Question 1

The cross price elasticity of demand between two goods is 2. We may conclude that

Accepted Answer

A)  the two goods are very complementary and probably are sold together. 
B)  the two goods are poor substitutes for each other. 
C)  the demand for one of the goods is likely to be fairly elastic and the demand for the other good is likely to be fairly inelastic. 
D)  the demand for each of the goods is likely to be very elastic. 
A)  the two goods are very complementary and probably are sold together. 
B)  the two goods are poor substitutes for each other. 
C)  the demand for one of the goods is likely to be fairly elastic and the demand for the other good is likely to be fairly inelastic. 
D)  the demand for each of the goods is likely to be very elastic.

Question 2

No matter what the price of orange juice is , Jill spends $20 a week on orange juice. We can conclude that the absolute value of the price elasticity of demand for orange juice for Jill 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 3

If the price of one good increases, and as a result the demand for another related good falls, the goods are

Accepted Answer

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

Question 4

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 5

A product that has an elastic demand curve has all of the following characteristics EXCEPT

Accepted Answer

A)  it has many substitutes. 
B)  a consumer can wait to buy the product. 
C)  it has few or no substitutes. 
D)  it is a large part of a consumer's income. 
A)  it has many substitutes. 
B)  a consumer can wait to buy the product. 
C)  it has few or no substitutes. 
D)  it is a large part of a consumer's income.

Question 6

If the price of nacho chips increases from $2.00 per bag to $3.00 per bag and the quantity demanded goes down from 100 million bags per week to 50 million bags per week, the absolute value of price elasticity of demand in that price range is

Accepted Answer

A)  0.50. 
B)  1.67. 
C)  0.93. 
D)  2.33. 
A)  0.50. 
B)  1.67. 
C)  0.93. 
D)  2.33.

Question 7

The supply curve for housing in the very short run is likely to be

Accepted Answer

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

Question 8

The price elasticity of demand measures

Accepted Answer

A)  the responsiveness of quantity demanded to a change in price. 
B)  the responsiveness of price to a change in competition. 
C)  the change in quantity demanded due to a change consumer income. 
D)  the change in price due to a change in demand. 
A)  the responsiveness of quantity demanded to a change in price. 
B)  the responsiveness of price to a change in competition. 
C)  the change in quantity demanded due to a change consumer income. 
D)  the change in price due to a change in demand.

Question 9

Whenever the absolute value of the price elasticity of demand is greater than 1, but less than infinite

Accepted Answer

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

Question 10

If the value of the cross elasticity of demand is negative, the two goods are

Accepted Answer

A)  complementary goods. 
B)  substitute goods. 
C)  normal goods. 
D)  inferior goods. 
A)  complementary goods. 
B)  substitute goods. 
C)  normal goods. 
D)  inferior goods.

Question 11

Suppose diamonds have an absolute price elasticity of 0, the demand for the good is

Accepted Answer

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

Question 12

The range to the left of the midpoint on a linear demand curve is

Accepted Answer

A)  elastic. 
B)  infinite. 
C)  one. 
D)  inelastic. 
A)  elastic. 
B)  infinite. 
C)  one. 
D)  inelastic.

Question 13

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 14

When the absolute price elasticity of demand equals 1, demand is

Accepted Answer

A)  elastic. 
B)  unit-elastic. 
C)  inelastic. 
D)  undetermined without more information. 
A)  elastic. 
B)  unit-elastic. 
C)  inelastic. 
D)  undetermined without more information.

Question 15

If the absolute price elasticity of demand is 2.0, a 10 percent decrease in price will increase quantity demanded by

Accepted Answer

A)  10 percent. 
B)  20 percent. 
C)  5 percent. 
D)  12 percent. 
A)  10 percent. 
B)  20 percent. 
C)  5 percent. 
D)  12 percent.

Question 16

The absolute price elasticity of demand would be the lowest for

Accepted Answer

A)  automobiles. 
B)  Mr. Donut coffee. 
C)  sugar. 
D)  movie tickets. 
A)  automobiles. 
B)  Mr. Donut coffee. 
C)  sugar. 
D)  movie tickets.

Question 17

Which of the following statements regarding price elasticity of supply and the length of time for adjustment is FALSE?

Accepted Answer

A)  The longer is the time period for adjustment, the greater is the price elasticity of supply. 
B)  The longer is the time period for adjustment, the less is the extent to which resources flow into (or out of) an industry through expansion (or contraction) of existing firms. 
C)  The longer is the time period for adjustment, the greater is the extent to which entry or (exit) of firms increases or (decreases) production in an industry. 
D)  The shorter the time period for adjustment, the greater is the price elasticity of supply. 
A)  The longer is the time period for adjustment, the greater is the price elasticity of supply. 
B)  The longer is the time period for adjustment, the less is the extent to which resources flow into (or out of) an industry through expansion (or contraction) of existing firms. 
C)  The longer is the time period for adjustment, the greater is the extent to which entry or (exit) of firms increases or (decreases) production in an industry. 
D)  The shorter the time period for adjustment, the greater is the price elasticity of supply.

Question 18

If a 5 percent increase in price causes a 10 percent increase in quantity supplied, then supply is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  infinite. 
A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  infinite.

Question 19

The income elasticity of demand for all goods taken together must be

Accepted Answer

A)  zero. 
B)  -1. 
C)  +1. 
D)  between 0 and 1. 
A)  zero. 
B)  -1. 
C)  +1. 
D)  between 0 and 1.

Question 20

An increase in total revenue will result if

Accepted Answer

A)  demand is inelastic and price decreases. 
B)  demand is elastic and price decreases. 
C)  demand is elastic and price increases. 
D)  demand is unitary elastic and price increases. 
A)  demand is inelastic and price decreases. 
B)  demand is elastic and price decreases. 
C)  demand is elastic and price increases. 
D)  demand is unitary elastic and price increases.

Exam 19: Demand and Supply Elasticity

The cross price elasticity of demand between two goods is 2. We may conclude that

No matter what the price of orange juice is , Jill spends $20 a week on orange juice. We can conclude that the absolute value of the price elasticity of demand for orange juice for Jill is

If the price of one good increases, and as a result the demand for another related good falls, the goods are

The longer any price change lasts over time, the

A product that has an elastic demand curve has all of the following characteristics EXCEPT

If the price of nacho chips increases from $2.00 per bag to $3.00 per bag and the quantity demanded goes down from 100 million bags per week to 50 million bags per week, the absolute value of price elasticity of demand in that price range is

The supply curve for housing in the very short run is likely to be

The price elasticity of demand measures

Whenever the absolute value of the price elasticity of demand is greater than 1, but less than infinite

If the value of the cross elasticity of demand is negative, the two goods are

Suppose diamonds have an absolute price elasticity of 0, the demand for the good is

The range to the left of the midpoint on a linear demand curve is

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?

When the absolute price elasticity of demand equals 1, demand is

If the absolute price elasticity of demand is 2.0, a 10 percent decrease in price will increase quantity demanded by

The absolute price elasticity of demand would be the lowest for

Which of the following statements regarding price elasticity of supply and the length of time for adjustment is FALSE?

If a 5 percent increase in price causes a 10 percent increase in quantity supplied, then supply is

The income elasticity of demand for all goods taken together must be

An increase in total revenue will result 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

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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