Question 1

If demand is inelastic and the price of a product decreases by 100 percent, then

Accepted Answer

A)  the change in quantity demanded is less than 100 percent. 
B)  the change in quantity demanded is equal to 100 percent. 
C)  the change in quantity demanded is greater than 100 percent. 
D)  the decrease in quantity demanded is greater than 0 percent. 
A)  the change in quantity demanded is less than 100 percent. 
B)  the change in quantity demanded is equal to 100 percent. 
C)  the change in quantity demanded is greater than 100 percent. 
D)  the decrease in quantity demanded is greater than 0 percent. A

Question 2

Moving up a straight-line demand curve, the absolute price elasticity of demand

Accepted Answer

A)  decreases. 
B)  remains constant. 
C)  increases. 
D)  varies in uncertain ways. 
A)  decreases. 
B)  remains constant. 
C)  increases. 
D)  varies in uncertain ways. C

Question 3

When two goods are unrelated,

Accepted Answer

A)  their cross price elasticity of demand will be infinity. 
B)  their cross price elasticity of demand will be 0. 
C)  their cross price elasticity of demand will be negative. 
D)  their cross price elasticity of demand will be positive. 
A)  their cross price elasticity of demand will be infinity. 
B)  their cross price elasticity of demand will be 0. 
C)  their cross price elasticity of demand will be negative. 
D)  their cross price elasticity of demand will be positive. B

Question 4

Robert must always have sugar in his coffee. For Robert, the cross price elasticity of demand for coffee and sugar is

Accepted Answer

A)  equal to 0. 
B)  negative. 
C)  positive. 
D)  impossible to determine without more information. 
A)  equal to 0. 
B)  negative. 
C)  positive. 
D)  impossible to determine without more information.

Question 5

The more 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 zero. 
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 zero.

Question 6

Owners of a taco shop finds that they can sell 150 tacos a day when the price of a taco is $1.20. When they price tacos at $1, they sell 170 tacos. The absolute value of the price elasticity of demand for tacos is

Accepted Answer

A)  0.69. 
B)  1.45. 
C)  1.00. 
D)  infinity. 
A)  0.69. 
B)  1.45. 
C)  1.00. 
D)  infinity.

Question 7

Price elasticity of demand basically measures

Accepted Answer

A)  the reliability of a product. 
B)  the responsiveness of consumers to price changes. 
C)  the variability of price changes. 
D)  the percentage change in market price as a result of a change in demand. 
A)  the reliability of a product. 
B)  the responsiveness of consumers to price changes. 
C)  the variability of price changes. 
D)  the percentage change in market price as a result of a change in demand.

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

When the price of coffee is $2.2 per cup, 11 million cups are demanded, and when the price of coffee goes up to $2.6 per cup, 10 billion cups are demanded. The coffee in this range has a(n)

Accepted Answer

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

Question 10

A cafeteria is willing to produce 100 bottles of soda when the price is $1 and 150 bottles of soda when the price is $1.30, other things being equal. The price elasticity of supply of soda is

Accepted Answer

A)  1.53. 
B)  0.67. 
C)  0.10. 
D)  0.50. 
A)  1.53. 
B)  0.67. 
C)  0.10. 
D)  0.50.

Question 11

A university raises annual tuition by 2 percent. No other events have occurred, and the university's revenues have increased. It must be TRUE that

Accepted Answer

A)  the associated change in quantity demanded was smaller than 2 percent. 
B)  the associated change in quantity demanded was equal to 2 percent. 
C)  the associated change in quantity demanded was greater than 2 percent. 
D)  there was no associated change in quantity demanded. 
A)  the associated change in quantity demanded was smaller than 2 percent. 
B)  the associated change in quantity demanded was equal to 2 percent. 
C)  the associated change in quantity demanded was greater than 2 percent. 
D)  there was no associated change in quantity demanded.

Question 12

Suppose the price change of a good causes no change in quantity demanded, we would say that the item is

Accepted Answer

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

Question 13

"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

Question 14

The demand for diet soft drinks (as a group) is relatively inelastic because

Accepted Answer

A)  there are many of them on the market. 
B)  there are few substitutes. 
C)  the purchase of a soft drink represents a large portion of a person's budget. 
D)  none of the above. 
A)  there are many of them on the market. 
B)  there are few substitutes. 
C)  the purchase of a soft drink represents a large portion of a person's budget. 
D)  none of the above.

