Question 1

Figure 5.10 shows two upward-sloping linear supply curves that pass through the origin. Which supply curve is more elastic in the figure below?​ Figure 5.10
​

Accepted Answer

A) Both S and S' have the same elasticity. 
B) S is more elastic at lower prices, and S' is more elastic at higher prices. 
C) S is more elastic at higher prices, and S' is more elastic at lower prices. 
D) S is more elastic than S'. 
E) S' is more elastic than S. 
A) Both S and S' have the same elasticity. 
B) S is more elastic at lower prices, and S' is more elastic at higher prices. 
C) S is more elastic at higher prices, and S' is more elastic at lower prices. 
D) S is more elastic than S'. 
E) S' is more elastic than S.

Question 2

Price elasticity is 1 at the midpoint of a linear downward-sloping demand curve.​

Accepted Answer

A) True 
 B)False

Question 3

The price elasticity of demand is typically negative because:​

Accepted Answer

A) as price decreases, quantity demanded decreases. 
B) as price decreases, quantity demanded increases. 
C) as price decreases, demand decreases. 
D) as price decreases, demand increases. 
E) consumers rarely respond to a change in price. 
A) as price decreases, quantity demanded decreases. 
B) as price decreases, quantity demanded increases. 
C) as price decreases, demand decreases. 
D) as price decreases, demand increases. 
E) consumers rarely respond to a change in price.

Question 4

Figure 5.9 shows three upward-sloping linear supply curves. Which of the following supply curves is the most elastic and which is the least elastic between the prices of $5 and $6?​ Figure 5.9
​

Accepted Answer

A) S1 is the most elastic; S2 is the least elastic. 
B) S1 is the most elastic; S3 is the least elastic. 
C) S3 is the most elastic; S1 is the least elastic. 
D) S3 is the most elastic; S2 is the least elastic. 
E) S2 is the most elastic; S3 is the least elastic. 
A) S1 is the most elastic; S2 is the least elastic. 
B) S1 is the most elastic; S3 is the least elastic. 
C) S3 is the most elastic; S1 is the least elastic. 
D) S3 is the most elastic; S2 is the least elastic. 
E) S2 is the most elastic; S3 is the least elastic.

Question 5

If the cross-price elasticity of demand is −3, then:​

Accepted Answer

A) the goods are substitutes. 
B) the goods are unrelated. 
C) one of the two goods is an inferior good 
D) one of the two goods is a luxury. 
E) the goods are complements. 
A) the goods are substitutes. 
B) the goods are unrelated. 
C) one of the two goods is an inferior good 
D) one of the two goods is a luxury. 
E) the goods are complements.

Question 6

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

Accepted Answer

A) necessities. 
B) inferior goods. 
C) substitutes. 
D) luxuries. 
E) complements. 
A) necessities. 
B) inferior goods. 
C) substitutes. 
D) luxuries. 
E) complements.

Question 7

Which of the following determines a firm's revenue when it changes the price of its product?​

Accepted Answer

A) The firm's cost function 
B) The elasticity of the firm's total product curve 
C) The plant size used by the firm in the long run 
D) The price elasticity of demand for the firm's product 
E) The price elasticity of supply 
A) The firm's cost function 
B) The elasticity of the firm's total product curve 
C) The plant size used by the firm in the long run 
D) The price elasticity of demand for the firm's product 
E) The price elasticity of supply

Question 8

If a price reduction leads to an increase in total revenue, demand is:​

Accepted Answer

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

Question 9

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

Accepted Answer

A) Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B) Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C) Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D) Total revenue decreases by $10 when the price of spats rises by $10. 
E) Total revenue decreases by more than $10 when the price of spats rises by $10. 
A) Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B) Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C) Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D) Total revenue decreases by $10 when the price of spats rises by $10. 
E) Total revenue decreases by more than $10 when the price of spats rises by $10.

