Question 1

If a good has an absolute price elasticity of 4, the demand for the good is

Accepted Answer

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

Question 2

-According to the above table, what is the absolute price elasticity of demand when price rises from $5.50 to $6?

Accepted Answer

A)  4.00 
B)  2.23 
C)  1.21 
D)  0.50 
A)  4.00 
B)  2.23 
C)  1.21 
D)  0.50

Question 3

The word best associated with price elasticity of demand is

Accepted Answer

A)  relative. 
B)  total. 
C)  absolute. 
D)  unit. 
A)  relative. 
B)  total. 
C)  absolute. 
D)  unit.

Question 4

If goods are completely unrelated, their cross price elasticity will

Accepted Answer

A)  be greater than one. 
B)  be less than one. 
C)  be equal to zero. 
D)  be negative. 
A)  be greater than one. 
B)  be less than one. 
C)  be equal to zero. 
D)  be negative.

Question 5

The income elasticity of demand

Accepted Answer

A)  is positive only. 
B)  is negative only. 
C)  must lie between -1 and +1. 
D)  can be positive, negative, or zero. 
A)  is positive only. 
B)  is negative only. 
C)  must lie between -1 and +1. 
D)  can be positive, negative, or zero.

Question 6

-In the above figure, along which range would the demand for this good be most elastic?

Accepted Answer

A)  between point a and point b 
B)  between point c and point d 
C)  between point d and point e 
D)  at point e 
A)  between point a and point b 
B)  between point c and point d 
C)  between point d and point e 
D)  at point e

Question 7

Relative percentage changes are used in measuring price elasticity of demand, so that

Accepted Answer

A)  it does not matter whether price increases or decreases when calculating the elasticity. 
B)  it does not matter what units are used to measure prices or quantities. 
C)  we always obtain a positive number. 
D)  larger numbers indicate greater responsiveness. 
A)  it does not matter whether price increases or decreases when calculating the elasticity. 
B)  it does not matter what units are used to measure prices or quantities. 
C)  we always obtain a positive number. 
D)  larger numbers indicate greater responsiveness.

Question 8

Charlie's income went from $1000 per week to $1500 per week. As a result he increased his consumption of beef from 1 pound a week to 3 pounds a week. Based on his consumption patterns, the income elasticity of beef for Charlie is

Accepted Answer

A)  2.50. 
B)  -.50. 
C)  .50. 
D)  -1.50. 
A)  2.50. 
B)  -.50. 
C)  .50. 
D)  -1.50.

Question 9

"Unit elasticity of demand can be found everywhere along a straight-line demand curve with a slope of -1." Do you agree or disagree? Explain.

Accepted Answer

Disagree. A vertical demand curve implie

Question 10

If the supply of a good is perfectly inelastic, the price elasticity of supply will equal

Accepted Answer

A)  positive infinity. 
B)  one. 
C)  zero. 
D)  none of the above. 
A)  positive infinity. 
B)  one. 
C)  zero. 
D)  none of the above.

Question 11

Suppose that when the price of donuts rises 10%, the quantity demanded of donuts falls 3%. Based on this information, what is the approximate absolute price elasticity of demand for donuts?

Accepted Answer

A)  3.33 
B)  0.3 
C)  30 
D)  1.3 
A)  3.33 
B)  0.3 
C)  30 
D)  1.3

Question 12

When there are very few substitutes for a good, the demand for the good 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 13

When the absolute price elasticity of demand is less than 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 14

"Higher prices always yield higher revenues." Do you agree or disagree? Why?

Accepted Answer

Disagree. Higher prices generate higher

Question 15

A vertical supply curve may be described as being

Accepted Answer

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

Question 16

Moving downward on a downward sloping linear demand curve, the absolute value of the price elasticity of demand

Accepted Answer

A)  is constant. 
B)  increases continuously. 
C)  decreases continuously. 
D)  may either increase or decrease. 
A)  is constant. 
B)  increases continuously. 
C)  decreases continuously. 
D)  may either increase or decrease.

Question 17

The price elasticity of demand can be computed as

Accepted Answer

A)  change in total utility/change in quantity. 
B)  change in price/change in quantity demanded. 
C)  percentage change in quantity demanded/percentage change in price. 
D)  change in quantity demanded/change in price. 
A)  change in total utility/change in quantity. 
B)  change in price/change in quantity demanded. 
C)  percentage change in quantity demanded/percentage change in price. 
D)  change in quantity demanded/change in price.

Question 18

If a price decrease of a product significantly raises its revenues, then the absolute price elasticity of demand for that product must be

Accepted Answer

A)  less than one. 
B)  equal to one. 
C)  greater than one. 
D)  an example of unit elasticity. 
A)  less than one. 
B)  equal to one. 
C)  greater than one. 
D)  an example of unit elasticity.

Question 19

The longer any price change persists, the

Accepted Answer

A)  more difficult it is to alter quantity demanded. 
B)  greater is the price elasticity of demand. 
C)  lower is the price elasticity of demand. 
D)  more likely price will return to its original level. 
A)  more difficult it is to alter quantity demanded. 
B)  greater is the price elasticity of demand. 
C)  lower is the price elasticity of demand. 
D)  more likely price will return to its original level.

Question 20

An inferior good has an income elasticity of demand that is

Accepted Answer

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

Exam 19: Demand and Supply Elasticity

If a good has an absolute price elasticity of 4, the demand for the good is

-According to the above table, what is the absolute price elasticity of demand when price rises from $5.50 to $6?

The word best associated with price elasticity of demand is

If goods are completely unrelated, their cross price elasticity will

The income elasticity of demand

-In the above figure, along which range would the demand for this good be most elastic?

Relative percentage changes are used in measuring price elasticity of demand, so that

Charlie's income went from $1000 per week to $1500 per week. As a result he increased his consumption of beef from 1 pound a week to 3 pounds a week. Based on his consumption patterns, the income elasticity of beef for Charlie is

"Unit elasticity of demand can be found everywhere along a straight-line demand curve with a slope of -1." Do you agree or disagree? Explain.

If the supply of a good is perfectly inelastic, the price elasticity of supply will equal

Suppose that when the price of donuts rises 10%, the quantity demanded of donuts falls 3%. Based on this information, what is the approximate absolute price elasticity of demand for donuts?

When there are very few substitutes for a good, the demand for the good will tend to be

When the absolute price elasticity of demand is less than 1, demand is

"Higher prices always yield higher revenues." Do you agree or disagree? Why?

A vertical supply curve may be described as being

Moving downward on a downward sloping linear demand curve, the absolute value of the price elasticity of demand

The price elasticity of demand can be computed as

If a price decrease of a product significantly raises its revenues, then the absolute price elasticity of demand for that product must be

The longer any price change persists, the

An inferior good has an income elasticity of demand that 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

Filters