Question 1

The cross-price elasticity of two goods that are close substitutes can never be:

Accepted Answer

A) negative. 
B) less than one. 
C) greater than one. 
D) positive. 
A) negative. 
B) less than one. 
C) greater than one. 
D) positive.

Question 2

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 pain reliever 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 3

A demand curve that is drawn as a vertical line illustrates price elasticity equal to:

Accepted Answer

A) 0. 
B) 1. 
C) infinity. 
D) the quantity. 
A) 0. 
B) 1. 
C) infinity. 
D) the quantity.

Question 4

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 main reason for the difference in the slopes of the demand curves is that:

Accepted Answer

A) one drug has many substitutes and the other does not. 
B) one drug is new on the market and the other has been available for a long time. 
C) one drug is heavily regulated by the Food and Drug Administration and the other is not. 
D) one market is in equilibrium and the other is not. 
A) one drug has many substitutes and the other does not. 
B) one drug is new on the market and the other has been available for a long time. 
C) one drug is heavily regulated by the Food and Drug Administration and the other is not. 
D) one market is in equilibrium and the other is not.

Question 5

If the slope of the demand curve is equal to infinity,the price elasticity of demand will be:

Accepted Answer

A) zero. 
B) infinite. 
C) one. 
D) equal to the price of the good. 
A) zero. 
B) infinite. 
C) one. 
D) equal to the price of the good.

Question 6

Price elasticity of demand is a measure of:

Accepted Answer

A) consumer response to a change in a good's price. 
B) a market's ability to restore equilibrium after a change in a good's price. 
C) the demand for a good or service. 
D) consumer response to excess demand. 
A) consumer response to a change in a good's price. 
B) a market's ability to restore equilibrium after a change in a good's price. 
C) the demand for a good or service. 
D) consumer response to excess demand.

Question 7

When the price of NBA ticket is $25 each,30,000 tickets are sold every game.After the price rises to $30 each,20,000 tickets are sold every game.At the original price,the demand for NBA ticket is:

Accepted Answer

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

Question 8

The price elasticity of supply at a point is:

Accepted Answer

A) the percentage change in quantity supplied divided by the percentage change in price. 
B) the percentage change in price divided by the percentage change in quantity supplied. 
C) the change in quantity supplied divided by the change in price. 
D) the change in price divided by the change in quantity supplied. 
A) the percentage change in quantity supplied divided by the percentage change in price. 
B) the percentage change in price divided by the percentage change in quantity supplied. 
C) the change in quantity supplied divided by the change in price. 
D) the change in price divided by the change in quantity supplied.

Question 9

Suppose two demand curves have a point in common.With respect to price at that point,demand shown by the steeper curve will be _______ the less steep curve.

Accepted Answer

A) more elastic than 
B) less elastic than 
C) as elastic as 
D) more likely to be unitary than 
A) more elastic than 
B) less elastic than 
C) as elastic as 
D) more likely to be unitary than

Question 10

If the price of plane tickets increased,more people might choose to travel by train.If this happened,you would know that:

Accepted Answer

A) plane tickets are now an inferior good. 
B) the cross-price elasticity between plane tickets and train tickets is positive. 
C) the cross-price elasticity between plane tickets and train tickets is negative. 
D) plane tickets and train tickets are complements. 
A) plane tickets are now an inferior good. 
B) the cross-price elasticity between plane tickets and train tickets is positive. 
C) the cross-price elasticity between plane tickets and train tickets is negative. 
D) plane tickets and train tickets are complements.

Question 11

When calculating price elasticity of demand,if the numerator is positive,the denominator is:

Accepted Answer

A) always greater than one. 
B) always greater than zero. 
C) sometimes positive and sometimes negative. 
D) always less than zero. 
A) always greater than one. 
B) always greater than zero. 
C) sometimes positive and sometimes negative. 
D) always less than zero.

Question 12

The change in quantity supplied that results from a change in price is known as the:

Accepted Answer

A) cross-price elasticity of supply. 
B) slope of the supply curve. 
C) price elasticity of supply. 
D) cross-price elasticity of demand. 
A) cross-price elasticity of supply. 
B) slope of the supply curve. 
C) price elasticity of supply. 
D) cross-price elasticity of demand.

Question 13

When the price of lettuce rises,the demand for salad dressing _______ because these two goods are complements.

