Deck 3: Elasticity

Question 1

Which of the following products is most likely to have an elastic demand?

A)toothpicks
B)cigarettes
C)insulin
D)coffee
E)automobiles

Answer 1

E

Question 2

A perfectly inelastic demand curve:

A)rises upward and to the right, but has a constant slope
B)can be represented by a line parallel to the vertical axis
C)cannot be shown on a two-dimensional graph
D)can be represented by a line parallel to the horizontal axis
E)is downward sloping and has a constant slope

Answer 2

B

Question 3

The price elasticity of demand indicates:

A)the extent to which consumers respond to a change in price
B)the extent to which a demand curve shifts as income changes
C)the slope of the demand curve
D)how far business executives can stretch their fixed costs
E)the extent to which changes in a product's price affect consumers' incomes

Answer 3

A

Question 4

If the University Chamber Music Society decides to raise ticket prices to acquire more funds to finance concerts,the Society is assuming that the demand for tickets is:

A)parallel to the horizontal axis
B)shifting to the left
C)unit-elastic
D)elastic
E)inelastic

Question 5

An elastic demand curve is one for which:

A)the absolute change in price is smaller than the absolute change in quantity demanded
B)a given percentage change in price causes a larger percentage change in quantity demanded
C)the absolute change in price is bigger than the absolute change in quantity demanded
D)a given percentage change in price causes a smaller percentage change in quantity demanded
E)the absolute changes in price and quantity demanded are the same

Question 6

The elasticity of demand for a product is likely to be greater:

A)if the product is a "necessity" rather than a "luxury" good
B)the greater the amount of time over which producers adjust to a price change
C)the smaller the proportion of one's income spent on the product
D)the smaller the number of substitute products
E)the greater the amount of time over which buyers adjust to a price change

Question 7

The quantity demanded of smartphones increases by 15 million units from an initial quantity of 22.5 million phones when its price drops from $500 to $300.Therefore the price elasticity of demand has a numerical value of:

A)0.80
B)1.20
C)1.00
D)1.67
E)0.67

Question 8

If the demand for product X is inelastic,a 4 percent increase in the price of X:

A)decreases the quantity demanded of X by more than 4 percent
B)decreases the quantity demanded of X by less than 4 percent
C)increases the quantity demanded of X by more than 4 percent
D)increases the quantity demanded of X by less than 4 percent
E)does not affect the quantity demanded of X

Question 9

If a business can sell 20 000 units of a product at $2 per unit and 10 000 units at $4 per unit,its demand is:

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

Question 10

If a business can sell 3000 units of a product at $10 per unit and 5000 units at $8 per unit,its demand is:

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

Question 11

Suppose that VIA Rail asked government authorities for permission to increase its commuter rates by 20 percent.The railroad argues that declining revenues make this rate increase essential.Opponents of the rate increase contend that the railroad's revenues would fall because of the rate hike.It can be concluded that:

A)both groups feel that the demand is elastic but for different reasons
B)both groups feel that the demand is inelastic but for different reasons
C)both groups feel that demand is unit-elastic, but for different reasons
D)the railroad feels that the demand for passenger service is elastic and opponents of the rate increase feel it is inelastic
E)the railroad feels that the demand for passenger service is inelastic and opponents of the rate feel it is elastic

Question 12

The quantity demanded of a product rises from 200 000 to 300 000 units when its price falls from $4 to $1.The numerical value of the price of elasticity of demand for this product is therefore:

A)3.00
B)0.67
C)0.17
D)0.44
E)0.33

Question 13

The demand for such products as salt,bread,and electricity tends to be:

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

Question 14

Which of the following generalizations is not correct?

A)The larger an item is in one's budget, the greater the price elasticity of demand
B)The price elasticity of demand is greater for necessities than it is for luxuries
C)The larger the number of close substitutes available, the greater will be the price elasticity of demand for particular product
D)The price elasticity of demand is greater the longer the time period under consideration
E)The price elasticity of supply is smaller the shorter the time period under consideration.

Question 15

If the demand for farm products is inelastic,a good harvest will cause farm revenues to:

A)increase
B)decrease
C)be unchanged
D)either increase or decrease, depending upon what happens to supply
E)disappear

Question 16

A perfectly elastic demand curve:

A)is impossible to graph given only the variables of price and quantity demanded
B)can be represented by a line parallel to the horizontal axis
C)slopes downward, reflecting the law of demand
D)can be represented by a line parallel to the vertical axis
E)slopes upward and to the right, breaking the law of demand

Question 17

In which of the following instances does total revenue increase?

