Question 1

The demand for diet soft drinks (as a group)is relatively inelastic because

Accepted Answer

A) there are many of them on the market. 
B) there are few substitutes. 
C) the purchase of a soft drink represents a large portion of a person's budget. 
D) none of the above. 
A) there are many of them on the market. 
B) there are few substitutes. 
C) the purchase of a soft drink represents a large portion of a person's budget. 
D) none of the above.

Question 2

-In the above figure,along the section of the demand curve between point a and point b,demand is

Accepted Answer

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

Question 3

If demand is elastic and the price of a product decreases by 10 percent,then

Accepted Answer

A) the change in quantity demanded is less than 10 percent. 
B) the change in quantity demanded is equal to 10 percent. 
C) the change in quantity demanded is greater than 10 percent. 
D) the decrease in quantity demanded is greater than 0 percent. 
A) the change in quantity demanded is less than 10 percent. 
B) the change in quantity demanded is equal to 10 percent. 
C) the change in quantity demanded is greater than 10 percent. 
D) the decrease in quantity demanded is greater than 0 percent.

Question 4

The supply curve for housing in the very short run is likely to be

Accepted Answer

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

Question 5

If the absolute price elasticity of demand of a good is 1.46,then the total revenues will increase if its market price

Accepted Answer

A) increases. 
B) decreases. 
C) stays the same. 
D) changes,but we can't tell without more information if the price increases or decreases. 
A) increases. 
B) decreases. 
C) stays the same. 
D) changes,but we can't tell without more information if the price increases or decreases.

Question 6

The cross elasticity of demand is

Accepted Answer

A) the percentage change in the demand divided by the percentage change in price of another good. 
B) the change in the price of one good divided by the change of quantity demanded of another good. 
C) the percentage change in the quantity demanded of one good divided by the percentage change in the quantity demanded of another good. 
D) the percentage change in the price of one good divided by the percentage change in the price of another good. 
A) the percentage change in the demand divided by the percentage change in price of another good. 
B) the change in the price of one good divided by the change of quantity demanded of another good. 
C) the percentage change in the quantity demanded of one good divided by the percentage change in the quantity demanded of another good. 
D) the percentage change in the price of one good divided by the percentage change in the price of another good.

Question 7

Moving upward along a downward sloping straight-line demand curve,as the price of the product goes up,

Accepted Answer

A) the price elasticity of demand does not change. 
B) the price elasticity of demand goes from being inelastic to being elastic. 
C) the price elasticity of demand goes from being elastic to being inelastic. 
D) the price elasticity of demand goes from negative to positive. 
A) the price elasticity of demand does not change. 
B) the price elasticity of demand goes from being inelastic to being elastic. 
C) the price elasticity of demand goes from being elastic to being inelastic. 
D) the price elasticity of demand goes from negative to positive.

Question 8

If a 10 percent increase in price causes a 5 percent increase in quantity supplied,then supply is

Accepted Answer

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

Question 9

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

Accepted Answer

A) -1.833 
B) +0.545 
C) +0.579 
D) +1.833 
A) -1.833 
B) +0.545 
C) +0.579 
D) +1.833

Question 10

Price elasticity of demand is measured using percentage changes.Why?

Accepted Answer

By using percentage changes,we are focus

Question 11

-Refer to the above figure.The supply curve is

Accepted Answer

A) elastic at high prices and inelastic at low prices. 
B) unitary for all prices. 
C) perfectly elastic. 
D) perfectly inelastic. 
A) elastic at high prices and inelastic at low prices. 
B) unitary for all prices. 
C) perfectly elastic. 
D) perfectly inelastic.

Question 12

If the cross price elasticity of demand between two goods is negative,then the two goods are

Accepted Answer

A) substitutes. 
B) complements. 
C) unrelated. 
D) independent. 
A) substitutes. 
B) complements. 
C) unrelated. 
D) independent.

Question 13

If the absolute price elasticity of demand is equal to 1 in the short run,then in the long run,other things being equal,the absolute price elasticity of demand will be

Accepted Answer

A) less than one. 
B) less than zero. 
C) greater than one. 
D) equal to zero. 
A) less than one. 
B) less than zero. 
C) greater than one. 
D) equal to zero.

Question 14

A university raises annual tuition by 10 percent.No other events have occurred,and the university's revenues have increased.It must be true that

Accepted Answer

A) the associated change in quantity demanded was smaller than 10 percent. 
B) the associated change in quantity demanded was equal to 10 percent. 
C) the associated change in quantity demanded was greater than 10 percent. 
D) there was no associated change in quantity demanded. 
A) the associated change in quantity demanded was smaller than 10 percent. 
B) the associated change in quantity demanded was equal to 10 percent. 
C) the associated change in quantity demanded was greater than 10 percent. 
D) there was no associated change in quantity demanded.

