Question 1

If the demand curve shifts but the supply curve does not and price remains the same, supply must be perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 2

Along a downward-sloping linear demand curve,

Accepted Answer

A)  slope is constant and elasticity is changing 
B)  slope is changing and elasticity is constant 
C)  both slope and elasticity are constant 
D)  both slope and elasticity are changing 
E)  no generalizations can be made about slope 
A)  slope is constant and elasticity is changing 
B)  slope is changing and elasticity is constant 
C)  both slope and elasticity are constant 
D)  both slope and elasticity are changing 
E)  no generalizations can be made about slope

Question 3

NARRBEGIN: Exhibit 5-9
Exhibit 5-9
  
-Between points a and b on the demand curve in Exhibit 5-9, demand is

Accepted Answer

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

Question 4

A normal good is defined as a product for which quantity demanded increases as price decreases.

Accepted Answer

A) True 
 B)False

Question 5

For which of the following is demand most likely to be perfectly inelastic?

Accepted Answer

A)  BMW automobiles 
B)  Pepsi Cola 
C)  hot dogs 
D)  insulin 
E)  Tylenol 
A)  BMW automobiles 
B)  Pepsi Cola 
C)  hot dogs 
D)  insulin 
E)  Tylenol

Question 6

One group of people uses New York City subways only during rush hour to travel to and from work. Another group uses them only in midday for leisure activity. If New York City wants to increase transit fares with the smallest possible reduction in revenue, for which group should it increase the fare?

Accepted Answer

A)  The rush-hour group because its demand for subway service is more elastic than that of the midday group. 
B)  The rush-hour group because its demand for subway service is less elastic than that of the midday group. 
C)  The midday group because its demand for subway service is more elastic than that of the rush-hour group. 
D)  The midday group because its demand for subway service is less elastic than that of the rush-hour group. 
E)  It doesn't matter because both groups have the same elasticity of demand. 
A)  The rush-hour group because its demand for subway service is more elastic than that of the midday group. 
B)  The rush-hour group because its demand for subway service is less elastic than that of the midday group. 
C)  The midday group because its demand for subway service is more elastic than that of the rush-hour group. 
D)  The midday group because its demand for subway service is less elastic than that of the rush-hour group. 
E)  It doesn't matter because both groups have the same elasticity of demand.

Question 7

Given the availability of California oranges, demand for Florida oranges will

Accepted Answer

A)  be less elastic than if there were no California oranges 
B)  be more elastic than if there were no California oranges 
C)  have the same elasticity as it would if there were no California oranges 
D)  be perfectly elastic 
E)  be perfectly inelastic 
A)  be less elastic than if there were no California oranges 
B)  be more elastic than if there were no California oranges 
C)  have the same elasticity as it would if there were no California oranges 
D)  be perfectly elastic 
E)  be perfectly inelastic

Question 8

For which of the following products is the consumer's demand curve most likely to be vertical?

Accepted Answer

A)  lobster, for a seafood lover 
B)  cars, for high school students 
C)  insulin, for a diabetic 
D)  compact disks, for a music lover 
E)  beef, for a food lover 
A)  lobster, for a seafood lover 
B)  cars, for high school students 
C)  insulin, for a diabetic 
D)  compact disks, for a music lover 
E)  beef, for a food lover

Question 9

Which of the following describes a situation in which demand must be elastic?

Accepted Answer

A)  Total revenue increases by 15 percent when the price of corndogs rises by 15 percent. 
B)  Total revenue increases by less than 15 percent when the price of corndogs rises by 15 percent. 
C)  Total revenue decreases by more than 15 percent when the price of corndogs rises by 15 percent. 
D)  Total revenue increases by $15 when the price of corndogs rises by $15. 
E)  Total revenue increases by more than $15 when the price of corndogs rises by $15. 
A)  Total revenue increases by 15 percent when the price of corndogs rises by 15 percent. 
B)  Total revenue increases by less than 15 percent when the price of corndogs rises by 15 percent. 
C)  Total revenue decreases by more than 15 percent when the price of corndogs rises by 15 percent. 
D)  Total revenue increases by $15 when the price of corndogs rises by $15. 
E)  Total revenue increases by more than $15 when the price of corndogs rises by $15.

Question 10

Income elasticity of demand is greater than zero for all of the following except

Accepted Answer

A)  restaurant meals 
B)  beer 
C)  owner-occupied housing 
D)  food 
E)  rental housing 
A)  restaurant meals 
B)  beer 
C)  owner-occupied housing 
D)  food 
E)  rental housing

Question 11

NARRBEGIN: Exhibit 5-24
Exhibit 5-24
  
-Exhibit 5-24 shows a hypothetical demand curve for soybeans. The vertical axis measures the average price per bushel in dollars. The horizontal axis measures billions of bushels per year. If perfect weather boosts the harvest from 3.5 billion bushels to 4.0 billion bushels (a 13 percent increase), what must happen to average price in order for the increased production to be sold?

Accepted Answer

A)  The average price must increase by $1 per bushel, a 22 percent increase. 
B)  The average price will remain at $5 per bushel. 
C)  The average price must fall by $0.58 per bushel, a 13 percent decrease. 
D)  The average price must fall by $1 per bushel, a 22 percent decrease. 
E)  It is not possible to answer without knowing exactly how much supply decreases. 
A)  The average price must increase by $1 per bushel, a 22 percent increase. 
B)  The average price will remain at $5 per bushel. 
C)  The average price must fall by $0.58 per bushel, a 13 percent decrease. 
D)  The average price must fall by $1 per bushel, a 22 percent decrease. 
E)  It is not possible to answer without knowing exactly how much supply decreases.

Question 12

NARRBEGIN: Exhibit 5-8
Exhibit 5-8
  
-Which of the following statements is true in the range of the total revenue curve labeled A in Exhibit 5-8?

Accepted Answer

A)  Demand is elastic. 
B)  Demand is inelastic. 
C)  Demand is unit elastic. 
D)  We cannot tell anything about elasticity of demand because this is a total revenue curve. 
E)  Demand is perfectly elastic. 
A)  Demand is elastic. 
B)  Demand is inelastic. 
C)  Demand is unit elastic. 
D)  We cannot tell anything about elasticity of demand because this is a total revenue curve. 
E)  Demand is perfectly elastic.

Question 13

NARRBEGIN: Exhibit 5-4
Exhibit 5-4
  
-Demand in Exhibit 5-4 is

Accepted Answer

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

Question 14

NARRBEGIN: Exhibit 5-7
Exhibit 5-7
  
-In Exhibit 5-7, demand is unit elastic

Accepted Answer

A)  between points a and d 
B)  between points d and e 
C)  between points e and g 
D)  only at the top and bottom of the curve 
E)  anywhere along the curve 
A)  between points a and d 
B)  between points d and e 
C)  between points e and g 
D)  only at the top and bottom of the curve 
E)  anywhere along the curve

Question 15

If the cross-price elasticity of demand between good x and good y is 0.4, then

Accepted Answer

A)  the demand for good x is highly responsive to changes in the price of good y 
B)  a 10 percent increase in the price of good y leads to a 0.4 percent increase in the quantity demanded of good x 
C)  a 10 percent decrease in the price of good y leads to a 4 percent decrease in the demand for good y 
D)  good x and good y are complements 
E)  good x is a normal good and good y is an inferior good 
A)  the demand for good x is highly responsive to changes in the price of good y 
B)  a 10 percent increase in the price of good y leads to a 0.4 percent increase in the quantity demanded of good x 
C)  a 10 percent decrease in the price of good y leads to a 4 percent decrease in the demand for good y 
D)  good x and good y are complements 
E)  good x is a normal good and good y is an inferior good

Question 16

A demand curve that is unit elastic everywhere is

Accepted Answer

A)  linear and slopes downward 
B)  linear and slopes upward 
C)  vertical 
D)  horizontal 
E)  nonlinear 
A)  linear and slopes downward 
B)  linear and slopes upward 
C)  vertical 
D)  horizontal 
E)  nonlinear

Question 17

A perfectly inelastic demand curve is

Accepted Answer

A)  a vertical straight line 
B)  a horizontal straight line 
C)  a downward-sloping straight line 
D)  an upward-sloping straight line 
E)  not a straight line 
A)  a vertical straight line 
B)  a horizontal straight line 
C)  a downward-sloping straight line 
D)  an upward-sloping straight line 
E)  not a straight line

Question 18

In calculating price elasticity of demand, which of the following is assumed to be constant?

Accepted Answer

A)  the price of the product itself 
B)  the quantity demanded of the product 
C)  total revenue received from the sale of the product 
D)  the prices of all other products 
E)  none of the above 
A)  the price of the product itself 
B)  the quantity demanded of the product 
C)  total revenue received from the sale of the product 
D)  the prices of all other products 
E)  none of the above

Question 19

The demand for Olin skis is likely to be

Accepted Answer

A)  less elastic than the demand for skis in general 
B)  more elastic than the demand for skis in general 
C)  unit elastic relative to the demand for skis in general 
D)  as elastic as the demand for skis in general 
E)  greater than the demand for skis in general 
A)  less elastic than the demand for skis in general 
B)  more elastic than the demand for skis in general 
C)  unit elastic relative to the demand for skis in general 
D)  as elastic as the demand for skis in general 
E)  greater than the demand for skis in general

Question 20

An inferior good is

Accepted Answer

A)  any good of low quality 
B)  one that consumers buy less of as the price rises 
C)  one that consumers buy less of as their income rises 
D)  one that has few substitutes 
E)  any good made with inexpensive labor 
A)  any good of low quality 
B)  one that consumers buy less of as the price rises 
C)  one that consumers buy less of as their income rises 
D)  one that has few substitutes 
E)  any good made with inexpensive labor

Exam 5: Elasticity of Demand and Supply

If the demand curve shifts but the supply curve does not and price remains the same, supply must be perfectly inelastic.

Along a downward-sloping linear demand curve,

NARRBEGIN: Exhibit 5-9 Exhibit 5-9 -Between points a and b on the demand curve in Exhibit 5-9, demand is

A normal good is defined as a product for which quantity demanded increases as price decreases.

For which of the following is demand most likely to be perfectly inelastic?

Given the availability of California oranges, demand for Florida oranges will

For which of the following products is the consumer's demand curve most likely to be vertical?

Which of the following describes a situation in which demand must be elastic?

Income elasticity of demand is greater than zero for all of the following except

NARRBEGIN: Exhibit 5-8 Exhibit 5-8 -Which of the following statements is true in the range of the total revenue curve labeled A in Exhibit 5-8?

NARRBEGIN: Exhibit 5-4 Exhibit 5-4 -Demand in Exhibit 5-4 is

NARRBEGIN: Exhibit 5-7 Exhibit 5-7 -In Exhibit 5-7, demand is unit elastic

If the cross-price elasticity of demand between good x and good y is 0.4, then

A demand curve that is unit elastic everywhere is

A perfectly inelastic demand curve is

In calculating price elasticity of demand, which of the following is assumed to be constant?

The demand for Olin skis is likely to be

An inferior good is

The Art and Science of Economic Analysis

Appendix: Understanding Graphs

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Economic Decision Makers

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Consumer Choice and Demand

Production and Cost in the Firm

A: Perfect Competition

B: Perfect Competition

A: Monopoly

B: Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

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Capital, Interest, and Corporate Finance

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Income Distribution and Poverty

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