Question 1

Any supply curve that is a straight line passing through the graph's origin is unit elastic.​

Accepted Answer

A) True 
 B)False

Question 2

If an increase in the price of peanut butter causes a decline in the demand for jelly, then:​

Accepted Answer

A) the goods are substitutes. 
B) jelly is an inferior good. 
C) the goods are complements. 
D) both goods are necessities. 
E) peanut butter is an inferior good. 
A) the goods are substitutes. 
B) jelly is an inferior good. 
C) the goods are complements. 
D) both goods are necessities. 
E) peanut butter is an inferior good.

Question 3

The value of the price elasticity of demand for a good with no close substitutes tends to be:​

Accepted Answer

A) greater than −1. 
B) less than −1. 
C) equal to −1. 
D) equal to 0. 
E) equal to 1. 
A) greater than −1. 
B) less than −1. 
C) equal to −1. 
D) equal to 0. 
E) equal to 1.

Question 4

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 5

If demand is price elastic, total revenue is:​

Accepted Answer

A) directly related to quantity demanded. 
B) inversely related to quantity demanded. 
C) directly related to price. 
D) directly related to price and inversely related to quantity demanded. 
E) not related to either price or to quantity demanded. 
A) directly related to quantity demanded. 
B) inversely related to quantity demanded. 
C) directly related to price. 
D) directly related to price and inversely related to quantity demanded. 
E) not related to either price or to quantity demanded.

Question 6

Figure 5.3 shows a linear demand curve. Between points B and C, the demand is:​ ​
Figure 5.3
​

Accepted Answer

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

Question 7

Unit-elastic demand occurs when:​

Accepted Answer

A) a one-unit increase in price leads to a one-unit decrease in quantity demanded. 
B) a 1 percent increase in price leads to a one-unit decrease in quantity demanded. 
C) the price elasticity of demand is positive. 
D) the price elasticity of demand is exactly zero. 
E) the price elasticity of demand is exactly 1. 
A) a one-unit increase in price leads to a one-unit decrease in quantity demanded. 
B) a 1 percent increase in price leads to a one-unit decrease in quantity demanded. 
C) the price elasticity of demand is positive. 
D) the price elasticity of demand is exactly zero. 
E) the price elasticity of demand is exactly 1.

Question 8

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

Question 9

A normal good is defined as a product for which quantity demanded increases as price decreases.​

Accepted Answer

A) True 
 B)False

Question 10

A perfectly elastic demand curve is:​

Accepted Answer

A) a vertical straight line. 
B) a horizontal straight line. 
C) a downward-sloping straight line. 
D) an upward-sloping straight line. 
E) u-shaped. 
A) a vertical straight line. 
B) a horizontal straight line. 
C) a downward-sloping straight line. 
D) an upward-sloping straight line. 
E) u-shaped.

Question 11

If demand is elastic, a decrease in price leads to a decrease in total revenue.​

Accepted Answer

A) True 
 B)False

Question 12

Figure 5.5 shows the total revenue curve for a firm. Which of the following is not true in the range of the total revenue curve labeled A?​ ​
Figure 5.5
​

Accepted Answer

A) Demand is inelastic. 
B) Total revenue is increasing. 
C) Total revenue is positive. 
D) Demand is elastic. 
E) Demand elasticity decreases as total revenue increases. 
A) Demand is inelastic. 
B) Total revenue is increasing. 
C) Total revenue is positive. 
D) Demand is elastic. 
E) Demand elasticity decreases as total revenue increases.

Question 13

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) zero, 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) zero, because the goods are not usually consumed by the same person at one time.

Question 14

The supply of a product will be more elastic if:​

Accepted Answer

A) the good has few substitutes. 
B) the time the producer has to adjust to a price change is long. 
C) the time frame for adjusting to price changes is short. 
D) demand is elastic. 
E) demand is inelastic. 
A) the good has few substitutes. 
B) the time the producer has to adjust to a price change is long. 
C) the time frame for adjusting to price changes is short. 
D) demand is elastic. 
E) demand is inelastic.

