Question 1

If total revenues decline when the market clearing price increases,then we know that

Accepted Answer

A) demand is inelastic. 
B) demand is elastic. 
C) demand is unit-elastic. 
D) demand has zero elasticity. 
A) demand is inelastic. 
B) demand is elastic. 
C) demand is unit-elastic. 
D) demand has zero elasticity.

Question 2

A demand relationship in which a given percentage change in price will result in a larger percentage change in quantity demanded is

Accepted Answer

A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) consistent with zero elasticity. 
A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) consistent with zero elasticity.

Question 3

A perfectly inelastic demand curve exhibits

Accepted Answer

A) zero responsiveness to changes in price. 
B) zero quantity demanded when there is a slight change in price. 
C) a change in quantity demanded that is proportional to the change in price. 
D) a change in quantity demanded that is always twenty percent of the change in price. 
A) zero responsiveness to changes in price. 
B) zero quantity demanded when there is a slight change in price. 
C) a change in quantity demanded that is proportional to the change in price. 
D) a change in quantity demanded that is always twenty percent of the change in price.

Question 4

A vertical supply curve may be described as being

Accepted Answer

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

Question 5

Total revenues reach a maximum when

Accepted Answer

A) demand is elastic. 
B) demand is inelastic. 
C) demand is unit-elastic. 
D) price elasticity is at a minimum. 
A) demand is elastic. 
B) demand is inelastic. 
C) demand is unit-elastic. 
D) price elasticity is at a minimum.

Question 6

Suppose that the absolute price elasticity for cookies equals 0.9.We could then say that the demand for cookies is

Accepted Answer

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

Question 7

Why is time such an important determinant in the elasticity of supply? Is time also important in determining price elasticity of demand? Explain.

Accepted Answer

Time is an important determinant in the

Question 8

The price elasticity of supply measures

Accepted Answer

A) the responsiveness of quantity demanded to a change in price. 
B) the responsiveness of quantity supplied to a change in price. 
C) the change in supply due to a change in input prices. 
D) the change in price due to a change in quantity supplied. 
A) the responsiveness of quantity demanded to a change in price. 
B) the responsiveness of quantity supplied to a change in price. 
C) the change in supply due to a change in input prices. 
D) the change in price due to a change in quantity supplied.

Question 9

Absolute price elasticities are calculated for four commodities,and the values are: 0.009; 1.0; 3.3; and 4.1.Which indicates the most price-responsive situation?

Accepted Answer

A) 0.009 
B) 1.0 
C) 3.3 
D) 4.1 
A) 0.009 
B) 1.0 
C) 3.3 
D) 4.1

Question 10

When demand is perfectly inelastic,the demand curve is

Accepted Answer

A) horizontal. 
B) vertical. 
C) upward sloping. 
D) downward sloping. 
A) horizontal. 
B) vertical. 
C) upward sloping. 
D) downward sloping.

Question 11

The formal definition of price elasticity of demand is

Accepted Answer

A) change in quantity demanded divided by change in price. 
B) quantity demanded divided by price. 
C) percentage change in quantity demanded divided by percentage change in price. 
D) quantity demanded multiplied by price and divided by 100. 
A) change in quantity demanded divided by change in price. 
B) quantity demanded divided by price. 
C) percentage change in quantity demanded divided by percentage change in price. 
D) quantity demanded multiplied by price and divided by 100.

Question 12

The price elasticity of demand is the

Accepted Answer

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

Question 13

No matter what the price of coffee is in the cafeteria,Jack spends $20 a week on coffee.We can conclude that the absolute value of the price elasticity of demand for coffee for Jack is

Accepted Answer

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

Question 14

The absolute price elasticity of demand for good X is 1.2 when price is measured in dollars.If price were measured in cents,the price elasticity elasticity of demand would equal

Accepted Answer

A) 1200 
B) 12 
C) 1.2 
D) 0.012 
A) 1200 
B) 12 
C) 1.2 
D) 0.012

Question 15

A perfectly elastic demand would imply what kind of demand curve?

