Question 1

The smaller is the absolute price elasticity of demand, the

Accepted Answer

A)  smaller is the responsiveness of quantity demanded to the price change. 
B)  larger is the responsiveness to a price change. 
C)  larger is the income of the buyer. 
D)  higher is the change in demand to an income change. 
A)  smaller is the responsiveness of quantity demanded to the price change. 
B)  larger is the responsiveness to a price change. 
C)  larger is the income of the buyer. 
D)  higher is the change in demand to an income change.

Question 2

If a 1 percent increase in price causes a 0.5 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 3

If your income rises and, as a result, you buy fewer packages of Ramen Noodles, then Ramen Noodles are a(n)

Accepted Answer

A)  substitute. 
B)  normal good. 
C)  complement. 
D)  inferior good. 
A)  substitute. 
B)  normal good. 
C)  complement. 
D)  inferior good.

Question 4

Explain the three possible ranges for price elasticity of demand.

Accepted Answer

If the percentage change in quantity dem

Question 5

Which of the following is NOT a determinant of the price elasticity of demand?

Accepted Answer

A)  the availability of potential substitutes 
B)  the share of the budget spent on the item 
C)  the time the consumer has to adjust to the price change 
D)  the cost to produce the product 
A)  the availability of potential substitutes 
B)  the share of the budget spent on the item 
C)  the time the consumer has to adjust to the price change 
D)  the cost to produce the product

Question 6

A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.2. To increase its revenue, the transit authority should

Accepted Answer

A)  leave the fare as it is. 
B)  raise the fare. 
C)  lower the fare. 
D)  charge $1.20. 
A)  leave the fare as it is. 
B)  raise the fare. 
C)  lower the fare. 
D)  charge $1.20.

Question 7

If the absolute price elasticity of demand for a product is less than 1, then

Accepted Answer

A)  consumers are relatively insensitive to price changes. 
B)  consumers are relatively sensitive to price changes. 
C)  there is a positive relationship between price changes and total revenue. 
D)  producers are relatively insensitive to price changes. 
A)  consumers are relatively insensitive to price changes. 
B)  consumers are relatively sensitive to price changes. 
C)  there is a positive relationship between price changes and total revenue. 
D)  producers are relatively insensitive to price changes.

Question 8

Suppose the absolute price elasticity of demand for magazine subscriptions is 1.5. In order to increase the total revenues from subscriptions, the publishers should

Accepted Answer

A)  increase the price of the newsletters. 
B)  reduce the price of the newsletters. 
C)  sell the newsletters on the inelastic portion of its demand curve. 
D)  keep the price the same. 
A)  increase the price of the newsletters. 
B)  reduce the price of the newsletters. 
C)  sell the newsletters on the inelastic portion of its demand curve. 
D)  keep the price the same.

Question 9

-Refer to the above figure. Demand will be elastic when quantity is between

Accepted Answer

A)  0 and A. 
B)  0 and B. 
C)  A and B. 
D)  B and C. 
A)  0 and A. 
B)  0 and B. 
C)  A and B. 
D)  B and C.

Question 10

Suppose the short-run supply curve is a straight line of slope +1 that intersects the origin. The long-run supply curve will be

Accepted Answer

A)  horizontal. 
B)  steeper. 
C)  shallower. 
D)  vertical. 
A)  horizontal. 
B)  steeper. 
C)  shallower. 
D)  vertical.

Question 11

A measure of the responsiveness of the demand for one good to the percentage change in the price of another good is

Accepted Answer

A)  price elasticity of demand. 
B)  price elasticity of supply. 
C)  cross price elasticity of demand. 
D)  income elasticity. 
A)  price elasticity of demand. 
B)  price elasticity of supply. 
C)  cross price elasticity of demand. 
D)  income elasticity.

Question 12

When two goods are substitutes, their cross price elasticity of demand

Accepted Answer

A)  infinity. 
B)  0. 
C)  negative. 
D)  positive. 
A)  infinity. 
B)  0. 
C)  negative. 
D)  positive.

Exam 19: Demand and Supply Elasticity

The smaller is the absolute price elasticity of demand, the

If a 1 percent increase in price causes a 0.5 percent increase in quantity supplied, then supply is

If your income rises and, as a result, you buy fewer packages of Ramen Noodles, then Ramen Noodles are a(n)

Explain the three possible ranges for price elasticity of demand.

Which of the following is NOT a determinant of the price elasticity of demand?

A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.2. To increase its revenue, the transit authority should

If the absolute price elasticity of demand for a product is less than 1, then

Suppose the absolute price elasticity of demand for magazine subscriptions is 1.5. In order to increase the total revenues from subscriptions, the publishers should

-Refer to the above figure. Demand will be elastic when quantity is between

Suppose the short-run supply curve is a straight line of slope +1 that intersects the origin. The long-run supply curve will be

A measure of the responsiveness of the demand for one good to the percentage change in the price of another good is

When two goods are substitutes, their cross price elasticity of demand

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

Filters