Question 1

Along a perfectly elastic supply curve

Accepted Answer

A)  the quantity supplied is always the same 
B)  the price elasticity of demand is always the same 
C)  the price is always the same 
D)  the cross-price elasticity of demand is always the same 
E)  the elasticity of supply is different at each point. 
A)  the quantity supplied is always the same 
B)  the price elasticity of demand is always the same 
C)  the price is always the same 
D)  the cross-price elasticity of demand is always the same 
E)  the elasticity of supply is different at each point.

Question 2

If demand is perfectly inelastic,

Accepted Answer

A)  the percent change in quantity demanded divided by the percent change in price is zero 
B)  the demand curve is a vertical line 
C)  supply is perfectly inelastic too 
D)  consumers have power over prices 
E)  the percentage change in price divided by the percentage change in quantity demanded is zero 
A)  the percent change in quantity demanded divided by the percent change in price is zero 
B)  the demand curve is a vertical line 
C)  supply is perfectly inelastic too 
D)  consumers have power over prices 
E)  the percentage change in price divided by the percentage change in quantity demanded is zero

Question 3

Which of the following statements concerning the slope and price elasticity of demand along a straight-line demand curve is correct?

Accepted Answer

A)  Slope measures the change in quantity resulting from a one-dollar change in price. 
B)  Elasticity measures the percent change in price resulting from a one-percent change in quantity demanded. 
C)  Slope measures the dollar change in price for a one-unit change in quantity demanded. 
D)  Elasticity measures the unit change in quantity demanded resulting from a one-dollar change in price. 
E)  Slope measures the percent change in price resulting from a one-percent change in quantity demanded. 
A)  Slope measures the change in quantity resulting from a one-dollar change in price. 
B)  Elasticity measures the percent change in price resulting from a one-percent change in quantity demanded. 
C)  Slope measures the dollar change in price for a one-unit change in quantity demanded. 
D)  Elasticity measures the unit change in quantity demanded resulting from a one-dollar change in price. 
E)  Slope measures the percent change in price resulting from a one-percent change in quantity demanded.

Question 4

If a decrease in the price of one good causes the demand curve for another good to shift to the left,the two goods must be

Accepted Answer

A)  inferior 
B)  normal goods 
C)  inferior goods 
D)  substitutes 
E)  complements 
A)  inferior 
B)  normal goods 
C)  inferior goods 
D)  substitutes 
E)  complements

Question 5

If the demand for good A is more elastic than the demand for good B,a small decrease in supply in both markets will cause

Accepted Answer

A)  a much greater increase in price for good A than for good B 
B)  a much greater increase in price for good B than for good A 
C)  the price will increase by the same amount in both markets 
D)  only the price of good B will increase 
E)  only the price of good A will increase 
A)  a much greater increase in price for good A than for good B 
B)  a much greater increase in price for good B than for good A 
C)  the price will increase by the same amount in both markets 
D)  only the price of good B will increase 
E)  only the price of good A will increase

Question 6

If the price of a certain brand of sneakers falls from $27.50 to $22.50,and the quantity demanded by consumers increases from 15 to 25 pairs per week,then the price elasticity of demand is

Accepted Answer

A)  0.25 
B)  1.00 
C)  2.75 
D)  1.50 
E)  2.50 
A)  0.25 
B)  1.00 
C)  2.75 
D)  1.50 
E)  2.50

Question 7

The cross-price elasticity of demand is

Accepted Answer

A)  price elasticity of demand multiplied by the income elasticity of demand 
B)  the percent change in the price of one commodity with respect to a one-percent change in the quantity demanded of another commodity 
C)  the percent change in the demand for one commodity with respect to a one-percent change in the price of another commodity 
D)  negative for substitute goods 
E)  price elasticity of demand crossed with consumer incomes 
A)  price elasticity of demand multiplied by the income elasticity of demand 
B)  the percent change in the price of one commodity with respect to a one-percent change in the quantity demanded of another commodity 
C)  the percent change in the demand for one commodity with respect to a one-percent change in the price of another commodity 
D)  negative for substitute goods 
E)  price elasticity of demand crossed with consumer incomes

