Question 1

The price of a litre of gasoline increases 10% this year.As a result,which event is MOST likely to occur?

Accepted Answer

A)  More people will drive their cars. 
B)  Public transportation usage will decrease. 
C)  Gasoline expenditures will increase if gasoline is an inelastic good. 
D)  Fewer people will ride bicycles,a substitute for car travel. 
A)  More people will drive their cars. 
B)  Public transportation usage will decrease. 
C)  Gasoline expenditures will increase if gasoline is an inelastic good. 
D)  Fewer people will ride bicycles,a substitute for car travel.

Question 2

Suppose that the price of Vanilla Coke increases by 9% and quantity demanded falls by 13% overall but only by 4% for loyal Coca-Cola customers.This means that for the general public there are _____ for Vanilla Coke,but for loyal Coca-Cola customers,Vanilla Coke is more of a _____.This means that Coca-Cola will enjoy an increase in total revenue only from _____.

Accepted Answer

A)  several substitutes;necessity;loyal Coca-Cola customers 
B)  few substitutes;luxury item;the general public 
C)  no substitutes;necessity;the general public 
D)  several substitutes;necessity;the general public 
A)  several substitutes;necessity;loyal Coca-Cola customers 
B)  few substitutes;luxury item;the general public 
C)  no substitutes;necessity;the general public 
D)  several substitutes;necessity;the general public

Question 3

If the price elasticity of demand between two points on a demand curve is 0.75,then the demand between those two points is:

Accepted Answer

A)  price unit-elastic. 
B)  price-inelastic. 
C)  price-elastic. 
D)  unknown. 
A)  price unit-elastic. 
B)  price-inelastic. 
C)  price-elastic. 
D)  unknown.

Question 4

A dairy co-op in Ontario is trying to raise milk prices by 10%.If the price elasticity of demand for milk is 0.75 and the price elasticity of supply for milk is 0,by how much should the co-op reduce their milk production to obtain the 10% increase?

Accepted Answer

A)  10% 
B)  7.5% 
C)  15% 
D)  13% 
A)  10% 
B)  7.5% 
C)  15% 
D)  13%

Question 5

Assume that the supply curve shifts to the right by a given amount at each price.The price in the market will decline the most if demand is more price-_____ and supply is more price-_____.

Accepted Answer

A)  elastic;elastic 
B)  inelastic;elastic 
C)  elastic;inelastic 
D)  inelastic;inelastic 
A)  elastic;elastic 
B)  inelastic;elastic 
C)  elastic;inelastic 
D)  inelastic;inelastic

Question 6

Use the following to answer questions :
Figure: The Linear Demand Curve  
-(Figure: The Linear Demand Curve)Use Figure: The Linear Demand Curve.As a producer,you are interested in maximizing your total revenues in this market.At what price should you sell your good? What is the corresponding total revenue?

Accepted Answer

A)  $10;$100 
B)  $20;$200 
C)  $0;$100 
D)  $5;$100 
A)  $10;$100 
B)  $20;$200 
C)  $0;$100 
D)  $5;$100

Question 7

Use the following to answer questions :
Figure: The Linear Demand Curve  
-(Figure: The Linear Demand Curve)Use Figure: The Linear Demand Curve.If the price is initially $10,then falls to $9,this will result in a(n)_____ in quantity demanded and a(n)_____ in total revenue.

Accepted Answer

A)  decrease;decrease 
B)  decrease;increase 
C)  increase;decrease 
D)  increase;increase 
A)  decrease;decrease 
B)  decrease;increase 
C)  increase;decrease 
D)  increase;increase

Question 8

A price floor above equilibrium will cause a larger surplus when demand is _____ and supply is _____.

Accepted Answer

A)  elastic;inelastic 
B)  inelastic;inelastic 
C)  elastic;elastic 
D)  perfectly inelastic;elastic 
A)  elastic;inelastic 
B)  inelastic;inelastic 
C)  elastic;elastic 
D)  perfectly inelastic;elastic

Question 9

Tomas produces 100 cartons of free range eggs when the price is $5 and 150 cartons of free range eggs when the price is $7.What is the value of Tomas's price elasticity of supply?

