Question 1

If consumer income increases, then the demand shifts right for an inferior good.

Accepted Answer

A) True 
 B)False

Question 2

A perfectly elastic demand curve is represented by a vertical line.

Accepted Answer

A) True 
 B)False

Question 3

If a product has an elastic demand, it means that consumers are relatively insensitive to a change in the price of the product.

Accepted Answer

A) True 
 B)False

Question 4

For a given product, income elasticity of demand relates the percentage change in:

Accepted Answer

A) quantity demanded to the percentage change in income. 
B) quantity demanded to the absolute change in income. 
C) income to the percentage change in price. 
D) price to the absolute change in quantity demanded. 
E) income to the percentage change in quantity available for sale. 
A) quantity demanded to the percentage change in income. 
B) quantity demanded to the absolute change in income. 
C) income to the percentage change in price. 
D) price to the absolute change in quantity demanded. 
E) income to the percentage change in quantity available for sale.

Question 5

An inferior good or service is any good or service for which:

Accepted Answer

A) an increase in price causes an increase in the quantity demanded. 
B) a decrease in price causes an increase in demand. 
C) an increase in price causes a decrease in the quantity demanded. 
D) an increase in the amount consumed causes a decrease in marginal utility. 
E) an increase in income causes a decrease in demand. 
A) an increase in price causes an increase in the quantity demanded. 
B) a decrease in price causes an increase in demand. 
C) an increase in price causes a decrease in the quantity demanded. 
D) an increase in the amount consumed causes a decrease in marginal utility. 
E) an increase in income causes a decrease in demand.

Question 6

The cross-price elasticity between movie tickets and video rentals is positive.

Accepted Answer

A) True 
 B)False

Question 7

Since an expensive sports car constitutes a greater portion of the consumer's budget than does laundry soap, the elasticity of demand for an expensive sports car is _____.

Accepted Answer

A) relatively less elastic 
B) a vertical line 
C) a downward sloping straight line 
D) relatively more elastic 
E) not subject to elasticity because of the income level of the consumers who purchase expensive sports cars 
A) relatively less elastic 
B) a vertical line 
C) a downward sloping straight line 
D) relatively more elastic 
E) not subject to elasticity because of the income level of the consumers who purchase expensive sports cars

Question 8

If a 50 percent increase in the price of pizza results in a 25 percent decrease in the quantity demanded of pizza, then the elasticity of demand for pizza:

Accepted Answer

A) is equal to 0.5 and demand is inelastic. 
B) is equal to 0.5 and demand is elastic. 
C) is equal to 2 and is elastic. 
D) is equal to 2 and is inelastic. 
E) cannot be determined from the information provided. 
A) is equal to 0.5 and demand is inelastic. 
B) is equal to 0.5 and demand is elastic. 
C) is equal to 2 and is elastic. 
D) is equal to 2 and is inelastic. 
E) cannot be determined from the information provided.

Question 9

If butter has an income elasticity equal to 0.75, then butter is an inferior good.

Accepted Answer

A) True 
 B)False

Question 10

When the supply elasticity of a product is 2.5, a 10 percent decrease in price will _____ the quantity supplied of the product by _____ percent.

Accepted Answer

A) increase;25 
B) decrease;25 
C) increase;2.5 
D) decrease;2.5 
E) decrease;4 
A) increase;25 
B) decrease;25 
C) increase;2.5 
D) decrease;2.5 
E) decrease;4

Question 11

If the percentage change in quantity demanded of a good is greater than the percentage change in price that caused it, then demand for the good is _____.

Accepted Answer

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

Question 12

When the cross-price elasticity of demand is a large positive number, one can correctly conclude that:

Accepted Answer

A) the goods are normal goods. 
B) the goods are inferior goods. 
C) the goods are substitutes. 
D) the goods are complements. 
E) total revenue will increase when the price increases. 
A) the goods are normal goods. 
B) the goods are inferior goods. 
C) the goods are substitutes. 
D) the goods are complements. 
E) total revenue will increase when the price increases.

Question 13

When the manager of a local movie theater raises the price of movie tickets from $7.50 to $8.50 total revenue falls.This means that:

Accepted Answer

A) the demand for movie tickets is highly elastic. 
B) the supply of movie ticket is perfectly elastic. 
C) the supply of movie tickets is elastic. 
D) the demand for movie tickets is inelastic. 
E) the supply of movie tickets is inelastic. 
A) the demand for movie tickets is highly elastic. 
B) the supply of movie ticket is perfectly elastic. 
C) the supply of movie tickets is elastic. 
D) the demand for movie tickets is inelastic. 
E) the supply of movie tickets is inelastic.

