Question 1

NARRBEGIN: Exhibit 5-11
Exhibit 5-11
  
-Refer to Exhibit 5-11. What can be said of the price elasticity of demand for this good?

Accepted Answer

A)  Demand is inelastic. 
B)  Demand is unit elastic. 
C)  Demand is elastic. 
D)  Demand is perfectly elastic. 
E)  Not enough information is given to determine elasticity. 
A)  Demand is inelastic. 
B)  Demand is unit elastic. 
C)  Demand is elastic. 
D)  Demand is perfectly elastic. 
E)  Not enough information is given to determine elasticity.

Question 2

If demand is elastic, a decrease in price leads to a decrease in total revenue.

Accepted Answer

A) True 
 B)False

Question 3

The demand for firewood is likely to be more elastic in the summer than in the winter.

Accepted Answer

A) True 
 B)False

Question 4

The demand for flour is

Accepted Answer

A)  inelastic because there are few substitutes for flour and it represents a large percentage of a consumer's budget 
B)  inelastic because there are many substitutes for flour and it represents a large percentage of a consumer's budget 
C)  inelastic because there are few substitutes for flour and it represents a small percentage of a consumer's budget 
D)  elastic because there are no substitutes for flour and it represents a large percentage of a consumer's budget 
E)  elastic because there are many substitutes for flour and it represents a large percentage of a consumer's budget 
A)  inelastic because there are few substitutes for flour and it represents a large percentage of a consumer's budget 
B)  inelastic because there are many substitutes for flour and it represents a large percentage of a consumer's budget 
C)  inelastic because there are few substitutes for flour and it represents a small percentage of a consumer's budget 
D)  elastic because there are no substitutes for flour and it represents a large percentage of a consumer's budget 
E)  elastic because there are many substitutes for flour and it represents a large percentage of a consumer's budget

Question 5

The cross-price elasticity of demand between pancakes and waffles is positive. This indicates all of the following except one. Which is the exception?

Accepted Answer

A)  Pancakes and waffles are substitutes. 
B)  An increase in the price of pancakes will shift the demand curve for waffles to the right. 
C)  An increase in the price of waffles will shift the demand curve for pancakes to the right. 
D)  A decrease in the supply of waffles will shift the demand curve for pancakes to the right. 
E)  Pancake demand and waffle demand are price elastic. 
A)  Pancakes and waffles are substitutes. 
B)  An increase in the price of pancakes will shift the demand curve for waffles to the right. 
C)  An increase in the price of waffles will shift the demand curve for pancakes to the right. 
D)  A decrease in the supply of waffles will shift the demand curve for pancakes to the right. 
E)  Pancake demand and waffle demand are price elastic.

Question 6

Cross-price elasticity measures the responsiveness of the price of good A to a change in the price of good B.

Accepted Answer

A) True 
 B)False

Question 7

NARRBEGIN: Exhibit 5-15
Exhibit 5-15
  
-Which demand curve in Exhibit 5-15 is perfectly elastic?

Accepted Answer

A)  the curve in graph a 
B)  the curve in graph b 
C)  the curve in graph c 
D)  the curve in graph d 
E)  the curve in graph e 
A)  the curve in graph a 
B)  the curve in graph b 
C)  the curve in graph c 
D)  the curve in graph d 
E)  the curve in graph e

Question 8

As consumers have a longer time period to respond, the demand for a product typically becomes more inelastic.

Accepted Answer

A) True 
 B)False

Question 9

Total revenue is the same for every price-quantity combination along a unit elastic demand curve.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)  consumers are being irrational 
B)  supply is elastic 
C)  the goods may have similar uses 
D)  the goods may go well together in consumption 
E)  one good must be a necessity 
A)  consumers are being irrational 
B)  supply is elastic 
C)  the goods may have similar uses 
D)  the goods may go well together in consumption 
E)  one good must be a necessity

Question 11

Some demand curves have constant elasticity everywhere.

Accepted Answer

A) True 
 B)False

Question 12

If an increase in the price of a product from $100 to $200 per unit leads to a decrease in the quantity demanded from 10 to 8 units, then demand is

Accepted Answer

A)  elastic 
B)  inelastic 
C)  unit elastic 
D)  0 
E)  inferior 
A)  elastic 
B)  inelastic 
C)  unit elastic 
D)  0 
E)  inferior

Question 13

The more broadly a good is defined,

Accepted Answer

A)  the more substitutes it has so the more elastic is its demand 
B)  the fewer substitutes it has so the more elastic is its demand 
C)  the more substitutes it has so the less elastic is its demand 
D)  the fewer substitutes it has so the less elastic is its demand 
E)  the more complements it has so the more elastic is its demand 
A)  the more substitutes it has so the more elastic is its demand 
B)  the fewer substitutes it has so the more elastic is its demand 
C)  the more substitutes it has so the less elastic is its demand 
D)  the fewer substitutes it has so the less elastic is its demand 
E)  the more complements it has so the more elastic is its demand

Question 14

NARRBEGIN: Exhibit 5-26
Exhibit 5-25
  
-Refer to exhibit 5-25. As you move from A to B on the demand curve, total revenue __________ and therefore the price elasticity must be ____________ between A and B.

