Question 1

Figure 5.5 shows the total revenue curve for a firm. Which of the following statements is true in the range of the total revenue curve labeled B?​ ​
Figure 5.5.
​

Accepted Answer

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

Question 2

Figure 5.3 shows a linear demand curve. As you move from point B to point C along the demand curve, total revenue _____ and the demand is _____.​ ​
Figure 5.3
​

Accepted Answer

A) stays the same; unitary 
B) decreases; inelastic 
C) increases; elastic 
D) decreases; elastic 
E) increases, inelastic 
A) stays the same; unitary 
B) decreases; inelastic 
C) increases; elastic 
D) decreases; elastic 
E) increases, inelastic

Question 3

Which of the following is a possible reason for the price elasticity of demand for cigarettes being large for young smokers?​

Accepted Answer

A) They have large discretionary incomes. 
B) The price of cigarettes has increased recently. 
C) They are no longer permitted to smoke in public. 
D) Cigarette advertising on television has been banned. 
E) The proportion of income a young smoker spends on cigarettes is usually quite large. 
A) They have large discretionary incomes. 
B) The price of cigarettes has increased recently. 
C) They are no longer permitted to smoke in public. 
D) Cigarette advertising on television has been banned. 
E) The proportion of income a young smoker spends on cigarettes is usually quite large.

Question 4

When agricultural production increases, the total amount paid for agricultural products tends to:​

Accepted Answer

A) increase because demand is perfectly elastic. 
B) decrease because demand is price elastic. 
C) increase because demand is price inelastic. 
D) decrease because demand is price inelastic. 
E) remain constant because demand is price inelastic. 
A) increase because demand is perfectly elastic. 
B) decrease because demand is price elastic. 
C) increase because demand is price inelastic. 
D) decrease because demand is price inelastic. 
E) remain constant because demand is price inelastic.

Question 5

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) be equal to −1. 
E) remain unchanged. 
A) increase. 
B) decrease. 
C) fall to zero. 
D) be equal to −1. 
E) remain unchanged.

Question 6

Figure 5.3 shows a linear demand curve. Between points A and B, 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

The demand for flour is:​

Accepted Answer

A) inelastic because there are few substitutes for flour and it represents a large percentage of a consumer's budget. 
B) inelastic because there are many substitutes for flour and it represents a large percentage of a consumer's budget. 
C) inelastic because there are few substitutes for flour and it represents a small percentage of a consumer's budget. 
D) elastic because there are no substitutes for flour and it represents a large percentage of a consumer's budget. 
E) elastic because there are many substitutes for flour and it represents a large percentage of a consumer's budget. 
A) inelastic because there are few substitutes for flour and it represents a large percentage of a consumer's budget. 
B) inelastic because there are many substitutes for flour and it represents a large percentage of a consumer's budget. 
C) inelastic because there are few substitutes for flour and it represents a small percentage of a consumer's budget. 
D) elastic because there are no substitutes for flour and it represents a large percentage of a consumer's budget. 
E) elastic because there are many substitutes for flour and it represents a large percentage of a consumer's budget.

Question 8

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 the 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 9

If the income elasticity of demand for a service is 0.6, then a 5 percent increase in income will generate a _____ in quantity demanded.​

Accepted Answer

A) 3 percent decrease​ 
B) 3 percent increase 
C) 8.33 percent decrease 
D) 8.33 percent increase 
E) 0.12 percent decrease 
A) 3 percent decrease​ 
B) 3 percent increase 
C) 8.33 percent decrease 
D) 8.33 percent increase 
E) 0.12 percent decrease

Question 10

Inferior goods have an income elasticity of demand that is:​

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) greater than 1 in absolute value. 
E) equal to 1 in absolute value. 
A) positive. 
B) negative. 
C) zero. 
D) greater than 1 in absolute value. 
E) equal to 1 in absolute value.

Question 11

Figure 5.4 shows a downward-sloping linear demand curve. Between points b and c in the figure below, price decreases by $1, quantity demanded increases by 10, _____.​ ​
Figure 5.4

Accepted Answer

A) total revenue decreases by $1, and demand is elastic 
B) total revenue decreases by $1, and demand is inelastic 
C) total revenue increases by $40, and demand is elastic 
D) total revenue increases by $40, and demand is inelastic 
E) and total revenue increases by $80 
A) total revenue decreases by $1, and demand is elastic 
B) total revenue decreases by $1, and demand is inelastic 
C) total revenue increases by $40, and demand is elastic 
D) total revenue increases by $40, and demand is inelastic 
E) and total revenue increases by $80

Question 12

If a firm facing a perfectly elastic demand curve raises its price, then:​

Accepted Answer

A) it will still sell exactly the same amount of output as it did at the lower price. 
B) it will lose some, but not all, of its sales. 
C) its sales will fall to zero. 
D) its sales will increase. 
E)  it will lose its market share. 
A) it will still sell exactly the same amount of output as it did at the lower price. 
B) it will lose some, but not all, of its sales. 
C) its sales will fall to zero. 
D) its sales will increase. 
E)  it will lose its market share.

