Question 1

Based on what you know about the determinants of price elasticiyt, the demands for agricultural products, like, wheat, soybeans, milk, and eggs tend to be

Accepted Answer

A)  price inelastic 
B)  price elastic 
C)  price inelastic only in the long run 
D)  price elastic only in the short run 
E)  price elastic only in the long run 
A)  price inelastic 
B)  price elastic 
C)  price inelastic only in the long run 
D)  price elastic only in the short run 
E)  price elastic only in the long run

Question 2

The price elasticity of demand for cigarettes by adults is -1.3 while for young smokers it is -0.4. A tax on cigarettes would lead to which of the following effects?

Accepted Answer

A)  a smaller reduction in the quantity of cigarettes demanded by younger smokers than by older smokers 
B)  the same reduction in the quantity of cigarettes demanded by both age groups 
C)  a larger reduction in the quantity of cigarettes demanded by younger smokers than by older smokers 
D)  no impact on the quantity of cigarettes demanded by either group 
E)  not enough information to predict the impact 
A)  a smaller reduction in the quantity of cigarettes demanded by younger smokers than by older smokers 
B)  the same reduction in the quantity of cigarettes demanded by both age groups 
C)  a larger reduction in the quantity of cigarettes demanded by younger smokers than by older smokers 
D)  no impact on the quantity of cigarettes demanded by either group 
E)  not enough information to predict the impact

Question 3

If output in the calculator market increases by 5 percent when the price increases by more than 5 percent, then

Accepted Answer

A)  supply is inelastic 
B)  supply is elastic 
C)  a small increase in price will cause a leftward shift of the supply curve 
D)  a small increase in price will cause a rightward shift of the supply curve 
E)  a large increase in price will cause a large shift of the supply curve 
A)  supply is inelastic 
B)  supply is elastic 
C)  a small increase in price will cause a leftward shift of the supply curve 
D)  a small increase in price will cause a rightward shift of the supply curve 
E)  a large increase in price will cause a large shift of the supply curve

Question 4

NARRBEGIN: Exhibit 5-4
Exhibit 5-4
  
-What is the price elasticity of demand in Exhibit 5-4?

Accepted Answer

A)  0 
B)  -1 
C)  negative infinity 
D)  1 
E)  -100 
A)  0 
B)  -1 
C)  negative infinity 
D)  1 
E)  -100

Question 5

NARRBEGIN: Exhibit 5-15
Exhibit 5-15
  
-Which of the demand curves in Exhibit 5-15 has constant elasticity everywhere?

Accepted Answer

A)  the curve in graph c only 
B)  the curves in graphs a and b 
C)  the curves in graphs a, b, and c 
D)  all of the curves shown 
E)  the curves in graphs c, d, and e 
A)  the curve in graph c only 
B)  the curves in graphs a and b 
C)  the curves in graphs a, b, and c 
D)  all of the curves shown 
E)  the curves in graphs c, d, and e

Question 6

John spends exactly the same dollar amount on candy bars each week, regardless of their price. John's demand curve for candy bars is

Accepted Answer

A)  upward-sloping 
B)  backward-bending 
C)  perfectly inelastic 
D)  perfectly elastic 
E)  unit elastic 
A)  upward-sloping 
B)  backward-bending 
C)  perfectly inelastic 
D)  perfectly elastic 
E)  unit elastic

Question 7

The price elasticity of demand helps determine the effect of price changes on a firm's

Accepted Answer

A)  property taxes 
B)  profits 
C)  quantity supplied 
D)  revenues 
E)  total costs 
A)  property taxes 
B)  profits 
C)  quantity supplied 
D)  revenues 
E)  total costs

Question 8

The value of price elasticity of demand for a good with no close substitutes

Accepted Answer

A)  will tend to be greater than -1 
B)  will tend to be less than -1 
C)  will tend to be equal to -1 
D)  will tend to be equal to 0 
E)  cannot be determined without more information 
A)  will tend to be greater than -1 
B)  will tend to be less than -1 
C)  will tend to be equal to -1 
D)  will tend to be equal to 0 
E)  cannot be determined without more information

