilibrium price for ramen noodles is too high. 
C) college graduates have a high reservation price for ramen noodles. 
D) ramen noodles are an inferior good. 
A) there is excess demand for ramen noodles. 
B) the equilibrium price for ramen noodles is too high. 
C) college graduates have a high reservation price for ramen noodles. 
D) ramen noodles are an inferior good.

Question 5

If income elasticity for a particular good has a negative sign:

Accepted Answer

A) the good is a normal good. 
B) as income increases,consumers will tend to purchase more of the good. 
C) as income increases,consumers will tend to purchase less of the good. 
D) the good is a luxury good. 
A) the good is a normal good. 
B) as income increases,consumers will tend to purchase more of the good. 
C) as income increases,consumers will tend to purchase less of the good. 
D) the good is a luxury good.

Question 6

Oil and oil products remain the main fuel for cars,planes,ships,and power plants.The amount of oil still in the earth is finite.According to this information,the supply of gasoline is relatively _______.

Accepted Answer

A) elastic 
B) inelastic 
C) unitary elastic 
D) perfectly inelastic 
A) elastic 
B) inelastic 
C) unitary elastic 
D) perfectly inelastic

Question 7

Big-ticket items such as refrigerators have a(n)_____ price elasticity of demand compared to low budget items such as paper towels.

Accepted Answer

A) higher 
B) lower 
C) very low 
D) equal 
A) higher 
B) lower 
C) very low 
D) equal

Question 8

Suppose that the price elasticity of supply for the Hope Diamond is zero.Therefore,the supply curve for the Hope Diamond is:

Accepted Answer

A) elastic. 
B) perfectly inelastic. 
C) unitary elastic. 
D) perfectly elastic. 
A) elastic. 
B) perfectly inelastic. 
C) unitary elastic. 
D) perfectly elastic.

Question 9

The following graph depicts demand.  
Refer to the figure above.The price elasticity of demand at point C is:

Accepted Answer

A) 3/16. 
B) 16/3. 
C) 3/4. 
D) 3/8. 
A) 3/16. 
B) 16/3. 
C) 3/4. 
D) 3/8.

Question 10

Suppose that a new drug has been approved to treat a life-threatening disease.Demand for that drug is shown on the graph below.Prior to approval of this drug,the only treatment for this condition was non-prescription pain relief.Demand for one brand of non-prescription pain reliever is also shown on the graph below.  
Refer to the figure above.The manufacturer of the new drug would _______ total revenue by increasing the price from $15 to $25.

Accepted Answer

A) increase 
B) decrease,but continue to earn some 
C) experience no change 
D) completely eliminate 
A) increase 
B) decrease,but continue to earn some 
C) experience no change 
D) completely eliminate

Question 11

Lakeville is a small community that completely surrounds a scenic lake up north.Lakeville's zoning regulations require that residential lots have at least one hundred feet of frontage,or shoreline,on the lake.The total shoreline of the lake is 5,000 feet.
Assuming that the zoning regulations in Lakeville remain enforced,elasticity of supply of lakefront property is,

Accepted Answer

A) infinite at a quantity of 50. 
B) greater than zero at quantities less than 50 and zero at quantity of 50. 
C) less than zero at quantities through 100. 
D) positive for all quantities. 
A) infinite at a quantity of 50. 
B) greater than zero at quantities less than 50 and zero at quantity of 50. 
C) less than zero at quantities through 100. 
D) positive for all quantities.

Question 12

Suppose that the short run price elasticity of demand for electricity is 0.03 and the long run price elasticity of demand is 1.2.One would classify the short run elasticity as being ___________ and the long run elasticity as being ____________.

Accepted Answer

A) elastic;elastic 
B) elastic;inelastic 
C) inelastic;unitary elastic 
D) inelastic;elastic 
A) elastic;elastic 
B) elastic;inelastic 
C) inelastic;unitary elastic 
D) inelastic;elastic

Question 13

Price elasticity of demand for transportation generally is:

Accepted Answer

A) the same as price elasticity of the demand for bus tickets. 
B) greater than price elasticity of the demand for bus tickets. 
C) less than price elasticity of the demand for bus tickets. 
D) greater than price elasticity of the demand for bus tickets when bus tickets are expensive,but less than price elasticity of the demand for bus tickets when the prices of bus tickets fall. 
A) the same as price elasticity of the demand for bus tickets. 
B) greater than price elasticity of the demand for bus tickets. 
C) less than price elasticity of the demand for bus tickets. 
D) greater than price elasticity of the demand for bus tickets when bus tickets are expensive,but less than price elasticity of the demand for bus tickets when the prices of bus tickets fall.

Question 14

Suppose that the company that owns all of the vending machines on your campus has doubled the price of a can of soda,but they still sell almost the same number of sodas per day because:

Accepted Answer

A) students do not have good nutritional information. 
B) soda purchases represent a large fraction of students' budgets. 
C) there are few other places to purchase soda on campus. 
D) price elasticity of demand for soda is almost unitary. 
A) students do not have good nutritional information. 
B) soda purchases represent a large fraction of students' budgets. 
C) there are few other places to purchase soda on campus. 
D) price elasticity of demand for soda is almost unitary.