Question 8

A 10 percent increase in buyers' incomes results in a 5 percent drop in the quantity of hot dogs demanded.In this range,the income elasticity of demand for hot dogs is

Accepted Answer

A)  0.5 
B)  2.0 
C)  5.0 
D)  -2.0 
E)  -0.5 
A)  0.5 
B)  2.0 
C)  5.0 
D)  -2.0 
E)  -0.5

Question 9

If demand is price inelastic,a decrease in price

Accepted Answer

A)  raises total revenue to the seller 
B)  raises total expenditure on the good,but not total revenue to the seller 
C)  reduces total revenue to the seller 
D)  leaves total revenue to the seller unchanged 
E)  leaves total expenditure on the good unchanged 
A)  raises total revenue to the seller 
B)  raises total expenditure on the good,but not total revenue to the seller 
C)  reduces total revenue to the seller 
D)  leaves total revenue to the seller unchanged 
E)  leaves total expenditure on the good unchanged

Question 10

If the quantity of higher education demanded rises by 5 percent when incomes rise by 10 percent,

Accepted Answer

A)  higher education is a normal good 
B)  higher education is an inferior good 
C)  the demand for higher education is price elastic 
D)  the law of demand applies to higher education 
E)  the demand for higher education is price inelastic 
A)  higher education is a normal good 
B)  higher education is an inferior good 
C)  the demand for higher education is price elastic 
D)  the law of demand applies to higher education 
E)  the demand for higher education is price inelastic

Question 11

The sign of the cross-price elasticity tells us whether two commodities are complements or substitutes,but the size of this elasticity measure tells us

Accepted Answer

A)  how the supply side of the market reacts to changes in demand 
B)  whether the government should regulate the two markets 
C)  which technology producers use 
D)  how closely the two goods are related 
E)  whether or not excess profits can be made in either market 
A)  how the supply side of the market reacts to changes in demand 
B)  whether the government should regulate the two markets 
C)  which technology producers use 
D)  how closely the two goods are related 
E)  whether or not excess profits can be made in either market

Question 12

An inferior good is defined by an income elasticity less than 1.

Accepted Answer

A) True 
 B)False

Question 13

If the income elasticity of demand for a good is 0.5,then

Accepted Answer

A)  it is a normal good,and its demand curve will shift to the left if buyers' incomes increase 
B)  it is a normal good,and its demand curve will shift to the right if buyers' incomes increase 
C)  it is an inferior good,and its demand curve will shift to the right if buyers' incomes increase 
D)  it is an inferior good,and its demand curve will shift to the left if buyers' incomes increase 
E)  there is insufficient information to determine whether the good is normal or inferior 
A)  it is a normal good,and its demand curve will shift to the left if buyers' incomes increase 
B)  it is a normal good,and its demand curve will shift to the right if buyers' incomes increase 
C)  it is an inferior good,and its demand curve will shift to the right if buyers' incomes increase 
D)  it is an inferior good,and its demand curve will shift to the left if buyers' incomes increase 
E)  there is insufficient information to determine whether the good is normal or inferior

Question 14

If demand is price inelastic,

Accepted Answer

A)  price and total revenue change in opposite directions 
B)  a seller should decrease the price to increase total revenue 
C)  too few goods are being produced from society's point of view 
D)  price and total revenue change in the same direction 
E)  the market can never be in equilibrium 
A)  price and total revenue change in opposite directions 
B)  a seller should decrease the price to increase total revenue 
C)  too few goods are being produced from society's point of view 
D)  price and total revenue change in the same direction 
E)  the market can never be in equilibrium

Question 15

When Brenda was in college,she worked part-time delivering pizzas and she ate five boxes of macaroni and cheese per week.After graduation,she became a high school teacher and ate only two boxes of macaroni and cheese per week.From this information,

Accepted Answer

A)  macaroni and cheese is a normal good for Brenda 
B)  the law of demand applies to macaroni and cheese for Brenda 
C)  macaroni and cheese are substitute goods 
D)  macaroni and cheese is an inferior good for Brenda 
E)  Brenda's income elasticity of demand for macaroni and cheese is positive 
A)  macaroni and cheese is a normal good for Brenda 
B)  the law of demand applies to macaroni and cheese for Brenda 
C)  macaroni and cheese are substitute goods 
D)  macaroni and cheese is an inferior good for Brenda 
E)  Brenda's income elasticity of demand for macaroni and cheese is positive

Question 16

For which of the following goods is the income elasticity of demand likely to be largest?

