Question 1

Tickets for the Super Bowl are an example of supply that is

Accepted Answer

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

Question 2

The most important determinant of price elasticity of supply is

Accepted Answer

A)  the number of close substitutes there are for the good. 
B)  the time period firms have to adjust to the new price. 
C)  the price of the good. 
D)  the importance of the good in the budgets of consumers. 
A)  the number of close substitutes there are for the good. 
B)  the time period firms have to adjust to the new price. 
C)  the price of the good. 
D)  the importance of the good in the budgets of consumers.

Question 3

Which of the following is NOT a factor that determines the price elasticity of demand?

Accepted Answer

A)  the amount that suppliers have made available 
B)  the percentage of a consumer's total budget spent on the good 
C)  the existence of substitutes 
D)  the length of time allowed for adjustments to change in the price of the commodities 
A)  the amount that suppliers have made available 
B)  the percentage of a consumer's total budget spent on the good 
C)  the existence of substitutes 
D)  the length of time allowed for adjustments to change in the price of the commodities

Question 4

Suppose two goods are perfect substitutes. The price elasticity of demand of one of the goods is

Accepted Answer

A)  0. 
B)  1. 
C)  10. 
D)  infinity. 
A)  0. 
B)  1. 
C)  10. 
D)  infinity.

Question 5

The absolute price elasticity of demand for a product that has many good substitutes is probably

Accepted Answer

A)  less than 1. 
B)  greater than 1. 
C)  equal to 1. 
D)  infinity. 
A)  less than 1. 
B)  greater than 1. 
C)  equal to 1. 
D)  infinity.

Question 6

If a 10 percent change in the price of a good caused a 10 percent change in the quantity demanded of the good, we would say that over this range of prices the good has a(n)

Accepted Answer

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

Question 7

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 8

Over the inelastic range of a demand curve, there is

Accepted Answer

A)  a positive relationship between a given percentage change in price and a change in total revenues. 
B)  a negative relationship between a given percentage change in price and a change in total revenues. 
C)  an increase in total revenues regardless of an increase or decrease in price. 
D)  no relationship between changes in price and changes in total revenues. 
A)  a positive relationship between a given percentage change in price and a change in total revenues. 
B)  a negative relationship between a given percentage change in price and a change in total revenues. 
C)  an increase in total revenues regardless of an increase or decrease in price. 
D)  no relationship between changes in price and changes in total revenues.

Question 9

If the absolute price elasticity of demand of a good is 1.8, then the total revenues will increase if its market price

Accepted Answer

A)  increases. 
B)  decreases. 
C)  stays the same. 
D)  changes, but we can't tell without more information if the price increases or decreases. 
A)  increases. 
B)  decreases. 
C)  stays the same. 
D)  changes, but we can't tell without more information if the price increases or decreases.

Question 10

A 2 percent rise in the price of a good leads to a 4 percent decrease in quantity demanded. The absolute price elasticity of demand is

Accepted Answer

A)  2. 
B)  0.5. 
C)  20. 
D)  5. 
A)  2. 
B)  0.5. 
C)  20. 
D)  5.

Question 11

-Refer to the above table. For which prices is demand inelastic?

Accepted Answer

A)  in a range of prices below $6.00 
B)  in a range of prices above $6.00 
C)  in a range of prices between $5 and $1 
D)  in a range of prices above $9.00 
A)  in a range of prices below $6.00 
B)  in a range of prices above $6.00 
C)  in a range of prices between $5 and $1 
D)  in a range of prices above $9.00

Question 12

The result of the calculation of the price elasticity of demand is

Accepted Answer

A)  always positive. 
B)  always negative. 
C)  sometimes positive, sometimes negative. 
D)  always greater than one. 
A)  always positive. 
B)  always negative. 
C)  sometimes positive, sometimes negative. 
D)  always greater than one.

Question 13

A perfectly inelastic demand would imply what kind of demand curve?

Accepted Answer

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

Question 14

When Mary earned $3,200 per month, she bought 2 concert tickets each month. Now her monthly income is $5,600, and the number of concert tickets she purchases has risen to 3 per month. Mary's income elasticity of demand for concert tickets equals ________ and the tickets are a(n) ________ good for Mary.

