Question 1

Perfectly elastic demand is represented as a horizontal line.

Accepted Answer

A) True 
 B)False

Question 2

The cross-price elasticity of demand between good X and good Y is -3. Given this information, which of the following statements is true?

Accepted Answer

A)  The demand for goods X and Y is elastic. 
B)  Goods X and Y are substitutes. 
C)  Goods X and Y are complements. 
D)  The demand for goods X and Y is income elastic. 
A)  The demand for goods X and Y is elastic. 
B)  Goods X and Y are substitutes. 
C)  Goods X and Y are complements. 
D)  The demand for goods X and Y is income elastic.

Question 3

Related to the Economics in Practice on page 108: Which of the following, if true, would support the argument for raising cigarette taxes even if the price of cigarettes has relatively little impact on adults' cigarette consumption?

Accepted Answer

A)  The health risks of cigarette smoking are affected by the amount of nicotine in cigarettes as well as the number of cigarettes smoked. 
B)  When cigarette taxes vary between neighboring states, people have an incentive to buy cigarettes in the state with lower taxes. 
C)  Illness due to smoking is a significant cause of lost economic productivity. 
D)  The demand for cigarettes is more elastic for underage smokers as compared to that of adult smokers. 
A)  The health risks of cigarette smoking are affected by the amount of nicotine in cigarettes as well as the number of cigarettes smoked. 
B)  When cigarette taxes vary between neighboring states, people have an incentive to buy cigarettes in the state with lower taxes. 
C)  Illness due to smoking is a significant cause of lost economic productivity. 
D)  The demand for cigarettes is more elastic for underage smokers as compared to that of adult smokers.

Question 4

Refer to the information provided in Figure 5.2 below to answer the questions that follow.   Figure 5.2
-Refer to Figure 5.2. At Point C the price elasticity of demand is -1. Along line segment AB of the demand curve, the demand is

Accepted Answer

A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  either elastic or inelastic, depending on whether price increases or decreases. 
A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  either elastic or inelastic, depending on whether price increases or decreases.

Question 5

When demand is elastic, a decrease in price will result in an increase in total revenue.

Accepted Answer

A) True 
 B)False

Question 6

Price and total revenue are directly related when demand is

Accepted Answer

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

Question 7

Inferior goods will experience increasing demand when incomes increase.

Accepted Answer

A) True 
 B)False

Question 8

When demand is unit elastic, a decrease in price will result in no change in total revenue.

Accepted Answer

A) True 
 B)False

Question 9

The price elasticity of demand for heart transplants is perfectly inelastic. Thus, the price elasticity demand for heart transplants is

Accepted Answer

A)  1.0. 
B)  0.0. 
C)  -1.0. 
D)  -100.0. 
A)  1.0. 
B)  0.0. 
C)  -1.0. 
D)  -100.0.

Question 10

When demand is elastic, an increase in price will result in an increase in total revenue.

Accepted Answer

A) True 
 B)False

Question 11

A tax on a good whose demand is price elastic will be effective in discouraging consumption of that good.

Accepted Answer

A) True 
 B)False

Question 12

Price elasticity of demand is calculated as the ratio of the change in quantity demanded to the change in price.

Accepted Answer

A) True 
 B)False

Question 13

A mass transit authority charges bus fares of $1.25 during morning rush hours but only $1.00 during late morning non-rush hours. Economists explain the fare difference by the fact that the demand for bus rides during the morning rush hours is ________, but during the late morning it is ________.

Accepted Answer

A)  more elastic; more inelastic 
B)  perfectly elastic; perfectly inelastic 
C)  more inelastic; more elastic 
D)  unit elastic; relatively inelastic 
A)  more elastic; more inelastic 
B)  perfectly elastic; perfectly inelastic 
C)  more inelastic; more elastic 
D)  unit elastic; relatively inelastic

Question 14

A demand curve with constant slope over all quantity values can have a continuously changing price elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 15

Refer to the information provided in Figure 5.4 below to answer the questions that follow.   Figure 5.4
-Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If the milkshake price falls from P1 to P2, total revenue will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  either increase or decrease. 
A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  either increase or decrease.

