Question 1

A perfectly elastic supply curve is

Accepted Answer

A) a straight line that crosses the horizontal axis. 
B) a straight line coming out of the origin. 
C) a horizontal straight line. 
D) a vertical straight line. 
A) a straight line that crosses the horizontal axis. 
B) a straight line coming out of the origin. 
C) a horizontal straight line. 
D) a vertical straight line.

Question 2

When very few substitutes for a good exist,demand will be

Accepted Answer

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

Question 3

-In the above figure,along which range would total revenue remain unchanged by raising prices?

Accepted Answer

A) Between point a and point b 
B) Between point c and point d 
C) Between point d and point e 
D) Below point e and above point a. 
A) Between point a and point b 
B) Between point c and point d 
C) Between point d and point e 
D) Below point e and above point a.

Question 4

Which of the following goods is likely to have the highest income elasticity?

Accepted Answer

A) A designer blouse 
B) Tomato soup 
C) Hamburger 
D) Can of tuna 
A) A designer blouse 
B) Tomato soup 
C) Hamburger 
D) Can of tuna

Question 5

When price is $5 per unit,quantity demanded is 12 units.When price is $6 per unit,quantity demanded is 8 units.The value of the absolute price elasticity of demand is approximately

Accepted Answer

A) 2.20. 
B) 4.00. 
C) 1.82. 
D) 0.36. 
A) 2.20. 
B) 4.00. 
C) 1.82. 
D) 0.36.

Question 6

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

Accepted Answer

A) In a range of prices below $6.50 
B) In a range of prices above $6.50 
C) In a range of prices between $5 and $10 
D) In a range of prices between $6 and $6.50 
A) In a range of prices below $6.50 
B) In a range of prices above $6.50 
C) In a range of prices between $5 and $10 
D) In a range of prices between $6 and $6.50

Question 7

If the price elasticity of demand for apples is greater than 1,an increase in apple prices will

Accepted Answer

A) raise total revenue. 
B) lower total revenue. 
C) not affect total revenue. 
D) either raise or lower total revenue,but it is impossible to determine which. 
A) raise total revenue. 
B) lower total revenue. 
C) not affect total revenue. 
D) either raise or lower total revenue,but it is impossible to determine which.

Question 8

The less sensitive quantity demanded is to a change in price,the

Accepted Answer

A) smaller a change in price must be to induce a certain change in quantity demanded. 
B) greater the absolute price elasticity of demand. 
C) smaller the absolute price elasticity of demand. 
D) closer the absolute price elasticity of demand is to one. 
A) smaller a change in price must be to induce a certain change in quantity demanded. 
B) greater the absolute price elasticity of demand. 
C) smaller the absolute price elasticity of demand. 
D) closer the absolute price elasticity of demand is to one.

Question 9

Supply will become more elastic when

Accepted Answer

A) a time period lengthens. 
B) the time period shortens. 
C) the good is important to consumers. 
D) there are good substitutes for the goods. 
A) a time period lengthens. 
B) the time period shortens. 
C) the good is important to consumers. 
D) there are good substitutes for the goods.

Question 10

-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 11

The longer any price change lasts over time,the

Accepted Answer

A) more difficult it is to alter quantity demanded. 
B) the more quickly quantity demanded will return to its original level. 
C) the longer the short-run equilibrium will continue to be the short-run equilibrium. 
D) more quantity demanded will change. 
A) more difficult it is to alter quantity demanded. 
B) the more quickly quantity demanded will return to its original level. 
C) the longer the short-run equilibrium will continue to be the short-run equilibrium. 
D) more quantity demanded will change.

Question 12

When quantity supplied is not very responsive to a change in price,supply is

Accepted Answer

A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) income sensitive. 
A) elastic. 
B) unit-elastic. 
C) inelastic. 
D) income sensitive.

Question 13

The actual value of price elasticity of demand

Accepted Answer

A) measures the relative change in quantity demanded when there is a change in price. 
B) will change when the units good is measured in changes. 
C) varies with changes in supply. 
D) is always negative. 
A) measures the relative change in quantity demanded when there is a change in price. 
B) will change when the units good is measured in changes. 
C) varies with changes in supply. 
D) is always negative.

Question 14

The responsiveness of demand to changes in income holding the good's relative price constant is

Accepted Answer

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

Question 15

"The price elasticity of demand for a particular good is smaller in the long run because consumers adapt to higher prices over time." Do you agree or disagree? Explain.

