Question 1

If demand is unit-elastic, then a $5 decrease in price will lead to an increase in quantity demanded by 5 units.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is true with respect to the price elasticity of demand?

Accepted Answer

A) The coefficient of price elasticity of demand will change with changes in the units of measurement (for instance, going from pounds to ounces). 
B) Elasticity of demand will be equal to the slope of the demand curve. 
C) Elasticity measures the sensitivity of total expenditure to a change in price. 
D) Elasticity will tend to be greater for a relatively expensive product than for a cheaper one. 
E) A coefficient of 1 means that the percentage change in total expenditure is equivalent to the percentage change in price. 
A) The coefficient of price elasticity of demand will change with changes in the units of measurement (for instance, going from pounds to ounces). 
B) Elasticity of demand will be equal to the slope of the demand curve. 
C) Elasticity measures the sensitivity of total expenditure to a change in price. 
D) Elasticity will tend to be greater for a relatively expensive product than for a cheaper one. 
E) A coefficient of 1 means that the percentage change in total expenditure is equivalent to the percentage change in price.

Question 3

When economists speak of the short run, they are referring to _____.

Accepted Answer

A) a specific period of time, usually less than one year 
B) a specific period of time, more than one year, but less than two years 
C) a specific period of time just long enough that the quantities of all resources can be varied 
D) a period of time short enough that the quantities of at least one of the resources cannot be varied 
E) a period of time short enough that none of the quantities of the resources can be varied 
A) a specific period of time, usually less than one year 
B) a specific period of time, more than one year, but less than two years 
C) a specific period of time just long enough that the quantities of all resources can be varied 
D) a period of time short enough that the quantities of at least one of the resources cannot be varied 
E) a period of time short enough that none of the quantities of the resources can be varied

Question 4

Suppose the price of a product is reduced from $10 to $6 and the quantity demanded increases from 40 to 60 units.From this we can conclude that the price elasticity of demand over this price range is equal to _____.

Accepted Answer

A) 1.2 
B) 1.25 
C) 0.80 
D) 0.20 
E) 0.5 
A) 1.2 
B) 1.25 
C) 0.80 
D) 0.20 
E) 0.5

Question 5

The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income. Table 5.2
  Based on the information given in Table 5.2, coffee would be considered:

Accepted Answer

A) an inferior good. 
B) a necessity. 
C) a normal good. 
D) a negative good. 
E) a luxury good. 
A) an inferior good. 
B) a necessity. 
C) a normal good. 
D) a negative good. 
E) a luxury good.

Question 6

_____ 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 7

If demand is relatively elastic and supply is relatively inelastic, then the incidence of a tax will fall mainly on consumers.

Accepted Answer

A) True 
 B)False

Question 8

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px.Assume that P = $8, I = 200, and Px = $10.
Given the above equation, the quantity of noodles demanded at a price of $8 is _____.

Accepted Answer

A) 8 
B) 10 
C) 12 
D) 4 
E) 20 
A) 8 
B) 10 
C) 12 
D) 4 
E) 20

Question 9

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.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Economists have said that deregulation of the electric utility industry might lead to increased prices in the short run but prices will fall in the long run.In this context:

Accepted Answer

A) the short run means the middle of next year. 
B) the short run means after all adjustments have been made and the quantities of all resources have been varied as necessary. 
C) the long run means after all adjustments have been made, the quantities of all resources have been varied as necessary, and new market entrants begin producing electricity. 
D) the short run means after new firms begin producing electricity. 
E) the long run means approximately ten years. 
A) the short run means the middle of next year. 
B) the short run means after all adjustments have been made and the quantities of all resources have been varied as necessary. 
C) the long run means after all adjustments have been made, the quantities of all resources have been varied as necessary, and new market entrants begin producing electricity. 
D) the short run means after new firms begin producing electricity. 
E) the long run means approximately ten years.

Question 12

In which of the following cases will an effective price floor lead to the largest surplus in a market?

Accepted Answer

A) When demand is elastic and supply is inelastic 
B) When demand is inelastic and supply is elastic 
C) When both demand and supply are elastic 
D) When both demand and supply are inelastic 
E) When demand is inelastic and supply is perfectly inelastic 
A) When demand is elastic and supply is inelastic 
B) When demand is inelastic and supply is elastic 
C) When both demand and supply are elastic 
D) When both demand and supply are inelastic 
E) When demand is inelastic and supply is perfectly inelastic

Question 13

Consider a medical breakthrough that led to the discovery of a simple microchip which when inserted inside the human ear could prevent certain chronic diseases.The price elasticity of demand for that microchip would most likely be _____.