Accepted Answer

A)  -1.36; normal 
B)  -0.21; inferior 
C)  +0.21; complementary 
D)  +0.73; normal 
A)  -1.36; normal 
B)  -0.21; inferior 
C)  +0.21; complementary 
D)  +0.73; normal

Question 15

An increase in total revenue will result if

Accepted Answer

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

Question 16

If milk and cookies are complements, then their cross price elasticity of demand will be

Accepted Answer

A)  elastic. 
B)  greater than zero but less than 1. 
C)  negative. 
D)  positive. 
A)  elastic. 
B)  greater than zero but less than 1. 
C)  negative. 
D)  positive.

Question 17

When demand is elastic, a decrease in price will

Accepted Answer

A)  decrease total revenue. 
B)  not change total revenue. 
C)  increase total revenue. 
D)  reduce quantity demanded. 
A)  decrease total revenue. 
B)  not change total revenue. 
C)  increase total revenue. 
D)  reduce quantity demanded.

Question 18

All of the following are true regarding the relationship between price elasticity of demand and total revenues EXCEPT

Accepted Answer

A)  when market demand is elastic, if the market price declines, then total revenues will rise. 
B)  when market demand is unit elastic, if the market price rises, then total revenues will not change. 
C)  when market demand is inelastic, if the market price falls, then total revenues will decrease. 
D)  when market demand is inelastic, if the market price rises, then total revenues will decrease. 
A)  when market demand is elastic, if the market price declines, then total revenues will rise. 
B)  when market demand is unit elastic, if the market price rises, then total revenues will not change. 
C)  when market demand is inelastic, if the market price falls, then total revenues will decrease. 
D)  when market demand is inelastic, if the market price rises, then total revenues will decrease.

Question 19

A movie theater raises ticket prices from $8 to $10 in order to raise revenues. The theater's management is assuming the absolute value of the price elasticity of demand for tickets is

Accepted Answer

A)  less than 1. 
B)  greater than 1. 
C)  equal to 1. 
D)  infinity. 
A)  less than 1. 
B)  greater than 1. 
C)  equal to 1. 
D)  infinity.

Question 20

A perfectly inelastic demand curve is

Accepted Answer

A)  a horizontal straight line. 
B)  a vertical straight line. 
C)  a downward sloping straight line that intersects the horizontal axis at the origin. 
D)  an upward sloping straight line that crosses the vertical axis. 
A)  a horizontal straight line. 
B)  a vertical straight line. 
C)  a downward sloping straight line that intersects the horizontal axis at the origin. 
D)  an upward sloping straight line that crosses the vertical axis.

Exam 19: Demand and Supply Elasticity

Tickets for the Super Bowl are an example of supply that is

The most important determinant of price elasticity of supply is

Which of the following is NOT a factor that determines the price elasticity of demand?

Suppose two goods are perfect substitutes. The price elasticity of demand of one of the goods is

The absolute price elasticity of demand for a product that has many good substitutes is probably

If a 10 percent change in the price of a good caused a 10 percent change in the quantity demanded of the good, we would say that over this range of prices the good has a(n)

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

Over the inelastic range of a demand curve, there is

If the absolute price elasticity of demand of a good is 1.8, then the total revenues will increase if its market price

A 2 percent rise in the price of a good leads to a 4 percent decrease in quantity demanded. The absolute price elasticity of demand is

-Refer to the above table. For which prices is demand inelastic?

The result of the calculation of the price elasticity of demand is

A perfectly inelastic demand would imply what kind of demand curve?

An increase in total revenue will result if

If milk and cookies are complements, then their cross price elasticity of demand will be

When demand is elastic, a decrease in price will

All of the following are true regarding the relationship between price elasticity of demand and total revenues EXCEPT

A movie theater raises ticket prices from $8 to $10 in order to raise revenues. The theater's management is assuming the absolute value of the price elasticity of demand for tickets is

A perfectly inelastic demand curve 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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