Question 1

Total revenue decreases if price increases and demand is inelastic.

Accepted Answer

A) True 
 B)False  False

Question 2

Elasticity of supply is

Accepted Answer

A) the responsiveness of supply to changes in costs. 
B) the percentage change in quantity supplied due to a percentage change in price. 
C) the responsiveness of the price to changes in supply. 
D) 1 minus the elasticity of demand. 
E) the change in quantity supplied due to a change in quantity demanded. 
A) the responsiveness of supply to changes in costs. 
B) the percentage change in quantity supplied due to a percentage change in price. 
C) the responsiveness of the price to changes in supply. 
D) 1 minus the elasticity of demand. 
E) the change in quantity supplied due to a change in quantity demanded. B

Question 3

For demand to be elastic,

Accepted Answer

A) the percentage change in quantity demanded must be greater than the associated percentage change in price. 
B) demand must change with a change in price. 
C) the percentage change in quantity demanded must be less than the associated percentage change in price. 
D) the percentage change in quantity demanded must be equal to the associated percentage change in price. 
E) quantity demanded must change with a change in price. 
A) the percentage change in quantity demanded must be greater than the associated percentage change in price. 
B) demand must change with a change in price. 
C) the percentage change in quantity demanded must be less than the associated percentage change in price. 
D) the percentage change in quantity demanded must be equal to the associated percentage change in price. 
E) quantity demanded must change with a change in price. A

Question 4

If supply is perfectly elastic,then the supply curve must

Accepted Answer

A) be vertical. 
B) be horizontal. 
C) be upward sloping. 
D) be downward sloping. 
E) have a slope of zero. 
A) be vertical. 
B) be horizontal. 
C) be upward sloping. 
D) be downward sloping. 
E) have a slope of zero.

Question 5

Good X has a high price elasticity of demand; it is most likely that

Accepted Answer

A) consumers have high incomes. 
B) good X has a lot of substitutes. 
C) good X has a lot of complements. 
D) good X is in short supply. 
E) good X is not related to any other goods. 
A) consumers have high incomes. 
B) good X has a lot of substitutes. 
C) good X has a lot of complements. 
D) good X is in short supply. 
E) good X is not related to any other goods.

Question 6

A product with an elastic demand means that

Accepted Answer

A) consumers are relatively insensitive to a change in the quantity demanded. 
B) consumers are relatively insensitive to a change in the price of the product. 
C) consumers are relatively sensitive to a change in the price of the product. 
D) producers are relatively insensitive to a change in the price of the product. 
E) producers are relatively sensitive to a change in the quantity demanded. 
A) consumers are relatively insensitive to a change in the quantity demanded. 
B) consumers are relatively insensitive to a change in the price of the product. 
C) consumers are relatively sensitive to a change in the price of the product. 
D) producers are relatively insensitive to a change in the price of the product. 
E) producers are relatively sensitive to a change in the quantity demanded.

Question 7

The local public transportation system recently raised rates and was surprised to be faced with declining revenue.What can be accurately concluded?

Accepted Answer

A) The cross-price elasticity of demand for public transportation is less than 1. 
B) The demand for public transportation is inelastic. 
C) The income elasticity of demand for public transportation is greater than 1. 
D) The demand for public transportation is elastic. 
E) The demand curve for public transportation has a positive slope. 
A) The cross-price elasticity of demand for public transportation is less than 1. 
B) The demand for public transportation is inelastic. 
C) The income elasticity of demand for public transportation is greater than 1. 
D) The demand for public transportation is elastic. 
E) The demand curve for public transportation has a positive slope.

Question 8

The price elasticity of supply is a measure of how

Accepted Answer

A) long it takes for producers to change technology. 
B) sensitive producers are to a change in technology. 
C) long it takes for producers to change their prices. 
D) sensitive producers are to a change in input prices. 
E) sensitive producers are to a change in output price. 
A) long it takes for producers to change technology. 
B) sensitive producers are to a change in technology. 
C) long it takes for producers to change their prices. 
D) sensitive producers are to a change in input prices. 
E) sensitive producers are to a change in output price.

Question 9

Exhibit 4-1  
-Refer to Exhibit 4-1.The price elasticity of demand is most likely to be elastic

Accepted Answer

A) at point A. 
B) at point B. 
C) at point C. 
D) anywhere along the demand curve. 
E) nowhere along the demand curve. 
A) at point A. 
B) at point B. 
C) at point C. 
D) anywhere along the demand curve. 
E) nowhere along the demand curve.

Question 10

When price changes,the effect on quantity demanded is larger as time passes at least partly because

Accepted Answer

A) people are better able to search out alternatives in the long run. 
B) government regulations affect the short run but not the long run. 
C) consumers are irrational in the short run. 
D) fewer people consume in the long run than in the short run. 
E) most consumers do not realize price has changed in the short run. 
A) people are better able to search out alternatives in the long run. 
B) government regulations affect the short run but not the long run. 
C) consumers are irrational in the short run. 
D) fewer people consume in the long run than in the short run. 
E) most consumers do not realize price has changed in the short run.

Question 11

Which of the following often occurs as a result of a price ceiling?

