Question 1

NARRBEGIN: Exhibit 5-18
Exhibit 5-18
  
-The curve shown in Exhibit 5-18 could represent

Accepted Answer

A)  perfectly elastic demand or supply 
B)  perfectly inelastic supply or perfectly elastic demand 
C)  perfectly elastic supply or perfectly inelastic demand 
D)  perfectly inelastic supply or demand 
E)  perfectly inelastic supply or demand which is unit elastic 
A)  perfectly elastic demand or supply 
B)  perfectly inelastic supply or perfectly elastic demand 
C)  perfectly elastic supply or perfectly inelastic demand 
D)  perfectly inelastic supply or demand 
E)  perfectly inelastic supply or demand which is unit elastic

Question 2

Which of the following tends to make demand for a good more elastic?

Accepted Answer

A)  A reduction in the number of substitutes for the good. 
B)  Consumers have a long time to adjust to a price change. 
C)  The amount spent on the good is a small proportion of the consumer's budget. 
D)  The good is broadly defined. 
E)  The good is a necessity. 
A)  A reduction in the number of substitutes for the good. 
B)  Consumers have a long time to adjust to a price change. 
C)  The amount spent on the good is a small proportion of the consumer's budget. 
D)  The good is broadly defined. 
E)  The good is a necessity.

Question 3

If the managers of a theater plan to raise ticket prices to increase ticket revenues, then they must believe that demand is

Accepted Answer

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

Question 4

NARRBEGIN: Exhibit 5-10
Exhibit 5-10
  
-In Exhibit 5-10, between the two equilibrium prices shown, demand is

Accepted Answer

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

Question 5

If people have more time to adjust to a price change,

Accepted Answer

A)  demand becomes more elastic, and supply becomes less elastic 
B)  demand becomes less elastic, and supply becomes more elastic 
C)  both supply and demand become less elastic 
D)  both supply and demand become more elastic 
E)  elasticity of both demand and supply tends toward unity 
A)  demand becomes more elastic, and supply becomes less elastic 
B)  demand becomes less elastic, and supply becomes more elastic 
C)  both supply and demand become less elastic 
D)  both supply and demand become more elastic 
E)  elasticity of both demand and supply tends toward unity

Question 6

If the demand for ptyalin is unit elastic, then

Accepted Answer

A)  total revenue decreases as quantity demanded increases 
B)  total revenue increases as quantity demanded increases 
C)  total revenue increases as price increases 
D)  total revenue remains constant as price increases 
E)  total revenue decreases as price increases 
A)  total revenue decreases as quantity demanded increases 
B)  total revenue increases as quantity demanded increases 
C)  total revenue increases as price increases 
D)  total revenue remains constant as price increases 
E)  total revenue decreases as price increases

Question 7

If its value of cross-price elasticity is negative, a good must be a necessity.

Accepted Answer

A) True 
 B)False

Question 8

If there is no change in equilibrium price after a $1 per unit tax is imposed on suppliers, demand must be perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 9

The absolute value of the price elasticity of demand at the midpoint of a linear demand curve is always

Accepted Answer

A)  greater than one 
B)  less than one 
C)  one 
D)  zero 
E)  infinity 
A)  greater than one 
B)  less than one 
C)  one 
D)  zero 
E)  infinity

Question 10

To ensure that we get the same result for price elasticity no matter which direction we move on the demand curve, we must take the average of the

Accepted Answer

A)  initial price and the initial quantity demanded and the average of the new price and the new quantity demanded 
B)  new price and the initial quantity demanded and the average of the new quantity demanded and the initial price 
C)  initial price and the new price and the average of the initial quantity demanded and the new quantity demanded 
D)  initial price and the new price only 
E)  new quantity demanded and the initial quantity demanded only 
A)  initial price and the initial quantity demanded and the average of the new price and the new quantity demanded 
B)  new price and the initial quantity demanded and the average of the new quantity demanded and the initial price 
C)  initial price and the new price and the average of the initial quantity demanded and the new quantity demanded 
D)  initial price and the new price only 
E)  new quantity demanded and the initial quantity demanded only

Question 11

The more broadly a good is defined

Accepted Answer

A)  the more substitutes it has, so demand will be more price-elastic 
B)  the less substitutes it has, so demand will be more price-elastic 
C)  the more substitutes it has, so demand will be less price-elastic 
D)  the less substitutes it has, so demand will be less price-elastic 
E)  has no effect on the good's price elasticity of demand 
A)  the more substitutes it has, so demand will be more price-elastic 
B)  the less substitutes it has, so demand will be more price-elastic 
C)  the more substitutes it has, so demand will be less price-elastic 
D)  the less substitutes it has, so demand will be less price-elastic 
E)  has no effect on the good's price elasticity of demand

