Question 1

Elasticity is always _____.​

Accepted Answer

A) measured in dollars 
B) measured in utils 
C) measured in units of quantity 
D) measured in pounds 
E) independent of the units of measurement for price and quantity 
A) measured in dollars 
B) measured in utils 
C) measured in units of quantity 
D) measured in pounds 
E) independent of the units of measurement for price and quantity E

Question 2

A 5 percent increase in income leads to a 10 percent increase in the quantity demanded for a service. This service is a(n) _____ good, and the demand is _____.​

Accepted Answer

A) normal; elastic 
B) normal; inelastic 
C) normal; unit elastic 
D) inferior; elastic 
E) inferior; inelastic 
A) normal; elastic 
B) normal; inelastic 
C) normal; unit elastic 
D) inferior; elastic 
E) inferior; inelastic A

Question 3

An inferior good is:​

Accepted Answer

A) any good of low quality. 
B) one that consumers buy less of as the price rises. 
C) one that consumers buy less of as their income rises. 
D) one that has few substitutes. 
E) any good made with inexpensive inputs. 
A) any good of low quality. 
B) one that consumers buy less of as the price rises. 
C) one that consumers buy less of as their income rises. 
D) one that has few substitutes. 
E) any good made with inexpensive inputs. C

Question 4

Necessities and luxuries are both types of normal goods.​

Accepted Answer

A) True 
 B)False

Question 5

Figure 5.10 shows two upward-sloping linear supply curves that pass through the origin. The price elasticity of supply between $10 and $20 on the supply curve S is _____.​ Figure 5.10
​

Accepted Answer

A) 0 
B) infinity 
C) 1 
D) 2 
E) 10 
A) 0 
B) infinity 
C) 1 
D) 2 
E) 10

Question 6

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 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 7

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 the 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 the price elasticity of demand. 
E) never increase.

Question 8

A successful advertising campaign is most likely to:​

Accepted Answer

A) increase the price elasticity of demand by stressing upon the uniqueness of the product. 
B) reduce the price elasticity of demand by stressing upon the uniqueness of the product. 
C) reduce the price elasticity of demand by informing consumers about the availability of substitutes. 
D) have no effect on the demand curve. 
E) make the demand curve shift inward. 
A) increase the price elasticity of demand by stressing upon the uniqueness of the product. 
B) reduce the price elasticity of demand by stressing upon the uniqueness of the product. 
C) reduce the price elasticity of demand by informing consumers about the availability of substitutes. 
D) have no effect on the demand curve. 
E) make the demand curve shift inward.

Question 9

Demand is inelastic only if the price elasticity of demand has an absolute value:​

Accepted Answer

A) of 1. 
B) greater than 1. 
C) greater than 0 but less than 1. 
D) greater than 0. 
E) greater than 5. 
A) of 1. 
B) greater than 1. 
C) greater than 0 but less than 1. 
D) greater than 0. 
E) greater than 5.

Question 10

All other things constant, if a _____ proportion of a consumer's budget is spent on a good, the demand for the good will be more _____ and a consumer will purchase a substitute instead. ​

Accepted Answer

A) greater; price elastic 
B) smaller; unit elastic 
C) smaller; price elastic 
D) greater; price inelastic 
E) greater; stable 
A) greater; price elastic 
B) smaller; unit elastic 
C) smaller; price elastic 
D) greater; price inelastic 
E) greater; stable

Question 11

Substitutes are pairs of goods that have a positive cross-price elasticity of demand.​

Accepted Answer

A) True 
 B)False

Question 12

The larger the proportion of a consumer's budget that is spent on a product, the more the consumer will demand a substitute.​

Accepted Answer

A) True 
 B)False

Question 13

Demand is inelastic if:​

Accepted Answer

A) the percentage change in price is greater than the percentage change in quantity demanded. 
B) the percentage change in price is less than the percentage change in quantity demanded. 
C) the percentage change in price is equal to the percentage change in quantity demanded. 
D) the value of price elasticity is equal to −1. 
E) the value of price elasticity is less than −1. 
A) the percentage change in price is greater than the percentage change in quantity demanded. 
B) the percentage change in price is less than the percentage change in quantity demanded. 
C) the percentage change in price is equal to the percentage change in quantity demanded. 
D) the value of price elasticity is equal to −1. 
E) the value of price elasticity is less than −1.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Luis wonders why commercials appear more frequently at the end of a TV movie than at the beginning. Carol says that this pattern can be explained by the:​

Accepted Answer

A) amount of time Luis spends watching TV. 
B) length of the adjustment period. 
C) cost of supplying additional minutes of the movie. 
D) high elasticity of demand for watching the end of a TV movie. 
E) availability of substitutes for the TV movie. 
A) amount of time Luis spends watching TV. 
B) length of the adjustment period. 
C) cost of supplying additional minutes of the movie. 
D) high elasticity of demand for watching the end of a TV movie. 
E) availability of substitutes for the TV movie.

