Question 1

If supply is price-inelastic and demand is price-elastic, then the firm can earn positive profits by increasing the price.

Accepted Answer

A) True 
 B)False

Question 2

The table given below reports the price and quantity demanded of a commodity. Table 19.1
  According to Table 19.1, when the price increases from $5 to $6, the price elasticity of demand is _____.

Accepted Answer

A) 0.25 
B) 1.0 
C) 1.3 
D) 1.8 
E) 1.67 
A) 0.25 
B) 1.0 
C) 1.3 
D) 1.8 
E) 1.67

Question 3

A measure of the responsiveness of quantity supplied to changes in price is known as _____.

Accepted Answer

A) cross-price elasticity 
B) price elasticity of demand 
C) price elasticity of supply 
D) income elasticity 
E) point elasticity 
A) cross-price elasticity 
B) price elasticity of demand 
C) price elasticity of supply 
D) income elasticity 
E) point elasticity

Question 4

Arc elasticity is calculated as _____.

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 5

If a 1 percent change in the price of a good causes a 1 percent change in the quantity demanded of that good, then demand is said t be:

Accepted Answer

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

Question 6

The social security tax, like any other tax, is shared by employers and employees based on elasticities of demand and supply.If the wage elasticity of demand for labor is zero and the wage elasticity of supply for labor is positive:

Accepted Answer

A) most of the tax will be paid by the employer. 
B) most of the tax will be paid by the employee. 
C) all of the tax will be paid by the employer. 
D) all of the tax will be paid by the employee. 
E) the tax is split evenly between the employer and employee. 
A) most of the tax will be paid by the employer. 
B) most of the tax will be paid by the employee. 
C) all of the tax will be paid by the employer. 
D) all of the tax will be paid by the employee. 
E) the tax is split evenly between the employer and employee.

Question 7

Since the slope of a downward sloping demand curve is constant, the price elasticity of demand does not change when moving along this line.

Accepted Answer

A) True 
 B)False

Question 8

If the demand for liquor is elastic, and the government increases liquor tax, then _____.

Accepted Answer

A) most of the tax will be paid by the consumer 
B) most of the tax will be paid by the producer 
C) all of the tax will be paid by the consumer 
D) all of the tax will be paid by the producer 
E) the tax will be paid by the retailer 
A) most of the tax will be paid by the consumer 
B) most of the tax will be paid by the producer 
C) all of the tax will be paid by the consumer 
D) all of the tax will be paid by the producer 
E) the tax will be paid by the retailer

Question 9

If a 10 percent increase in the price of tomatoes leads to a 20 percent decrease in quantity demanded, then the price elasticity of demand for tomatoes,   , equals 2.

Accepted Answer

A) True 
 B)False

Question 10

Cross-price elasticity is represented by the formula DQ/DP ´ P/Q;where P and DP represent the price and change in price of a related good respectively.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is a determinant of price elasticity of demand?

Accepted Answer

A) Availability of substitute goods 
B) Excess capacity 
C) Scale of production 
D) Inventories 
E) Cost of production 
A) Availability of substitute goods 
B) Excess capacity 
C) Scale of production 
D) Inventories 
E) Cost of production

Question 12

Income elasticity of demand is expected to be _____.

Accepted Answer

A) relatively high for necessities 
B) positive for most products 
C) relatively low for luxuries 
D) negative for most products 
E) zero for most products 
A) relatively high for necessities 
B) positive for most products 
C) relatively low for luxuries 
D) negative for most products 
E) zero for most products

Question 13

Suppose the manager of a store wants to know whether the product of the store across the street is a substitute for her product.In other words, she would need to know if the cross-price elasticity of demand for the products _____.

Accepted Answer

A) is positive 
B) is negative 
C) is unity 
D) is zero 
E) is infinite 
A) is positive 
B) is negative 
C) is unity 
D) is zero 
E) is infinite

Question 14

The cross-price elasticity between baseballs and tennis balls is likely to be a large positive number.

Accepted Answer

A) True 
 B)False

Question 15

_____ measures the percentage change in quantity demanded caused by a given percentage change in the price of a related good.