Question 9

If demand is price elastic, total revenue is

Accepted Answer

A)  directly related to quantity demanded 
B)  inversely related to quantity demanded 
C)  directly related to price 
D)  directly related to price and inversely related to quantity demanded 
E)  not related to either price or to quantity demanded 
A)  directly related to quantity demanded 
B)  inversely related to quantity demanded 
C)  directly related to price 
D)  directly related to price and inversely related to quantity demanded 
E)  not related to either price or to quantity demanded

Question 10

In the real world, demand is not likely to be perfectly inelastic at every price because

Accepted Answer

A)  no substitutes exist for some goods 
B)  some consumers will be unable to afford very high prices with given incomes 
C)  at low prices, consumers always want a lot 
D)  consumers are willing to pay any price for certain goods 
E)  the prices of certain goods don't change 
A)  no substitutes exist for some goods 
B)  some consumers will be unable to afford very high prices with given incomes 
C)  at low prices, consumers always want a lot 
D)  consumers are willing to pay any price for certain goods 
E)  the prices of certain goods don't change

Question 11

NARRBEGIN: Exhibit 5-20
Exhibit 5-20
  
-Which supply curve is more elastic in Exhibit 5-20?

Accepted Answer

A)  Both S and S' have the same elasticity. 
B)  S is more elastic at lower prices and S' is more elastic at higher prices. 
C)  S is more elastic at higher prices and S' is more elastic at lower prices. 
D)  S 
E)  S' 
A)  Both S and S' have the same elasticity. 
B)  S is more elastic at lower prices and S' is more elastic at higher prices. 
C)  S is more elastic at higher prices and S' is more elastic at lower prices. 
D)  S 
E)  S'

Question 12

NARRBEGIN: Exhibit 5-19
Exhibit 5-19
  
-Consider Exhibit 5-19. Between the prices of $5 and $6, which supply curve is most elastic and which is least elastic?

Accepted Answer

A)  S1 is most elastic; S2 is least elastic. 
B)  S1 is most elastic; S3 is least elastic. 
C)  S3 is most elastic; S1 is least elastic. 
D)  S3 is most elastic; S2 is least elastic. 
E)  S2 is most elastic; S3 is least elastic. 
A)  S1 is most elastic; S2 is least elastic. 
B)  S1 is most elastic; S3 is least elastic. 
C)  S3 is most elastic; S1 is least elastic. 
D)  S3 is most elastic; S2 is least elastic. 
E)  S2 is most elastic; S3 is least elastic.

Question 13

A good that takes up a very large percentage of the consumer's budget will tend to have

Accepted Answer

A)  an elastic demand 
B)  a perfectly elastic demand 
C)  an inelastic demand 
D)  an upward-sloping demand curve 
E)  very many substitutes 
A)  an elastic demand 
B)  a perfectly elastic demand 
C)  an inelastic demand 
D)  an upward-sloping demand curve 
E)  very many substitutes

Question 14

If price elasticity of demand is -0.5,

Accepted Answer

A)  a 1% decrease in quantity demanded leads to a 0.5% decrease in price 
B)  a 1% decrease in price leads to a 0.5% increase in quantity demanded 
C)  a 50% decrease in price leads to a 1% increase in quantity demanded 
D)  a 50% decrease in price leads to a 100% increase in quantity demanded 
E)  demand is elastic 
A)  a 1% decrease in quantity demanded leads to a 0.5% decrease in price 
B)  a 1% decrease in price leads to a 0.5% increase in quantity demanded 
C)  a 50% decrease in price leads to a 1% increase in quantity demanded 
D)  a 50% decrease in price leads to a 100% increase in quantity demanded 
E)  demand is elastic

Question 15

If the supply curve slopes upward and a $3 per unit tax on suppliers raises the profit-maximizing price by $3, demand must be perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 16

The cross-price elasticity of demand between milk and soft drinks is likely to be