Question 13

Figure 5.3 shows a linear demand curve. As you move from point A to point B along the demand curve, total revenue _____ and the demand is _____.​ ​
Figure 5.3
​

Accepted Answer

A) stays the same; unitary 
B) decreases; inelastic 
C) increases; elastic 
D) increases; elastic. 
E) increases, inelastic 
A) stays the same; unitary 
B) decreases; inelastic 
C) increases; elastic 
D) increases; elastic. 
E) increases, inelastic

Question 14

Wheat farmers in Kansas would benefit from a devastating crop failure in North Dakota (another major wheat-producing state) if the U.S. demand for wheat is:​

Accepted Answer

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

Question 15

Table 5.6 shows the change in the quantity demanded for Good A and Good B as a result of a change in income. Use the information in the table below to calculate the value of the income elasticity of demand for Good B.​ ​
Table 5.6
​
​
Quantity
Income
Good A
​
100
$1,000
120
​
$2,000
Good B
200
$20
140
$35

Accepted Answer

A) -11/17 
B) 17/9 
C) 10/3 
D) -3/10 
E) 1 
A) -11/17 
B) 17/9 
C) 10/3 
D) -3/10 
E) 1

Question 16

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 17

Identify a statement that is true about a linear demand curve.​

Accepted Answer

A) Along a linear demand curve, both the slope and price elasticity are constant. 
B) Along a linear demand curve, the price elasticity is constant, but the slope varies. 
C) Along a linear demand curve, total revenues are constant. 
D) Along a linear demand curve, the slope is constant, but the price elasticity varies. 
E)  Along a linear demand curve, total revenues are negative. 
A) Along a linear demand curve, both the slope and price elasticity are constant. 
B) Along a linear demand curve, the price elasticity is constant, but the slope varies. 
C) Along a linear demand curve, total revenues are constant. 
D) Along a linear demand curve, the slope is constant, but the price elasticity varies. 
E)  Along a linear demand curve, total revenues are negative.

Question 18

If income rises and the demand for a product remains unchanged, the income elasticity of demand for that product is unit elastic.​

Accepted Answer

A) True 
 B)False

Question 19

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

Question 20

Figure 5.7 shows four demand curves. The demand curve that best illustrates how consumers will respond to a change in price over a very long time period is:​ Figure 5.7
​

Accepted Answer

A) curve D(1). 
B) curve D(2). 
C) curve D(4). 
D) curve D(3). 
E) curve D(1) or curve D(4). 
A) curve D(1). 
B) curve D(2). 
C) curve D(4). 
D) curve D(3). 
E) curve D(1) or curve D(4).

Exam 5: Elasticity of Demand and Supply

Figure 5.5 shows the total revenue curve for a firm. Which of the following statements is true in the range of the total revenue curve labeled B?​ ​ Figure 5.5. ​

Figure 5.3 shows a linear demand curve. As you move from point B to point C along the demand curve, total revenue _____ and the demand is _____.​ ​ Figure 5.3 ​

Which of the following is a possible reason for the price elasticity of demand for cigarettes being large for young smokers?​

When agricultural production increases, the total amount paid for agricultural products tends to:​

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

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

The demand for flour is:​

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 the price elasticity of demand is:​

If the income elasticity of demand for a service is 0.6, then a 5 percent increase in income will generate a _____ in quantity demanded.​

Inferior goods have an income elasticity of demand that is:​

Figure 5.4 shows a downward-sloping linear demand curve. Between points b and c in the figure below, price decreases by $1, quantity demanded increases by 10, _____.​ ​ Figure 5.4

If a firm facing a perfectly elastic demand curve raises its price, then:​

Figure 5.3 shows a linear demand curve. As you move from point A to point B along the demand curve, total revenue _____ and the demand is _____.​ ​ Figure 5.3 ​

Wheat farmers in Kansas would benefit from a devastating crop failure in North Dakota (another major wheat-producing state) if the U.S. demand for wheat is:​

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

Identify a statement that is true about a linear demand curve.​

If income rises and the demand for a product remains unchanged, the income elasticity of demand for that product is unit elastic.​

A perfectly inelastic demand curve is:​

Figure 5.7 shows four demand curves. The demand curve that best illustrates how consumers will respond to a change in price over a very long time period is:​ Figure 5.7 ​

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Figure 5.5 shows the total revenue curve for a firm. Which of the following statements is true in the range of the total revenue curve labeled B? Figure 5.5.

Figure 5.3 shows a linear demand curve. As you move from point B to point C along the demand curve, total revenue _ and the demand is _. Figure 5.3

Which of the following is a possible reason for the price elasticity of demand for cigarettes being large for young smokers?

When agricultural production increases, the total amount paid for agricultural products tends to:

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

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

The demand for flour is:

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 the price elasticity of demand is:

If the income elasticity of demand for a service is 0.6, then a 5 percent increase in income will generate a _____ in quantity demanded.

Inferior goods have an income elasticity of demand that is:

Figure 5.4 shows a downward-sloping linear demand curve. Between points b and c in the figure below, price decreases by $1, quantity demanded increases by 10, _____. Figure 5.4

If a firm facing a perfectly elastic demand curve raises its price, then:

Figure 5.3 shows a linear demand curve. As you move from point A to point B along the demand curve, total revenue _ and the demand is _. Figure 5.3

Wheat farmers in Kansas would benefit from a devastating crop failure in North Dakota (another major wheat-producing state) if the U.S. demand for wheat is:

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

Identify a statement that is true about a linear demand curve.

If income rises and the demand for a product remains unchanged, the income elasticity of demand for that product is unit elastic.

A perfectly inelastic demand curve is:

Figure 5.7 shows four demand curves. The demand curve that best illustrates how consumers will respond to a change in price over a very long time period is: Figure 5.7