Accepted Answer

A) horizontal 
B) vertical 
C) upward sloping 
D) downward sloping 
A) horizontal 
B) vertical 
C) upward sloping 
D) downward sloping

Question 16

Suppose that the cross price elasticity of demand between goods A and B equals 1.5.Which of the following is TRUE?

Accepted Answer

A) A and B are complements because the cross price elasticity is greater than one. 
B) A and B are complements because the cross price elasticity is positive. 
C) A and B are substitutes because the cross price elasticity is greater than one. 
D) A and B are substitutes because the cross price elasticity is positive. 
A) A and B are complements because the cross price elasticity is greater than one. 
B) A and B are complements because the cross price elasticity is positive. 
C) A and B are substitutes because the cross price elasticity is greater than one. 
D) A and B are substitutes because the cross price elasticity is positive.

Question 17

When total revenue remain unchanged when there is a change in price,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 18

A perfectly elastic demand curve exhibits

Accepted Answer

A) zero responsiveness to changes in price. 
B) that quantity demanded will decrease to zero when there is a slight increase in the price level. 
C) a change in quantity demanded that is proportional to the change in price. 
D) a change in quantity demanded that is always twenty percent of the change in price. 
A) zero responsiveness to changes in price. 
B) that quantity demanded will decrease to zero when there is a slight increase in the price level. 
C) a change in quantity demanded that is proportional to the change in price. 
D) a change in quantity demanded that is always twenty percent of the change in price.

Question 19

Suppose that the absolute price elasticity of demand for hamburger is 1.15 and that the absolute price elasticity of demand for steak is 2.4.Then the absolute price elasticity of demand for beef will be

Accepted Answer

A) less than 1.15. 
B) more than 2.4. 
C) between 1.15 and 2.4. 
D) equal to 1.15. 
A) less than 1.15. 
B) more than 2.4. 
C) between 1.15 and 2.4. 
D) equal to 1.15.

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 X increases from $10 to $12.What is the cross price elasticity of demand between X and Z?

Accepted Answer

A) +0.292 
B) +7.06 
C) -7.06 
D) -0.292 
A) +0.292 
B) +7.06 
C) -7.06 
D) -0.292

Exam 6: Demand and Supply Elasticity

If total revenues decline when the market clearing price increases,then we know that

A demand relationship in which a given percentage change in price will result in a larger percentage change in quantity demanded is

A perfectly inelastic demand curve exhibits

A vertical supply curve may be described as being

Total revenues reach a maximum when

Suppose that the absolute price elasticity for cookies equals 0.9.We could then say that the demand for cookies is

Why is time such an important determinant in the elasticity of supply? Is time also important in determining price elasticity of demand? Explain.

The price elasticity of supply measures

Absolute price elasticities are calculated for four commodities,and the values are: 0.009; 1.0; 3.3; and 4.1.Which indicates the most price-responsive situation?

When demand is perfectly inelastic,the demand curve is

The formal definition of price elasticity of demand is

The price elasticity of demand is the

No matter what the price of coffee is in the cafeteria,Jack spends $20 a week on coffee.We can conclude that the absolute value of the price elasticity of demand for coffee for Jack is

The absolute price elasticity of demand for good X is 1.2 when price is measured in dollars.If price were measured in cents,the price elasticity elasticity of demand would equal

A perfectly elastic demand would imply what kind of demand curve?

Suppose that the cross price elasticity of demand between goods A and B equals 1.5.Which of the following is TRUE?

When total revenue remain unchanged when there is a change in price,demand is

A perfectly elastic demand curve exhibits

Suppose that the absolute price elasticity of demand for hamburger is 1.15 and that the absolute price elasticity of demand for steak is 2.4.Then the absolute price elasticity of demand for beef will be

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 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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