Question 1

Suppose that the income elasticity of demand for college education is 1.3.This indicates that

Accepted Answer

A)  college education is a necessity 
B)  college education is an inferior good 
C)  the demand curve for college education slopes downward 
D)  college education is a normal good 
E)  the demand curve for college education is horizontal 
A)  college education is a necessity 
B)  college education is an inferior good 
C)  the demand curve for college education slopes downward 
D)  college education is a normal good 
E)  the demand curve for college education is horizontal

Question 2

Figure 5-2
-Consider demand curve D in Figure 5-2.Between points F and G,the price elasticity of demand is

Accepted Answer

A)  1 
B)  0.5 
C)  2 
D)  0.2 
E)  none of these 
A)  1 
B)  0.5 
C)  2 
D)  0.2 
E)  none of these

Question 3

We would expect the cross-price elasticity of demand between two different brands of flour to be

Accepted Answer

A)  negative with a high absolute value 
B)  negative with a low absolute value 
C)  zero 
D)  positive with a low absolute value 
E)  positive with a high absolute value 
A)  negative with a high absolute value 
B)  negative with a low absolute value 
C)  zero 
D)  positive with a low absolute value 
E)  positive with a high absolute value

Question 4

If the elasticity of supply is much greater than the elasticity of demand,an excise tax levied on the suppliers will

Accepted Answer

A)  cause the suppliers to incur a greater burden of the tax than demanders 
B)  cause the demanders to incur a greater burden of the tax than suppliers 
C)  the burden of the tax will be shared equally between the suppliers and the demanders 
D)  cause the entire burden of the tax to rest on the demanders 
E)  Without more information as to the amount of the excise tax,who will incur a greater burden will be unclear 
A)  cause the suppliers to incur a greater burden of the tax than demanders 
B)  cause the demanders to incur a greater burden of the tax than suppliers 
C)  the burden of the tax will be shared equally between the suppliers and the demanders 
D)  cause the entire burden of the tax to rest on the demanders 
E)  Without more information as to the amount of the excise tax,who will incur a greater burden will be unclear

Question 5

Demand for goods in broader category definitions,such as "beverages",is usually less elastic than demand for more narrowly defined goods,such as "diet colas."

Accepted Answer

A) True 
 B)False

Question 6

-In Figure 5-3,the price elasticity of demand between points T and U is the same as between points V and W.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

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

Question 8

Figure 5-2
-In Figure 5-2,compare demand curve D between points F and G to demand curve D' between points J and K.Which of the following statements is correct?

Accepted Answer

A)  Both demand curves have the same slope,but D' is more elastic in the $2 to $3 range. 
B)  Both demand curves have the same slope,but D' is less elastic in the $2 to $3 range. 
C)  Both demand curves have the same price elasticity of demand,but D' has a larger slope. 
D)  Both demand curves have the same price elasticity of demand,but D' has a smaller slope. 
E)  Both demand curves have the same slope and the same value for the price elasticity of demand. 
A)  Both demand curves have the same slope,but D' is more elastic in the $2 to $3 range. 
B)  Both demand curves have the same slope,but D' is less elastic in the $2 to $3 range. 
C)  Both demand curves have the same price elasticity of demand,but D' has a larger slope. 
D)  Both demand curves have the same price elasticity of demand,but D' has a smaller slope. 
E)  Both demand curves have the same slope and the same value for the price elasticity of demand.

Question 9

The slope of the demand curve and the price elasticity of demand are

Accepted Answer

A)  basically the same thing 
B)  determined by supply 
C)  are derived from production and distribution costs 
D)  different because slope is based on absolute changes and elasticity is based on percentage changes 
E)  implicit in the shape of the supply curve 
A)  basically the same thing 
B)  determined by supply 
C)  are derived from production and distribution costs 
D)  different because slope is based on absolute changes and elasticity is based on percentage changes 
E)  implicit in the shape of the supply curve

Question 10

Which of the following goods is likely to have the most elastic demand over the relevant range of prices?

Accepted Answer

A)  insulin 
B)  eggs 
C)  milk 
D)  Pepsi Cola 
E)  gasoline 
A)  insulin 
B)  eggs 
C)  milk 
D)  Pepsi Cola 
E)  gasoline

Question 11

If the elasticity of supply is much greater than the elasticity of demand,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 12

The more available substitutes there are for a good,the

Accepted Answer

A)  larger the number of consumers 
B)  smaller the number of consumers 
C)  smaller the supply side response 
D)  more elastic the demand for that good 
E)  less elastic the demand for that good 
A)  larger the number of consumers 
B)  smaller the number of consumers 
C)  smaller the supply side response 
D)  more elastic the demand for that good 
E)  less elastic the demand for that good

Question 13

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

Accepted Answer

A)  Tide liquid laundry detergent 
B)  laundry detergent in general 
C)  powdered laundry detergent 
D)  liquid laundry detergent 
A)  Tide liquid laundry detergent 
B)  laundry detergent in general 
C)  powdered laundry detergent 
D)  liquid laundry detergent

Question 14

If a 10 percent rise in the price of bananas leads to a 20 percent reduction in the quantity of bananas demanded,then the price elasticity of demand is 0.50.