Accepted Answer

A)  1.2 
B)  2.0 
C)  1.0 
D)  3.2 
A)  1.2 
B)  2.0 
C)  1.0 
D)  3.2

Question 10

There is NO total revenue test for price elasticity of supply because:

Accepted Answer

A)  price and quantity supplied are usually inversely related. 
B)  price and quantity supplied are usually positively related. 
C)  total revenue will not usually change in the direction of a supply price change. 
D)  price and quantity supplied are always negatively related. 
A)  price and quantity supplied are usually inversely related. 
B)  price and quantity supplied are usually positively related. 
C)  total revenue will not usually change in the direction of a supply price change. 
D)  price and quantity supplied are always negatively related.

Question 11

Use the following to answer questions :
Figure: The Demand Curve  
-(Figure: The Demand Curve)Use Figure: The Demand Curve.If the price is $5,total revenue is:

Accepted Answer

A)  $5. 
B)  $10. 
C)  $20. 
D)  $25. 
A)  $5. 
B)  $10. 
C)  $20. 
D)  $25.

Question 12

Use the following to answer questions :
Figure: The Demand Curve  
-(Figure: The Demand Curve)Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $8 and $9 is approximately:

Accepted Answer

A)  0.18. 
B)  0.56. 
C)  1.80. 
D)  5.67. 
A)  0.18. 
B)  0.56. 
C)  1.80. 
D)  5.67.

Question 13

The price elasticity of demand measures the responsiveness of the change in the:

Accepted Answer

A)  quantity demanded to a change in the price. 
B)  price to a change in the quantity demanded. 
C)  slope of the demand curve to a change in the price. 
D)  slope of the demand curve to a change in the quantity demanded. 
A)  quantity demanded to a change in the price. 
B)  price to a change in the quantity demanded. 
C)  slope of the demand curve to a change in the price. 
D)  slope of the demand curve to a change in the quantity demanded.

Question 14

The price of coffee increases by 10%,and as a result,Alex purchases fewer doughnuts.For Alex,coffee and doughnuts are:

Accepted Answer

A)  complements. 
B)  substitutes. 
C)  inferior goods. 
D)  normal goods. 
A)  complements. 
B)  substitutes. 
C)  inferior goods. 
D)  normal goods.

Question 15

A demand curve that is perfectly inelastic is:

Accepted Answer

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

Question 16

Jessica's income increased by 10% this year.In the same year,Jessica's quantity demanded of milk increased by 10% and her quantity demanded for bread increased by 5%.This means that,for Jessica:

Accepted Answer

A)  both milk and bread are inferior goods. 
B)  both milk and bread are normal goods. 
C)  milk is an inferior good,but bread is a normal good. 
D)  milk is a normal good,but bread is an inferior good. 
A)  both milk and bread are inferior goods. 
B)  both milk and bread are normal goods. 
C)  milk is an inferior good,but bread is a normal good. 
D)  milk is a normal good,but bread is an inferior good.

Question 17

The price elasticity of demand for ground beef has been estimated to be 1.0.If mad cow disease strikes Alberta beef producers and a large percentage of the cattle are removed from the market,how will that affect total expenditures on ground beef,all other things equal?

Accepted Answer

A)  Total expenditures will remain unchanged. 
B)  Total expenditures will fall by more than 1%. 
C)  Demand will fall by 1%,but total expenditures will fall by less than 1%. 
D)  Total expenditures will rise. 
A)  Total expenditures will remain unchanged. 
B)  Total expenditures will fall by more than 1%. 
C)  Demand will fall by 1%,but total expenditures will fall by less than 1%. 
D)  Total expenditures will rise.

Question 18

Use the following to answer questions :
Figure: The Demand Curve  
-(Figure: The Demand Curve)Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $1 and $2 is approximately:

Accepted Answer

A)  0.18. 
B)  0.56. 
C)  1.80. 
D)  5.67. 
A)  0.18. 
B)  0.56. 
C)  1.80. 
D)  5.67.