Question 15

When demand is elastic

Accepted Answer

A)  a proportionately small change in price leads to a proportionately large change in quantity supplied. 
B)  a proportionately small change in price leads to a proportionately small change in quantity supplied. 
C)  a proportionately small change in price leads to a proportionately large change in quantity demanded. 
D)  a proportionately small change in price leads to a proportionately small change in quantity demanded. 
A)  a proportionately small change in price leads to a proportionately large change in quantity supplied. 
B)  a proportionately small change in price leads to a proportionately small change in quantity supplied. 
C)  a proportionately small change in price leads to a proportionately large change in quantity demanded. 
D)  a proportionately small change in price leads to a proportionately small change in quantity demanded.

Question 16

A value of the absolute price elasticity of demand equal to 0.5 indicates that

Accepted Answer

A)  a 5 percent increase in price leads to a 10 percent decrease in quantity demanded. 
B)  a 10 percent increase in price leads to a 5 percent decrease in quantity demanded. 
C)  a 0.5 percent increase in price leads to a 1 percent decrease in quantity demanded. 
D)  a 1 percent increase in price leads to a 5 percent decrease in quantity demanded. 
A)  a 5 percent increase in price leads to a 10 percent decrease in quantity demanded. 
B)  a 10 percent increase in price leads to a 5 percent decrease in quantity demanded. 
C)  a 0.5 percent increase in price leads to a 1 percent decrease in quantity demanded. 
D)  a 1 percent increase in price leads to a 5 percent decrease in quantity demanded.

Question 17

When a particular product has numerous but imperfect substitutes, the demand for that product will tend to be

Accepted Answer

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

Question 18

If the absolute price elasticity of demand is 2.5, a 10 percent increase in the price will cause

Accepted Answer

A)  the quantity demanded to decrease by 2.5 percent. 
B)  the quantity demanded to decrease by 25 percent. 
C)  the quantity demanded to decrease by 4 percent. 
D)  the quantity demanded to decrease by 40 percent. 
A)  the quantity demanded to decrease by 2.5 percent. 
B)  the quantity demanded to decrease by 25 percent. 
C)  the quantity demanded to decrease by 4 percent. 
D)  the quantity demanded to decrease by 40 percent.

Question 19

If the calculated price elasticity of demand between two points is -1.5, demand is

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  unresponsive to price. 
D)  unit-elastic. 
A)  inelastic. 
B)  elastic. 
C)  unresponsive to price. 
D)  unit-elastic.

Question 20

A supply curve that is parallel to the price 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.

Exam 19: Demand and Supply Elasticity

If demand is inelastic and the price of a product decreases by 100 percent, then

Moving up a straight-line demand curve, the absolute price elasticity of demand

When two goods are unrelated,

Robert must always have sugar in his coffee. For Robert, the cross price elasticity of demand for coffee and sugar is

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

Owners of a taco shop finds that they can sell 150 tacos a day when the price of a taco is $1.20. When they price tacos at $1, they sell 170 tacos. The absolute value of the price elasticity of demand for tacos is

Price elasticity of demand basically measures

The price elasticity of supply measures

When the price of coffee is $2.2 per cup, 11 million cups are demanded, and when the price of coffee goes up to $2.6 per cup, 10 billion cups are demanded. The coffee in this range has a(n)

A cafeteria is willing to produce 100 bottles of soda when the price is $1 and 150 bottles of soda when the price is $1.30, other things being equal. The price elasticity of supply of soda is

A university raises annual tuition by 2 percent. No other events have occurred, and the university's revenues have increased. It must be TRUE that

Suppose the price change of a good causes no change in quantity demanded, we would say that the item 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.

The demand for diet soft drinks (as a group) is relatively inelastic because

When demand is elastic

A value of the absolute price elasticity of demand equal to 0.5 indicates that

When a particular product has numerous but imperfect substitutes, the demand for that product will tend to be

If the absolute price elasticity of demand is 2.5, a 10 percent increase in the price will cause

If the calculated price elasticity of demand between two points is -1.5, demand is

A supply curve that is parallel to the price axis 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

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

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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