Question 10

Table 5.5 shows the quantity supplied and the quantity demanded for restaurant meals at different prices. Use the information in the table below to calculate the price elasticity of supply for restaurant meals.​ Table 5.5

Accepted Answer

A) 7 
B) 2 
C) 1/2 
D) 3/5 
E) 5/3 
A) 7 
B) 2 
C) 1/2 
D) 3/5 
E) 5/3

Question 11

Figure 5.4 shows a downward-sloping linear demand curve. Which of the following is true between points g and h in the figure below?​ ​
Figure 5.4

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) Total revenue increases by $300. 
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) Total revenue increases by $300.

Question 12

For which of the following is demand most likely to be perfectly inelastic?​

Accepted Answer

A) BMW automobiles. 
B) Pepsi Cola. 
C) Hot dogs. 
D) Insulin. 
E) Tylenol. 
A) BMW automobiles. 
B) Pepsi Cola. 
C) Hot dogs. 
D) Insulin. 
E) Tylenol.

Question 13

If a 5 percent increase in price leads to an 8 percent decrease in quantity demanded, demand is:​

Accepted Answer

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

Question 14

Table 5.3 shows the quantity supplied and the quantity demanded for restaurant meals at different prices. Use the information in the table below to calculate the value of the price elasticity of demand for restaurant meals.​ Table 5.3
​

Accepted Answer

A) −1/2 
B) −5/3 
C) −3/5 
D) −3/7 
E) −7/3 
A) −1/2 
B) −5/3 
C) −3/5 
D) −3/7 
E) −7/3

Question 15

The cross-price elasticity of demand is used to determine whether:​

Accepted Answer

A) a product is an inferior or normal good. 
B) a product is a necessity or a luxury. 
C) two products are substitutes or complements. 
D) price and total revenue are directly or inversely related. 
E) the product's demand curve is linear. 
A) a product is an inferior or normal good. 
B) a product is a necessity or a luxury. 
C) two products are substitutes or complements. 
D) price and total revenue are directly or inversely related. 
E) the product's demand curve is linear.

Question 16

Which of the following does not determine a good's price elasticity of demand?​

Accepted Answer

A) The time interval considered 
B) The number of substitutes available for the good 
C) Expenditure on the good as a percentage of the total consumer budget 
D) The slope of the demand curve 
E) The more of a luxury a particular good is 
A) The time interval considered 
B) The number of substitutes available for the good 
C) Expenditure on the good as a percentage of the total consumer budget 
D) The slope of the demand curve 
E) The more of a luxury a particular good is

Question 17

Luxury goods are:​

Accepted Answer

A) price inelastic. 
B) income inelastic. 
C) income elastic. 
D) goods with negative income elasticity. 
E) goods with positive price elasticity. 
A) price inelastic. 
B) income inelastic. 
C) income elastic. 
D) goods with negative income elasticity. 
E) goods with positive price elasticity.

Question 18

If an increase in price from $1.20 to $2 per unit leads to an increase in quantity supplied from 20 to 100 units, then:​

Accepted Answer

A) supply is perfectly elastic. 
B) supply is perfectly inelastic. 
C) supply is unit elastic. 
D) supply is elastic. 
E) supply is inelastic. 
A) supply is perfectly elastic. 
B) supply is perfectly inelastic. 
C) supply is unit elastic. 
D) supply is elastic. 
E) supply is inelastic.

Question 19

The price elasticity of demand is calculated as:​

Accepted Answer

A) the percentage change in quantity demanded divided by the percentage change in price. 
B) the percentage change in price divided by the percentage change in quantity demanded. 
C) the absolute change in quantity demanded divided by the absolute change in price. 
D) the absolute change in price divided by the absolute change in quantity demanded. 
E) price multiplied by quantity demanded at that price. 
A) the percentage change in quantity demanded divided by the percentage change in price. 
B) the percentage change in price divided by the percentage change in quantity demanded. 
C) the absolute change in quantity demanded divided by the absolute change in price. 
D) the absolute change in price divided by the absolute change in quantity demanded. 
E) price multiplied by quantity demanded at that price.