Accepted Answer

A)  negative because the goods are complements 
B)  positive because the goods are complements 
C)  negative because the goods are substitutes 
D)  positive because the goods are substitutes 
E)  0 because the goods are not usually consumed by the same person at one time 
A)  negative because the goods are complements 
B)  positive because the goods are complements 
C)  negative because the goods are substitutes 
D)  positive because the goods are substitutes 
E)  0 because the goods are not usually consumed by the same person at one time

Question 17

Suppose consumers spent $42 million on Christmas trees last year when the average tree cost $30 and this year spent $42 million when the average tree costs $25. Assuming nothing else changed, this data suggests that

Accepted Answer

A)  consumers bought the same number of Christmas trees this year as last year 
B)  the price of Christmas trees stayed the same 
C)  total revenues to tree producers rose this year 
D)  the demand for trees is unit elastic 
E)  the demand for trees is inelastic 
A)  consumers bought the same number of Christmas trees this year as last year 
B)  the price of Christmas trees stayed the same 
C)  total revenues to tree producers rose this year 
D)  the demand for trees is unit elastic 
E)  the demand for trees is inelastic

Question 18

Farm income has fallen in part because demand for farm products is price inelastic and income inelastic.

Accepted Answer

A) True 
 B)False

Question 19

NARRBEGIN: Exhibit 5-21
Exhibit 5-21
  
-Use the information in Exhibit 5-21 to calculate the value of income elasticity of demand for Good B.

Accepted Answer

A)  -11/17 
B)  17/9 
C)  10/3 
D)  -3/10 
E)  1 
A)  -11/17 
B)  17/9 
C)  10/3 
D)  -3/10 
E)  1

Question 20

Demand is elastic whenever

Accepted Answer

A)  price elasticity has an absolute value of 1 
B)  price elasticity has an absolute value greater than 1 
C)  price elasticity has an absolute value less than 1 
D)  price elasticity is negative 
E)  consumers respond to a change in price 
A)  price elasticity has an absolute value of 1 
B)  price elasticity has an absolute value greater than 1 
C)  price elasticity has an absolute value less than 1 
D)  price elasticity is negative 
E)  consumers respond to a change in price

Exam 5: Elasticity of Demand and Supply

Based on what you know about the determinants of price elasticiyt, the demands for agricultural products, like, wheat, soybeans, milk, and eggs tend to be

The price elasticity of demand for cigarettes by adults is -1.3 while for young smokers it is -0.4. A tax on cigarettes would lead to which of the following effects?

If output in the calculator market increases by 5 percent when the price increases by more than 5 percent, then

NARRBEGIN: Exhibit 5-4 Exhibit 5-4 -What is the price elasticity of demand in Exhibit 5-4?

NARRBEGIN: Exhibit 5-15 Exhibit 5-15 -Which of the demand curves in Exhibit 5-15 has constant elasticity everywhere?

John spends exactly the same dollar amount on candy bars each week, regardless of their price. John's demand curve for candy bars is

The price elasticity of demand helps determine the effect of price changes on a firm's

The value of price elasticity of demand for a good with no close substitutes

If demand is price elastic, total revenue is

In the real world, demand is not likely to be perfectly inelastic at every price because

NARRBEGIN: Exhibit 5-20 Exhibit 5-20 -Which supply curve is more elastic in Exhibit 5-20?

NARRBEGIN: Exhibit 5-19 Exhibit 5-19 -Consider Exhibit 5-19. Between the prices of $5 and $6, which supply curve is most elastic and which is least elastic?

A good that takes up a very large percentage of the consumer's budget will tend to have

If price elasticity of demand is -0.5,

If the supply curve slopes upward and a $3 per unit tax on suppliers raises the profit-maximizing price by $3, demand must be perfectly inelastic.

The cross-price elasticity of demand between milk and soft drinks is likely to be

Suppose consumers spent $42 million on Christmas trees last year when the average tree cost $30 and this year spent $42 million when the average tree costs $25. Assuming nothing else changed, this data suggests that

Farm income has fallen in part because demand for farm products is price inelastic and income inelastic.

NARRBEGIN: Exhibit 5-21 Exhibit 5-21 -Use the information in Exhibit 5-21 to calculate the value of income elasticity of demand for Good B.

Demand is elastic whenever

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

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