Accepted Answer

A)  poultry products 
B)  meals at restaurants 
C)  lemonade 
D)  used books 
E)  paperback mystery novels 
A)  poultry products 
B)  meals at restaurants 
C)  lemonade 
D)  used books 
E)  paperback mystery novels

Question 17

If demand is perfectly elastic,then

Accepted Answer

A)  the demand curve is a horizontal line 
B)  supply is perfectly inelastic 
C)  supply is perfectly elastic 
D)  the demand curve is a vertical line 
E)  the demand curve is downward sloping 
A)  the demand curve is a horizontal line 
B)  supply is perfectly inelastic 
C)  supply is perfectly elastic 
D)  the demand curve is a vertical line 
E)  the demand curve is downward sloping

Question 18

A more elastic demand for a good would generally result from

Accepted Answer

A)  an increase in the supply of that good 
B)  an increase in the number of substitutes for that good 
C)  a decrease in the number of substitutes for that good 
D)  smaller consumer incomes 
E)  a reduction in the number of consumers 
A)  an increase in the supply of that good 
B)  an increase in the number of substitutes for that good 
C)  a decrease in the number of substitutes for that good 
D)  smaller consumer incomes 
E)  a reduction in the number of consumers

Question 19

Suppose that a local supermarket sells apples and oranges for 50 cents apiece,and at these prices is able to sell 100 apples and 200 oranges per week.One week,the supermarket lowered the price per apple to 40 cents and sold 120 apples.The next week,they lowered the price per orange to 40 cents (after raising the price per apple back to 50 cents)and sold 240 oranges.These results imply that the

Accepted Answer

A)  price elasticity of apples is lower than the price elasticity of oranges 
B)  price elasticity of apples is higher than the price elasticity of oranges 
C)  demand for apples is more price sensitive than the demand for oranges 
D)  demand for oranges is more price sensitive than the demand for apples 
E)  price elasticities of demand for apples and oranges are the same over these price ranges 
A)  price elasticity of apples is lower than the price elasticity of oranges 
B)  price elasticity of apples is higher than the price elasticity of oranges 
C)  demand for apples is more price sensitive than the demand for oranges 
D)  demand for oranges is more price sensitive than the demand for apples 
E)  price elasticities of demand for apples and oranges are the same over these price ranges

Question 20

The cross-price elasticity of demand is useful for determining which pairs of commodities serve as substitutes for each other.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity

Along a perfectly elastic supply curve

If demand is perfectly inelastic,

Which of the following statements concerning the slope and price elasticity of demand along a straight-line demand curve is correct?

If a decrease in the price of one good causes the demand curve for another good to shift to the left,the two goods must be

If the demand for good A is more elastic than the demand for good B,a small decrease in supply in both markets will cause

If the price of a certain brand of sneakers falls from $27.50 to $22.50,and the quantity demanded by consumers increases from 15 to 25 pairs per week,then the price elasticity of demand is

The cross-price elasticity of demand is

A 10 percent increase in buyers' incomes results in a 5 percent drop in the quantity of hot dogs demanded.In this range,the income elasticity of demand for hot dogs is

If demand is price inelastic,a decrease in price

If the quantity of higher education demanded rises by 5 percent when incomes rise by 10 percent,

The sign of the cross-price elasticity tells us whether two commodities are complements or substitutes,but the size of this elasticity measure tells us

An inferior good is defined by an income elasticity less than 1.

If the income elasticity of demand for a good is 0.5,then

If demand is price inelastic,

When Brenda was in college,she worked part-time delivering pizzas and she ate five boxes of macaroni and cheese per week.After graduation,she became a high school teacher and ate only two boxes of macaroni and cheese per week.From this information,

For which of the following goods is the income elasticity of demand likely to be largest?

If demand is perfectly elastic,then

A more elastic demand for a good would generally result from

The cross-price elasticity of demand is useful for determining which pairs of commodities serve as substitutes for each other.

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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