Question 1

If the demand curve shifts but the supply curve does not and price remains the same,supply must be perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 2

If an increase in price from $1 to $2 per unit leads to an increase in quantity supplied from 20 to 100 units,then the value of price elasticity of supply is

Accepted Answer

A)  0.38 
B)  2 
C)  2.67 
D)  4 
E)  8 
A)  0.38 
B)  2 
C)  2.67 
D)  4 
E)  8

Question 3

Suppose the price elasticity of demand for your economics textbook is -1.If the publisher raises the price by 5 percent,

Accepted Answer

A)  revenues will rise 5 percent 
B)  quantity demanded will rise 5 percent 
C)  total revenues will not change 
D)  revenues will fall 
E)  revenues will fall 5 percent 
A)  revenues will rise 5 percent 
B)  quantity demanded will rise 5 percent 
C)  total revenues will not change 
D)  revenues will fall 
E)  revenues will fall 5 percent

Question 4

Exhibit 5-1
  
-Use the information in Exhibit 5-1 to calculate the price elasticity of demand for Good A.

Accepted Answer

A)  -5/2 
B)  -11/3 
C)  -3/10 
D)  -10/3 
E)  -19/11 
A)  -5/2 
B)  -11/3 
C)  -3/10 
D)  -10/3 
E)  -19/11

Question 5

Exhibit 5-7
  
-Which of the following is true between points g and h in Exhibit 5-7?

Accepted Answer

A)  Total revenue remains constant at $180. 
B)  Total revenue falls by $12. 
C)  Total revenue falls by $60. 
D)  Total revenue falls by $180. 
E)  Demand is elastic. 
A)  Total revenue remains constant at $180. 
B)  Total revenue falls by $12. 
C)  Total revenue falls by $60. 
D)  Total revenue falls by $180. 
E)  Demand is elastic.

Question 6

If the absolute value of the price elasticity of demand is 2,then a 15% increase in price causes a:

Accepted Answer

A)  30% increase in quantity demanded 
B)  30% decrease in quantity demanded 
C)  7.5% increase in quantity demanded 
D)  7.5% decrease in quantity supplied 
E)  30% increase in income 
A)  30% increase in quantity demanded 
B)  30% decrease in quantity demanded 
C)  7.5% increase in quantity demanded 
D)  7.5% decrease in quantity supplied 
E)  30% increase in income

Question 7

Another word for elasticity is

Accepted Answer

A)  responsiveness 
B)  happiness 
C)  bonus 
D)  profit 
E)  surplus 
A)  responsiveness 
B)  happiness 
C)  bonus 
D)  profit 
E)  surplus

Question 8

For a perfectly elastic demand curve,a 10% increase in price causes

Accepted Answer

A)  A 10% increase in quantity demanded 
B)  A 10% decrease in quantity demanded 
C)  An increase in quantity demanded to infinity 
D)  A decrease of quantity demanded to zero 
E)  No change in quantity demanded 
A)  A 10% increase in quantity demanded 
B)  A 10% decrease in quantity demanded 
C)  An increase in quantity demanded to infinity 
D)  A decrease of quantity demanded to zero 
E)  No change in quantity demanded

Question 9

It has been suggested that if NHL hockey teams would lower ticket prices,they could increase revenue from ticket sales.Which of the following assumptions forms the basis for this suggestion?

Accepted Answer

A)  Both d and e are correct. 
B)  All of the following are correct. 
C)  Demand for NHL hockey is income inelastic. 
D)  Demand for NHL hockey is price elastic. 
E)  There are many substitutes for NHL hockey. 
A)  Both d and e are correct. 
B)  All of the following are correct. 
C)  Demand for NHL hockey is income inelastic. 
D)  Demand for NHL hockey is price elastic. 
E)  There are many substitutes for NHL hockey.

Question 10

Substitutes are pairs of products with

Accepted Answer

A)  positive cross-price elasticity of demand 
B)  negative cross-price elasticity of demand 
C)  positive income elasticity of demand 
D)  negative income elasticity of demand 
E)  positive price elasticity of demand 
A)  positive cross-price elasticity of demand 
B)  negative cross-price elasticity of demand 
C)  positive income elasticity of demand 
D)  negative income elasticity of demand 
E)  positive price elasticity of demand

Question 11

If supply is perfectly elastic,the supply curve is

Accepted Answer

A)  vertical 
B)  horizontal 
C)  any straight-line supply curve 
D)  any supply curve intersecting a perfectly elastic demand curve 
E)  any supply curve intersecting a demand curve which is unit elastic 
A)  vertical 
B)  horizontal 
C)  any straight-line supply curve 
D)  any supply curve intersecting a perfectly elastic demand curve 
E)  any supply curve intersecting a demand curve which is unit elastic

Question 12

Which of the following tends to make demand for a good more elastic?

Accepted Answer

A)  A reduction in the number of substitutes for the good. 
B)  Consumers have a long time to adjust to a price change. 
C)  The amount spent on the good is a small proportion of the consumer's budget. 
D)  The good is broadly defined. 
E)  The good is a necessity. 
A)  A reduction in the number of substitutes for the good. 
B)  Consumers have a long time to adjust to a price change. 
C)  The amount spent on the good is a small proportion of the consumer's budget. 
D)  The good is broadly defined. 
E)  The good is a necessity.