Accepted Answer

A) very elastic 
B) very inelastic 
C) infinite 
D) negative only for high prices 
E) positive only for high prices 
A) very elastic 
B) very inelastic 
C) infinite 
D) negative only for high prices 
E) positive only for high prices

Question 14

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 15

Ceteris paribus, if a 20 percent increase in the price of shoes leads to a 10 percent increase in the quantity supplied of shoes, then the price elasticity of supply is equal to _____.

Accepted Answer

A) 2 
B) 20 
C) 10 
D) 0.5 
E) 0.2 
A) 2 
B) 20 
C) 10 
D) 0.5 
E) 0.2

Question 16

As the price of movie tickets increases, which of the following is most likely to take place?

Accepted Answer

A) The quantity demanded for DVDs will increase 
B) The quantity of books demanded will decrease 
C) The number of Broadway tickets purchased will decrease 
D) The prices of popcorn and soda will increase 
E) The number of movies being produced will increase 
A) The quantity demanded for DVDs will increase 
B) The quantity of books demanded will decrease 
C) The number of Broadway tickets purchased will decrease 
D) The prices of popcorn and soda will increase 
E) The number of movies being produced will increase

Question 17

A horizontal demand curve shows that demand for the good is _____.

Accepted Answer

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

Question 18

When product A is a good substitute for product B, the cross-price elasticity of demand for products A and B will be _____.

Accepted Answer

A) unity 
B) negative 
C) positive 
D) decreasing 
E) increasing 
A) unity 
B) negative 
C) positive 
D) decreasing 
E) increasing

Question 19

If the price elasticity of supply is zero, the supply curve is a horizontal line parallel to the quantity axis.

Accepted Answer

A) True 
 B)False

Question 20

If a 10 percent increase in the price of gasoline results in a 2 percent decrease in the quantity demanded of gasoline, then the elasticity of demand for gasoline is:

Accepted Answer

A) equal to 0.2 and demand is inelastic. 
B) equal to 0.2 and demand is elastic. 
C) equal to 0.02 and demand is elastic. 
D) equal to 0.5 and demand is inelastic. 
E) equal to 0.5 and the demand is elastic. 
A) equal to 0.2 and demand is inelastic. 
B) equal to 0.2 and demand is elastic. 
C) equal to 0.02 and demand is elastic. 
D) equal to 0.5 and demand is inelastic. 
E) equal to 0.5 and the demand is elastic.

Exam 4: Elasticity: Demand and Supply

If demand is unit-elastic, then a $5 decrease in price will lead to an increase in quantity demanded by 5 units.

Which of the following is true with respect to the price elasticity of demand?

When economists speak of the short run, they are referring to _____.

Suppose the price of a product is reduced from $10 to $6 and the quantity demanded increases from 40 to 60 units.From this we can conclude that the price elasticity of demand over this price range is equal to _____.

The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income. Table 5.2 Based on the information given in Table 5.2, coffee would be considered:

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

If demand is relatively elastic and supply is relatively inelastic, then the incidence of a tax will fall mainly on consumers.

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px.Assume that P = $8, I = 200, and Px = $10. Given the above equation, the quantity of noodles demanded at a price of $8 is _____.

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

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

Economists have said that deregulation of the electric utility industry might lead to increased prices in the short run but prices will fall in the long run.In this context:

In which of the following cases will an effective price floor lead to the largest surplus in a market?

Consider a medical breakthrough that led to the discovery of a simple microchip which when inserted inside the human ear could prevent certain chronic diseases.The price elasticity of demand for that microchip would most likely be _____.

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

Ceteris paribus, if a 20 percent increase in the price of shoes leads to a 10 percent increase in the quantity supplied of shoes, then the price elasticity of supply is equal to _____.

As the price of movie tickets increases, which of the following is most likely to take place?

A horizontal demand curve shows that demand for the good is _____.

When product A is a good substitute for product B, the cross-price elasticity of demand for products A and B will be _____.

If the price elasticity of supply is zero, the supply curve is a horizontal line parallel to the quantity axis.

If a 10 percent increase in the price of gasoline results in a 2 percent decrease in the quantity demanded of gasoline, then the elasticity of demand for gasoline is:

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

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

Elasticity: Demand and Supply

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

Filters

Scenario 5.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x.Assume that P = $8, I = 200, and P_x= $10. Given the above equation, the quantity of noodles demanded at a price of $8 is _____.