Question 1

A perfectly inelastic supply curve

Accepted Answer

A)  cannot exist 
B)  is horizontal 
C)  has an elasticity of 0 
D)  has an elasticity of 1 
E)  is vertical 
A)  cannot exist 
B)  is horizontal 
C)  has an elasticity of 0 
D)  has an elasticity of 1 
E)  is vertical

Question 2

The price elasticity of demand is important to firms because

Accepted Answer

A)  it explains the relationship between income and demand for the goods they sell 
B)  it shows how price changes affect total expenditures on the goods they sell 
C)  the law of demand suggests that elasticity falls as total expenditures continuously rises 
D)  it helps identify the equilibrium price and quantity in the market 
E)  it relates price to supply 
A)  it explains the relationship between income and demand for the goods they sell 
B)  it shows how price changes affect total expenditures on the goods they sell 
C)  the law of demand suggests that elasticity falls as total expenditures continuously rises 
D)  it helps identify the equilibrium price and quantity in the market 
E)  it relates price to supply

Question 3

The sensitivity of one economic variable to changes in another variable is known as

Accepted Answer

A)  the variability coefficient 
B)  elasticity 
C)  the sensitivity coefficient 
D)  the cross-variability coefficient 
E)  the law of demand 
A)  the variability coefficient 
B)  elasticity 
C)  the sensitivity coefficient 
D)  the cross-variability coefficient 
E)  the law of demand

Question 4

-Bill's Office Furniture sells office chairs and desks.Bill's has changed the price per chair by $10 in each of four successive weeks.Figure 5-12 shows the four prices along with the corresponding sales of desks.What is the cross-price elasticity of demand of desks with respect to chairs when the price of a chair changes in the $45 to $55 range?

Accepted Answer

A)  -2.0 
B)  2.0 
C)  0.5 
D)  -0.5 
E)  1.0 
A)  -2.0 
B)  2.0 
C)  0.5 
D)  -0.5 
E)  1.0

Question 5

-Figure 5-8 shows the demand schedule for hockey pucks.At which price is demand the most price elastic?

Accepted Answer

A)  $1 
B)  $2 
C)  $3 
D)  $4 
E)  $5 
A)  $1 
B)  $2 
C)  $3 
D)  $4 
E)  $5

Question 6

The more narrowly we define a good,the easier it is to find substitutes,and

Accepted Answer

A)  the greater is the number of producers of that good 
B)  the greater is the supply-side response 
C)  fewer consumers therefore wish to purchase the good 
D)  less elastic is the demand for that good 
E)  more elastic is the demand for that good 
A)  the greater is the number of producers of that good 
B)  the greater is the supply-side response 
C)  fewer consumers therefore wish to purchase the good 
D)  less elastic is the demand for that good 
E)  more elastic is the demand for that good

Question 7

If the percentage change in quantity demanded is smaller (in absolute value)than the percentage change in price,then demand is

Accepted Answer

A)  inelastic 
B)  elastic 
C)  unit elastic 
D)  determined by supply 
E)  inadequate compared to supply 
A)  inelastic 
B)  elastic 
C)  unit elastic 
D)  determined by supply 
E)  inadequate compared to supply

Question 8

If the demand curve is a horizontal line,

Accepted Answer

A)  demand is perfectly elastic 
B)  demand is perfectly inelastic 
C)  demand is unitary elastic 
D)  demand is relatively inelastic 
E)  total expenditure is maximized 
A)  demand is perfectly elastic 
B)  demand is perfectly inelastic 
C)  demand is unitary elastic 
D)  demand is relatively inelastic 
E)  total expenditure is maximized

Question 9

The effect of a change in the price of tea on the quantity of coffee demanded is measured by the

Accepted Answer

A)  price elasticity of demand 
B)  substitute elasticity of demand 
C)  cross-price elasticity of demand 
D)  income elasticity of demand 
E)  alternative elasticity of demand 
A)  price elasticity of demand 
B)  substitute elasticity of demand 
C)  cross-price elasticity of demand 
D)  income elasticity of demand 
E)  alternative elasticity of demand

