Question 1

Suppose that the value of the short-run absolute elasticity of demand for a good is 0.38.Then,we know the long-run absolute price elasticity of demand will be

Accepted Answer

A) 0. 
B) greater than 0.38. 
C) elastic. 
D) less than 0.38. 
A) 0. 
B) greater than 0.38. 
C) elastic. 
D) less than 0.38.

Question 2

When the price of gasoline is $2.20 per gallon,11 million gallons are demanded,and when the price of gasoline goes up to $2.60 per gallon,10 million gallons are demanded.The gasoline in this range has a(n)

Accepted Answer

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

Question 3

The price elasticity of demand along a linear demand curve is

Accepted Answer

A) more elastic at higher prices than at low prices. 
B) infinite. 
C) one. 
D) constant. 
A) more elastic at higher prices than at low prices. 
B) infinite. 
C) one. 
D) constant.

Question 4

$$\begin{array} { c c } 
\hline \begin{array} { c } 
\text { Price } \
\text { Per Unit }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded } \
\text { Per Week }
\end{array} \
\hline \$ 10.00 & 25 \
9.50 & 30 \
9.00 & 35 \
8.50 & 40 \
8.00 & 45 \
7.50 & 50 \
7.00 & 55 \
6.50 & 60 \
6.00 & 65 \
5.50 & 70 \
5.00 & 75
\end{array}$$
-Refer to the above table.Demand is unit elastic between the prices of

Accepted Answer

A) $5.00 & $10.00. 
B) $6.00 & $7.00. 
C) $6.00 & $6.50. 
D) $7.00 & $7.50 
A) $5.00 & $10.00. 
B) $6.00 & $7.00. 
C) $6.00 & $6.50. 
D) $7.00 & $7.50

Question 5

A 2 percent rise in the price of a good leads to a 2 percent decrease in quantity demanded.The absolute price elasticity of demand is

Accepted Answer

A) 5. 
B) 10. 
C) 0.1. 
D) 1.0. 
A) 5. 
B) 10. 
C) 0.1. 
D) 1.0.

Question 6

If demand for a good is perfectly inelastic,then

Accepted Answer

A) a price increase would cause a fall in quantity demanded. 
B) a price increase would cause no change in quantity demanded. 
C) a price increase would cause an increase in quantity demanded. 
D) a price increase would cause a fall in total revenue. 
A) a price increase would cause a fall in quantity demanded. 
B) a price increase would cause no change in quantity demanded. 
C) a price increase would cause an increase in quantity demanded. 
D) a price increase would cause a fall in total revenue.

Question 7

In an extreme hypothetical instance in which the price change of a good elicited no change in quantity demanded,we would say that the item is

Accepted Answer

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

Question 8

When the price of cable modems decreased from $100 to $85,the number of cable modems produced fell from 1,000 per week to 850 per week.Using this information,we know the supply of cable modems is

Accepted Answer

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

Question 9

If an item has an absolute price elasticity of demand that is greater than 1,we say the demand for the item is

Accepted Answer

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

Question 10

If the absolute value of the price elasticity of demand for a product is 1.5,and the price of a product increased 30 percent,then the quantity demanded will decline by

Accepted Answer

A) 45 percent. 
B) 20 percent. 
C) 5 percent. 
D) 10 percent. 
A) 45 percent. 
B) 20 percent. 
C) 5 percent. 
D) 10 percent.

Question 11

"Income elasticity of demand is always positive." Do you agree or disagree? Explain.

Accepted Answer

Disagree.Income elasticity of demand can

Question 12

$$\begin{array} { r r r r r r } 
\text { Px } & \text { Qx } & \text { Py } & \text { Qy } & \text { Pz } & \text { Qz } \
\hline 10 & 100 & \$ 20 & 50 & \$ 25 & 200 \
10 & 90 & 18 & 60 & 25 & 225 \
10 & 70 & 15 & 90 & 25 & 275 \
12 & 50 & 15 & 100 & 25 & 290 \
15 & 25 & 15 & 120 & 25 & 320\\hline
\end{array}$$
-Refer to the above table.Based on the information in the table,we can say that

Accepted Answer

A) all three goods are substitutes for each other. 
B) all three goods are complements. 
C) X and Y are substitutes,Y and Z are complements,and X and Z are substitutes. 
D) X and Y are complements,Y and Z are substitutes,and X and Z are complements. 
A) all three goods are substitutes for each other. 
B) all three goods are complements. 
C) X and Y are substitutes,Y and Z are complements,and X and Z are substitutes. 
D) X and Y are complements,Y and Z are substitutes,and X and Z are complements.

Question 13

When total revenue and price are inversely related,demand is

Accepted Answer

A) unit-elastic. 
B) inelastic. 
C) elastic. 
D) not related. 
A) unit-elastic. 
B) inelastic. 
C) elastic. 
D) not related.

Question 14

Usually,price elasticities of supply are

Accepted Answer

A) positive,because higher prices yield larger quantities supplied. 
B) considered short-run adjustments due to supply constraints. 
C) ordinarily a negative number based on the law of supply. 
D) an inverse relationship between price and quantity supplied. 
A) positive,because higher prices yield larger quantities supplied. 
B) considered short-run adjustments due to supply constraints. 
C) ordinarily a negative number based on the law of supply. 
D) an inverse relationship between price and quantity supplied.

