Question 1

If the income elasticity of demand for a service is 0.6,then a 5 percent increase in income will generate a _____ in quantity demanded

Accepted Answer

A)  3 percent decrease 
B)  3 percent increase 
C)  8.33 percent decrease 
D)  8.33 percent increase 
E)  0.12 percent decrease 
A)  3 percent decrease 
B)  3 percent increase 
C)  8.33 percent decrease 
D)  8.33 percent increase 
E)  0.12 percent decrease

Question 2

If the value of the price elasticity of demand is -0.2,this means that a

Accepted Answer

A)  20 percent decrease in price causes a 1 percent increase in quantity demanded 
B)  0.2 percent decrease in price causes a 1 percent increase in quantity demanded 
C)  5 percent decrease in price causes a 1 percent increase in quantity demanded 
D)  0.2 percent decrease in price causes a 0.2 percent increase in quantity demanded 
E)  100 percent decrease in price causes a 200 percent increase in quantity demanded 
A)  20 percent decrease in price causes a 1 percent increase in quantity demanded 
B)  0.2 percent decrease in price causes a 1 percent increase in quantity demanded 
C)  5 percent decrease in price causes a 1 percent increase in quantity demanded 
D)  0.2 percent decrease in price causes a 0.2 percent increase in quantity demanded 
E)  100 percent decrease in price causes a 200 percent increase in quantity demanded

Question 3

If the cross-price elasticity of demand between two goods is 0,

Accepted Answer

A)  a price change for one good will be exactly offset by a price change for the other 
B)  neither demand curve would shift following a change in the price of one of the goods 
C)  there is no income effect between the two goods 
D)  the demand for each good is price inelastic 
E)  the demand for each good is price elastic 
A)  a price change for one good will be exactly offset by a price change for the other 
B)  neither demand curve would shift following a change in the price of one of the goods 
C)  there is no income effect between the two goods 
D)  the demand for each good is price inelastic 
E)  the demand for each good is price elastic

Question 4

If demand is inelastic,the percentage change in price is greater than the resulting percentage change in quantity demanded.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  paperback mystery stories 
B)  best-selling hardcover novels 
C)  used textbooks 
D)  children's books 
E)  leather-bound editions of Shakespeare 
A)  paperback mystery stories 
B)  best-selling hardcover novels 
C)  used textbooks 
D)  children's books 
E)  leather-bound editions of Shakespeare

Question 6

Along a downward-sloping linear demand curve,total revenue is greatest if demand is

Accepted Answer

A)  inelastic 
B)  elastic 
C)  inelastic when prices are high 
D)  elastic when prices are high 
E)  unit elastic 
A)  inelastic 
B)  elastic 
C)  inelastic when prices are high 
D)  elastic when prices are high 
E)  unit elastic

Question 7

When demand is elastic,an increase in price will lead to an increase in total revenue

Accepted Answer

A) True 
 B)False

Question 8

As the economy recovers from a recession,we should expect that

Accepted Answer

A)  demand for inferior goods will fall and demand for normal goods will rise 
B)  demand for both inferior and normal goods will rise 
C)  demand for inferior goods will rise and demand for normal goods will fall 
D)  demand for both inferior and normal goods will fall 
E)  demand for complements will fall 
A)  demand for inferior goods will fall and demand for normal goods will rise 
B)  demand for both inferior and normal goods will rise 
C)  demand for inferior goods will rise and demand for normal goods will fall 
D)  demand for both inferior and normal goods will fall 
E)  demand for complements will fall

Question 9

Exhibit 5-14
  
-Which of the following is true of the demand curve in Exhibit 5-14?

Accepted Answer

A)  Its slope is 0,and the value of elasticity is negative infinity. 
B)  Its slope is infinite,and the value of elasticity is 0. 
C)  Both its slope and the value of elasticity are 0. 
D)  Both its slope and the value of elasticity are negative infinity. 
E)  Its slope is 0,and demand is perfectly inelastic. 
A)  Its slope is 0,and the value of elasticity is negative infinity. 
B)  Its slope is infinite,and the value of elasticity is 0. 
C)  Both its slope and the value of elasticity are 0. 
D)  Both its slope and the value of elasticity are negative infinity. 
E)  Its slope is 0,and demand is perfectly inelastic.

Question 10

In the real world,demand is not likely to be perfectly inelastic at every price because

Accepted Answer

A)  no substitutes exist for some goods 
B)  some consumers will be unable to afford very high prices with given incomes 
C)  at low prices,consumers always want a lot 
D)  consumers are willing to pay any price for certain goods 
E)  the prices of certain goods don't change 
A)  no substitutes exist for some goods 
B)  some consumers will be unable to afford very high prices with given incomes 
C)  at low prices,consumers always want a lot 
D)  consumers are willing to pay any price for certain goods 
E)  the prices of certain goods don't change

Question 11

For which of the following goods is the value of income elasticity most likely to be negative?

Accepted Answer

A)  macaroni and cheese 
B)  champagne 
C)  airline tickets 
D)  clothes 
E)  toothpaste 
A)  macaroni and cheese 
B)  champagne 
C)  airline tickets 
D)  clothes 
E)  toothpaste

Question 12

The supply of paintings by Van Gogh is most likely to be

Accepted Answer

A)  of infinite elasticity because supply is limited 
B)  of high elasticity because supply is limited 
C)  elastic because the paintings are luxury goods 
D)  inelastic because supply is limited 
E)  unit elastic 
A)  of infinite elasticity because supply is limited 
B)  of high elasticity because supply is limited 
C)  elastic because the paintings are luxury goods 
D)  inelastic because supply is limited 
E)  unit elastic

Question 13

Demand is more elastic

Accepted Answer

A)  in the short run than in the long run 
B)  for necessities than for luxuries 
C)  for food than for hamburgers 
D)  for goods with many substitutes than for goods with only a few 
E)  for broadly defined goods than for narrowly defined ones 
A)  in the short run than in the long run 
B)  for necessities than for luxuries 
C)  for food than for hamburgers 
D)  for goods with many substitutes than for goods with only a few 
E)  for broadly defined goods than for narrowly defined ones

Question 14

If we wanted to prove that macaroni is an inferior good,we would test the __________ of macaroni and get a __________.

