Question 1

A supply curve that is parallel to the quantity axis is

Accepted Answer

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

Question 2

Which of the following statements regarding price elasticity of supply and the length of time for adjustment is FALSE?

Accepted Answer

A) The longer is the time period for adjustment,the greater is the price elasticity of supply. 
B) The longer is the time period for adjustment,the less is the extent to which resources flow into (or out of)an industry through expansion (or contraction)of existing firms. 
C) The longer is the time period for adjustment,the greater is the extent to which entry or (exit)of firms increases or (decreases)production in an industry. 
D) The shorter the time period for adjustment,the greater is the price elasticity of supply. 
A) The longer is the time period for adjustment,the greater is the price elasticity of supply. 
B) The longer is the time period for adjustment,the less is the extent to which resources flow into (or out of)an industry through expansion (or contraction)of existing firms. 
C) The longer is the time period for adjustment,the greater is the extent to which entry or (exit)of firms increases or (decreases)production in an industry. 
D) The shorter the time period for adjustment,the greater is the price elasticity of supply.

Question 3

If a 1 percent increase in price causes a 2 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 4

A decrease in total revenue will result if

Accepted Answer

A) demand is inelastic and price increases. 
B) demand is elastic and price decreases. 
C) demand is inelastic and price decreases. 
D) demand is unitary elastic and price decreases. 
A) demand is inelastic and price increases. 
B) demand is elastic and price decreases. 
C) demand is inelastic and price decreases. 
D) demand is unitary elastic and price decreases.

Question 5

When the absolute price elasticity of demand is less than 1,demand is

Accepted Answer

A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) undetermined without more information. 
A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) undetermined without more information.

Question 6

If a good has an absolute price elasticity of 1,the demand for the good is

Accepted Answer

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

Question 7

$$\begin{array} { c c } 
\hline \begin{array} { c } 
\text { Price } \
\text { Per Unit }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded } \
\text { Per Week }
\end{array} \
\hline \$ 10.00 & 25 \
9.50 & 30 \
9.00 & 35 \
8.50 & 40 \
8.00 & 45 \
7.50 & 50 \
7.00 & 55 \
6.50 & 60 \
6.00 & 65 \
5.50 & 70 \
5.00 & 75
\end{array}$$
-Refer to the above table.What is the absolute price elasticity of demand if a price falls from $7 to $6.50?

Accepted Answer

A) 0.85 
B) 1.08 
C) 1.17 
D) 0.92 
A) 0.85 
B) 1.08 
C) 1.17 
D) 0.92

Question 8

If the price elasticity of supply is equal to 1,we would say the supply of the item is

Accepted Answer

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

Question 9

-Refer to the above figure.Demand is

Accepted Answer

A) perfectly elastic. 
B) unitary elastic. 
C) perfectly inelastic. 
D) undetermined without more information. 
A) perfectly elastic. 
B) unitary elastic. 
C) perfectly inelastic. 
D) undetermined without more information.

Question 10

Within the range of prices around the midpoint on a straight-line demand curve,demand is

Accepted Answer

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

Question 11

A good's price elasticity of demand can be calculated by using the formula of

Accepted Answer

A) percentage change in price divided by percentage change in quantity demanded. 
B) percentage change in quantity demanded divided by percentage change in price. 
C) percentage change in price divided by percentage change in income. 
D) absolute change in quantity demanded divided by absolute change in price. 
A) percentage change in price divided by percentage change in quantity demanded. 
B) percentage change in quantity demanded divided by percentage change in price. 
C) percentage change in price divided by percentage change in income. 
D) absolute change in quantity demanded divided by absolute change in price.

Question 12

The most important determinant of price elasticity of supply is

Accepted Answer

A) the number of close substitutes there are for the good. 
B) the time period firms have to adjust to the new price. 
C) the price of the good. 
D) the importance of the good in the budgets of consumers. 
A) the number of close substitutes there are for the good. 
B) the time period firms have to adjust to the new price. 
C) the price of the good. 
D) the importance of the good in the budgets of consumers.

Question 13

Why is elasticity of demand greater for goods that are a large share of a consumer's budget?

Accepted Answer

The greater the share of a consumer's bu

Question 14

-Consider the above figure.Which of the following statements is correct?