Question 16

Elasticity rises as price falls along a linear downward-sloping demand curve.​

Accepted Answer

A) True 
 B)False

Question 17

A common determinant of both the price elasticity of demand and the price elasticity of supply for a product is:​

Accepted Answer

A) the availability of close substitutes for the product. 
B) the proportion of the consumer's budget spent on the product. 
C) the length of the adjustment period considered. 
D) the additional cost of increasing production. 
E) the availability of substitutes in production for the product. 
A) the availability of close substitutes for the product. 
B) the proportion of the consumer's budget spent on the product. 
C) the length of the adjustment period considered. 
D) the additional cost of increasing production. 
E) the availability of substitutes in production for the product.

Question 18

If demand is unit elastic, a price reduction will:​

Accepted Answer

A) increase revenues. 
B) reduce revenues. 
C) reduce total cost. 
D) have no effect on revenues. 
E) increase profits. 
A) increase revenues. 
B) reduce revenues. 
C) reduce total cost. 
D) have no effect on revenues. 
E) increase profits.

Question 19

A university administration's decision to raise tuition in order to increase revenue will be successful if:​

Accepted Answer

A) the demand curve slopes downward. 
B) demand is elastic. 
C) demand is inelastic. 
D) supply is elastic. 
E) supply is inelastic. 
A) the demand curve slopes downward. 
B) demand is elastic. 
C) demand is inelastic. 
D) supply is elastic. 
E) supply is inelastic.

Question 20

In order to prove that macaroni is an inferior good, we could 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.

Exam 5: Elasticity of Demand and Supply

Elasticity is always _____.​

A 5 percent increase in income leads to a 10 percent increase in the quantity demanded for a service. This service is a(n) _____ good, and the demand is _____.​

An inferior good is:​

Necessities and luxuries are both types of normal goods.​

Figure 5.10 shows two upward-sloping linear supply curves that pass through the origin. The price elasticity of supply between $10 and $20 on the supply curve S is _____.​ Figure 5.10 ​

Demand is unit elastic whenever​

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

A successful advertising campaign is most likely to:​

Demand is inelastic only if the price elasticity of demand has an absolute value:​

All other things constant, if a _____ proportion of a consumer's budget is spent on a good, the demand for the good will be more _____ and a consumer will purchase a substitute instead. ​

Substitutes are pairs of goods that have a positive cross-price elasticity of demand.​

The larger the proportion of a consumer's budget that is spent on a product, the more the consumer will demand a substitute.​

Demand is inelastic if:​

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

Luis wonders why commercials appear more frequently at the end of a TV movie than at the beginning. Carol says that this pattern can be explained by the:​

Elasticity rises as price falls along a linear downward-sloping demand curve.​

A common determinant of both the price elasticity of demand and the price elasticity of supply for a product is:​

If demand is unit elastic, a price reduction will:​

A university administration's decision to raise tuition in order to increase revenue will be successful if:​

In order to prove that macaroni is an inferior good, we could test the _____ of macaroni and get a _____.​

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, Supply, and Markets

Consumer Choice and Demand

Production and Cost in the Firm

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, Entrepreneurship, and Corporate Finance

Transaction Costs, Asymmetric Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Poverty and Redistribution

International Trade

International Finance

Economic Development

Filters

Elasticity is always _____.

A 5 percent increase in income leads to a 10 percent increase in the quantity demanded for a service. This service is a(n) _ good, and the demand is _.

An inferior good is:

Necessities and luxuries are both types of normal goods.

Figure 5.10 shows two upward-sloping linear supply curves that pass through the origin. The price elasticity of supply between $10 and $20 on the supply curve S is _____. Figure 5.10

Demand is unit elastic whenever

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

A successful advertising campaign is most likely to:

Demand is inelastic only if the price elasticity of demand has an absolute value:

All other things constant, if a _ proportion of a consumer's budget is spent on a good, the demand for the good will be more _ and a consumer will purchase a substitute instead.

Substitutes are pairs of goods that have a positive cross-price elasticity of demand.

The larger the proportion of a consumer's budget that is spent on a product, the more the consumer will demand a substitute.

Demand is inelastic if:

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

Luis wonders why commercials appear more frequently at the end of a TV movie than at the beginning. Carol says that this pattern can be explained by the:

Elasticity rises as price falls along a linear downward-sloping demand curve.

A common determinant of both the price elasticity of demand and the price elasticity of supply for a product is:

If demand is unit elastic, a price reduction will:

A university administration's decision to raise tuition in order to increase revenue will be successful if:

In order to prove that macaroni is an inferior good, we could test the _ of macaroni and get a _.