Accepted Answer

A)  stays the same; unitary 
B)  decreases; inelastic 
C)  increases; elastic 
D)  decreases; elastic 
E)  increases, inelastic 
A)  stays the same; unitary 
B)  decreases; inelastic 
C)  increases; elastic 
D)  decreases; elastic 
E)  increases, inelastic

Question 15

The total revenue curve that corresponds to a downward-sloping linear demand curve

Accepted Answer

A)  slopes downward 
B)  slopes upward 
C)  is a horizontal line 
D)  first rises, then falls 
E)  first falls, then rises 
A)  slopes downward 
B)  slopes upward 
C)  is a horizontal line 
D)  first rises, then falls 
E)  first falls, then rises

Question 16

When demand is elastic, an increase in price will lead to an increase in total revenue

Accepted Answer

A) True 
 B)False

Question 17

NARRBEGIN: Exhibit 5-3
Exhibit 5-3
  
-If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then the value of price elasticity of demand is

Accepted Answer

A)  -1/3 
B)  -2 1/3 
C)  -1/4 
D)  -3 
E)  -2/3 
A)  -1/3 
B)  -2 1/3 
C)  -1/4 
D)  -3 
E)  -2/3

Question 18

As producers have more time to adjust to a price change, price elasticity of supply

Accepted Answer

A)  increases 
B)  decreases 
C)  remains the same 
D)  rises and then falls 
E)  falls and then rises 
A)  increases 
B)  decreases 
C)  remains the same 
D)  rises and then falls 
E)  falls and then rises

Question 19

Suppose the cross-price elasticity of demand between quinces and muskmelons is 5. Which of the following must be true?

Accepted Answer

A)  Quinces are normal goods. 
B)  Muskmelons are normal goods. 
C)  If the price of quinces rises by $5, the demand for muskmelons will increase by 1. 
D)  If the price of muskmelons rises by $5, the demand for quinces will increase by 1. 
E)  Quinces and muskmelons are substitutes. 
A)  Quinces are normal goods. 
B)  Muskmelons are normal goods. 
C)  If the price of quinces rises by $5, the demand for muskmelons will increase by 1. 
D)  If the price of muskmelons rises by $5, the demand for quinces will increase by 1. 
E)  Quinces and muskmelons are substitutes.

Question 20

Economists distinguish between normal and inferior goods using

Accepted Answer

A)  price elasticity of demand 
B)  price elasticity of supply 
C)  income elasticity of demand 
D)  cross-price elasticity of demand 
E)  tax incidence 
A)  price elasticity of demand 
B)  price elasticity of supply 
C)  income elasticity of demand 
D)  cross-price elasticity of demand 
E)  tax incidence

Exam 5: Elasticity of Demand and Supply

NARRBEGIN: Exhibit 5-11 Exhibit 5-11 -Refer to Exhibit 5-11. What can be said of the price elasticity of demand for this good?

If demand is elastic, a decrease in price leads to a decrease in total revenue.

The demand for firewood is likely to be more elastic in the summer than in the winter.

The demand for flour is

The cross-price elasticity of demand between pancakes and waffles is positive. This indicates all of the following except one. Which is the exception?

Cross-price elasticity measures the responsiveness of the price of good A to a change in the price of good B.

NARRBEGIN: Exhibit 5-15 Exhibit 5-15 -Which demand curve in Exhibit 5-15 is perfectly elastic?

As consumers have a longer time period to respond, the demand for a product typically becomes more inelastic.

Total revenue is the same for every price-quantity combination along a unit elastic demand curve.

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

Some demand curves have constant elasticity everywhere.

If an increase in the price of a product from $100 to $200 per unit leads to a decrease in the quantity demanded from 10 to 8 units, then demand is

The more broadly a good is defined,

NARRBEGIN: Exhibit 5-26 Exhibit 5-25 -Refer to exhibit 5-25. As you move from A to B on the demand curve, total revenue __________ and therefore the price elasticity must be ____________ between A and B.

The total revenue curve that corresponds to a downward-sloping linear demand curve

When demand is elastic, an increase in price will lead to an increase in total revenue

NARRBEGIN: Exhibit 5-3 Exhibit 5-3 -If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then the value of price elasticity of demand is

As producers have more time to adjust to a price change, price elasticity of supply

Suppose the cross-price elasticity of demand between quinces and muskmelons is 5. Which of the following must be true?

Economists distinguish between normal and inferior goods using

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

NARRBEGIN: Exhibit 5-26 Exhibit 5-25 -Refer to exhibit 5-25. As you move from A to B on the demand curve, total revenue and therefore the price elasticity must be __ between A and B.