Question 1

If we wanted to prove that macaroni is an inferior good, we would test the __________ of macaroni and get a __________.

Accepted Answer

A)  cross-price elasticity; negative number 
B)  income elasticity; number less than 1 
C)  income elasticity; positive number 
D)  price elasticity of demand; number greater than negative 1 
E)  income elasticity; negative number 
A)  cross-price elasticity; negative number 
B)  income elasticity; number less than 1 
C)  income elasticity; positive number 
D)  price elasticity of demand; number greater than negative 1 
E)  income elasticity; negative number

Question 2

The price elasticity of demand is equal to the slope of the demand curve.

Accepted Answer

A) True 
 B)False

Question 3

The demand for most agricultural products tends to be

Accepted Answer

A)  both price and income elastic 
B)  both price and income inelastic 
C)  price inelastic and income elastic 
D)  price elastic and income inelastic 
E)  unit elastic in terms of price elasticity and income elastic 
A)  both price and income elastic 
B)  both price and income inelastic 
C)  price inelastic and income elastic 
D)  price elastic and income inelastic 
E)  unit elastic in terms of price elasticity and income elastic

Question 4

Demand for a necessity, such as food, is

Accepted Answer

A)  both income and price inelastic 
B)  income inelastic and price elastic 
C)  income elastic and price inelastic 
D)  both income and price elastic 
E)  income elastic and perfectly price inelastic 
A)  both income and price inelastic 
B)  income inelastic and price elastic 
C)  income elastic and price inelastic 
D)  both income and price elastic 
E)  income elastic and perfectly price inelastic

Question 5

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

Accepted Answer

A)  The price of pens rises by 10 cents, and quantity of pens demanded falls by 50. 
B)  The price of pens rises by 10 cents, and total revenue rises. 
C)  A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded. 
D)  Total revenue does not change when the price of pens rises. 
E)  Total revenue decreases when the price of pencils rises. 
A)  The price of pens rises by 10 cents, and quantity of pens demanded falls by 50. 
B)  The price of pens rises by 10 cents, and total revenue rises. 
C)  A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded. 
D)  Total revenue does not change when the price of pens rises. 
E)  Total revenue decreases when the price of pencils rises.

Question 6

NARRBEGIN: Exhibit 5-26
Exhibit 5-25
  
-Refer to exhibit 5-25. As you move down the demand curve from A to B to C to D, which of the following describes what happens to the price elasticity of demand?

Accepted Answer

A)  nothing 
B)  goes from elastic at A and gets increasingly inelastic as you go to B and C and D 
C)  goes from perfectly inelastic at A and gets increasingly elastic as you go to B and C and D 
D)  goes from inelastic at A and gets increasingly elastic as you go to B and C and D 
E)  goes from inelastic at A and gets increasingly elastic as you go to B but then gets increasingly inelastic as you go to C and D 
A)  nothing 
B)  goes from elastic at A and gets increasingly inelastic as you go to B and C and D 
C)  goes from perfectly inelastic at A and gets increasingly elastic as you go to B and C and D 
D)  goes from inelastic at A and gets increasingly elastic as you go to B and C and D 
E)  goes from inelastic at A and gets increasingly elastic as you go to B but then gets increasingly inelastic as you go to C and D

Question 7

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

Accepted Answer

A)  The price of pens rises by 10 cents, and quantity of pens demanded falls by 50. 
B)  The price of pens rises by 10 cents, and total revenue rises. 
C)  A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded. 
D)  Total revenue does not change when the price of pens rises. 
E)  Total revenue decreases when the price of pens rises. 
A)  The price of pens rises by 10 cents, and quantity of pens demanded falls by 50. 
B)  The price of pens rises by 10 cents, and total revenue rises. 
C)  A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded. 
D)  Total revenue does not change when the price of pens rises. 
E)  Total revenue decreases when the price of pens rises.

Question 8

Along a linear demand curve, as the price increases from zero,

Accepted Answer

A)  demand decreases 
B)  demand increases 
C)  quantity demanded increases 
D)  total revenue first increases but eventually decreases 
E)  total revenue first decreases but eventually increases 
A)  demand decreases 
B)  demand increases 
C)  quantity demanded increases 
D)  total revenue first increases but eventually decreases 
E)  total revenue first decreases but eventually increases

Question 9

The value of cross-price elasticity of demand between orange soda and grape soda is

Accepted Answer

A)  negative 
B)  positive 
C)  0 
D)  between -1 and 0 
E)  less than -1 
A)  negative 
B)  positive 
C)  0 
D)  between -1 and 0 
E)  less than -1

Question 10

NARRBEGIN: Exhibit 5-14
Exhibit 5-14
  
-Which of the following is true of the demand curve in Exhibit 5-14?

Accepted Answer

A)  Its slope is 0, and the value of elasticity is negative infinity. 
B)  Its slope is infinite, and the value of elasticity is 0. 
C)  Both its slope and the value of elasticity are 0. 
D)  Both its slope and the value of elasticity are negative infinity. 
E)  Its slope is 0, and demand is perfectly inelastic. 
A)  Its slope is 0, and the value of elasticity is negative infinity. 
B)  Its slope is infinite, and the value of elasticity is 0. 
C)  Both its slope and the value of elasticity are 0. 
D)  Both its slope and the value of elasticity are negative infinity. 
E)  Its slope is 0, and demand is perfectly inelastic.

