Question 1

For which of the following products is the consumer's demand curve most likely to be vertical?

Accepted Answer

A)  lobster,for a seafood lover 
B)  cars,for high school students 
C)  insulin,for a diabetic 
D)  compact disks,for a music lover 
E)  beef,for a food lover 
A)  lobster,for a seafood lover 
B)  cars,for high school students 
C)  insulin,for a diabetic 
D)  compact disks,for a music lover 
E)  beef,for a food lover

Question 2

If the demand for a product is price inelastic,

Accepted Answer

A)  producers' revenues will increase if supply increases 
B)  producers' revenues will increase if supply decreases 
C)  a small change in price will cause a large shift in the demand curve 
D)  a large change in price will cause a small shift in the demand curve 
E)  a small change in price will cause a small shift in the demand curve 
A)  producers' revenues will increase if supply increases 
B)  producers' revenues will increase if supply decreases 
C)  a small change in price will cause a large shift in the demand curve 
D)  a large change in price will cause a small shift in the demand curve 
E)  a small change in price will cause a small shift in the demand curve

Question 3

The value of cross-price elasticity of demand between orange soda and grape soda is

Accepted Answer

A)  negative 
B)  positive 
C)  0 
D)  between -1 and 0 
E)  less than -1 
A)  negative 
B)  positive 
C)  0 
D)  between -1 and 0 
E)  less than -1

Question 4

Demand is elastic whenever

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 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 respond to a change in price

Question 5

An inferior good is one for which demand increases as

Accepted Answer

A)  price decreases 
B)  price increases 
C)  income increases 
D)  income decreases 
E)  the price of a related good decreases 
A)  price decreases 
B)  price increases 
C)  income increases 
D)  income decreases 
E)  the price of a related good decreases

Question 6

Exhibit 5-6
  
-We can tell that demand is elastic as price increases between point b and point a in Exhibit 5-6 because:

Accepted Answer

A)  Quantity demanded is decreasing 
B)  Total revenue is increasing 
C)  Total revenue is decreasing 
D)  Total revenue is unchanged 
E)  Demand curve slopes downward 
A)  Quantity demanded is decreasing 
B)  Total revenue is increasing 
C)  Total revenue is decreasing 
D)  Total revenue is unchanged 
E)  Demand curve slopes downward

Question 7

If a good is inferior,then the income elasticity of demand for that good is

Accepted Answer

A)  positive and greater than 1 
B)  negative 
C)  positive and less than 1 
D)  0 
E)  perfectly elastic 
A)  positive and greater than 1 
B)  negative 
C)  positive and less than 1 
D)  0 
E)  perfectly elastic

Question 8

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

Accepted Answer

A)  emergency services after a car accident 
B)  measles shots 
C)  physical examinations for life insurance applications 
D)  medical tests to diagnose specific symptoms 
E)  face-lifts 
A)  emergency services after a car accident 
B)  measles shots 
C)  physical examinations for life insurance applications 
D)  medical tests to diagnose specific symptoms 
E)  face-lifts

Question 9

Exhibit 5-8
  
-Which of the following statements is true in the range of the total revenue curve labeled A in Exhibit 5-8?

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 10

The midpoint quantity between 100 and 300 units is

Accepted Answer

A)  100 units 
B)  200 units 
C)  300 units 
D)  150 units 
E)  20,000 units 
A)  100 units 
B)  200 units 
C)  300 units 
D)  150 units 
E)  20,000 units

Question 11

Today's supply curve of dorm rooms on campus is likely to be

Accepted Answer

A)  downward sloping 
B)  relatively flat 
C)  vertical 
D)  horizontal 
E)  price elastic 
A)  downward sloping 
B)  relatively flat 
C)  vertical 
D)  horizontal 
E)  price elastic

Question 12

Demand is unit elastic whenever

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 always respond to a one-dollar change in price by decreasing their quantity demanded by one unit 
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 always respond to a one-dollar change in price by decreasing their quantity demanded by one unit

Question 13

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units,then the value of price elasticity of demand is

