Question 1

Exhibit 5.6
  
-Refer to Exhibit 5.6,which shows a vertical demand curve.The demand is _____

Accepted Answer

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

Question 2

Which of the following goods will have a higher price elasticity of demand in the short run?

Accepted Answer

A) electricity (residential) 
B) gasoline 
C) milk 
D) movies 
E) cars 
A) electricity (residential) 
B) gasoline 
C) milk 
D) movies 
E) cars

Question 3

Substitutes are pairs of goods that have a positive cross-price elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 4

The value of the price elasticity of demand for a good with no close substitutes tends to be _____

Accepted Answer

A) greater than −1. 
B) less than −1. 
C) equal to −1. 
D) equal to 0. 
E) equal to 1. 
A) greater than −1. 
B) less than −1. 
C) equal to −1. 
D) equal to 0. 
E) equal to 1.

Question 5

A normal good is defined as a product for which quantity demanded increases as price decreases.

Accepted Answer

A) True 
 B)False

Question 6

The demand for flour is _____

Accepted Answer

A) inelastic, because there are few substitutes for flour and it represents a large percentage of a consumer's budget. 
B) inelastic, because there are many substitutes for flour and it represents a large percentage of a consumer's budget. 
C) inelastic, because there are few substitutes for flour and it represents a small percentage of a consumer's budget. 
D) elastic, because there are no substitutes for flour and it represents a large percentage of a consumer's budget. 
E) elastic, because there are many substitutes for flour and it represents a large percentage of a consumer's budget. 
A) inelastic, because there are few substitutes for flour and it represents a large percentage of a consumer's budget. 
B) inelastic, because there are many substitutes for flour and it represents a large percentage of a consumer's budget. 
C) inelastic, because there are few substitutes for flour and it represents a small percentage of a consumer's budget. 
D) elastic, because there are no substitutes for flour and it represents a large percentage of a consumer's budget. 
E) elastic, because there are many substitutes for flour and it represents a large percentage of a consumer's budget.

Question 7

Inferior goods have an income elasticity of demand that is _____

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) greater than 1 in absolute value. 
E) equal to 1 in absolute value. 
A) positive. 
B) negative. 
C) zero. 
D) greater than 1 in absolute value. 
E) equal to 1 in absolute value.

Question 8

What is the effect of a 10 percent price increase on quantity demanded if elasticity is zero?

Accepted Answer

A) Quantity demanded does not change. 
B) Quantity demanded drops by less than 10 percent. 
C) Quantity demanded drops by 10 percent. 
D) Quantity demanded drops by more than 10 percent. 
E) Quantity demanded drops to 0. 
A) Quantity demanded does not change. 
B) Quantity demanded drops by less than 10 percent. 
C) Quantity demanded drops by 10 percent. 
D) Quantity demanded drops by more than 10 percent. 
E) Quantity demanded drops to 0.

Question 9

Exhibit 5.3
  
-Refer to Exhibit 5.3,which shows a linear demand curve.As you move from point A to point B along the demand curve,total revenue _____ and the demand is _____.

Accepted Answer

A) stays the same; unitary 
B) decreases; inelastic 
C) increases; elastic 
D) decreases; elastic 
E) increases, inelastic 
A) stays the same; unitary 
B) decreases; inelastic 
C) increases; elastic 
D) decreases; elastic 
E) increases, inelastic

Question 10

A good that is defined broadly has _____

Accepted Answer

A) more substitutes and a more elastic demand. 
B) fewer substitutes and a more elastic demand. 
C) more substitutes and a less elastic demand. 
D) fewer substitutes and a less elastic demand. 
E) more complements and a more elastic demand. 
A) more substitutes and a more elastic demand. 
B) fewer substitutes and a more elastic demand. 
C) more substitutes and a less elastic demand. 
D) fewer substitutes and a less elastic demand. 
E) more complements and a more elastic demand.

Question 11

An inferior good is _____

Accepted Answer

A) any good of low quality. 
B) one that consumers buy less of as the price rises. 
C) one that consumers buy less of as their income rises. 
D) one that has few substitutes. 
E) any good made with inexpensive inputs. 
A) any good of low quality. 
B) one that consumers buy less of as the price rises. 
C) one that consumers buy less of as their income rises. 
D) one that has few substitutes. 
E) any good made with inexpensive inputs.

Question 12

Table 5.7
 $$\begin{array} { c c c } 
& \text { Quantity } & \text { Income } \
\text { Good A } & 100 & \$ 1,000 \
& 120 & \$ 2,000 \\

\text { Good B } & 200 & \$ 20 \
& 140 & \$ 35
\end{array}$$
-Refer to Table 5.7,which shows the change in the quantity demanded for Good A and Good B as a result of a change in income.Use the information to calculate the value of the income elasticity of demand for Good A.

Accepted Answer

A) 1 
B) 2/9 
C) 3/11 
D) 11/3 
E) 9/2 
A) 1 
B) 2/9 
C) 3/11 
D) 11/3 
E) 9/2

Question 13

John spends exactly the same dollar amount on candy bars each week,regardless of their price.John's demand curve for candy bars is _____

Accepted Answer

A) downward-sloping. 
B) backward-bending. 
C) perfectly inelastic. 
D) perfectly elastic. 
E) unit elastic. 
A) downward-sloping. 
B) backward-bending. 
C) perfectly inelastic. 
D) perfectly elastic. 
E) unit elastic.