Question 10

-Figure 5-7 shows Sally's demand for movie theater tickets (quantity of movies per year).At a price of $9 per ticket,her

Accepted Answer

A)  demand is inelastic 
B)  demand is perfectly elastic 
C)  demand is elastic 
D)  total expenditure is being maximized 
E)  demand is perfectly inelastic 
A)  demand is inelastic 
B)  demand is perfectly elastic 
C)  demand is elastic 
D)  total expenditure is being maximized 
E)  demand is perfectly inelastic

Question 11

If the demand curve is a straight line and has the normal negative slope,then as quantity demanded increases,demand

Accepted Answer

A)  becomes more elastic 
B)  becomes more inelastic 
C)  is unitary elastic 
D)  rises and then falls 
E)  is an inverse function of supply 
A)  becomes more elastic 
B)  becomes more inelastic 
C)  is unitary elastic 
D)  rises and then falls 
E)  is an inverse function of supply

Question 12

A $1.00 increase in the price of a restaurant meal results in a drop in quantity demanded of 5 meals.Which of the following statements is correct?

Accepted Answer

A)  The slope of the demand curve is -1/5;there is insufficient information to determine the price elasticity of demand. 
B)  The price elasticity of demand is -1/5;there is insufficient information to determine the slope of the demand curve. 
C)  Both the slope of the demand curve and the price elasticity of demand are equal to -1/5. 
D)  There is insufficient information to determine either the slope of the demand curve or the price elasticity of demand. 
E)  The slope of the demand curve is -1/5;the price elasticity of demand is 5. 
A)  The slope of the demand curve is -1/5;there is insufficient information to determine the price elasticity of demand. 
B)  The price elasticity of demand is -1/5;there is insufficient information to determine the slope of the demand curve. 
C)  Both the slope of the demand curve and the price elasticity of demand are equal to -1/5. 
D)  There is insufficient information to determine either the slope of the demand curve or the price elasticity of demand. 
E)  The slope of the demand curve is -1/5;the price elasticity of demand is 5.

Question 13

A local store noticed that when it increased the price of milk from $2.50 to $3.50 per gallon,it sold 33% less milk.Since everything else remained the same,we would say the

Accepted Answer

A)  demand for milk is perfectly elastic 
B)  demand for milk is elastic 
C)  demand for milk is perfectly inelastic 
D)  demand for milk is unitary elastic 
E)  law of supply does not apply in this situation 
A)  demand for milk is perfectly elastic 
B)  demand for milk is elastic 
C)  demand for milk is perfectly inelastic 
D)  demand for milk is unitary elastic 
E)  law of supply does not apply in this situation

Question 14

Demand for a good is likely to be less elastic

Accepted Answer

A)  the more narrowly defined the good is 
B)  the larger the good's share of the buyer's budget 
C)  in the long run than in the short run 
D)  the smaller the number of substitute goods available 
E)  at high prices 
A)  the more narrowly defined the good is 
B)  the larger the good's share of the buyer's budget 
C)  in the long run than in the short run 
D)  the smaller the number of substitute goods available 
E)  at high prices

Question 15

When there is a positive cross-price elasticity of demand between two goods,

Accepted Answer

A)  they are independent goods 
B)  they are complementary goods 
C)  they are substitute goods 
D)  they are normal goods 
E)  the income elasticity of demand is positive 
A)  they are independent goods 
B)  they are complementary goods 
C)  they are substitute goods 
D)  they are normal goods 
E)  the income elasticity of demand is positive

Question 16

Consider a good with a price elasticity equal to 1 at every point on its demand curve.Which of the following statements is correct?

Accepted Answer

A)  Total revenue always rises exactly in proportion to a drop in the price. 
B)  Total revenue always rises exactly in proportion to a rise in the price. 
C)  Total revenue does not change if the price changes. 
D)  Total revenue drops to zero whenever the price rises. 
E)  Total revenue always doubles if the price drops. 
A)  Total revenue always rises exactly in proportion to a drop in the price. 
B)  Total revenue always rises exactly in proportion to a rise in the price. 
C)  Total revenue does not change if the price changes. 
D)  Total revenue drops to zero whenever the price rises. 
E)  Total revenue always doubles if the price drops.