Question 12

If Katherine claims that when it comes to buying shoes, "price is no object," her demand curve for shoes is likely to be

Accepted Answer

A)  horizontal 
B)  nonexistent 
C)  upward sloping 
D)  highly inelastic 
E)  unit elastic 
A)  horizontal 
B)  nonexistent 
C)  upward sloping 
D)  highly inelastic 
E)  unit elastic

Question 13

NARRBEGIN: Exhibit 5-16
Exhibit 5-16
  
-Between points a and b in Exhibit 5-16, the demand curve is

Accepted Answer

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

Question 14

NARRBEGIN: Exhibit 5-8
Exhibit 5-8
  
-Which of the following statements is true in the range of the total revenue curve labeled B 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 15

Perfectly elastic demand curves are irrelevant, since real world demand curves are never perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 16

Demand for clothing tends to be

Accepted Answer

A)  elastic because there are few substitutes for clothing 
B)  inelastic because there are few substitutes for clothing 
C)  elastic because expenditures for clothing represent a large part of the consumer's budget 
D)  inelastic because expenditures for clothing represent a large part of the consumer's budget 
E)  elastic because it is a broadly defined good 
A)  elastic because there are few substitutes for clothing 
B)  inelastic because there are few substitutes for clothing 
C)  elastic because expenditures for clothing represent a large part of the consumer's budget 
D)  inelastic because expenditures for clothing represent a large part of the consumer's budget 
E)  elastic because it is a broadly defined good

Question 17

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

Accepted Answer

A)  Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of spats rises by $10. 
E)  Total revenue decreases by more than $10 when the price of spats rises by $10. 
A)  Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of spats rises by $10. 
E)  Total revenue decreases by more than $10 when the price of spats rises by $10.

Question 18

If city officials expect that an increase in bus fares will raise mass transit revenues, they must think that the demand for bus travel is

Accepted Answer

A)  elastic 
B)  unit elastic 
C)  inelastic 
D)  perfectly inelastic 
E)  -10 
A)  elastic 
B)  unit elastic 
C)  inelastic 
D)  perfectly inelastic 
E)  -10

Question 19

Which of the following will cause demand to be relatively elastic?

Accepted Answer

A)  There are few substitutes 
B)  The time interval is relatively long 
C)  The good is considered a necessity 
D)  The good involves a relatively small portion of the consumers' budget 
E)  The time interval is relatively short 
A)  There are few substitutes 
B)  The time interval is relatively long 
C)  The good is considered a necessity 
D)  The good involves a relatively small portion of the consumers' budget 
E)  The time interval is relatively short

Question 20

One reason why the price elasticity of demand for cigarettes is large for young smokers is that

Accepted Answer

A)  they have large discretionary incomes 
B)  the price of cigarettes increased recently 
C)  they are no longer permitted to smoke in public 
D)  cigarette advertising on television has been banned 
E)  the proportion of income a young smoker spends on cigarettes is usually quite large 
A)  they have large discretionary incomes 
B)  the price of cigarettes increased recently 
C)  they are no longer permitted to smoke in public 
D)  cigarette advertising on television has been banned 
E)  the proportion of income a young smoker spends on cigarettes is usually quite large

Exam 5: Elasticity of Demand and Supply

NARRBEGIN: Exhibit 5-18 Exhibit 5-18 -The curve shown in Exhibit 5-18 could represent

Which of the following tends to make demand for a good more elastic?

If the managers of a theater plan to raise ticket prices to increase ticket revenues, then they must believe that demand is

NARRBEGIN: Exhibit 5-10 Exhibit 5-10 -In Exhibit 5-10, between the two equilibrium prices shown, demand is

If people have more time to adjust to a price change,

If the demand for ptyalin is unit elastic, then

If its value of cross-price elasticity is negative, a good must be a necessity.

If there is no change in equilibrium price after a $1 per unit tax is imposed on suppliers, demand must be perfectly inelastic.

The absolute value of the price elasticity of demand at the midpoint of a linear demand curve is always

To ensure that we get the same result for price elasticity no matter which direction we move on the demand curve, we must take the average of the

The more broadly a good is defined

If Katherine claims that when it comes to buying shoes, "price is no object," her demand curve for shoes is likely to be

NARRBEGIN: Exhibit 5-16 Exhibit 5-16 -Between points a and b in Exhibit 5-16, the demand curve is

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

Perfectly elastic demand curves are irrelevant, since real world demand curves are never perfectly elastic.

Demand for clothing tends to be

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

If city officials expect that an increase in bus fares will raise mass transit revenues, they must think that the demand for bus travel is

Which of the following will cause demand to be relatively elastic?

One reason why the price elasticity of demand for cigarettes is large for young smokers is 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

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