Question 1

If demand is perfectly inelastic,the absolute value of the price elasticity of demand is

Accepted Answer

A) zero. 
B) less than one. 
C) more than one. 
D) equal to the absolute value of the slope of the demand curve. 
A) zero. 
B) less than one. 
C) more than one. 
D) equal to the absolute value of the slope of the demand curve.

Question 2

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons.What is the absolute value of the price elasticity of demand?

Accepted Answer

A) 0.11 
B) 0.37 
C) 2.69 
D) 9.33 
A) 0.11 
B) 0.37 
C) 2.69 
D) 9.33

Question 3

-Refer to Figure 6-12.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

Accepted Answer

A) SB represents supply in the short run and SA represents supply in the long run. 
B) Either SA or SB could represent supply in the short run;in the long run the supply curve must be a vertical line. 
C) Either SA or SB could represent supply in the long run;in the short run the supply curve must be a horizontal line. 
D) SA represents supply in the short run and SB represents supply in the long run. 
A) SB represents supply in the short run and SA represents supply in the long run. 
B) Either SA or SB could represent supply in the short run;in the long run the supply curve must be a vertical line. 
C) Either SA or SB could represent supply in the long run;in the short run the supply curve must be a horizontal line. 
D) SA represents supply in the short run and SB represents supply in the long run.

Question 4

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units.Use the midpoint formula to calculate the price elasticity of supply.

Accepted Answer

A) 1.22 
B) 1.0 
C) 0.82 
D) 0.07 
A) 1.22 
B) 1.0 
C) 0.82 
D) 0.07

Question 5

Article Summary
Just days before the 2015 Super Bowl was played in Glendale,Arizona,the average price of a ticket on the secondary resale market was $10,352,more than three times the average price for the 2014 game.People who were able to purchase tickets at face value directly from the NFL paid prices ranging from $800 to $1,900 per ticket.The day before the game,ticket broker StubHub listed its least expensive seat at $8,049,while the most expensive seat was priced at more than $65,000.
-Refer to the Article Summary.Based on the difference between the face value of Super Bowl tickets and the prices being charged in the resale market,the demand at the face value of the tickets is

Accepted Answer

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

Question 6

Which of the following statements is true?

Accepted Answer

A) The supply of oil is very elastic over short time periods but becomes perfectly inelastic over time.A given shift in supply results in a greater increase in the price of oil when the supply of oil is perfectly inelastic. 
B) The supply of oil is very inelastic over short time periods but becomes more elastic over time.A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic. 
C) The supply of oil is perfectly inelastic;therefore,as the demand for oil increases over time the price of oil increases significantly. 
D) Over short periods of time increases in the demand for oil are greater than increases in the supply of oil.Over the long run increases in the demand and the supply of oil are about equal.As a result,the price of oil increases greatly in the short run but is stable in the long run. 
A) The supply of oil is very elastic over short time periods but becomes perfectly inelastic over time.A given shift in supply results in a greater increase in the price of oil when the supply of oil is perfectly inelastic. 
B) The supply of oil is very inelastic over short time periods but becomes more elastic over time.A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic. 
C) The supply of oil is perfectly inelastic;therefore,as the demand for oil increases over time the price of oil increases significantly. 
D) Over short periods of time increases in the demand for oil are greater than increases in the supply of oil.Over the long run increases in the demand and the supply of oil are about equal.As a result,the price of oil increases greatly in the short run but is stable in the long run.

Question 7

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1.Increasing ticket prices will increase the total revenue from ticket sales.

Accepted Answer

A) True 
 B)False

Question 8

Between 1950 and 2015 the productivity of wheat farmers in the United States more than doubled.This means that

Accepted Answer

A) the amount of land and other resources devoted to wheat production more than doubled. 
B) the incomes of wheat farmers more than doubled. 
C) the total amount of wheat produced more than doubled. 
D) the amount of wheat produced by the average farmer more than doubled. 
A) the amount of land and other resources devoted to wheat production more than doubled. 
B) the incomes of wheat farmers more than doubled. 
C) the total amount of wheat produced more than doubled. 
D) the amount of wheat produced by the average farmer more than doubled.

Question 9

Which of the following is not a determinant of a good's price elasticity of demand?

Accepted Answer

A) the slope of the demand curve 
B) the share of the good in the consumer's total budget 
C) whether the good is a luxury or a necessity 
D) the passage of time 
A) the slope of the demand curve 
B) the share of the good in the consumer's total budget 
C) whether the good is a luxury or a necessity 
D) the passage of time

Question 10

Perfectly inelastic demand is represented by a demand curve which is ________,and relatively inelastic demand is represented by a demand curve which is ________.

Accepted Answer

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

Question 11

Assume that a 50 percent gasoline tax led to a large increase in its price and only a small decrease in the quantity of gasoline demanded.Economic analysis would lead one to conclude that

Accepted Answer

A) gasoline should be taxed because the benefits of the tax would exceed the costs. 
B) gasoline should not be taxed because the benefits are uncertain. 
C) gasoline should not be taxed on ethical grounds since ethical benefits and costs can't be measured. 
D) the benefits of taxing gasoline is a normative issue.Economic analysis can be used to contribute to discussion of this issue but cannot decide it. 
A) gasoline should be taxed because the benefits of the tax would exceed the costs. 
B) gasoline should not be taxed because the benefits are uncertain. 
C) gasoline should not be taxed on ethical grounds since ethical benefits and costs can't be measured. 
D) the benefits of taxing gasoline is a normative issue.Economic analysis can be used to contribute to discussion of this issue but cannot decide it.