Accepted Answer

A) Income elasticity of demand 
B) Cross-price elasticity of demand 
C) Advertising elasticity of demand 
D) Price elasticity of demand 
E) Point elasticity 
A) Income elasticity of demand 
B) Cross-price elasticity of demand 
C) Advertising elasticity of demand 
D) Price elasticity of demand 
E) Point elasticity

Question 16

In the long run, the quantity of capital available to a firm is fixed.

Accepted Answer

A) True 
 B)False

Question 17

Assume that the price elasticity of demand for a commodity is 0.20.A 10 percent increase in price will be followed by a:

Accepted Answer

A) 20 percent increase in the quantity demanded. 
B) 2 percent decrease in the quantity demanded. 
C) 20 percent decrease in the quantity demanded. 
D) 0.2 percent decrease in the quantity demanded. 
E) 2 percent increase in the quantity demanded. 
A) 20 percent increase in the quantity demanded. 
B) 2 percent decrease in the quantity demanded. 
C) 20 percent decrease in the quantity demanded. 
D) 0.2 percent decrease in the quantity demanded. 
E) 2 percent increase in the quantity demanded.

Question 18

By measuring the price elasticity of demand in terms of percentage changes, economists are able to compare the way consumers respond to changes in the prices of different products.

Accepted Answer

A) True 
 B)False

Question 19

If demand is perfectly inelastic, then:

Accepted Answer

A) the elasticity of demand is 1. 
B) the elasticity of demand is -1. 
C) the demand curve will be nonexistent. 
D) the demand curve will be a horizontal line. 
E) quantity demanded does not change when price changes. 
A) the elasticity of demand is 1. 
B) the elasticity of demand is -1. 
C) the demand curve will be nonexistent. 
D) the demand curve will be a horizontal line. 
E) quantity demanded does not change when price changes.

Question 20

When the elasticity of demand for a particular good is less than 1:

Accepted Answer

A) demand is elastic. 
B) demand is inelastic. 
C) the elasticity of demand is unit-elastic. 
D) the good is a substitute. 
E) the good is a normal good. 
A) demand is elastic. 
B) demand is inelastic. 
C) the elasticity of demand is unit-elastic. 
D) the good is a substitute. 
E) the good is a normal good.

Exam 33: Elasticity: Demand and Supply

If supply is price-inelastic and demand is price-elastic, then the firm can earn positive profits by increasing the price.

The table given below reports the price and quantity demanded of a commodity. Table 19.1 According to Table 19.1, when the price increases from $5 to $6, the price elasticity of demand is _____.

A measure of the responsiveness of quantity supplied to changes in price is known as _____.

Arc elasticity is calculated as _____.

If a 1 percent change in the price of a good causes a 1 percent change in the quantity demanded of that good, then demand is said t be:

The social security tax, like any other tax, is shared by employers and employees based on elasticities of demand and supply.If the wage elasticity of demand for labor is zero and the wage elasticity of supply for labor is positive:

Since the slope of a downward sloping demand curve is constant, the price elasticity of demand does not change when moving along this line.

If the demand for liquor is elastic, and the government increases liquor tax, then _____.

If a 10 percent increase in the price of tomatoes leads to a 20 percent decrease in quantity demanded, then the price elasticity of demand for tomatoes, , equals 2.

Cross-price elasticity is represented by the formula DQ/DP ´ P/Q;where P and DP represent the price and change in price of a related good respectively.

Which of the following is a determinant of price elasticity of demand?

Income elasticity of demand is expected to be _____.

Suppose the manager of a store wants to know whether the product of the store across the street is a substitute for her product.In other words, she would need to know if the cross-price elasticity of demand for the products _____.

The cross-price elasticity between baseballs and tennis balls is likely to be a large positive number.

_____ measures the percentage change in quantity demanded caused by a given percentage change in the price of a related good.

In the long run, the quantity of capital available to a firm is fixed.

Assume that the price elasticity of demand for a commodity is 0.20.A 10 percent increase in price will be followed by a:

By measuring the price elasticity of demand in terms of percentage changes, economists are able to compare the way consumers respond to changes in the prices of different products.

If demand is perfectly inelastic, then:

When the elasticity of demand for a particular good is less than 1:

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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