Question 1

With an income elasticity of demand of 0.5,cigarettes are an example of

Accepted Answer

A)  a normal good 
B)  an inferior good 
C)  irrational demand 
D)  complements to health care 
E)  unitary elasticity 
A)  a normal good 
B)  an inferior good 
C)  irrational demand 
D)  complements to health care 
E)  unitary elasticity

Question 2

If the percentage change in quantity demanded divided by the percentage change in price equals 1,then

Accepted Answer

A)  supply is inelastic 
B)  supply is elastic 
C)  demand is elastic 
D)  demand is inelastic 
E)  demand is unit elastic 
A)  supply is inelastic 
B)  supply is elastic 
C)  demand is elastic 
D)  demand is inelastic 
E)  demand is unit elastic

Question 3

-If demand for a good is represented by curve D' in Figure 5-10,then a decrease in supply of the good will cause

Accepted Answer

A)  both the equilibrium price and revenue to rise 
B)  both the equilibrium price and revenue to fall 
C)  the equilibrium price to rise,but revenue to fall 
D)  the equilibrium price to fall,but revenue to rise 
E)  neither the equilibrium price nor revenue to change 
A)  both the equilibrium price and revenue to rise 
B)  both the equilibrium price and revenue to fall 
C)  the equilibrium price to rise,but revenue to fall 
D)  the equilibrium price to fall,but revenue to rise 
E)  neither the equilibrium price nor revenue to change

Question 4

A local store noticed that when it increased the price of milk from $2.50 to $3.50 per gallon,it sold the same amount of milk per week (165 gallons).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 5

If the numerical value of the price elasticity of demand is 3,then a one-percent change in price will cause a(n)

Accepted Answer

A)  larger percentage change in quantity demanded,so demand is elastic 
B)  larger percentage change in quantity demanded,so demand is inelastic 
C)  smaller percentage change in quantity demanded,so demand is elastic 
D)  smaller percentage change in quantity demanded,so demand is inelastic 
E)  equal percentage change in quantity demand,so demand is unitary elastic 
A)  larger percentage change in quantity demanded,so demand is elastic 
B)  larger percentage change in quantity demanded,so demand is inelastic 
C)  smaller percentage change in quantity demanded,so demand is elastic 
D)  smaller percentage change in quantity demanded,so demand is inelastic 
E)  equal percentage change in quantity demand,so demand is unitary elastic

Question 6

For which of the following categories of goods is demand likely to be the most price elastic?

Accepted Answer

A)  automobiles 
B)  foreign-made automobiles 
C)  foreign-made sports cars 
D)  a BMW sports car 
A)  automobiles 
B)  foreign-made automobiles 
C)  foreign-made sports cars 
D)  a BMW sports car

Question 7

If the elasticity of demand is much greater than the elasticity of supply,a subsidy awarded to demanders will

Accepted Answer

A)  benefit the demanders more than the suppliers 
B)  benefit the suppliers more than the demanders 
C)  the benefit of the subsidy will be equally shared between the demanders and the suppliers 
D)  allow the demanders to be the only ones who will benefit 
E)  Without more information as to the amount of the subsidy,who will benefit more can not be determined 
A)  benefit the demanders more than the suppliers 
B)  benefit the suppliers more than the demanders 
C)  the benefit of the subsidy will be equally shared between the demanders and the suppliers 
D)  allow the demanders to be the only ones who will benefit 
E)  Without more information as to the amount of the subsidy,who will benefit more can not be determined

Question 8

If the price of food falls by 10 percent and the quantity sold increases by 5 percent,then the price elasticity of demand in that range equals

Accepted Answer

A)  2,and demand is elastic 
B)  0.5,and demand is elastic 
C)  2,and demand is inelastic 
D)  0.5,and demand is inelastic 
E)  15,and demand is elastic 
A)  2,and demand is elastic 
B)  0.5,and demand is elastic 
C)  2,and demand is inelastic 
D)  0.5,and demand is inelastic 
E)  15,and demand is elastic

Question 9

Demand is said to be price inelastic when the coefficient of price elasticity of demand is

Accepted Answer

A)  greater than +1 
B)  between 0 and +1 
C)  zero 
D)  infinity 
A)  greater than +1 
B)  between 0 and +1 
C)  zero 
D)  infinity

Question 10

A public university knows that demand from potential students is elastic.If the university wants to increase tuition revenue,it should

Accepted Answer

A)  raise its tuition rate 
B)  hold its tuition rate constant and increase faculty salaries 
C)  increase its financial aid 
D)  lower its tuition rate 
E)  increase its enrollment 
A)  raise its tuition rate 
B)  hold its tuition rate constant and increase faculty salaries 
C)  increase its financial aid 
D)  lower its tuition rate 
E)  increase its enrollment

Question 11

Suppose that the income elasticity of demand for fresh vegetables is 0.26.If buyers' incomes rise by 10 percent,then

Accepted Answer

A)  the demand curve for fresh vegetables will shift to the left 
B)  the quantity of fresh vegetables demanded will rise by 2.6 percent 
C)  the quantity of fresh vegetables demanded will rise by 12.6 percent 
D)  there will be a movement down and to the right on the demand curve for fresh vegetables 
E)  there will be a movement up and to the left along the demand curve for fresh vegetables 
A)  the demand curve for fresh vegetables will shift to the left 
B)  the quantity of fresh vegetables demanded will rise by 2.6 percent 
C)  the quantity of fresh vegetables demanded will rise by 12.6 percent 
D)  there will be a movement down and to the right on the demand curve for fresh vegetables 
E)  there will be a movement up and to the left along the demand curve for fresh vegetables

Question 12

The percentage change in quantity demanded divided by the percentage change in income is referred to as the

