Question 1

If the demand for wheat is highly price inelastic,an extraordinarily large crop may reduce farm incomes.

Accepted Answer

A) True 
 B)False

Question 2

(Last Word)Which of the following is not an example of pricing based on group differences in elasticity of demand?

Accepted Answer

A)  Senior-citizen discounts at restaurants and motels. 
B)  Cash rebates for purchases of automobiles. 
C)  Child discounts for admission to theme parks. 
D)  Discounted student prices for visits to museums. 
A)  Senior-citizen discounts at restaurants and motels. 
B)  Cash rebates for purchases of automobiles. 
C)  Child discounts for admission to theme parks. 
D)  Discounted student prices for visits to museums.

Question 3

If the price elasticity of demand for a product is 2.5,then a price cut from $2.00 to $1.80 will:

Accepted Answer

A)  increase the quantity demanded by about 2.5 percent. 
B)  decrease the quantity demanded by about 2.5 percent. 
C)  increase the quantity demanded by about 25 percent. 
D)  increase the quantity demanded by about 250 percent. 
A)  increase the quantity demanded by about 2.5 percent. 
B)  decrease the quantity demanded by about 2.5 percent. 
C)  increase the quantity demanded by about 25 percent. 
D)  increase the quantity demanded by about 250 percent.

Question 4

A perfectly inelastic demand schedule:

Accepted Answer

A)  rises upward and to the right but has a constant slope. 
B)  can be represented by a line parallel to the vertical axis. 
C)  cannot be shown on a two-dimensional graph. 
D)  can be represented by a line parallel to the horizontal axis. 
A)  rises upward and to the right but has a constant slope. 
B)  can be represented by a line parallel to the vertical axis. 
C)  cannot be shown on a two-dimensional graph. 
D)  can be represented by a line parallel to the horizontal axis.

Question 5

Suppose that as the price of Y falls from $2.00 to $1.90,the quantity of Y demanded increases from 110 to 118.Then the price elasticity of demand is:

Accepted Answer

A)  4.00. 
B)  2.09. 
C)  1.45. 
D)  3.94. 
A)  4.00. 
B)  2.09. 
C)  1.45. 
D)  3.94.

Question 6

The state legislature has cut Gigantic State University's appropriations.GSU's Board of Regents decides to increase tuition and fees to compensate for the loss of revenue.The board is assuming that the:

Accepted Answer

A)  demand for education at GSU is elastic. 
B)  demand for education at GSU is inelastic. 
C)  coefficient of price elasticity of demand for education at GSU is unity. 
D)  coefficient of price elasticity of demand for education at GSU is greater than unity. 
A)  demand for education at GSU is elastic. 
B)  demand for education at GSU is inelastic. 
C)  coefficient of price elasticity of demand for education at GSU is unity. 
D)  coefficient of price elasticity of demand for education at GSU is greater than unity.

Question 7

The larger the positive cross elasticity coefficient of demand between products X and Y,the:

Accepted Answer

A)  stronger their complementariness. 
B)  greater their substitutability. 
C)  smaller the price elasticity of demand for both products. 
D)  the less sensitive purchases of each are to increases in income. 
A)  stronger their complementariness. 
B)  greater their substitutability. 
C)  smaller the price elasticity of demand for both products. 
D)  the less sensitive purchases of each are to increases in income.

Question 8

Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent.The coefficient of price elasticity of supply for good X is:

Accepted Answer

A)  negative and therefore X is an inferior good. 
B)  positive and therefore X is a normal good. 
C)  less than 1 and therefore supply is inelastic. 
D)  more than 1 and therefore supply is elastic. 
A)  negative and therefore X is an inferior good. 
B)  positive and therefore X is a normal good. 
C)  less than 1 and therefore supply is inelastic. 
D)  more than 1 and therefore supply is elastic.

Question 9

Answer the question on the basis of the following demand and supply data: $ \begin{array}{cccc}\text {Quantity Demanded}&&
\text {Quantity Supplied}\\underline{\text { Per Month }} &\underline{\text { Price }} &\underline{ \text { Per Month} } \ 30& \$ 8 & 44 \ 36 & 7 & 38 \ 42 & 6 & 30 \ 50 & 5 &  20\end{array} $ Refer to the data.The demand for this product is elastic in the $8-$7 price range.

Accepted Answer

A) True 
 B)False

Question 10

The elasticity of demand for a product is likely to be greater:

Accepted Answer

A)  if the product is a necessity,rather than a luxury good. 
B)  the greater the amount of time over which buyers adjust to a price change. 
C)  the smaller the proportion of one's income spent on the product. 
D)  the smaller the number of substitute products available. 
A)  if the product is a necessity,rather than a luxury good. 
B)  the greater the amount of time over which buyers adjust to a price change. 
C)  the smaller the proportion of one's income spent on the product. 
D)  the smaller the number of substitute products available.

Question 11

Which of the following statements is not correct?

Accepted Answer

A)  If the relative change in price is greater than the relative change in the quantity demanded associated with it,demand is inelastic. 
B)  In the range of prices in which demand is elastic,total revenue will diminish as price decreases. 
C)  Total revenue will not change if price varies within a range where the elasticity coefficient is unity. 
D)  Demand tends to be elastic at high prices and inelastic at low prices. 
A)  If the relative change in price is greater than the relative change in the quantity demanded associated with it,demand is inelastic. 
B)  In the range of prices in which demand is elastic,total revenue will diminish as price decreases. 
C)  Total revenue will not change if price varies within a range where the elasticity coefficient is unity. 
D)  Demand tends to be elastic at high prices and inelastic at low prices.