Question 12

Which of the following explains why a firm would be interested in knowing the price elasticity of demand for a good it sells?

Accepted Answer

A) The price elasticity of demand can be used to determine the impact of changes in income on quantity sold. 
B) Knowing the price elasticity of demand allows the firm to determine how the cost of producing additional units of the good will change. 
C) Knowing the price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total profit. 
D) The price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total revenue. 
A) The price elasticity of demand can be used to determine the impact of changes in income on quantity sold. 
B) Knowing the price elasticity of demand allows the firm to determine how the cost of producing additional units of the good will change. 
C) Knowing the price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total profit. 
D) The price elasticity of demand allows the firm to calculate how changes in the price of the good will affect the firm's total revenue.

Question 13

To calculate the price elasticity of demand we divide

Accepted Answer

A) the percentage change in quantity demanded by the percentage change in price. 
B) the percentage change in price by the percentage change in quantity demanded. 
C) rise by the run. 
D) the average price by the average quantity demanded. 
A) the percentage change in quantity demanded by the percentage change in price. 
B) the percentage change in price by the percentage change in quantity demanded. 
C) rise by the run. 
D) the average price by the average quantity demanded.

Question 14

Which of the following is one reason why the income of small family farms has decreased over time?

Accepted Answer

A) Technology has increased farm productivity and market supply. 
B) The demand for farm products is price elastic. 
C) The demand for farm products is income inelastic. 
D) The U.S.population has increased greatly since 1950. 
A) Technology has increased farm productivity and market supply. 
B) The demand for farm products is price elastic. 
C) The demand for farm products is income inelastic. 
D) The U.S.population has increased greatly since 1950.

Question 15

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative,then an increase in tolls will result in

Accepted Answer

A) a decrease in total revenue. 
B) a decrease in non-toll road usage. 
C) an increase in total revenue. 
D) an increase in toll road usage. 
A) a decrease in total revenue. 
B) a decrease in non-toll road usage. 
C) an increase in total revenue. 
D) an increase in toll road usage.

Question 16

If a firm raised its price and discovered that its total revenue fell,then the demand for its product is

Accepted Answer

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

Question 17

For each pair of items below determine which product would have the higher price elasticity of demand (in absolute value).
a.Blood pressure medicine for someone who has high blood pressure or the purchase of Clairol hair coloring product.
b.A new Ford Fusion or a tank of gas for your current car.
c.A Seiko watch or watches in general.

Accepted Answer

a.The demand for the hair product is mor

Question 18

Which of the following statements is true?

Accepted Answer

A) Whenever a firm raises its price its total revenue will increase. 
B) When a firm lowers its price its total revenue may either increase or decrease. 
C) Whenever a firm increases its quantity sold its revenue will increase. 
D) Total revenue will equal zero when the demand for a product is unit elastic. 
A) Whenever a firm raises its price its total revenue will increase. 
B) When a firm lowers its price its total revenue may either increase or decrease. 
C) Whenever a firm increases its quantity sold its revenue will increase. 
D) Total revenue will equal zero when the demand for a product is unit elastic.

Question 19

Which of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

Accepted Answer

A) pancakes and syrup 
B) hot dogs and hamburgers 
C) orange juice and grapefruit juice 
D) peanuts and cat food 
A) pancakes and syrup 
B) hot dogs and hamburgers 
C) orange juice and grapefruit juice 
D) peanuts and cat food

Question 20

The price elasticity of supply is calculated as the change in supply divided by the change in price.

Accepted Answer

A) True 
 B)False

Exam 6: Elasticity: the Responsiveness of Demand and Supply

If demand is perfectly inelastic,the absolute value of the price elasticity of demand is

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons.What is the absolute value of the price elasticity of demand?

-Refer to Figure 6-12.Suppose the diagram shows the supply curves for a product in the short run and in the long run.Which supply curve represents supply in the short run and which curve represents supply in the long run?

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units.Use the midpoint formula to calculate the price elasticity of supply.

Which of the following statements is true?

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1.Increasing ticket prices will increase the total revenue from ticket sales.

Between 1950 and 2015 the productivity of wheat farmers in the United States more than doubled.This means that

Which of the following is not a determinant of a good's price elasticity of demand?

Perfectly inelastic demand is represented by a demand curve which is ________,and relatively inelastic demand is represented by a demand curve which is ________.

Assume that a 50 percent gasoline tax led to a large increase in its price and only a small decrease in the quantity of gasoline demanded.Economic analysis would lead one to conclude that

Which of the following explains why a firm would be interested in knowing the price elasticity of demand for a good it sells?

To calculate the price elasticity of demand we divide

Which of the following is one reason why the income of small family farms has decreased over time?

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative,then an increase in tolls will result in

If a firm raised its price and discovered that its total revenue fell,then the demand for its product is

Which of the following statements is true?

Which of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

The price elasticity of supply is calculated as the change in supply divided by the change in price.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Perfectly inelastic demand is represented by a demand curve which is ,and relatively inelastic demand is represented by a demand curve which is .