Accepted Answer

A) In any range of prices encompassing the crossing point of the two demand curves,the price elasticity of demand associated with demand curve D1 is equal to the price elasticity of demand associated with demand curve D2. 
B) In any range of prices encompassing the crossing point of the two demand curves,the price elasticity of demand associated with demand curve D1 is less than the price elasticity of demand associated with demand curve D2. 
C) In any range of prices encompassing the crossing point of the two demand curves,the price elasticity of demand associated with demand curve D1 is greater than the price elasticity of demand associated with demand curve D2. 
D) In any range of prices encompassing the crossing point of the two demand curves,the price elasticity of demand is infinite. 
A) In any range of prices encompassing the crossing point of the two demand curves,the price elasticity of demand associated with demand curve D1 is equal to the price elasticity of demand associated with demand curve D2. 
B) In any range of prices encompassing the crossing point of the two demand curves,the price elasticity of demand associated with demand curve D1 is less than the price elasticity of demand associated with demand curve D2. 
C) In any range of prices encompassing the crossing point of the two demand curves,the price elasticity of demand associated with demand curve D1 is greater than the price elasticity of demand associated with demand curve D2. 
D) In any range of prices encompassing the crossing point of the two demand curves,the price elasticity of demand is infinite.

Question 15

A positive cross price elasticity of demand between two goods suggests that the goods are

Accepted Answer

A) not related. 
B) complements. 
C) substitutes. 
D) both of unitary elasticity. 
A) not related. 
B) complements. 
C) substitutes. 
D) both of unitary elasticity.

Question 16

The absolute price elasticity of demand would be the lowest for

Accepted Answer

A) automobiles. 
B) Pizza Hut pizza. 
C) salt. 
D) movie tickets. 
A) automobiles. 
B) Pizza Hut pizza. 
C) salt. 
D) movie tickets.

Question 17

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

Accepted Answer

A) the absolute price elasticity of demand is inelastic and consumers are relatively insensitive to price changes. 
B) the absolute price elasticity of demand is inelastic and consumers are relatively sensitive to price changes. 
C) the absolute price elasticity of demand is elastic and consumers are relatively insensitive to price changes. 
D) the absolute price elasticity of demand is elastic and consumers are relatively sensitive to price changes. 
A) the absolute price elasticity of demand is inelastic and consumers are relatively insensitive to price changes. 
B) the absolute price elasticity of demand is inelastic and consumers are relatively sensitive to price changes. 
C) the absolute price elasticity of demand is elastic and consumers are relatively insensitive to price changes. 
D) the absolute price elasticity of demand is elastic and consumers are relatively sensitive to price changes.

Question 18

If the price elasticity of demand (Ep)equals one in the short run,then,other things being equal,in the long run Ep will be

Accepted Answer

A) one. 
B) less than one. 
C) greater than one. 
D) indeterminate without more information. 
A) one. 
B) less than one. 
C) greater than one. 
D) indeterminate without more information.

Question 19

How does the cross elasticity of demand differ from the price elasticity of demand? How are they related?

Accepted Answer

The cross elasticity of demand is the re

Question 20

A consumer is willing and able to buy 1,000 units of a good at $10,but the consumer's quantity demanded falls to zero if the price rises even a fraction of a cent.The consumer's demand curve is

Accepted Answer

A) horizontal and is perfectly inelastic. 
B) horizontal and is perfectly elastic. 
C) vertical and is perfectly elastic. 
D) downward sloping from higher prices down to $10 and then horizontal. 
A) horizontal and is perfectly inelastic. 
B) horizontal and is perfectly elastic. 
C) vertical and is perfectly elastic. 
D) downward sloping from higher prices down to $10 and then horizontal.

Exam 6: Demand and Supply Elasticity

A supply curve that is parallel to the quantity axis is

Which of the following statements regarding price elasticity of supply and the length of time for adjustment is FALSE?

If a 1 percent increase in price causes a 2 percent increase in quantity supplied,then supply is

A decrease in total revenue will result if

When the absolute price elasticity of demand is less than 1,demand is

If a good has an absolute price elasticity of 1,the demand for the good 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.What is the absolute price elasticity of demand if a price falls from $7 to $6.50?

If the price elasticity of supply is equal to 1,we would say the supply of the item is

-Refer to the above figure.Demand is

Within the range of prices around the midpoint on a straight-line demand curve,demand is

A good's price elasticity of demand can be calculated by using the formula of

The most important determinant of price elasticity of supply is

Why is elasticity of demand greater for goods that are a large share of a consumer's budget?

-Consider the above figure.Which of the following statements is correct?

A positive cross price elasticity of demand between two goods suggests that the goods are

The absolute price elasticity of demand would be the lowest for

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

If the price elasticity of demand (Ep)equals one in the short run,then,other things being equal,in the long run Ep will be

How does the cross elasticity of demand differ from the price elasticity of demand? How are they related?

A consumer is willing and able to buy 1,000 units of a good at $10,but the consumer's quantity demanded falls to zero if the price rises even a fraction of a cent.The consumer's demand curve is

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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