Accepted Answer

A)  cross-price elasticity;negative number 
B)  income elasticity;number less than 1 
C)  income elasticity;positive number 
D)  price elasticity of demand;number greater than negative 1 
E)  income elasticity;negative number 
A)  cross-price elasticity;negative number 
B)  income elasticity;number less than 1 
C)  income elasticity;positive number 
D)  price elasticity of demand;number greater than negative 1 
E)  income elasticity;negative number

Question 15

Demand is inelastic only if

Accepted Answer

A)  price elasticity has an absolute value of 1 
B)  price elasticity has an absolute value greater than 1 
C)  price elasticity has an absolute value less than 1 
D)  price elasticity is negative 
E)  consumers do not respond to a change in price 
A)  price elasticity has an absolute value of 1 
B)  price elasticity has an absolute value greater than 1 
C)  price elasticity has an absolute value less than 1 
D)  price elasticity is negative 
E)  consumers do not respond to a change in price

Question 16

A good that takes up a very large percentage of the consumer's budget will tend to have

Accepted Answer

A)  an elastic demand 
B)  a perfectly elastic demand 
C)  an inelastic demand 
D)  an upward-sloping demand curve 
E)  very many substitutes 
A)  an elastic demand 
B)  a perfectly elastic demand 
C)  an inelastic demand 
D)  an upward-sloping demand curve 
E)  very many substitutes

Question 17

Exhibit 5-22
  
-Refer to Exhibit 5-22.Demand curve D is an example of a(n)

Accepted Answer

A)  curvilinear demand curve 
B)  linear demand curve 
C)  linear supply curve 
D)  unit-elastic demand curve 
E)  total revenue curve 
A)  curvilinear demand curve 
B)  linear demand curve 
C)  linear supply curve 
D)  unit-elastic demand curve 
E)  total revenue curve

Question 18

Suppose that you allow yourself $50 per month to spend on compact disks.You spend exactly this much every month regardless of the price of compact disks.Therefore,your demand for CDs

Accepted Answer

A)  is elastic 
B)  is inelastic 
C)  is unit elastic 
D)  cannot be characterized unless we know the price of a disk 
E)  cannot be characterized unless we know the price and quantity of compact disks purchased 
A)  is elastic 
B)  is inelastic 
C)  is unit elastic 
D)  cannot be characterized unless we know the price of a disk 
E)  cannot be characterized unless we know the price and quantity of compact disks purchased

Question 19

"More elastic" means

Accepted Answer

A)  unchanging 
B)  less desirable 
C)  more desirable 
D)  less responsive 
E)  more responsive 
A)  unchanging 
B)  less desirable 
C)  more desirable 
D)  less responsive 
E)  more responsive

Question 20

Exhibit 5-2
  
-Based on the information in Exhibit 5-2,the demand for the good is _____ and an increase in price from $40 to $60 per unit will _____ total revenue.

Accepted Answer

A)  unit elastic;increase 
B)  elastic;decrease 
C)  unit elastic;not change 
D)  inelastic;increase 
E)  elastic;decrease. 
A)  unit elastic;increase 
B)  elastic;decrease 
C)  unit elastic;not change 
D)  inelastic;increase 
E)  elastic;decrease.

Exam 5: Elasticity of Demand and Supply

If the income elasticity of demand for a service is 0.6,then a 5 percent increase in income will generate a _____ in quantity demanded

If the value of the price elasticity of demand is -0.2,this means that a

If the cross-price elasticity of demand between two goods is 0,

If demand is inelastic,the percentage change in price is greater than the resulting percentage change in quantity demanded.

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

Along a downward-sloping linear demand curve,total revenue is greatest if demand is

When demand is elastic,an increase in price will lead to an increase in total revenue

As the economy recovers from a recession,we should expect that

Exhibit 5-14 -Which of the following is true of the demand curve in Exhibit 5-14?

In the real world,demand is not likely to be perfectly inelastic at every price because

For which of the following goods is the value of income elasticity most likely to be negative?

The supply of paintings by Van Gogh is most likely to be

Demand is more elastic

If we wanted to prove that macaroni is an inferior good,we would test the __________ of macaroni and get a __________.

Demand is inelastic only if

A good that takes up a very large percentage of the consumer's budget will tend to have

Exhibit 5-22 -Refer to Exhibit 5-22.Demand curve D is an example of a(n)

Suppose that you allow yourself $50 per month to spend on compact disks.You spend exactly this much every month regardless of the price of compact disks.Therefore,your demand for CDs

"More elastic" means

Exhibit 5-2 -Based on the information in Exhibit 5-2,the demand for the good is _____ and an increase in price from $40 to $60 per unit will _____ total revenue.

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Consumer Choice and Demand

Production and Cost in the Firm

Perfect Competition

Amonopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, interest, and Corporate Finance

Transaction Costs, imperfect Information, and Market Behavior

Economic Regulation and Antitrust Policy

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Externalities and the Environment

Income Distribution and Poverty

International Trade

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Developing and Transitional Economies

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If we wanted to prove that macaroni is an inferior good,we would test the of macaroni and get a .

Exhibit 5-2 -Based on the information in Exhibit 5-2,the demand for the good is _ and an increase in price from $40 to $60 per unit will _ total revenue.