Question 14

Exhibit 5.3
  
-Refer to Exhibit 5.3,which shows a linear demand curve.Between points A and B,the elasticity of demand is ____ and demand is _____

Accepted Answer

A) 1; unit elastic. 
B) 1.89; elastic. 
C) 0.2; inelastic. 
D) infinity; perfectly elastic. 
E) 1; perfectly inelastic. 
A) 1; unit elastic. 
B) 1.89; elastic. 
C) 0.2; inelastic. 
D) infinity; perfectly elastic. 
E) 1; perfectly inelastic.

Question 15

Suppose consumers spent $42 million on Christmas trees last year,when the average tree cost was $30.This year they spend $42 million,when the average tree costs $25.Assume that everything else remains constant.This data suggests that _____

Accepted Answer

A) consumers bought the same number of Christmas trees this year as last year. 
B) the price of the Christmas trees stayed the same. 
C) total revenue to tree producers rose this year. 
D) the demand for trees is unit elastic. 
E) the demand for trees is inelastic. 
A) consumers bought the same number of Christmas trees this year as last year. 
B) the price of the Christmas trees stayed the same. 
C) total revenue to tree producers rose this year. 
D) the demand for trees is unit elastic. 
E) the demand for trees is inelastic.

Question 16

The demand for firewood is likely to be more elastic in summer than in winter.

Accepted Answer

A) True 
 B)False

Question 17

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units,then the value of the price elasticity of demand is _____

Accepted Answer

A) −1/3. 
B) −2 1/3. 
C) −1/4. 
D) −3. 
E) −2/3. 
A) −1/3. 
B) −2 1/3. 
C) −1/4. 
D) −3. 
E) −2/3.

Question 18

The greater the availability of close substitutes for a product,the greater the price elasticity of demand for that product.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 5.5
  
-Refer to Exhibit 5.5,which shows the total revenue curve for a firm.Which of the following statements is true in the range of the total revenue curve labeled B?

Accepted Answer

A) Demand is elastic. 
B) Demand is inelastic. 
C) Demand is unit elastic. 
D) Demand is perfectly inelastic. 
E) Demand is perfectly elastic. 
A) Demand is elastic. 
B) Demand is inelastic. 
C) Demand is unit elastic. 
D) Demand is perfectly inelastic. 
E) Demand is perfectly elastic.

Question 20

If the price elasticity of supply for a product is 5,and prices increase 10 percent,then supply will _____

Accepted Answer

A) increase by 5 percent. 
B) increase by 10 percent. 
C) increase by 50 percent. 
D) decrease by 50 percent. 
E) decrease by 3 percent. 
A) increase by 5 percent. 
B) increase by 10 percent. 
C) increase by 50 percent. 
D) decrease by 50 percent. 
E) decrease by 3 percent.

Exam 5: Elasticity of Demand and Supply

Exhibit 5.6 -Refer to Exhibit 5.6,which shows a vertical demand curve.The demand is _____

Which of the following goods will have a higher price elasticity of demand in the short run?

Substitutes are pairs of goods that have a positive cross-price elasticity of demand.

The value of the price elasticity of demand for a good with no close substitutes tends to be _____

A normal good is defined as a product for which quantity demanded increases as price decreases.

The demand for flour is _____

Inferior goods have an income elasticity of demand that is _____

What is the effect of a 10 percent price increase on quantity demanded if elasticity is zero?

Exhibit 5.3 -Refer to Exhibit 5.3,which shows a linear demand curve.As you move from point A to point B along the demand curve,total revenue _____ and the demand is _____.

A good that is defined broadly has _____

An inferior good is _____

Table 5.7 Quantity Income Good A 100 \ 1,000 120 \ 2,000 Good B 200 \ 20 140 \ 35 -Refer to Table 5.7,which shows the change in the quantity demanded for Good A and Good B as a result of a change in income.Use the information to calculate the value of the income elasticity of demand for Good A.

John spends exactly the same dollar amount on candy bars each week,regardless of their price.John's demand curve for candy bars is _____

Exhibit 5.3 -Refer to Exhibit 5.3,which shows a linear demand curve.Between points A and B,the elasticity of demand is ____ and demand is _____

Suppose consumers spent $42 million on Christmas trees last year,when the average tree cost was $30.This year they spend $42 million,when the average tree costs $25.Assume that everything else remains constant.This data suggests that _____

The demand for firewood is likely to be more elastic in summer than in winter.

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units,then the value of the price elasticity of demand is _____

The greater the availability of close substitutes for a product,the greater the price elasticity of demand for that product.

Exhibit 5.5 -Refer to Exhibit 5.5,which shows the total revenue curve for a firm.Which of the following statements is true in the range of the total revenue curve labeled B?

If the price elasticity of supply for a product is 5,and prices increase 10 percent,then supply will _____

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Exhibit 5.3 -Refer to Exhibit 5.3,which shows a linear demand curve.As you move from point A to point B along the demand curve,total revenue _ and the demand is _.

Exhibit 5.3 -Refer to Exhibit 5.3,which shows a linear demand curve.Between points A and B,the elasticity of demand is and demand is _