Question 20

Given the proportion of a consumer's income spent on various goods, the demand for _____ is likely to be the most price inelastic.​

Accepted Answer

A) furniture 
B) automobiles 
C) hotel rooms 
D) airline travel 
E) candy bars 
A) furniture 
B) automobiles 
C) hotel rooms 
D) airline travel 
E) candy bars

Exam 5: Elasticity of Demand and Supply

Figure 5.10 shows two upward-sloping linear supply curves that pass through the origin. Which supply curve is more elastic in the figure below?​ Figure 5.10 ​

Price elasticity is 1 at the midpoint of a linear downward-sloping demand curve.​

The price elasticity of demand is typically negative because:​

Figure 5.9 shows three upward-sloping linear supply curves. Which of the following supply curves is the most elastic and which is the least elastic between the prices of $5 and $6?​ Figure 5.9 ​

If the cross-price elasticity of demand is −3, then:​

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

Which of the following determines a firm's revenue when it changes the price of its product?​

If a price reduction leads to an increase in total revenue, demand is:​

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

Table 5.5 shows the quantity supplied and the quantity demanded for restaurant meals at different prices. Use the information in the table below to calculate the price elasticity of supply for restaurant meals.​ Table 5.5

Figure 5.4 shows a downward-sloping linear demand curve. Which of the following is true between points g and h in the figure below?​ ​ Figure 5.4

For which of the following is demand most likely to be perfectly inelastic?​

If a 5 percent increase in price leads to an 8 percent decrease in quantity demanded, demand is:​

Table 5.3 shows the quantity supplied and the quantity demanded for restaurant meals at different prices. Use the information in the table below to calculate the value of the price elasticity of demand for restaurant meals.​ Table 5.3 ​

The cross-price elasticity of demand is used to determine whether:​

Which of the following does not determine a good's price elasticity of demand?​

Luxury goods are:​

If an increase in price from $1.20 to $2 per unit leads to an increase in quantity supplied from 20 to 100 units, then:​

The price elasticity of demand is calculated as:​

Given the proportion of a consumer's income spent on various goods, the demand for _____ is likely to be the most price inelastic.​

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Figure 5.10 shows two upward-sloping linear supply curves that pass through the origin. Which supply curve is more elastic in the figure below? Figure 5.10

Price elasticity is 1 at the midpoint of a linear downward-sloping demand curve.

The price elasticity of demand is typically negative because:

Figure 5.9 shows three upward-sloping linear supply curves. Which of the following supply curves is the most elastic and which is the least elastic between the prices of $5 and $6? Figure 5.9

If the cross-price elasticity of demand is −3, then:

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

Which of the following determines a firm's revenue when it changes the price of its product?

If a price reduction leads to an increase in total revenue, demand is:

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

Table 5.5 shows the quantity supplied and the quantity demanded for restaurant meals at different prices. Use the information in the table below to calculate the price elasticity of supply for restaurant meals. Table 5.5

Figure 5.4 shows a downward-sloping linear demand curve. Which of the following is true between points g and h in the figure below? Figure 5.4

For which of the following is demand most likely to be perfectly inelastic?

If a 5 percent increase in price leads to an 8 percent decrease in quantity demanded, demand is:

Table 5.3 shows the quantity supplied and the quantity demanded for restaurant meals at different prices. Use the information in the table below to calculate the value of the price elasticity of demand for restaurant meals. Table 5.3

The cross-price elasticity of demand is used to determine whether:

Which of the following does not determine a good's price elasticity of demand?

Luxury goods are:

If an increase in price from $1.20 to $2 per unit leads to an increase in quantity supplied from 20 to 100 units, then:

The price elasticity of demand is calculated as:

Given the proportion of a consumer's income spent on various goods, the demand for _____ is likely to be the most price inelastic.