Accepted Answer

A)  price elasticity of demand 
B)  income elasticity of demand 
C)  cross-price elasticity of demand 
D)  slope of the demand curve 
E)  demand curve 
A)  price elasticity of demand 
B)  income elasticity of demand 
C)  cross-price elasticity of demand 
D)  slope of the demand curve 
E)  demand curve

Question 13

-In Figure 5-5,the slope of the demand curve

Accepted Answer

A)  has a constant value of -2 
B)  is higher between points T and U than between points V and W 
C)  is lower between points T and U than between points V and W 
D)  matches the value of the price elasticity of demand at each point 
E)  is lower than the value of the price elasticity of demand at every point 
A)  has a constant value of -2 
B)  is higher between points T and U than between points V and W 
C)  is lower between points T and U than between points V and W 
D)  matches the value of the price elasticity of demand at each point 
E)  is lower than the value of the price elasticity of demand at every point

Question 14

If the price elasticity of demand for Cheer detergent is 3.0,then a

Accepted Answer

A)  12 percent drop in price leads to a 36 percent rise in the quantity demanded 
B)  12 percent drop in price leads to a 4 percent rise in the quantity demanded 
C)  $1,000 drop in price leads to a 3,000-unit rise in the quantity demanded 
D)  $1,000 drop in price leads to a 333-unit rise in the quantity demanded 
E)  12 percent rise in price leads to a 36 percent rise in the quantity demanded 
A)  12 percent drop in price leads to a 36 percent rise in the quantity demanded 
B)  12 percent drop in price leads to a 4 percent rise in the quantity demanded 
C)  $1,000 drop in price leads to a 3,000-unit rise in the quantity demanded 
D)  $1,000 drop in price leads to a 333-unit rise in the quantity demanded 
E)  12 percent rise in price leads to a 36 percent rise in the quantity demanded

Question 15

If a 20 percent decrease in the price of chicken results in a 10 percent increase in the quantity demanded,the price elasticity of demand has a value of

Accepted Answer

A)  0.5 
B)  2 
C)  1 
D)  0.1 
E)  none of these 
A)  0.5 
B)  2 
C)  1 
D)  0.1 
E)  none of these

Question 16

Moving downward along a straight-line demand curve,the absolute value of the price elasticity of demand

Accepted Answer

A)  always rises 
B)  rises until the midpoint of the curve is reached,and then falls 
C)  falls until the midpoint of the curve is reached,and then rises 
D)  always falls 
E)  falls from 1 to 0 
A)  always rises 
B)  rises until the midpoint of the curve is reached,and then falls 
C)  falls until the midpoint of the curve is reached,and then rises 
D)  always falls 
E)  falls from 1 to 0

Question 17

Ink jet printers are a normal good only if,as income falls by a certain percentage,the quantity demanded rises by an even greater percentage.

Accepted Answer

A) True 
 B)False

Question 18

If the income elasticity of demand for a good is -2.5,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 19

After John's income rose by 8 percent,the amount of chicken he consumed fell by 2 percent.This means that

Accepted Answer

A)  his income elasticity for chicken is positive 
B)  chicken is a normal good for John 
C)  his demand curve for chicken shifted to the left 
D)  his demand curve for chicken shifted to the right 
E)  John is spending more of his income on chicken than before 
A)  his income elasticity for chicken is positive 
B)  chicken is a normal good for John 
C)  his demand curve for chicken shifted to the left 
D)  his demand curve for chicken shifted to the right 
E)  John is spending more of his income on chicken than before

Question 20

The cross-price elasticity of demand between butter and margarine is most likely

Accepted Answer

A)  positive,since the goods are substitutes 
B)  positive,since the goods are complements 
C)  negative,since the goods are complements 
D)  negative,since the goods are substitutes 
E)  zero,since the goods are both normal 
A)  positive,since the goods are substitutes 
B)  positive,since the goods are complements 
C)  negative,since the goods are complements 
D)  negative,since the goods are substitutes 
E)  zero,since the goods are both normal

Exam 5: Elasticity

With an income elasticity of demand of 0.5,cigarettes are an example of

If the percentage change in quantity demanded divided by the percentage change in price equals 1,then

-If demand for a good is represented by curve D' in Figure 5-10,then a decrease in supply of the good will cause

A local store noticed that when it increased the price of milk from $2.50 to $3.50 per gallon,it sold the same amount of milk per week (165 gallons).Since everything else remained the same,we would say the

If the numerical value of the price elasticity of demand is 3,then a one-percent change in price will cause a(n)

For which of the following categories of goods is demand likely to be the most price elastic?

If the elasticity of demand is much greater than the elasticity of supply,a subsidy awarded to demanders will

If the price of food falls by 10 percent and the quantity sold increases by 5 percent,then the price elasticity of demand in that range equals

Demand is said to be price inelastic when the coefficient of price elasticity of demand is

A public university knows that demand from potential students is elastic.If the university wants to increase tuition revenue,it should

Suppose that the income elasticity of demand for fresh vegetables is 0.26.If buyers' incomes rise by 10 percent,then

The percentage change in quantity demanded divided by the percentage change in income is referred to as the

-In Figure 5-5,the slope of the demand curve

If the price elasticity of demand for Cheer detergent is 3.0,then a

If a 20 percent decrease in the price of chicken results in a 10 percent increase in the quantity demanded,the price elasticity of demand has a value of

Moving downward along a straight-line demand curve,the absolute value of the price elasticity of demand

Ink jet printers are a normal good only if,as income falls by a certain percentage,the quantity demanded rises by an even greater percentage.

If the income elasticity of demand for a good is -2.5,then

After John's income rose by 8 percent,the amount of chicken he consumed fell by 2 percent.This means that

The cross-price elasticity of demand between butter and margarine is most likely

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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