Question 15

Cross-price elasticity measures the responsiveness of the price of good A to a change in the price of good B.​

Accepted Answer

A) True 
 B)False

Question 16

Elasticity measures:​

Accepted Answer

A) whether a price increase causes quantity demanded to increase or decrease. 
B) the strength of an economy's tendency to recover from recession. 
C) the responsiveness of decision makers to changes in price, income, or other variables. 
D) the profitability of investment in an industry. 
E) the long-run price trends in an economy. 
A) whether a price increase causes quantity demanded to increase or decrease. 
B) the strength of an economy's tendency to recover from recession. 
C) the responsiveness of decision makers to changes in price, income, or other variables. 
D) the profitability of investment in an industry. 
E) the long-run price trends in an economy.

Question 17

The ability of increasing quantity supplied in response to a higher price is identical across industries.​

Accepted Answer

A) True 
 B)False

Question 18

If price increases from $45 to $55, the market quantity supplied increases from 20 units per week to 30 units per week. The price elasticity of supply is:​

Accepted Answer

A) 0.5. 
B) 1. 
C) 1.8333. 
D) 2.25. 
E) 2. 
A) 0.5. 
B) 1. 
C) 1.8333. 
D) 2.25. 
E) 2.

Question 19

John spends exactly the same dollar amount on candy bars each week, regardless of their price. John's demand curve for candy bars is:​

Accepted Answer

A) downward-sloping. 
B) backward-bending. 
C) perfectly inelastic. 
D) perfectly elastic. 
E) unit elastic. 
A) downward-sloping. 
B) backward-bending. 
C) perfectly inelastic. 
D) perfectly elastic. 
E) unit elastic.

Question 20

The total revenue curve that corresponds to a downward-sloping linear demand curve:​

Accepted Answer

A) slopes downward. 
B) slopes upward. 
C) is a horizontal line. 
D) first rises, then falls. 
E) first falls, then rises. 
A) slopes downward. 
B) slopes upward. 
C) is a horizontal line. 
D) first rises, then falls. 
E) first falls, then rises.

Exam 5: Elasticity of Demand and Supply

Any supply curve that is a straight line passing through the graph's origin is unit elastic.​

If an increase in the price of peanut butter causes a decline in the demand for jelly, then:​

The value of the price elasticity of demand for a good with no close substitutes tends to be:​

If demand is price elastic, total revenue is:​

Figure 5.3 shows a linear demand curve. Between points B and C, the demand is:​ ​ Figure 5.3 ​

Unit-elastic demand occurs when:​

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

A normal good is defined as a product for which quantity demanded increases as price decreases.​

A perfectly elastic demand curve is:​

If demand is elastic, a decrease in price leads to a decrease in total revenue.​

Figure 5.5 shows the total revenue curve for a firm. Which of the following is not true in the range of the total revenue curve labeled A?​ ​ Figure 5.5 ​

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

The supply of a product will be more elastic if:​

Cross-price elasticity measures the responsiveness of the price of good A to a change in the price of good B.​

Elasticity measures:​

The ability of increasing quantity supplied in response to a higher price is identical across industries.​

If price increases from $45 to $55, the market quantity supplied increases from 20 units per week to 30 units per week. The price elasticity of supply is:​

John spends exactly the same dollar amount on candy bars each week, regardless of their price. John's demand curve for candy bars is:​

The total revenue curve that corresponds to a downward-sloping linear demand curve:​

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Filters

Any supply curve that is a straight line passing through the graph's origin is unit elastic.

If an increase in the price of peanut butter causes a decline in the demand for jelly, then:

The value of the price elasticity of demand for a good with no close substitutes tends to be:

If demand is price elastic, total revenue is:

Figure 5.3 shows a linear demand curve. Between points B and C, the demand is: Figure 5.3

Unit-elastic demand occurs when:

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

A normal good is defined as a product for which quantity demanded increases as price decreases.

A perfectly elastic demand curve is:

If demand is elastic, a decrease in price leads to a decrease in total revenue.

Figure 5.5 shows the total revenue curve for a firm. Which of the following is not true in the range of the total revenue curve labeled A? Figure 5.5

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

The supply of a product will be more elastic if:

Cross-price elasticity measures the responsiveness of the price of good A to a change in the price of good B.

Elasticity measures:

The ability of increasing quantity supplied in response to a higher price is identical across industries.

If price increases from $45 to $55, the market quantity supplied increases from 20 units per week to 30 units per week. The price elasticity of supply is:

John spends exactly the same dollar amount on candy bars each week, regardless of their price. John's demand curve for candy bars is:

The total revenue curve that corresponds to a downward-sloping linear demand curve: