Question 1

If the supply curve slopes upward and a $3 per unit tax on suppliers raises the profit-maximizing price by $3,demand must be perfectly inelastic.

Accepted Answer

A) True 
 B)False  True

Question 2

If price increases from $45 to $55,the market quantity supplied increases from 20 units per week to 30 units per week.The price elasticity of supply is

Accepted Answer

A)  1/2 = 0.5 
B)  1.0 
C)  11/6 = 1.8333 
D)  9/4 = 2.25 
E)  2.0 
A)  1/2 = 0.5 
B)  1.0 
C)  11/6 = 1.8333 
D)  9/4 = 2.25 
E)  2.0 E

Question 3

If a firm raises the price of its product,its total revenue will

Accepted Answer

A)  always increase 
B)  increase only if demand is price inelastic 
C)  increase only if demand is price elastic 
D)  remain constant,regardless of price elasticity of demand 
E)  never increase 
A)  always increase 
B)  increase only if demand is price inelastic 
C)  increase only if demand is price elastic 
D)  remain constant,regardless of price elasticity of demand 
E)  never increase B

Question 4

If the demand for ptyalin is unit elastic,then

Accepted Answer

A)  total revenue decreases as quantity demanded increases 
B)  total revenue increases as quantity demanded increases 
C)  total revenue increases as price increases 
D)  total revenue remains constant as price increases 
E)  total revenue decreases as price increases 
A)  total revenue decreases as quantity demanded increases 
B)  total revenue increases as quantity demanded increases 
C)  total revenue increases as price increases 
D)  total revenue remains constant as price increases 
E)  total revenue decreases as price increases

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Cross-price elasticity of demand measures

Accepted Answer

A)  elasticity of demand at the intersection of the supply and demand curves 
B)  elasticity of supply at the intersection of supply and demand curves 
C)  the relative elasticity of supply and demand at the intersection of the two curves 
D)  the relationship between the demand for one good and the price of another 
E)  the relationship between the demand for one good and the supply of another 
A)  elasticity of demand at the intersection of the supply and demand curves 
B)  elasticity of supply at the intersection of supply and demand curves 
C)  the relative elasticity of supply and demand at the intersection of the two curves 
D)  the relationship between the demand for one good and the price of another 
E)  the relationship between the demand for one good and the supply of another

Question 7

The "Cherries for all" farm is selling cherries at $3 per pound and earns a total revenue of $300.The manager decides to increase the price to $4 per pound,but his decision reduces the total revenue to $240.Which of the following is a good explanation for what happened?

Accepted Answer

A)  The demand for cherries is inelastic 
B)  The demand for cherries is perfectly inelastic 
C)  The demand for cherries is perfectly elastic 
D)  The demand for cherries is elastic 
E)  The demand for cherries is unit elastic 
A)  The demand for cherries is inelastic 
B)  The demand for cherries is perfectly inelastic 
C)  The demand for cherries is perfectly elastic 
D)  The demand for cherries is elastic 
E)  The demand for cherries is unit elastic

Question 8

A new tax on beer will increase the price of beer by 35%,As a result,the quantity demanded of beer will decrease by 25%.Then,the demand for beer is:

Accepted Answer

A)  Elastic 
B)  Inelastic 
C)  Unit elastic 
D)  Perfectly elastic 
E)  Perfectly inelastic 
A)  Elastic 
B)  Inelastic 
C)  Unit elastic 
D)  Perfectly elastic 
E)  Perfectly inelastic

Question 9

Perfectly elastic demand curves are irrelevant,since real world demand curves are never perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following describes a situation in which demand must be elastic?

Accepted Answer

A)  Total revenue increases by 15 percent when the price of corndogs rises by 15 percent. 
B)  Total revenue increases by less than 15 percent when the price of corndogs rises by 15 percent. 
C)  Total revenue decreases by more than 15 percent when the price of corndogs rises by 15 percent. 
D)  Total revenue increases by $15 when the price of corndogs rises by $15. 
E)  Total revenue increases by more than $15 when the price of corndogs rises by $15. 
A)  Total revenue increases by 15 percent when the price of corndogs rises by 15 percent. 
B)  Total revenue increases by less than 15 percent when the price of corndogs rises by 15 percent. 
C)  Total revenue decreases by more than 15 percent when the price of corndogs rises by 15 percent. 
D)  Total revenue increases by $15 when the price of corndogs rises by $15. 
E)  Total revenue increases by more than $15 when the price of corndogs rises by $15.

Question 11

Exhibit 5-20
  
-Which supply curve is more elastic in Exhibit 5-20?

Accepted Answer

A)  Both S and S' have the same elasticity. 
B)  S is more elastic at lower prices and S' is more elastic at higher prices. 
C)  S is more elastic at higher prices and S' is more elastic at lower prices. 
D)  S 
E)  S' 
A)  Both S and S' have the same elasticity. 
B)  S is more elastic at lower prices and S' is more elastic at higher prices. 
C)  S is more elastic at higher prices and S' is more elastic at lower prices. 
D)  S 
E)  S'

Question 12

Elasticity is always

Accepted Answer

A)  measured in dollars 
B)  measured in dollars per unit of quantity 
C)  measured in units of quantity 
D)  measured in units of quantity per dollar 
E)  independent of the units of measurement 
A)  measured in dollars 
B)  measured in dollars per unit of quantity 
C)  measured in units of quantity 
D)  measured in units of quantity per dollar 
E)  independent of the units of measurement