Question 15

Price elasticity of demand is _______ the slope of the demand curve.

Accepted Answer

A) not related to 
B) inversely related to 
C) positively related to 
D) equal to 
A) not related to 
B) inversely related to 
C) positively related to 
D) equal to

Question 16

If the demand for a good is elastic,that good is likely to have:

Accepted Answer

A) many close complements. 
B) few close complements. 
C) many close substitutes. 
D) few close substitutes. 
A) many close complements. 
B) few close complements. 
C) many close substitutes. 
D) few close substitutes.

Question 17

Price elasticity of demand is often expressed as a positive number because:

Accepted Answer

A) using the formula yields a positive number. 
B) demand has a positive slope. 
C) it's convenient to use absolute values even though the formula yields non-positive numbers. 
D) both the numerator and the denominator in the formula are negative. 
A) using the formula yields a positive number. 
B) demand has a positive slope. 
C) it's convenient to use absolute values even though the formula yields non-positive numbers. 
D) both the numerator and the denominator in the formula are negative.

Question 18

For which of the following products is income elasticity likely to be greatest?

Accepted Answer

A) Salt 
B) Groceries 
C) Airplane travel 
D) Blue jeans 
A) Salt 
B) Groceries 
C) Airplane travel 
D) Blue jeans

Question 19

In 1985 a desert community stopped pumping from a 1000 foot well because it had run dry.In 2005 the price of water doubled.The community then drilled the well deeper and started pumping again.In this community,

Accepted Answer

A) the supply of water is perfectly inelastic because it is a finite resource. 
B) water production faces increasing opportunity costs. 
C) markets cannot reach equilibrium because there is a persistent shortage of water. 
D) higher water prices can reduce quantity demanded,but cannot increase quantity supplied. 
A) the supply of water is perfectly inelastic because it is a finite resource. 
B) water production faces increasing opportunity costs. 
C) markets cannot reach equilibrium because there is a persistent shortage of water. 
D) higher water prices can reduce quantity demanded,but cannot increase quantity supplied.

Question 20

If consumers completely cease purchasing a product when its price increases by any amount,demand is classified as:

Accepted Answer

A) elastic. 
B) perfectly inelastic. 
C) unitary elastic. 
D) perfectly elastic. 
A) elastic. 
B) perfectly inelastic. 
C) unitary elastic. 
D) perfectly elastic.

Exam 4: Elasticity

A change in consumers' income levels:

If the slope of the demand curve is -0.167,price is $8 and quantity demanded is 12 units,then demand for this good is:

Suppose that the company that owns all of the vending machines on your campus has doubled the price of a can of soda.They notice that they are selling approximately 15% fewer sodas.Price elasticity of demand for sodas from the campus vending machines is:

In surveying their alumni,State U's economics department discovered that ramen noodle consumption declined as soon as students graduated and found jobs.One conclusion the survey team might draw from this result is that:

If income elasticity for a particular good has a negative sign:

Oil and oil products remain the main fuel for cars,planes,ships,and power plants.The amount of oil still in the earth is finite.According to this information,the supply of gasoline is relatively _______.

Big-ticket items such as refrigerators have a(n)_____ price elasticity of demand compared to low budget items such as paper towels.

Suppose that the price elasticity of supply for the Hope Diamond is zero.Therefore,the supply curve for the Hope Diamond is:

The following graph depicts demand. Refer to the figure above.The price elasticity of demand at point C is:

Suppose that the short run price elasticity of demand for electricity is 0.03 and the long run price elasticity of demand is 1.2.One would classify the short run elasticity as being ___________ and the long run elasticity as being ____________.

Price elasticity of demand for transportation generally is:

Suppose that the company that owns all of the vending machines on your campus has doubled the price of a can of soda,but they still sell almost the same number of sodas per day because:

Price elasticity of demand is _______ the slope of the demand curve.

If the demand for a good is elastic,that good is likely to have:

Price elasticity of demand is often expressed as a positive number because:

For which of the following products is income elasticity likely to be greatest?

In 1985 a desert community stopped pumping from a 1000 foot well because it had run dry.In 2005 the price of water doubled.The community then drilled the well deeper and started pumping again.In this community,

If consumers completely cease purchasing a product when its price increases by any amount,demand is classified as:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

The Environment, Health, and Safety

Public Goods and Tax Policy

Spending, Income, and GDP

Inflation and the Price Level

Wages and Unemployment

Economic Growth

Saving, Capital Formation, and Financial Markets

Money, Prices, and the Financial System

Short-Term Economic Fluctuations

Spending, Output, and Fiscal Policy

Monetary Policy and the Federal Reserve

Aggregate Demand, Aggregate Supply, and Business Cycles

Macroeconomic Policy

Exchange Rates, International Trade, and Capital Flows

Filters

Suppose that the short run price elasticity of demand for electricity is 0.03 and the long run price elasticity of demand is 1.2.One would classify the short run elasticity as being _ and the long run elasticity as being __.