Question 13

Both income elasticity of demand and cross-price elasticity of demand coefficients can take on negative,zero,or positive values.

Accepted Answer

A) True 
 B)False

Question 14

If the demand for a good is elastic,then total revenue

Accepted Answer

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

Question 15

In calculating price elasticity of demand,which of the following is assumed to be constant?

Accepted Answer

A)  the price of the product itself 
B)  the quantity demanded of the product 
C)  total revenue received from the sale of the product 
D)  the prices of all other products 
E)  none of the above 
A)  the price of the product itself 
B)  the quantity demanded of the product 
C)  total revenue received from the sale of the product 
D)  the prices of all other products 
E)  none of the above

Question 16

Suppose the income elasticity of demand for a private college education is equal to 1.5.This means that

Accepted Answer

A)  every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education 
B)  every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education 
C)  a 10 percent increase in income causes a 15 percent increase in the demand for a private college education 
D)  a 15 percent increase in income causes a 10 percent increase in the demand for a private college education 
E)  a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent 
A)  every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education 
B)  every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education 
C)  a 10 percent increase in income causes a 15 percent increase in the demand for a private college education 
D)  a 15 percent increase in income causes a 10 percent increase in the demand for a private college education 
E)  a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent

Question 17

Exhibit 5-8
  
-In Exhibit 5-8,which of the following statements is true at a quantity of 10?

Accepted Answer

A)  Demand is elastic. 
B)  Demand is inelastic. 
C)  Demand is unit elastic. 
D)  We cannot tell anything about elasticity of demand because this is a total revenue curve. 
E)  Demand is perfectly elastic. 
A)  Demand is elastic. 
B)  Demand is inelastic. 
C)  Demand is unit elastic. 
D)  We cannot tell anything about elasticity of demand because this is a total revenue curve. 
E)  Demand is perfectly elastic.

Question 18

If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans,then the demand for Pepsi-Cola is

Accepted Answer

A)  unit elastic 
B)  perfectly elastic 
C)  perfectly inelastic 
D)  relatively elastic 
E)  relatively inelastic 
A)  unit elastic 
B)  perfectly elastic 
C)  perfectly inelastic 
D)  relatively elastic 
E)  relatively inelastic

Question 19

If a firm facing a perfectly elastic demand curve raises its price,

Accepted Answer

A)  it will still sell exactly the same amount of output as it did at the lower price 
B)  it will lose some,but not all,of its sales 
C)  its sales will decrease to zero 
D)  its sales will increase 
E)  it is impossible to predict what will happen to its sales 
A)  it will still sell exactly the same amount of output as it did at the lower price 
B)  it will lose some,but not all,of its sales 
C)  its sales will decrease to zero 
D)  its sales will increase 
E)  it is impossible to predict what will happen to its sales

Question 20

Given the availability of California oranges,demand for Florida oranges will

Accepted Answer

A)  be less elastic than if there were no California oranges 
B)  be more elastic than if there were no California oranges 
C)  have the same elasticity as it would if there were no California oranges 
D)  be perfectly elastic 
E)  be perfectly inelastic 
A)  be less elastic than if there were no California oranges 
B)  be more elastic than if there were no California oranges 
C)  have the same elasticity as it would if there were no California oranges 
D)  be perfectly elastic 
E)  be perfectly inelastic

Exam 5: Elasticity of Demand and Supply

If the demand curve shifts but the supply curve does not and price remains the same,supply must be perfectly inelastic.

If an increase in price from $1 to $2 per unit leads to an increase in quantity supplied from 20 to 100 units,then the value of price elasticity of supply is

Suppose the price elasticity of demand for your economics textbook is -1.If the publisher raises the price by 5 percent,

Exhibit 5-1 -Use the information in Exhibit 5-1 to calculate the price elasticity of demand for Good A.

Exhibit 5-7 -Which of the following is true between points g and h in Exhibit 5-7?

If the absolute value of the price elasticity of demand is 2,then a 15% increase in price causes a:

Another word for elasticity is

For a perfectly elastic demand curve,a 10% increase in price causes

It has been suggested that if NHL hockey teams would lower ticket prices,they could increase revenue from ticket sales.Which of the following assumptions forms the basis for this suggestion?

Substitutes are pairs of products with

If supply is perfectly elastic,the supply curve is

Which of the following tends to make demand for a good more elastic?

Both income elasticity of demand and cross-price elasticity of demand coefficients can take on negative,zero,or positive values.

If the demand for a good is elastic,then total revenue

In calculating price elasticity of demand,which of the following is assumed to be constant?

Suppose the income elasticity of demand for a private college education is equal to 1.5.This means that

Exhibit 5-8 -In Exhibit 5-8,which of the following statements is true at a quantity of 10?

If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans,then the demand for Pepsi-Cola is

If a firm facing a perfectly elastic demand curve raises its price,

Given the availability of California oranges,demand for Florida oranges will

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