Accepted Answer

Disagree.Price elasticity of demand is r

Question 16

When demand is inelastic,

Accepted Answer

A) quantity demanded is very responsive to a change in price. 
B) quantity demanded is not very responsive to a change in price. 
C) the proportional change in quantity demanded is equal to the proportional change in price. 
D) producers react quickly to price changes. 
A) quantity demanded is very responsive to a change in price. 
B) quantity demanded is not very responsive to a change in price. 
C) the proportional change in quantity demanded is equal to the proportional change in price. 
D) producers react quickly to price changes.

Question 17

Suppose the price of X increases by 20 percent while the quantity demanded of Y does not change.We would conclude that

Accepted Answer

A) the two goods are substitutes,but the cross elasticity of demand is not large. 
B) the two goods are complements,but the cross elasticity of demand is not large. 
C) the two goods are perfect substitutes. 
D) the two goods are not related. 
A) the two goods are substitutes,but the cross elasticity of demand is not large. 
B) the two goods are complements,but the cross elasticity of demand is not large. 
C) the two goods are perfect substitutes. 
D) the two goods are not related.

Question 18

Six months ago,the price of gasoline was $2.20 per gallon.Now,the price is $2.40 per gallon.In response to this price increase,the number of gallons of gasoline purchased has declined by 2 percent.Based on this information,what is the absolute price elasticity of demand for gasoline?

Accepted Answer

A) 4.35 
B) 1.20 
C) 0.23 
D) 0.10 
A) 4.35 
B) 1.20 
C) 0.23 
D) 0.10

Question 19

The value of the absolute price elasticity of demand for good X is 3.The absolute price elasticity for good Y is 2.Which good's quantity demanded is less responsive to a change in price?

Accepted Answer

A) Good X. 
B) Good Y. 
C) They are equally responsive. 
D) Not enough information is given. 
A) Good X. 
B) Good Y. 
C) They are equally responsive. 
D) Not enough information is given.

Question 20

The government raises gasoline taxes as part of the price of gasoline and receives more tax revenues.However,after five years,the government discovers that revenues from the gasoline tax have declined.This situation would be most likely to occur if

Accepted Answer

A) the long-run elasticity of supply was much greater than the long-run elasticity of demand. 
B) the demand for gasoline was inelastic in the short run,but elastic in the long run. 
C) the long-run elasticity of demand was greater than the long-run elasticity of supply. 
D) the demand for gasoline was perfectly inelastic in both the short run and the long run. 
A) the long-run elasticity of supply was much greater than the long-run elasticity of demand. 
B) the demand for gasoline was inelastic in the short run,but elastic in the long run. 
C) the long-run elasticity of demand was greater than the long-run elasticity of supply. 
D) the demand for gasoline was perfectly inelastic in both the short run and the long run.

Exam 6: Demand and Supply Elasticity

A perfectly elastic supply curve is

When very few substitutes for a good exist,demand will be

-In the above figure,along which range would total revenue remain unchanged by raising prices?

Which of the following goods is likely to have the highest income elasticity?

When price is $5 per unit,quantity demanded is 12 units.When price is $6 per unit,quantity demanded is 8 units.The value of the absolute price elasticity of demand is approximately

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.For which prices is demand unit-elastic?

If the price elasticity of demand for apples is greater than 1,an increase in apple prices will

The less sensitive quantity demanded is to a change in price,the

Supply will become more elastic when

-Refer to the above figure.Demand is

The longer any price change lasts over time,the

When quantity supplied is not very responsive to a change in price,supply is

The actual value of price elasticity of demand

The responsiveness of demand to changes in income holding the good's relative price constant is

"The price elasticity of demand for a particular good is smaller in the long run because consumers adapt to higher prices over time." Do you agree or disagree? Explain.

When demand is inelastic,

Suppose the price of X increases by 20 percent while the quantity demanded of Y does not change.We would conclude that

Six months ago,the price of gasoline was $2.20 per gallon.Now,the price is $2.40 per gallon.In response to this price increase,the number of gallons of gasoline purchased has declined by 2 percent.Based on this information,what is the absolute price elasticity of demand for gasoline?

The value of the absolute price elasticity of demand for good X is 3.The absolute price elasticity for good Y is 2.Which good's quantity demanded is less responsive to a change in price?

The government raises gasoline taxes as part of the price of gasoline and receives more tax revenues.However,after five years,the government discovers that revenues from the gasoline tax have declined.This situation would be most likely to occur if

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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