Question 11

When the cross-price elasticity of demand between two products is positive, the two goods are said to be substitutes.

Accepted Answer

A) True 
 B)False

Question 12

The midpoint quantity between 100 and 300 units is

Accepted Answer

A)  100 units 
B)  200 units 
C)  300 units 
D)  150 units 
E)  20,000 units 
A)  100 units 
B)  200 units 
C)  300 units 
D)  150 units 
E)  20,000 units

Question 13

Price elasticity is unit elastic at the midpoint of a linear, downward-sloping demand curve.

Accepted Answer

A) True 
 B)False

Question 14

When quantity is measured in gallons, the price elasticity of demand for milk will be __________ the price elasticity when quantity is measured in quarts.

Accepted Answer

A)  the same as 
B)  four times 
C)  one quarter 
D)  two times 
E)  less than 
A)  the same as 
B)  four times 
C)  one quarter 
D)  two times 
E)  less than

Question 15

If a 5% increase in price leads to an 8% decrease in quantity demanded, demand is

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 16

Which of the following does not determine a good's price elasticity of demand?

Accepted Answer

A)  the time interval considered 
B)  the number of substitutes there are for the good 
C)  expenditures on the good as a percentage of the total consumer budget 
D)  the slope of the demand curve 
E)  the more of a luxury a particular good is 
A)  the time interval considered 
B)  the number of substitutes there are for the good 
C)  expenditures on the good as a percentage of the total consumer budget 
D)  the slope of the demand curve 
E)  the more of a luxury a particular good is

Question 17

The demand curve for a good that has many perfect substitutes in consumption is likely to be

Accepted Answer

A)  upward sloping 
B)  steep 
C)  highly inelastic 
D)  horizontal 
E)  vertical 
A)  upward sloping 
B)  steep 
C)  highly inelastic 
D)  horizontal 
E)  vertical

Question 18

If the cross-price elasticity of demand between two goods is 0,

Accepted Answer

A)  a price change for one good will be exactly offset by a price change for the other 
B)  neither demand curve would shift following a change in the price of one of the goods 
C)  there is no income effect between the two goods 
D)  the demand for each good is price inelastic 
E)  the demand for each good is price elastic 
A)  a price change for one good will be exactly offset by a price change for the other 
B)  neither demand curve would shift following a change in the price of one of the goods 
C)  there is no income effect between the two goods 
D)  the demand for each good is price inelastic 
E)  the demand for each good is price elastic

Question 19

If the administration raises tuition on our campus in order to increase revenue, it will

Accepted Answer

A)  not be successful if the demand curve slopes downward 
B)  be successful if demand is elastic 
C)  be successful if demand is inelastic 
D)  be successful if supply is elastic 
E)  be successful if supply is inelastic 
A)  not be successful if the demand curve slopes downward 
B)  be successful if demand is elastic 
C)  be successful if demand is inelastic 
D)  be successful if supply is elastic 
E)  be successful if supply is inelastic

Question 20

As the economy recovers from a recession, we should expect that

Accepted Answer

A)  demand for inferior goods will fall and demand for normal goods will rise 
B)  demand for both inferior and normal goods will rise 
C)  demand for inferior goods will rise and demand for normal goods will fall 
D)  demand for both inferior and normal goods will fall 
E)  demand for complements will fall 
A)  demand for inferior goods will fall and demand for normal goods will rise 
B)  demand for both inferior and normal goods will rise 
C)  demand for inferior goods will rise and demand for normal goods will fall 
D)  demand for both inferior and normal goods will fall 
E)  demand for complements will fall

Exam 5: Elasticity of Demand and Supply

If we wanted to prove that macaroni is an inferior good, we would test the __________ of macaroni and get a __________.

The price elasticity of demand is equal to the slope of the demand curve.

The demand for most agricultural products tends to be

Demand for a necessity, such as food, is

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

NARRBEGIN: Exhibit 5-26 Exhibit 5-25 -Refer to exhibit 5-25. As you move down the demand curve from A to B to C to D, which of the following describes what happens to the price elasticity of demand?

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

Along a linear demand curve, as the price increases from zero,

The value of cross-price elasticity of demand between orange soda and grape soda is

NARRBEGIN: Exhibit 5-14 Exhibit 5-14 -Which of the following is true of the demand curve in Exhibit 5-14?

When the cross-price elasticity of demand between two products is positive, the two goods are said to be substitutes.

The midpoint quantity between 100 and 300 units is

Price elasticity is unit elastic at the midpoint of a linear, downward-sloping demand curve.

When quantity is measured in gallons, the price elasticity of demand for milk will be __________ the price elasticity when quantity is measured in quarts.

If a 5% increase in price leads to an 8% decrease in quantity demanded, demand is

Which of the following does not determine a good's price elasticity of demand?

The demand curve for a good that has many perfect substitutes in consumption is likely to be

If the cross-price elasticity of demand between two goods is 0,

If the administration raises tuition on our campus in order to increase revenue, it will

As the economy recovers from a recession, we should expect that

The Art and Science of Economic Analysis

Appendix: Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

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

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

Filters

If we wanted to prove that macaroni is an inferior good, we would test the of macaroni and get a .