Question 13

The demand for flounder (a specific type of fish) is

Accepted Answer

A)  more elastic than the demand for fish because there are more substitutes for flounder than for fish in general 
B)  less elastic than the demand for fish because there are more substitutes for flounder than for fish in general 
C)  more elastic than the demand for fish because there are more substitutes for fish in general than for flounder 
D)  less elastic than the demand for fish because there are more substitutes for fish in general than for flounder 
E)  more elastic than the demand for fish because flounder is one of the less expensive kinds of fish 
A)  more elastic than the demand for fish because there are more substitutes for flounder than for fish in general 
B)  less elastic than the demand for fish because there are more substitutes for flounder than for fish in general 
C)  more elastic than the demand for fish because there are more substitutes for fish in general than for flounder 
D)  less elastic than the demand for fish because there are more substitutes for fish in general than for flounder 
E)  more elastic than the demand for fish because flounder is one of the less expensive kinds of fish

Question 14

An increase in the price of T-shirts from $20 to $25 causes an increase in the quantity supplied of T-shirts from 12,000 to 14,000.Then:

Accepted Answer

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

Question 15

A 20% increase in the price of rubber ducks leads to a 10% decrease in the quantity demanded of soap.Therefore:

Accepted Answer

A)  The two goods are unrelated 
B)  The two goods are substitutes 
C)  The two goods are complements 
D)  The demand for rubber ducks is price elastic 
E)  The supply of soap is inelastic 
A)  The two goods are unrelated 
B)  The two goods are substitutes 
C)  The two goods are complements 
D)  The demand for rubber ducks is price elastic 
E)  The supply of soap is inelastic

Question 16

To ensure that we get the same result for price elasticity no matter which direction we move on the demand curve,we must take the average of the

Accepted Answer

A)  initial price and the initial quantity demanded and the average of the new price and the new quantity demanded 
B)  new price and the initial quantity demanded and the average of the new quantity demanded and the initial price 
C)  initial price and the new price and the average of the initial quantity demanded and the new quantity demanded 
D)  initial price and the new price only 
E)  new quantity demanded and the initial quantity demanded only 
A)  initial price and the initial quantity demanded and the average of the new price and the new quantity demanded 
B)  new price and the initial quantity demanded and the average of the new quantity demanded and the initial price 
C)  initial price and the new price and the average of the initial quantity demanded and the new quantity demanded 
D)  initial price and the new price only 
E)  new quantity demanded and the initial quantity demanded only

Question 17

If an increase in the price of peanut butter causes a decline in the demand for jelly,then

Accepted Answer

A)  the goods are substitutes 
B)  jelly is an inferior good 
C)  the goods are complements 
D)  both goods are inelastic 
E)  peanut butter is an inferior good 
A)  the goods are substitutes 
B)  jelly is an inferior good 
C)  the goods are complements 
D)  both goods are inelastic 
E)  peanut butter is an inferior good

Question 18

Exhibit 5-12
  
-Refer to Exhibit 5-12.What can be said of the price elasticity of demand for this good?

Accepted Answer

A)  Demand is inelastic. 
B)  Demand is unit elastic. 
C)  Demand is elastic. 
D)  Demand is perfectly elastic. 
E)  Not enough information is given to determine elasticity. 
A)  Demand is inelastic. 
B)  Demand is unit elastic. 
C)  Demand is elastic. 
D)  Demand is perfectly elastic. 
E)  Not enough information is given to determine elasticity.

Question 19

A perfectly inelastic demand curve is

Accepted Answer

A)  a vertical straight line 
B)  a horizontal straight line 
C)  a downward-sloping straight line 
D)  an upward-sloping straight line 
E)  not a straight line 
A)  a vertical straight line 
B)  a horizontal straight line 
C)  a downward-sloping straight line 
D)  an upward-sloping straight line 
E)  not a straight line

Question 20

Necessities and luxuries are both types of normal goods.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity of Demand and Supply

If the supply curve slopes upward and a $3 per unit tax on suppliers raises the profit-maximizing price by $3,demand must be perfectly inelastic.

If price increases from $45 to $55,the market quantity supplied increases from 20 units per week to 30 units per week.The price elasticity of supply is

If a firm raises the price of its product,its total revenue will

If the demand for ptyalin is unit elastic,then

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

Cross-price elasticity of demand measures

The "Cherries for all" farm is selling cherries at $3 per pound and earns a total revenue of $300.The manager decides to increase the price to $4 per pound,but his decision reduces the total revenue to $240.Which of the following is a good explanation for what happened?

A new tax on beer will increase the price of beer by 35%,As a result,the quantity demanded of beer will decrease by 25%.Then,the demand for beer is:

Perfectly elastic demand curves are irrelevant,since real world demand curves are never perfectly elastic.

Which of the following describes a situation in which demand must be elastic?

Exhibit 5-20 -Which supply curve is more elastic in Exhibit 5-20?

Elasticity is always

The demand for flounder (a specific type of fish) is

An increase in the price of T-shirts from $20 to $25 causes an increase in the quantity supplied of T-shirts from 12,000 to 14,000.Then:

A 20% increase in the price of rubber ducks leads to a 10% decrease in the quantity demanded of soap.Therefore:

To ensure that we get the same result for price elasticity no matter which direction we move on the demand curve,we must take the average of the

If an increase in the price of peanut butter causes a decline in the demand for jelly,then

Exhibit 5-12 -Refer to Exhibit 5-12.What can be said of the price elasticity of demand for this good?

A perfectly inelastic demand curve is

Necessities and luxuries are both types of normal goods.

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