Question 15

If price decreases by 10 percent and quantity demanded increases by 30 percent,the price elasticity of demand will be

Accepted Answer

A) 0.333. 
B) 3. 
C) 30. 
D) 300. 
A) 0.333. 
B) 3. 
C) 30. 
D) 300.

Question 16

Robert must always have cream in his coffee.For Robert,the cross price elasticity of demand for coffee and cream is

Accepted Answer

A) equal to 0. 
B) negative. 
C) positive. 
D) impossible to determine without more information. 
A) equal to 0. 
B) negative. 
C) positive. 
D) impossible to determine without more information.

Question 17

If the price of apples went up by 25 percent,which of the following values of the cross price elasticity for oranges would be most reasonable to anticipate?

Accepted Answer

A) 0.0 
B) 1.2 
C) -2.5 
D) -1.0 
A) 0.0 
B) 1.2 
C) -2.5 
D) -1.0

Question 18

The responsiveness of quantity demanded of a good to changes in its price is the

Accepted Answer

A) cross elasticity of demand. 
B) price elasticity of supply. 
C) income elasticity. 
D) price elasticity of demand. 
A) cross elasticity of demand. 
B) price elasticity of supply. 
C) income elasticity. 
D) price elasticity of demand.

Question 19

A cafeteria is willing to produce 100 cups of coffee when the price is $1 and 150 cups of coffee when the price is $1.30,other things being equal.The price elasticity of supply of coffee is

Accepted Answer

A) 1.53. 
B) 0.67. 
C) 0.10. 
D) 0.50. 
A) 1.53. 
B) 0.67. 
C) 0.10. 
D) 0.50.

Question 20

$$\begin{array} { r r r r r r } 
\text { Px } & \text { Qx } & \text { Py } & \text { Qy } & \text { Pz } & \text { Qz } \
\hline 10 & 100 & \$ 20 & 50 & \$ 25 & 200 \
10 & 90 & 18 & 60 & 25 & 225 \
10 & 70 & 15 & 90 & 25 & 275 \
12 & 50 & 15 & 100 & 25 & 290 \
15 & 25 & 15 & 120 & 25 & 320\\hline
\end{array}$$
-Refer to the above table.Suppose the price of Y rises from $18 to $20.What is the cross price elasticity of demand between Y and Z?

Accepted Answer

A) -1.7273 
B) -1.1176 
C) -0.8947 
D) +1.7273 
A) -1.7273 
B) -1.1176 
C) -0.8947 
D) +1.7273

Exam 6: Demand and Supply Elasticity

Suppose that the value of the short-run absolute elasticity of demand for a good is 0.38.Then,we know the long-run absolute price elasticity of demand will be

When the price of gasoline is $2.20 per gallon,11 million gallons are demanded,and when the price of gasoline goes up to $2.60 per gallon,10 million gallons are demanded.The gasoline in this range has a(n)

The price elasticity of demand along a linear demand curve is

Price Per Unit Quantity Demanded Per Week \ 10.00 25 9.50 30 9.00 35 8.50 40 8.00 45 7.50 50 7.00 55 6.50 60 6.00 65 5.50 70 5.00 75 -Refer to the above table.Demand is unit elastic between the prices of

A 2 percent rise in the price of a good leads to a 2 percent decrease in quantity demanded.The absolute price elasticity of demand is

If demand for a good is perfectly inelastic,then

In an extreme hypothetical instance in which the price change of a good elicited no change in quantity demanded,we would say that the item is

When the price of cable modems decreased from $100 to $85,the number of cable modems produced fell from 1,000 per week to 850 per week.Using this information,we know the supply of cable modems is

If an item has an absolute price elasticity of demand that is greater than 1,we say the demand for the item is

If the absolute value of the price elasticity of demand for a product is 1.5,and the price of a product increased 30 percent,then the quantity demanded will decline by

"Income elasticity of demand is always positive." Do you agree or disagree? Explain.

Px Qx Py Qy Pz Qz 10 100 \ 20 50 \ 25 200 10 90 18 60 25 225 10 70 15 90 25 275 12 50 15 100 25 290 15 25 15 120 25 320 -Refer to the above table.Based on the information in the table,we can say that

When total revenue and price are inversely related,demand is

Usually,price elasticities of supply are

If price decreases by 10 percent and quantity demanded increases by 30 percent,the price elasticity of demand will be

Robert must always have cream in his coffee.For Robert,the cross price elasticity of demand for coffee and cream is

If the price of apples went up by 25 percent,which of the following values of the cross price elasticity for oranges would be most reasonable to anticipate?

The responsiveness of quantity demanded of a good to changes in its price is the

A cafeteria is willing to produce 100 cups of coffee when the price is $1 and 150 cups of coffee when the price is $1.30,other things being equal.The price elasticity of supply of coffee is

Px Qx Py Qy Pz Qz 10 100 \ 20 50 \ 25 200 10 90 18 60 25 225 10 70 15 90 25 275 12 50 15 100 25 290 15 25 15 120 25 320 -Refer to the above table.Suppose the price of Y rises from $18 to $20.What is the cross price elasticity of demand between Y and Z?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

Consumer Choice

Rents, profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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