Question 1

The absolute value of the price elasticity of demand at the midpoint of a linear demand curve is always

Accepted Answer

A)  greater than one 
B)  less than one 
C)  one 
D)  zero 
E)  infinity 
A)  greater than one 
B)  less than one 
C)  one 
D)  zero 
E)  infinity

Question 2

One group of people uses New York City subways only during rush hour to travel to and from work.Another group uses them only in midday for leisure activity.If New York City wants to increase transit fares with the smallest possible reduction in revenue,for which group should it increase the fare?

Accepted Answer

A)  The rush-hour group because its demand for subway service is more elastic than that of the midday group. 
B)  The rush-hour group because its demand for subway service is less elastic than that of the midday group. 
C)  The midday group because its demand for subway service is more elastic than that of the rush-hour group. 
D)  The midday group because its demand for subway service is less elastic than that of the rush-hour group. 
E)  It doesn't matter because both groups have the same elasticity of demand. 
A)  The rush-hour group because its demand for subway service is more elastic than that of the midday group. 
B)  The rush-hour group because its demand for subway service is less elastic than that of the midday group. 
C)  The midday group because its demand for subway service is more elastic than that of the rush-hour group. 
D)  The midday group because its demand for subway service is less elastic than that of the rush-hour group. 
E)  It doesn't matter because both groups have the same elasticity of demand.

Question 3

If a tripling of price triples the quantity of a good supplied,the price elasticity of supply is

Accepted Answer

A)  3 
B)  300 
C)  1 
D)  -1 
E)  -3 
A)  3 
B)  300 
C)  1 
D)  -1 
E)  -3

Question 4

The cross-price elasticity of demand between milk and soft drinks is likely to be

Accepted Answer

A)  negative because the goods are complements 
B)  positive because the goods are complements 
C)  negative because the goods are substitutes 
D)  positive because the goods are substitutes 
E)  0 because the goods are not usually consumed by the same person at one time 
A)  negative because the goods are complements 
B)  positive because the goods are complements 
C)  negative because the goods are substitutes 
D)  positive because the goods are substitutes 
E)  0 because the goods are not usually consumed by the same person at one time

Question 5

Along a linear demand curve,as the price increases from zero,

Accepted Answer

A)  demand decreases 
B)  demand increases 
C)  quantity demanded increases 
D)  total revenue first increases but eventually decreases 
E)  total revenue first decreases but eventually increases 
A)  demand decreases 
B)  demand increases 
C)  quantity demanded increases 
D)  total revenue first increases but eventually decreases 
E)  total revenue first decreases but eventually increases

Question 6

Exhibit 5-15
  
-Which of the demand curves in Exhibit 5-15 has constant elasticity everywhere?

Accepted Answer

A)  the curve in graph c only 
B)  the curves in graphs a and b 
C)  the curves in graphs a,b,and c 
D)  all of the curves shown 
E)  the curves in graphs c,d,and e 
A)  the curve in graph c only 
B)  the curves in graphs a and b 
C)  the curves in graphs a,b,and c 
D)  all of the curves shown 
E)  the curves in graphs c,d,and e

Question 7

The total revenue from selling trucks is equal to

Accepted Answer

A)  the price of a truck times the quantity sold 
B)  the change in quantity sold divided by the change in price 
C)  average cost times quantity produced 
D)  the price of a truck times the quantity produced 
E)  the price of a truck times the price elasticity of demand 
A)  the price of a truck times the quantity sold 
B)  the change in quantity sold divided by the change in price 
C)  average cost times quantity produced 
D)  the price of a truck times the quantity produced 
E)  the price of a truck times the price elasticity of demand

Question 8

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

Accepted Answer

A)  -2/3 
B)  -1/6 
C)  -1/2 
D)  -11/17 
E)  -17/11 
A)  -2/3 
B)  -1/6 
C)  -1/2 
D)  -11/17 
E)  -17/11

Question 9

If income rises and the demand for toothbrushes stays the same,income elasticity of toothbrushes is said to be unit elastic.

Accepted Answer

A) True 
 B)False

Question 10

If Joe says that nothing comes close to a Pepsi,his demand for Pepsi is likely to be

Accepted Answer

A)  relatively price elastic 
B)  relatively income elastic 
C)  relatively price inelastic 
D)  unit elastic 
E)  infinitely elastic 
A)  relatively price elastic 
B)  relatively income elastic 
C)  relatively price inelastic 
D)  unit elastic 
E)  infinitely elastic

Question 11

Along a linear demand curve,as the price rises,demand becomes more

Accepted Answer

A)  steep 
B)  elastic 
C)  inelastic 
D)  unit elastic 
E)  variable 
A)  steep 
B)  elastic 
C)  inelastic 
D)  unit elastic 
E)  variable

Question 12

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

Accepted Answer

A)  consumers are being irrational 
B)  supply is elastic 
C)  the goods may have similar uses 
D)  the goods may go well together in consumption 
E)  one good must be a necessity 
A)  consumers are being irrational 
B)  supply is elastic 
C)  the goods may have similar uses 
D)  the goods may go well together in consumption 
E)  one good must be a necessity

Question 13

The availability of substitutes makes the demand for a good less elastic.