A)price falls and supply is inelastic
B)price falls and demand is unit-elastic
C)price rises and demand is inelastic
D)price rises and demand is elastic
E)price falls and demand is perfectly inelastic

Question 18

With a rise in the price of digitally streamed music from $0.50 to $1.00 per song,the number of songs bought falls from 3 million to 1 million.Hence the numerical value of the price of elasticity of demand for this product is:

A)1.50
B)4.00
C)2.00
D)1.33
E)0.67

Question 19

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4.It was also found that total revenue decreased when price was raised from $5 to $6.It can be concluded that:

A)the demand for pizza is elastic above $5 and inelastic below $5
B)the demand for pizza is elastic both above and below $5
C)the demand for pizza is inelastic above $5 and elastic below $5
D)the demand for pizza is inelastic both above and below $5
E)$5 is not the equilibrium price of pizza

Question 20

A product's price rises from $4 to $6,causing consumption to fall from 2 million to 1 million units.The numerical value of price elasticity of demand is therefore:

A)1.50
B)1.67
C)2.00
D)3.00
E)1.00

Question 21

Assume that the price of product X rises by 13 percent and the quantity supplied of X increases by 15 percent.The supply for good X is:

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

Question 22

Suppose the supply of product X is perfectly inelastic.If there is an increase in the demand for this product,the:

A)price of the product will remain constant
B)quantity demanded will rise
C)quantity supplied will rise
D)quantity supplied of the product will remain unchanged in the immediate run
E)quantity supplied will fall

Question 23

The price and quantity demanded of a particular smartphone app are shown in the table below.

$\begin{array} { | l | c | c | c | c | c | c | c | c | } \hline \begin{array} { l } \text { Price } \\\text { (\$ per download) }\end{array} & \$ 0 & \$ 1 & \$ 2 & \$ 3 & \$ 4 & \$ 5 & \$ 6 & \$ 7 \\\hline \begin{array} { l } \text { Quantity Demanded } \\\text { (millions of downloads) }\end{array} & 7 & 6 & 5 & 4 & 3 & 2 & 1&0 \\\hline\end{array}$

-Between prices $3 and $4,the numerical value of the price elasticity of demand is:

A)0.08
B)7.0
C)0.17
D)13.0
E)1.0

Question 24

An upward-sloping long-run supply curve suggests that:

A)when quantity supplied increases, price drops
B)the relationship between price and quantity supplied is inverse
C)a change in demand will not change price
D)this is an increasing-cost industry
E)this is a decreasing-cost industry

Question 25

A rise in the price of butter from $3 to $5 per kilogram causes the quantity demanded of margarine to increase from 100 000 to 200 000 kilograms.The numerical value of the cross-price elasticity between these two goods is therefore:

A)-0.75
B)0.75
C)1.33
D)1.50
E)-1.33

Question 26

If for a particular market a rise in price from $10 to $15 causes quantity supplied to increase from 3 million to 6 million units we can say that supply:

A)is elastic
B)is inelastic
C)is perfectly inelastic
D)is perfectly elastic
E)has a price elasticity whose numerical value is exactly equal to one

Question 27

Is it possible to calculate the numerical value of the price elasticity of supply for an item if all you are told is that a $1 rise in price leads to an increase in quantity supplied of 10 units?

A)Yes, the value of the price elasticity of supply is 10.
B)Yes, the value of the price elasticity of supply is 0.1.
C)No, but one can calculate this value if given the initial values for both price and quantity supplied.
D)No, but one can calculate this value if given the final values for both price and quantity supplied.
E)No, but one can calculate this value if given the initial and final values for both price and quantity supplied.

Question 28

A supply curve that is parallel to the vertical axis suggests that the relevant time period is:

A)the immediate run
B)the short run
C)the long run, and this is an increasing-cost industry
D)the long run, and this is a constant-cost industry
E)the long run, and this is a decreasing-cost industry

Question 29

Average annual consumer incomes rise from $50 000 to $60 000,pushing up the quantity demanded for cars in a given region from 750 000 to 1.25 million.The numerical value of the income elasticity of cars is therefore:

A)0.33
B)3.33
C)2.75
D)0.36
E)-0.36

Question 30

The price elasticity of supply measures how:

A)easily labour and capital can be substituted for one another in the production process
B)responsive the quantity supplied of X is to changes in the price of X
C)responsive the quantity supplied of Y is to changes in the price of X
D)responsive quantity supplied is to a change in incomes
E)responsive the quantity supplied of X is to changes in resource prices

Question 31

Supply for a particular product:

A)has the same elasticity in the short run and long run
B)is more elastic in the long run than in the short run
C)is more elastic in the short run than in the long run
D)is more elastic the larger the product is in buyers' budgets
E)is more elastic when the product is a necessity than when it is a luxury

Question 32

If for a particular market a drop in price from $100 to $50 causes quantity supplied to decrease from 3 million to 2 million units we can say that supply:

A)is elastic
B)is inelastic
C)is perfectly inelastic
D)is perfectly elastic
E)has a price elasticity whose numerical value is exactly equal to one

Question 33

The price and quantity demanded of a particular smartphone app are shown in the table below.