Accepted Answer

A)  -1/3 
B)  -2 1/3 
C)  -1/4 
D)  -3 
E)  -2/3 
A)  -1/3 
B)  -2 1/3 
C)  -1/4 
D)  -3 
E)  -2/3

Question 14

Exhibit 5-6
  
-We can tell that demand is elastic as price falls between point a and point b in Exhibit 5-6 because

Accepted Answer

A)  quantity demanded is increasing 
B)  total revenue is increasing 
C)  total revenue is decreasing 
D)  total revenue is unchanged 
E)  the demand curve slopes downward 
A)  quantity demanded is increasing 
B)  total revenue is increasing 
C)  total revenue is decreasing 
D)  total revenue is unchanged 
E)  the demand curve slopes downward

Question 15

Exhibit 5-11
  
-Refer to Exhibit 5-11.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 16

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

Accepted Answer

A)  The price of pens rises by 10 cents,and quantity of pens demanded falls by 50. 
B)  The price of pens rises by 10 cents,and total revenue rises. 
C)  A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded. 
D)  Total revenue does not change when the price of pens rises. 
E)  Total revenue decreases when the price of pencils rises. 
A)  The price of pens rises by 10 cents,and quantity of pens demanded falls by 50. 
B)  The price of pens rises by 10 cents,and total revenue rises. 
C)  A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded. 
D)  Total revenue does not change when the price of pens rises. 
E)  Total revenue decreases when the price of pencils rises.

Question 17

The most important determinant of price elasticity of supply is

Accepted Answer

A)  price elasticity of demand 
B)  technological conditions such as how rapidly costs increase when a firm increases its output 
C)  whether the production process relies heavily on capital or on labor 
D)  the number and closeness of available substitutes 
E)  whether the product is a normal good or an inferior good 
A)  price elasticity of demand 
B)  technological conditions such as how rapidly costs increase when a firm increases its output 
C)  whether the production process relies heavily on capital or on labor 
D)  the number and closeness of available substitutes 
E)  whether the product is a normal good or an inferior good

Question 18

The demand for a particular brand of automobile is likely to be more inelastic than the demand for automobiles in general.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 5-5
  
-In Exhibit 5-5,what is the total revenue at point a?

Accepted Answer

A)  $4 
B)  $5 
C)  $10 
D)  $50 
E)  $100 
A)  $4 
B)  $5 
C)  $10 
D)  $50 
E)  $100

Question 20

Goods with an income elasticity of demand greater than 1 are called

Accepted Answer

A)  necessities 
B)  inferior goods 
C)  normal goods 
D)  luxuries 
E)  complements 
A)  necessities 
B)  inferior goods 
C)  normal goods 
D)  luxuries 
E)  complements

Exam 5: Elasticity of Demand and Supply

For which of the following products is the consumer's demand curve most likely to be vertical?

If the demand for a product is price inelastic,

The value of cross-price elasticity of demand between orange soda and grape soda is

Demand is elastic whenever

An inferior good is one for which demand increases as

Exhibit 5-6 -We can tell that demand is elastic as price increases between point b and point a in Exhibit 5-6 because:

If a good is inferior,then the income elasticity of demand for that good is

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

Exhibit 5-8 -Which of the following statements is true in the range of the total revenue curve labeled A in Exhibit 5-8?

The midpoint quantity between 100 and 300 units is

Today's supply curve of dorm rooms on campus is likely to be

Demand is unit elastic whenever

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units,then the value of price elasticity of demand is

Exhibit 5-6 -We can tell that demand is elastic as price falls between point a and point b in Exhibit 5-6 because

Exhibit 5-11 -Refer to Exhibit 5-11.What can be said of the price elasticity of demand for this good?

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

The most important determinant of price elasticity of supply is

The demand for a particular brand of automobile is likely to be more inelastic than the demand for automobiles in general.

Exhibit 5-5 -In Exhibit 5-5,what is the total revenue at point a?

Goods with an income elasticity of demand greater than 1 are called

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