Question 19

The price elasticity of demand measures the:

Accepted Answer

A)  responsiveness of quantity demanded to a change in price. 
B)  responsiveness of price to a change in quantity demanded. 
C)  extent to which prices are flexible and respond to market forces. 
D)  responsiveness of demand when price is held constant and demand increases or decreases. 
A)  responsiveness of quantity demanded to a change in price. 
B)  responsiveness of price to a change in quantity demanded. 
C)  extent to which prices are flexible and respond to market forces. 
D)  responsiveness of demand when price is held constant and demand increases or decreases.

Question 20

If the price of a good increases by 15% and quantity demanded changes by 20%,then the price elasticity of demand is equal to:

Accepted Answer

A)  0.75. 
B)  approximately 0.33. 
C)  approximately 1.33. 
D)  1. 
A)  0.75. 
B)  approximately 0.33. 
C)  approximately 1.33. 
D)  1.

Exam 6: Elasticity

The price of a litre of gasoline increases 10% this year.As a result,which event is MOST likely to occur?

If the price elasticity of demand between two points on a demand curve is 0.75,then the demand between those two points is:

A dairy co-op in Ontario is trying to raise milk prices by 10%.If the price elasticity of demand for milk is 0.75 and the price elasticity of supply for milk is 0,by how much should the co-op reduce their milk production to obtain the 10% increase?

Assume that the supply curve shifts to the right by a given amount at each price.The price in the market will decline the most if demand is more price-_____ and supply is more price-_____.

Use the following to answer questions : Figure: The Linear Demand Curve -(Figure: The Linear Demand Curve)Use Figure: The Linear Demand Curve.If the price is initially $10,then falls to $9,this will result in a(n)_____ in quantity demanded and a(n)_____ in total revenue.

A price floor above equilibrium will cause a larger surplus when demand is _____ and supply is _____.

Tomas produces 100 cartons of free range eggs when the price is $5 and 150 cartons of free range eggs when the price is $7.What is the value of Tomas's price elasticity of supply?

There is NO total revenue test for price elasticity of supply because:

Use the following to answer questions : Figure: The Demand Curve -(Figure: The Demand Curve)Use Figure: The Demand Curve.If the price is $5,total revenue is:

Use the following to answer questions : Figure: The Demand Curve -(Figure: The Demand Curve)Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $8 and $9 is approximately:

The price elasticity of demand measures the responsiveness of the change in the:

The price of coffee increases by 10%,and as a result,Alex purchases fewer doughnuts.For Alex,coffee and doughnuts are:

A demand curve that is perfectly inelastic is:

Jessica's income increased by 10% this year.In the same year,Jessica's quantity demanded of milk increased by 10% and her quantity demanded for bread increased by 5%.This means that,for Jessica:

The price elasticity of demand for ground beef has been estimated to be 1.0.If mad cow disease strikes Alberta beef producers and a large percentage of the cattle are removed from the market,how will that affect total expenditures on ground beef,all other things equal?

Use the following to answer questions : Figure: The Demand Curve -(Figure: The Demand Curve)Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $1 and $2 is approximately:

The price elasticity of demand measures the:

If the price of a good increases by 15% and quantity demanded changes by 20%,then the price elasticity of demand is equal to:

First Principles

Economic Models

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve- Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, risk, and Private Information

Graphs in Economics

Consumer Preferences

Indifference Curve Analysis

Filters

Assume that the supply curve shifts to the right by a given amount at each price.The price in the market will decline the most if demand is more price-_ and supply is more price-_.

Use the following to answer questions : Figure: The Linear Demand Curve -(Figure: The Linear Demand Curve)Use Figure: The Linear Demand Curve.If the price is initially $10,then falls to $9,this will result in a(n)_ in quantity demanded and a(n)_ in total revenue.

A price floor above equilibrium will cause a larger surplus when demand is _ and supply is _.