Question 16

Total revenue decreases if price ________ and demand is ________.

Accepted Answer

A)  falls; elastic 
B)  falls; inelastic 
C)  rises; inelastic 
D)  rises; unit elastic 
A)  falls; elastic 
B)  falls; inelastic 
C)  rises; inelastic 
D)  rises; unit elastic

Question 17

A government wants to reduce electricity consumption by 5%. The price elasticity of demand for electricity is -0.5. The government must ________ the price of electricity by ________.

Accepted Answer

A)  raise; 10.0% 
B)  raise; 1.0% 
C)  raise; 0.1% 
D)  lower; 0.5% 
A)  raise; 10.0% 
B)  raise; 1.0% 
C)  raise; 0.1% 
D)  lower; 0.5%

Question 18

A positive cross-price elasticity between two goods implies that the two goods are compliments.

Accepted Answer

A) True 
 B)False

Question 19

If the quantity of peanut butter demanded increases by 4% when the price of jelly decreases by 2%, the cross-price elasticity of demand between peanut butter and jelly is

Accepted Answer

A)  -4. 
B)  -2. 
C)  -0.5. 
D)  2. 
A)  -4. 
B)  -2. 
C)  -0.5. 
D)  2.

Question 20

Refer to the information provided in Figure 5.1 below to answer the questions that follow.   Figure 5.1
-Refer to Figure 5.1. The demand for tickets is

Accepted Answer

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

Exam 5: Elasticity

Perfectly elastic demand is represented as a horizontal line.

The cross-price elasticity of demand between good X and good Y is -3. Given this information, which of the following statements is true?

Related to the Economics in Practice on page 108: Which of the following, if true, would support the argument for raising cigarette taxes even if the price of cigarettes has relatively little impact on adults' cigarette consumption?

Refer to the information provided in Figure 5.2 below to answer the questions that follow. Figure 5.2 -Refer to Figure 5.2. At Point C the price elasticity of demand is -1. Along line segment AB of the demand curve, the demand is

When demand is elastic, a decrease in price will result in an increase in total revenue.

Price and total revenue are directly related when demand is

Inferior goods will experience increasing demand when incomes increase.

When demand is unit elastic, a decrease in price will result in no change in total revenue.

The price elasticity of demand for heart transplants is perfectly inelastic. Thus, the price elasticity demand for heart transplants is

When demand is elastic, an increase in price will result in an increase in total revenue.

A tax on a good whose demand is price elastic will be effective in discouraging consumption of that good.

Price elasticity of demand is calculated as the ratio of the change in quantity demanded to the change in price.

A mass transit authority charges bus fares of $1.25 during morning rush hours but only $1.00 during late morning non-rush hours. Economists explain the fare difference by the fact that the demand for bus rides during the morning rush hours is ________, but during the late morning it is ________.

A demand curve with constant slope over all quantity values can have a continuously changing price elasticity of demand.

Refer to the information provided in Figure 5.4 below to answer the questions that follow. Figure 5.4 -Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If the milkshake price falls from P1 to P2, total revenue will

Total revenue decreases if price ________ and demand is ________.

A government wants to reduce electricity consumption by 5%. The price elasticity of demand for electricity is -0.5. The government must ________ the price of electricity by ________.

A positive cross-price elasticity between two goods implies that the two goods are compliments.

If the quantity of peanut butter demanded increases by 4% when the price of jelly decreases by 2%, the cross-price elasticity of demand between peanut butter and jelly is

Refer to the information provided in Figure 5.1 below to answer the questions that follow. Figure 5.1 -Refer to Figure 5.1. The demand for tickets is

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Social Choice

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing and Transitional Economies

Filters

A mass transit authority charges bus fares of $1.25 during morning rush hours but only $1.00 during late morning non-rush hours. Economists explain the fare difference by the fact that the demand for bus rides during the morning rush hours is , but during the late morning it is .

Total revenue decreases if price and demand is .

A government wants to reduce electricity consumption by 5%. The price elasticity of demand for electricity is -0.5. The government must the price of electricity by .