Accepted Answer

A) More of a product is produced than people are willing to buy. 
B) The product becomes unavailable. 
C) Consumers wanting to buy the product form long lines. 
D) Poor people find it harder to obtain the product. 
E) Black markets for the product disappear. 
A) More of a product is produced than people are willing to buy. 
B) The product becomes unavailable. 
C) Consumers wanting to buy the product form long lines. 
D) Poor people find it harder to obtain the product. 
E) Black markets for the product disappear.

Question 12

Suppose the price of a good falls from $4.95 to $3.85,and the quantity demanded changes from 77 units to 99 units.Calculate the price elasticity of demand using the midpoint formula,and indicate whether demand is elastic,inelastic,or unit-elastic.

Accepted Answer

The answer of Suppose the price of a good falls...

Question 13

Because tea and coffee are substitutes,their cross-price elasticity must be

Accepted Answer

A) less than 1. 
B) less than 0. 
C) equal to 0. 
D) positive. 
E) infinity. 
A) less than 1. 
B) less than 0. 
C) equal to 0. 
D) positive. 
E) infinity.

Question 14

The midpoint formula for calculating price elasticity of demand gives the same answer,regardless of the direction of the price change.

Accepted Answer

A) True 
 B)False

Question 15

Suppose there is a sudden decrease in the supply of oranges.Compare the effect of the change in orange supply on the price of oranges in a market with high demand elasticity and a market with low demand elasticity.

Accepted Answer

The price of oranges will increase in bo

Question 16

The price elasticity of demand measures

Accepted Answer

A) a buyer's responsiveness to a change in income. 
B) a buyer's responsiveness to a change in price. 
C) a seller's responsiveness to a change in demand. 
D) how much price increases for a change in demand. 
E) how much demand changes for a change in supply. 
A) a buyer's responsiveness to a change in income. 
B) a buyer's responsiveness to a change in price. 
C) a seller's responsiveness to a change in demand. 
D) how much price increases for a change in demand. 
E) how much demand changes for a change in supply.

Question 17

In the case of a price floor,

Accepted Answer

A) there will be a shortage. 
B) there is no need for government to buy any excess. 
C) government must require producers to increase production to meet demand. 
D) there is a redistribution of income from consumers to producers. 
E) supply decreases. 
A) there will be a shortage. 
B) there is no need for government to buy any excess. 
C) government must require producers to increase production to meet demand. 
D) there is a redistribution of income from consumers to producers. 
E) supply decreases.

Question 18

Suppose a $1 change in the price of a good results in the quantity demanded changing by .2 percent.Then you know

Accepted Answer

A) the price elasticity of demand is 1/5. 
B) nothing about slope or price elasticity of demand based on this information. 
C) the price elasticity of demand is 5. 
D) the slope of the demand curve is 5. 
E) the slope of the demand curve is 1/5. 
A) the price elasticity of demand is 1/5. 
B) nothing about slope or price elasticity of demand based on this information. 
C) the price elasticity of demand is 5. 
D) the slope of the demand curve is 5. 
E) the slope of the demand curve is 1/5.

Question 19

Along a downward-sloping,straight-line demand curve,total revenue is greatest where demand is

Accepted Answer

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

Question 20

A price floor is

Accepted Answer

A) a minimum price set by government.It causes a surplus if effective. 
B) the equilibrium price. 
C) a minimum price set by government.It causes a shortage if effective. 
D) a maximum price set by government.It causes a shortage if effective. 
E) a maximum price set by government.It causes a surplus if effective. 
A) a minimum price set by government.It causes a surplus if effective. 
B) the equilibrium price. 
C) a minimum price set by government.It causes a shortage if effective. 
D) a maximum price set by government.It causes a shortage if effective. 
E) a maximum price set by government.It causes a surplus if effective.

Exam 4: Subtleties of the Supply and Demand Model: Price Floors,price Ceilings,and Elasticity

Total revenue decreases if price increases and demand is inelastic.

Elasticity of supply is

For demand to be elastic,

If supply is perfectly elastic,then the supply curve must

Good X has a high price elasticity of demand; it is most likely that

A product with an elastic demand means that

The local public transportation system recently raised rates and was surprised to be faced with declining revenue.What can be accurately concluded?

The price elasticity of supply is a measure of how

Exhibit 4-1 -Refer to Exhibit 4-1.The price elasticity of demand is most likely to be elastic

When price changes,the effect on quantity demanded is larger as time passes at least partly because

Which of the following often occurs as a result of a price ceiling?

Suppose the price of a good falls from $4.95 to $3.85,and the quantity demanded changes from 77 units to 99 units.Calculate the price elasticity of demand using the midpoint formula,and indicate whether demand is elastic,inelastic,or unit-elastic.

Because tea and coffee are substitutes,their cross-price elasticity must be

The midpoint formula for calculating price elasticity of demand gives the same answer,regardless of the direction of the price change.

Suppose there is a sudden decrease in the supply of oranges.Compare the effect of the change in orange supply on the price of oranges in a market with high demand elasticity and a market with low demand elasticity.

The price elasticity of demand measures

In the case of a price floor,

Suppose a $1 change in the price of a good results in the quantity demanded changing by .2 percent.Then you know

Along a downward-sloping,straight-line demand curve,total revenue is greatest where demand is

A price floor is

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, transfers, and Income Distribution

Public Goods, externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth and Globalization

International Trade

International Finance

Reading,understanding,and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Present Discounted Value

The Miracle of Compound Growth

Deriving the Growth Accounting Formula

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

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