Accepted Answer

A) True 
 B)False

Question 14

Along a downward-sloping linear demand curve,

Accepted Answer

A)  slope is constant and elasticity is changing 
B)  slope is changing and elasticity is constant 
C)  both slope and elasticity are constant 
D)  both slope and elasticity are changing 
E)  no generalizations can be made about slope 
A)  slope is constant and elasticity is changing 
B)  slope is changing and elasticity is constant 
C)  both slope and elasticity are constant 
D)  both slope and elasticity are changing 
E)  no generalizations can be made about slope

Question 15

As price decreases along a linear demand curve,price elasticity of demand decreases.

Accepted Answer

A) True 
 B)False

Question 16

The value of price elasticity of demand for a good with no close substitutes

Accepted Answer

A)  will tend to be greater than -1 
B)  will tend to be less than -1 
C)  will tend to be equal to -1 
D)  will tend to be equal to 0 
E)  cannot be determined without more information 
A)  will tend to be greater than -1 
B)  will tend to be less than -1 
C)  will tend to be equal to -1 
D)  will tend to be equal to 0 
E)  cannot be determined without more information

Question 17

If people have more time to adjust to a price change,the price elasticity of demand for that good is likely to

Accepted Answer

A)  increase 
B)  decrease 
C)  fall to zero 
D)  become equal to -1 
E)  remain unchanged 
A)  increase 
B)  decrease 
C)  fall to zero 
D)  become equal to -1 
E)  remain unchanged

Question 18

Exhibit 5-13
  
-Which of the following is true of the demand curve in Exhibit 5-13?

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 unit elastic. 
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 unit elastic.

Question 19

The more broadly a good is defined,

Accepted Answer

A)  the more substitutes it has so the more elastic is its demand 
B)  the fewer substitutes it has so the more elastic is its demand 
C)  the more substitutes it has so the less elastic is its demand 
D)  the fewer substitutes it has so the less elastic is its demand 
E)  the more complements it has so the more elastic is its demand 
A)  the more substitutes it has so the more elastic is its demand 
B)  the fewer substitutes it has so the more elastic is its demand 
C)  the more substitutes it has so the less elastic is its demand 
D)  the fewer substitutes it has so the less elastic is its demand 
E)  the more complements it has so the more elastic is its demand

Question 20

Exhibit 5-15
  
-Which of the demand curves in Exhibit 5-15 is unit elastic?

Accepted Answer

A)  the curve in graph a 
B)  the curve in graph b 
C)  the curve in graph c 
D)  the curve in graph d 
E)  the curve in graph e 
A)  the curve in graph a 
B)  the curve in graph b 
C)  the curve in graph c 
D)  the curve in graph d 
E)  the curve in graph e

Exam 5: Elasticity of Demand and Supply

The absolute value of the price elasticity of demand at the midpoint of a linear demand curve is always

One group of people uses New York City subways only during rush hour to travel to and from work.Another group uses them only in midday for leisure activity.If New York City wants to increase transit fares with the smallest possible reduction in revenue,for which group should it increase the fare?

If a tripling of price triples the quantity of a good supplied,the price elasticity of supply is

The cross-price elasticity of demand between milk and soft drinks is likely to be

Along a linear demand curve,as the price increases from zero,

Exhibit 5-15 -Which of the demand curves in Exhibit 5-15 has constant elasticity everywhere?

The total revenue from selling trucks is equal to

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

If income rises and the demand for toothbrushes stays the same,income elasticity of toothbrushes is said to be unit elastic.

If Joe says that nothing comes close to a Pepsi,his demand for Pepsi is likely to be

Along a linear demand curve,as the price rises,demand becomes more

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

The availability of substitutes makes the demand for a good less elastic.

Along a downward-sloping linear demand curve,

As price decreases along a linear demand curve,price elasticity of demand decreases.

The value of price elasticity of demand for a good with no close substitutes

If people have more time to adjust to a price change,the price elasticity of demand for that good is likely to

Exhibit 5-13 -Which of the following is true of the demand curve in Exhibit 5-13?

The more broadly a good is defined,

Exhibit 5-15 -Which of the demand curves in Exhibit 5-15 is unit elastic?

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