Accepted Answer

A) True 
 B)False

Question 15

In measuring the sensitivity of demand,the

Accepted Answer

A)  price and income elasticities refer to movements along the demand curve;other elasticities refer to shifts of the entire demand curve 
B)  price and cross-price elasticities analyze movements along the demand curve;other elasticities refer to shifts of the entire demand curve 
C)  income and cross-price elasticities refer to movements along the demand curve;price elasticity refers to shifts of the entire demand curve 
D)  price elasticity refers to movements along the demand curve;income and cross-price elasticities refer to shifts of the entire demand curve 
E)  income elasticity refers to movements along the demand curve;other elasticities refer to shifts of the entire demand curve 
A)  price and income elasticities refer to movements along the demand curve;other elasticities refer to shifts of the entire demand curve 
B)  price and cross-price elasticities analyze movements along the demand curve;other elasticities refer to shifts of the entire demand curve 
C)  income and cross-price elasticities refer to movements along the demand curve;price elasticity refers to shifts of the entire demand curve 
D)  price elasticity refers to movements along the demand curve;income and cross-price elasticities refer to shifts of the entire demand curve 
E)  income elasticity refers to movements along the demand curve;other elasticities refer to shifts of the entire demand curve

Question 16

The supply of a good is more price elastic,

Accepted Answer

A)  the fewer alternatives there are to producing the good in question 
B)  the more broadly the market for the good is defined 
C)  the longer the time horizon over which it is measured 
D)  the higher the cost of production 
E)  the more elastic the demand for that good. 
A)  the fewer alternatives there are to producing the good in question 
B)  the more broadly the market for the good is defined 
C)  the longer the time horizon over which it is measured 
D)  the higher the cost of production 
E)  the more elastic the demand for that good.

Question 17

If demand is price elastic,a decrease in seller's total revenue would result from a(n)

Accepted Answer

A)  decrease in price 
B)  increase in quantity demanded 
C)  increase in price 
D)  decrease in income for an inferior good 
E)  increase in total cost to the seller 
A)  decrease in price 
B)  increase in quantity demanded 
C)  increase in price 
D)  decrease in income for an inferior good 
E)  increase in total cost to the seller

Question 18

The price elasticity of demand measures the responsiveness of quantity demanded to changes in price.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  .5 
B)  1.0 
C)  1.5 
D)  2 
E)  cannot tell from information given 
A)  .5 
B)  1.0 
C)  1.5 
D)  2 
E)  cannot tell from information given

Question 20

The price elasticity of demand measures the

Accepted Answer

A)  responsiveness of a good's price to a change in quantity demanded 
B)  adaptability of suppliers when a change in demand alters the price of a good 
C)  responsiveness of quantity demanded to a change in a good's price 
D)  adaptability of buyers when there is a change in demand 
E)  responsiveness of quantity supplied to a change in quantity demanded 
A)  responsiveness of a good's price to a change in quantity demanded 
B)  adaptability of suppliers when a change in demand alters the price of a good 
C)  responsiveness of quantity demanded to a change in a good's price 
D)  adaptability of buyers when there is a change in demand 
E)  responsiveness of quantity supplied to a change in quantity demanded

Exam 5: Elasticity

Suppose that the income elasticity of demand for college education is 1.3.This indicates that

Figure 5-2 -Consider demand curve D in Figure 5-2.Between points F and G,the price elasticity of demand is

We would expect the cross-price elasticity of demand between two different brands of flour to be

If the elasticity of supply is much greater than the elasticity of demand,an excise tax levied on the suppliers will

Demand for goods in broader category definitions,such as "beverages",is usually less elastic than demand for more narrowly defined goods,such as "diet colas."

-In Figure 5-3,the price elasticity of demand between points T and U is the same as between points V and W.

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

Figure 5-2 -In Figure 5-2,compare demand curve D between points F and G to demand curve D' between points J and K.Which of the following statements is correct?

The slope of the demand curve and the price elasticity of demand are

Which of the following goods is likely to have the most elastic demand over the relevant range of prices?

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

The more available substitutes there are for a good,the

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

If a 10 percent rise in the price of bananas leads to a 20 percent reduction in the quantity of bananas demanded,then the price elasticity of demand is 0.50.

In measuring the sensitivity of demand,the

The supply of a good is more price elastic,

If demand is price elastic,a decrease in seller's total revenue would result from a(n)

The price elasticity of demand measures the responsiveness of quantity demanded to changes in price.

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

The price elasticity of demand measures the

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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