Question 17

A perfectly elastic supply curve

Accepted Answer

A)  has an elasticity of 1 
B)  has an elasticity less than 1 
C)  has an elasticity of 0 
D)  is horizontal 
E)  is upward sloping 
A)  has an elasticity of 1 
B)  has an elasticity less than 1 
C)  has an elasticity of 0 
D)  is horizontal 
E)  is upward sloping

Question 18

The concept of elasticity is used to

Accepted Answer

A)  indicate the economy's ability to rebound from a recession 
B)  measure the robustness of a variable 
C)  measure the sensitivity of one variable to changes in another 
D)  measure price changes 
E)  measure income changes 
A)  indicate the economy's ability to rebound from a recession 
B)  measure the robustness of a variable 
C)  measure the sensitivity of one variable to changes in another 
D)  measure price changes 
E)  measure income changes

Question 19

If demand is perfectly inelastic,a decrease in price results in a(n)

Accepted Answer

A)  decrease in seller's total revenue 
B)  increase in total seller's expenditure 
C)  increase in expenditure on the good,but a decrease in revenue to the seller 
D)  unfavorable shift in tastes and preferences 
E)  increase in total revenue to the seller 
A)  decrease in seller's total revenue 
B)  increase in total seller's expenditure 
C)  increase in expenditure on the good,but a decrease in revenue to the seller 
D)  unfavorable shift in tastes and preferences 
E)  increase in total revenue to the seller

Question 20

If two commodities are substitutes,then

Accepted Answer

A)  they tend to be used together by consumers 
B)  their prices are generally regulated by the government 
C)  an increase in the price of one of them increases the supply of the other 
D)  the cross-price elasticity of demand is positive 
E)  the cross-price elasticity of demand is negative 
A)  they tend to be used together by consumers 
B)  their prices are generally regulated by the government 
C)  an increase in the price of one of them increases the supply of the other 
D)  the cross-price elasticity of demand is positive 
E)  the cross-price elasticity of demand is negative

Exam 5: Elasticity

A perfectly inelastic supply curve

The price elasticity of demand is important to firms because

The sensitivity of one economic variable to changes in another variable is known as

-Figure 5-8 shows the demand schedule for hockey pucks.At which price is demand the most price elastic?

The more narrowly we define a good,the easier it is to find substitutes,and

If the percentage change in quantity demanded is smaller (in absolute value)than the percentage change in price,then demand is

If the demand curve is a horizontal line,

The effect of a change in the price of tea on the quantity of coffee demanded is measured by the

-Figure 5-7 shows Sally's demand for movie theater tickets (quantity of movies per year).At a price of $9 per ticket,her

If the demand curve is a straight line and has the normal negative slope,then as quantity demanded increases,demand

A $1.00 increase in the price of a restaurant meal results in a drop in quantity demanded of 5 meals.Which of the following statements is correct?

A local store noticed that when it increased the price of milk from $2.50 to $3.50 per gallon,it sold 33% less milk.Since everything else remained the same,we would say the

Demand for a good is likely to be less elastic

When there is a positive cross-price elasticity of demand between two goods,

Consider a good with a price elasticity equal to 1 at every point on its demand curve.Which of the following statements is correct?

A perfectly elastic supply curve

The concept of elasticity is used to

If demand is perfectly inelastic,a decrease in price results in a(n)

If two commodities are substitutes,then

What Is Economics

Scarcity,choice,and Economic Systems

Scarcity, choice, and Economic Systems: Part A

Working With Supply and Demand

Consumer Choice

Production and Cost

How Firms Make Decisions: Profit Maximization

Perfect Competition

Perfect Competition: Part A

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

labor Markets: Part A

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

What Macroeconomics Tries to Explain

Production, income, and Employment

The Price Level and Inflation

The Classical Long-Run Model

Part A: The Classical Model in an Open Economy

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-Run Macro Model

Fiscal Policy

Money,banks,and the Federal Reserve

The Money Market and Monetary Policy

Feedback Effects From GDP to the Money Market

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Appendix-finding Equilibrium GDP Algebraically

Appendix: Capital and Leverage

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