$\begin{array} { | l | c | c | c | c | c | c | c | c | } \hline \begin{array} { l } \text { Price } \\\text { (\$ per download) }\end{array} & \$ 0 & \$ 1 & \$ 2 & \$ 3 & \$ 4 & \$ 5 & \$ 6 & \$ 7 \\\hline \begin{array} { l } \text { Quantity Demanded } \\\text { (millions of downloads) }\end{array} & 7 & 6 & 5 & 4 & 3 & 2 & 1&0 \\\hline\end{array}$

-Between prices $0 and $1,the numerical value of the price elasticity of demand is:

A)0.08
B)7.0
C)0.17
D)13.0
E)1.0

Question 34

A drop in the price of gasoline from $1.75 to $1.25 per litre causes purchases of cars to rise from 20 000 to 40 000.The numerical value of the cross-price elasticity between these two goods is therefore:

A)-1.0
B)-2.0
C)2.0
D)0.5
E)-0.5

Question 35

If the quantity supplied of tomatoes rises from 7 million to 9 million kilograms when the price rises from $3.50 to $4.50 per kilogram,then the numerical value of the price elasticity of supply is:

A)1.0
B)1.3
C)0.8
D)2.0
E)0.5

Question 36

A supply curve that is parallel to the horizontal axis suggests that:

A)when quantity supplied increases, price rises
B)the relationship between price and quantity supplied is inverse
C)a change in demand will change price in the same direction
D)the relevant time period is the immediate run
E)in the long run, additional units of output will be forthcoming without an increase in price, in a constant cost industry

Question 37

The number of tonnes of wheat sold rises from 100 million to 200 million tonnes due to an increase in the price of wheat from $500 to $700 per tonne.The numerical value of the price elasticity of supply is therefore:

A)0.25
B)1.25
C)3.5
D)2.0
E)2.5

Question 38

The price and quantity demanded of a particular smartphone app are shown in the table below.

$\begin{array} { | l | c | c | c | c | c | c | c | c | } \hline \begin{array} { l } \text { Price } \\\text { (\$ per download) }\end{array} & \$ 0 & \$ 1 & \$ 2 & \$ 3 & \$ 4 & \$ 5 & \$ 6 & \$ 7 \\\hline \begin{array} { l } \text { Quantity Demanded } \\\text { (millions of downloads) }\end{array} & 7 & 6 & 5 & 4 & 3 & 2 & 1&0 \\\hline\end{array}$

-If graphed,the demand schedule shown in the table would be:

A)an upsloping nonlinear curve
B)a downsloping nonlinear curve
C)a downsloping line
D)a horizontal line
E)a vertical line

Question 39

A drop in a town's average monthly incomes from $2000 to $1000 causes sales of canned meat to rise from 10 000 to 15 000 cans.The numerical value of the income elasticity of this item is:

A)-1.0
B)1.0
C)-0.6
D)0.6
E)1.67

Question 40

The price and quantity demanded of a particular smartphone app are shown in the table below.

$\begin{array} { | l | c | c | c | c | c | c | c | c | } \hline \begin{array} { l } \text { Price } \\\text { (\$ per download) }\end{array} & \$ 0 & \$ 1 & \$ 2 & \$ 3 & \$ 4 & \$ 5 & \$ 6 & \$ 7 \\\hline \begin{array} { l } \text { Quantity Demanded } \\\text { (millions of downloads) }\end{array} & 7 & 6 & 5 & 4 & 3 & 2 & 1&0 \\\hline\end{array}$

-Between prices $6 and $7,the numerical value of the price elasticity of demand is:

A)0.08
B)7.0
C)0.17
D)13.0
E)1.0

Question 41

A rise in the price of apples from $3 to $4 per kilogram raises quantity supplied from 3 million to 5 million kilograms.Therefore the numerical value of the price elasticity of supply is:

A)1.20
B)2.00
C)1.75
D)0.57
E)2.67

Question 42

Karl Marx based his attack on capitalism on the:

A)unfairly high rents of agricultural landlords
B)labour theory of value
C)mass exodus of the British population from rural areas
D)unequal distribution of wealth in rural areas
E)unfairly low rents for agricultural landlords

Question 43

Marx's labour theory of value has current significance because it has:

A)minimized payments to entrepreneurs
B)minimized the implementation of socialist theories in most countries
C)limited the role of government in countries such as Canada
D)became the dominant theory of value in modern times
E)provided philosophical support for labour movements

Question 44

Marx's theory of exploitation asserts that:

A)workers are paid less than the value they contribute to production
B)each worker's surplus value is eventually paid out in wages
C)when wages are increased, the surplus value extracted from each worker also increases
D)as the length of the workday increases, surplus value remains unchanged
E)as the length of the working day decreases, surplus value increases