Question 15

If the absolute price elasticity of demand for a product is greater than 1,then

Accepted Answer

A) consumers are relatively insensitive to price changes. 
B) consumers are relatively sensitive to price changes. 
C) there is a positive relationship between price changes and total revenue. 
D) producers are relatively insensitive to price changes. 
A) consumers are relatively insensitive to price changes. 
B) consumers are relatively sensitive to price changes. 
C) there is a positive relationship between price changes and total revenue. 
D) producers are relatively insensitive to price changes.

Question 16

The difference between price elasticity of demand and income elasticity of demand is that

Accepted Answer

A) income elasticity of demand examines how an individual's income changes when prices change and the price elasticity of demand examines how quantity demand changes when price changes. 
B) income elasticity refers to the movement along the demand curve while price elasticity refers to a horizontal shift of the demand curve. 
C) income elasticity measures the responsiveness of income to changes in supply while price elasticity of demand measures the responsiveness of demand to a change in price. 
D) income elasticity refers to a horizontal shift of the demand curve while price elasticity of demand refers to a movement along the demand curve. 
A) income elasticity of demand examines how an individual's income changes when prices change and the price elasticity of demand examines how quantity demand changes when price changes. 
B) income elasticity refers to the movement along the demand curve while price elasticity refers to a horizontal shift of the demand curve. 
C) income elasticity measures the responsiveness of income to changes in supply while price elasticity of demand measures the responsiveness of demand to a change in price. 
D) income elasticity refers to a horizontal shift of the demand curve while price elasticity of demand refers to a movement along the demand curve.

Question 17

If the price of a good increases and the total revenue remains the same,the demand for the good is

Accepted Answer

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

Question 18

The price elasticity of demand is

Accepted Answer

A) always negative. 
B) sometimes positive. 
C) always positive. 
D) constant along the demand curve. 
A) always negative. 
B) sometimes positive. 
C) always positive. 
D) constant along the demand curve.

Question 19

Suppose two goods are perfect substitutes.The price elasticity of demand of one of the goods is

Accepted Answer

A) 0. 
B) 1. 
C) 1000. 
D) infinity. 
A) 0. 
B) 1. 
C) 1000. 
D) infinity.

Question 20

The cross price elasticity of demand is defined as

Accepted Answer

A) the percentage change in the supply for one good (a shift in the supply curve)divided by the percentage change in price of a related good. 
B) the percentage change in demand for two different commodities. 
C) the percentage change in the demand for one good (a shift in the demand curve)divided by the percentage change in price of a related good. 
D) the percentage change in price for two different commodities. 
A) the percentage change in the supply for one good (a shift in the supply curve)divided by the percentage change in price of a related good. 
B) the percentage change in demand for two different commodities. 
C) the percentage change in the demand for one good (a shift in the demand curve)divided by the percentage change in price of a related good. 
D) the percentage change in price for two different commodities.

Exam 6: Demand and Supply Elasticity

The demand for diet soft drinks (as a group)is relatively inelastic because

-In the above figure,along the section of the demand curve between point a and point b,demand is

If demand is elastic and the price of a product decreases by 10 percent,then

The supply curve for housing in the very short run is likely to be

If the absolute price elasticity of demand of a good is 1.46,then the total revenues will increase if its market price

The cross elasticity of demand is

Moving upward along a downward sloping straight-line demand curve,as the price of the product goes up,

If a 10 percent increase in price causes a 5 percent increase in quantity supplied,then supply 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 X increases from $10 to $12.What is the cross price elasticity of demand between X and Y?

Price elasticity of demand is measured using percentage changes.Why?

-Refer to the above figure.The supply curve is

If the cross price elasticity of demand between two goods is negative,then the two goods are

If the absolute price elasticity of demand is equal to 1 in the short run,then in the long run,other things being equal,the absolute price elasticity of demand will be

A university raises annual tuition by 10 percent.No other events have occurred,and the university's revenues have increased.It must be true that

If the absolute price elasticity of demand for a product is greater than 1,then

The difference between price elasticity of demand and income elasticity of demand is that

If the price of a good increases and the total revenue remains the same,the demand for the good is

The price elasticity of demand is

Suppose two goods are perfect substitutes.The price elasticity of demand of one of the goods is

The cross price elasticity of demand is defined as

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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