Question 14

If price elasticity of supply is large and demand is price-inelastic, then the firm can earn positive profits byincreasing the price.

Accepted Answer

A) True 
 B)False

Question 15

If the demand for beans tends to decline as incomes rise, everything else held constant, beans are _____.

Accepted Answer

A) a luxury good 
B) a normal good 
C) price sensitive 
D) not price sensitive 
E) an inferior good 
A) a luxury good 
B) a normal good 
C) price sensitive 
D) not price sensitive 
E) an inferior good

Question 16

The actual or chronological time for the short and the long run does not vary from industry to industry.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

If the price elasticity of demand is equal to 4, a 1 percent increase in price will cause the quantity demanded to _____ by _____ percent.

Accepted Answer

A) increase;0.25 
B) decrease;0.25 
C) increase;4 
D) decrease;25 
E) decrease;4 
A) increase;0.25 
B) decrease;0.25 
C) increase;4 
D) decrease;25 
E) decrease;4

Question 19

As income levels rose moderately last year in the San Jose area, it was observed by local realtors that housing sales increased substantially.It is clear from this information that, everything else held constant, the income elasticity of demand for houses is _____.

Accepted Answer

A) negative and relatively low 
B) negative and relatively high 
C) positive and relatively low 
D) positive and relatively high 
E) neither positive nor negative 
A) negative and relatively low 
B) negative and relatively high 
C) positive and relatively low 
D) positive and relatively high 
E) neither positive nor negative

Question 20

If a product has an inelastic demand, then:

Accepted Answer

A) there is probably a long time period under consideration. 
B) as price increases, total revenue to producers decreases. 
C) an increase in the price will decrease total consumer expenditures. 
D) there are probably many complements for the good. 
E) there are probably few substitutes for the good. 
A) there is probably a long time period under consideration. 
B) as price increases, total revenue to producers decreases. 
C) an increase in the price will decrease total consumer expenditures. 
D) there are probably many complements for the good. 
E) there are probably few substitutes for the good.

Exam 4: Elasticity: Demand and Supply

If consumer income increases, then the demand shifts right for an inferior good.

A perfectly elastic demand curve is represented by a vertical line.

If a product has an elastic demand, it means that consumers are relatively insensitive to a change in the price of the product.

For a given product, income elasticity of demand relates the percentage change in:

An inferior good or service is any good or service for which:

The cross-price elasticity between movie tickets and video rentals is positive.

Since an expensive sports car constitutes a greater portion of the consumer's budget than does laundry soap, the elasticity of demand for an expensive sports car is _____.

If a 50 percent increase in the price of pizza results in a 25 percent decrease in the quantity demanded of pizza, then the elasticity of demand for pizza:

If butter has an income elasticity equal to 0.75, then butter is an inferior good.

When the supply elasticity of a product is 2.5, a 10 percent decrease in price will _____ the quantity supplied of the product by _____ percent.

If the percentage change in quantity demanded of a good is greater than the percentage change in price that caused it, then demand for the good is _____.

When the cross-price elasticity of demand is a large positive number, one can correctly conclude that:

When the manager of a local movie theater raises the price of movie tickets from $7.50 to $8.50 total revenue falls.This means that:

If price elasticity of supply is large and demand is price-inelastic, then the firm can earn positive profits byincreasing the price.

If the demand for beans tends to decline as incomes rise, everything else held constant, beans are _____.

The actual or chronological time for the short and the long run does not vary from industry to industry.

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

If the price elasticity of demand is equal to 4, a 1 percent increase in price will cause the quantity demanded to _____ by _____ percent.

As income levels rose moderately last year in the San Jose area, it was observed by local realtors that housing sales increased substantially.It is clear from this information that, everything else held constant, the income elasticity of demand for houses is _____.

If a product has an inelastic demand, then:

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

When the supply elasticity of a product is 2.5, a 10 percent decrease in price will _ the quantity supplied of the product by _ percent.

If the price elasticity of demand is equal to 4, a 1 percent increase in price will cause the quantity demanded to _ by _ percent.