Accepted Answer

A) increases 
B) decreases 
C) remains the same 
D) becomes more inelastic 
A) increases 
B) decreases 
C) remains the same 
D) becomes more inelastic

Question 14

If the price elasticity of demand for chicken is 2,a 20% decrease in the price of chicken will lead to a:

Accepted Answer

A) 10% decrease in the quantity demanded of chicken. 
B) 10% increase in the quantity demanded of chicken. 
C) 40% decrease in the quantity demanded of chicken. 
D) 40% increase in the quantity demanded of chicken. 
A) 10% decrease in the quantity demanded of chicken. 
B) 10% increase in the quantity demanded of chicken. 
C) 40% decrease in the quantity demanded of chicken. 
D) 40% increase in the quantity demanded of chicken.

Question 15

Suppose the price price P gives us a price elasticity of demand equal to 1.It is on the ______ portion of the demand curve.

Accepted Answer

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

Question 16

If a product has lots of substitutes:

Accepted Answer

A) its income elasticity will be high. 
B) its price elasticity of demand will be low. 
C) the cross-price elasticity among those substitutes will be negative. 
D) the cross-price elasticity among those substitutes will be positive. 
A) its income elasticity will be high. 
B) its price elasticity of demand will be low. 
C) the cross-price elasticity among those substitutes will be negative. 
D) the cross-price elasticity among those substitutes will be positive.

Question 17

The responsiveness of quantity demanded for one good when the price of a different good changes is measured by the:

Accepted Answer

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

Question 18

Suppose that each serving of Mac & Cheese costs exactly $0.50 to make no matter how many servings are produced.This means that the price elasticity of supply for Mac & Cheese is ______ and the supply is _______.

Accepted Answer

A) one;perfectly inelastic 
B) zero;perfectly elastic 
C) infinity;perfectly inelastic 
D) infinity;perfectly elastic 
A) one;perfectly inelastic 
B) zero;perfectly elastic 
C) infinity;perfectly inelastic 
D) infinity;perfectly elastic

Question 19

If a one percent increase in the price of oranges leads to a five percent increase in the quantity supplied,the price elasticity of supply for oranges is ______.

Accepted Answer

A) 1/5 
B) 1/2 
C) 5 
D) 2 
A) 1/5 
B) 1/2 
C) 5 
D) 2

Question 20

Small budget items such as soap have ______ price elasticity of demand compared to big-ticket items such as flat-screen TVs.

Accepted Answer

A) higher 
B) lower 
C) very high 
D) the same 
A) higher 
B) lower 
C) very high 
D) the same

Exam 4: Elasticity

The cross-price elasticity of two goods that are close substitutes can never be:

A demand curve that is drawn as a vertical line illustrates price elasticity equal to:

If the slope of the demand curve is equal to infinity,the price elasticity of demand will be:

Price elasticity of demand is a measure of:

When the price of NBA ticket is $25 each,30,000 tickets are sold every game.After the price rises to $30 each,20,000 tickets are sold every game.At the original price,the demand for NBA ticket is:

The price elasticity of supply at a point is:

Suppose two demand curves have a point in common.With respect to price at that point,demand shown by the steeper curve will be _______ the less steep curve.

If the price of plane tickets increased,more people might choose to travel by train.If this happened,you would know that:

When calculating price elasticity of demand,if the numerator is positive,the denominator is:

The change in quantity supplied that results from a change in price is known as the:

When the price of lettuce rises,the demand for salad dressing _______ because these two goods are complements.

If the price elasticity of demand for chicken is 2,a 20% decrease in the price of chicken will lead to a:

Suppose the price price P gives us a price elasticity of demand equal to 1.It is on the ______ portion of the demand curve.

If a product has lots of substitutes:

The responsiveness of quantity demanded for one good when the price of a different good changes is measured by the:

Suppose that each serving of Mac & Cheese costs exactly $0.50 to make no matter how many servings are produced.This means that the price elasticity of supply for Mac & Cheese is ______ and the supply is _______.

If a one percent increase in the price of oranges leads to a five percent increase in the quantity supplied,the price elasticity of supply for oranges is ______.

Small budget items such as soap have ______ price elasticity of demand compared to big-ticket items such as flat-screen TVs.

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 each serving of Mac & Cheese costs exactly $0.50 to make no matter how many servings are produced.This means that the price elasticity of supply for Mac & Cheese is and the supply is _.