Question 12

The supply of product X is inelastic (but not perfectly inelastic)if the price of X rises by:

Accepted Answer

A)  5 percent and quantity supplied rises by 7 percent. 
B)  8 percent and quantity supplied rises by 8 percent. 
C)  10 percent and quantity supplied remains the same. 
D)  7 percent and quantity supplied rises by 5 percent. 
A)  5 percent and quantity supplied rises by 7 percent. 
B)  8 percent and quantity supplied rises by 8 percent. 
C)  10 percent and quantity supplied remains the same. 
D)  7 percent and quantity supplied rises by 5 percent.

Question 13

If the elasticity coefficient of supply is 0.7,supply is elastic.

Accepted Answer

A) True 
 B)False

Question 14

The price of product X is reduced from $100 to $90 and,as a result,the quantity demanded increases from 50 to 60 units.Therefore,demand for X in this price range:

Accepted Answer

A)  has declined. 
B)  is of unit elasticity. 
C)  is inelastic. 
D)  is elastic. 
A)  has declined. 
B)  is of unit elasticity. 
C)  is inelastic. 
D)  is elastic.

Question 15

The more time consumers have to adjust to a change in price:

Accepted Answer

A)  the smaller will be the price elasticity of demand. 
B)  the greater will be the price elasticity of demand. 
C)  the more likely the product is a normal good. 
D)  the more likely the product is an inferior good. 
A)  the smaller will be the price elasticity of demand. 
B)  the greater will be the price elasticity of demand. 
C)  the more likely the product is a normal good. 
D)  the more likely the product is an inferior good.

Question 16

Studies show that the demand for gasoline is:

Accepted Answer

A)  price inelastic in the short run but elastic in the long run. 
B)  price inelastic in both the short and long run. 
C)  price elastic in the short run but inelastic in the long run. 
D)  price elastic in both the short and long run. 
A)  price inelastic in the short run but elastic in the long run. 
B)  price inelastic in both the short and long run. 
C)  price elastic in the short run but inelastic in the long run. 
D)  price elastic in both the short and long run.

Question 17

The price elasticity of supply measures how:

Accepted Answer

A)  easily labor and capital can be substituted for one another in the production process. 
B)  responsive the quantity supplied of X is to changes in the price of X. 
C)  responsive the quantity supplied of Y is to changes in the price of X. 
D)  responsive quantity supplied is to a change in incomes. 
A)  easily labor and capital can be substituted for one another in the production process. 
B)  responsive the quantity supplied of X is to changes in the price of X. 
C)  responsive the quantity supplied of Y is to changes in the price of X. 
D)  responsive quantity supplied is to a change in incomes.

Question 18

If a firm's demand for labor is elastic,a union-negotiated wage increase will:

Accepted Answer

A)  necessarily be inflationary. 
B)  cause the firm's total payroll to increase. 
C)  cause the firm's total payroll to decline. 
D)  cause a shortage of labor. 
A)  necessarily be inflationary. 
B)  cause the firm's total payroll to increase. 
C)  cause the firm's total payroll to decline. 
D)  cause a shortage of labor.

Question 19

The price elasticity of demand coefficient measures:

Accepted Answer

A)  buyer responsiveness to price changes. 
B)  the extent to which a demand curve shifts as incomes change. 
C)  the slope of the demand curve. 
D)  how far business executives can stretch their fixed costs. 
A)  buyer responsiveness to price changes. 
B)  the extent to which a demand curve shifts as incomes change. 
C)  the slope of the demand curve. 
D)  how far business executives can stretch their fixed costs.

Question 20

The supply curve of antique reproductions is:

Accepted Answer

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

Exam 6: Elasticity

If the demand for wheat is highly price inelastic,an extraordinarily large crop may reduce farm incomes.

(Last Word)Which of the following is not an example of pricing based on group differences in elasticity of demand?

If the price elasticity of demand for a product is 2.5,then a price cut from $2.00 to $1.80 will:

A perfectly inelastic demand schedule:

Suppose that as the price of Y falls from $2.00 to $1.90,the quantity of Y demanded increases from 110 to 118.Then the price elasticity of demand is:

The state legislature has cut Gigantic State University's appropriations.GSU's Board of Regents decides to increase tuition and fees to compensate for the loss of revenue.The board is assuming that the:

The larger the positive cross elasticity coefficient of demand between products X and Y,the:

Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent.The coefficient of price elasticity of supply for good X is:

Answer the question on the basis of the following demand and supply data: Quantity Demanded Quantity Supplied 30 \ 8 44 36 7 38 42 6 30 50 5 20 Refer to the data.The demand for this product is elastic in the $8-$7 price range.

The elasticity of demand for a product is likely to be greater:

Which of the following statements is not correct?

The supply of product X is inelastic (but not perfectly inelastic)if the price of X rises by:

If the elasticity coefficient of supply is 0.7,supply is elastic.

The price of product X is reduced from $100 to $90 and,as a result,the quantity demanded increases from 50 to 60 units.Therefore,demand for X in this price range:

The more time consumers have to adjust to a change in price:

Studies show that the demand for gasoline is:

The price elasticity of supply measures how:

If a firm's demand for labor is elastic,a union-negotiated wage increase will:

The price elasticity of demand coefficient measures:

The supply curve of antique reproductions is:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Utility Maximization

Behavioral Economics

Businesses and the Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

Technology RD and Efficiency

The Demand for Resources

Wage Determination

Rent Interest and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

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