Question 1

Suppose there is a sudden decrease in the supply of oranges. Compare the effect of the change in orange supply on the price of oranges in a market with high demand elasticity and a market with low demand elasticity.

Accepted Answer

The answer of Suppose there is a sudden decrease in...

Question 2

Calculate the price elasticity of demand if a 2.6 percent change in the price of a product results in a 10.5 percent change in quantity demanded, and indicate whether demand is elastic, inelastic, or unit elastic.

Accepted Answer

The answer of Calculate the price elasticity of demand if...

Question 3

Suppose that the government imposes a sales tax on the consumption of natural gas, which of the following would have the least impact on the producers of natural gas?

Accepted Answer

A)  Perfectly elastic demand 
B)  Perfectly inelastic demand 
C)  Unitary elastic demand 
D)  Zero demand 
E)  Plastic is an inferior good.

Question 4

Suppose the price of a good falls from $200 to $150, and the quantity demanded changes from 45,000 units to 50,500 units. Calculate the price elasticity of demand using the midpoint formula, and indicate whether demand is elastic, inelastic, or unit elastic.

Accepted Answer

The answer of Suppose the price of a good falls...

Question 5

The concept of price elasticity of demand makes it possible to

Accepted Answer

A)  predict how much demand will shift with a change in price. 
B)  predict how much price will change with a change in demand. 
C)  predict how much price will change with a change in supply. 
D)  predict how much supply will shift with a change in price. 
E)  anticipate shifts in demand.

Question 6

If the cross-price elasticity between two goods is positive, then it is most likely that the two goods are

Accepted Answer

A)  both inferior goods. 
B)  both luxury goods. 
C)  complements. 
D)  substitutes. 
E)  necessities.

Question 7

Suppose the price of a good rises from $2.25 to $3.15, and the quantity demanded changes from 2,360 units to 1,250 units. Calculate the price elasticity of demand using the midpoint formula, and indicate whether demand is elastic, inelastic, or unit elastic.

Accepted Answer

The answer of Suppose the price of a good rises...

Question 8

If demand for a product is unit elastic, then increasing the price of the product leaves total revenue unchanged.

Accepted Answer

A) True 
 B)False

Question 9

The minimum wage is an example of a

Accepted Answer

A)  price floor. 
B)  price ceiling. 
C)  market equilibrium. 
D)  restriction on quantity. 
E)  price elasticity.

Question 10

The price elasticity of demand is expressed in dollar changes in price and quantity demanded.

Accepted Answer

A) True 
 B)False

Question 11

The elasticity of demand changes

Accepted Answer

A)  along a vertical demand curve. 
B)  along a horizontal demand curve. 
C)  along a linear, downward-sloping demand curve. 
D)  along a supply curve. 
E)  only when the demand curve shifts.

Question 12

Total revenue decreases if price increases and demand is inelastic.

Accepted Answer

A) True 
 B)False

Question 13

When price rises by 3 percent and quantity demanded changes by 6 percent,

Accepted Answer

A)  total revenue falls 3 percent. 
B)  total revenue falls by half. 
C)  total revenue doubles. 
D)  total revenue does not change. 
E)  total revenue increases 18 percent.

Question 14

If supply decreases and total revenue in an industry increases,

Accepted Answer

A)  demand elasticity must be equal to 1. 
B)  demand must be horizontal. 
C)  demand elasticity must be greater than 1. 
D)  we have a perfectly implausible situation. 
E)  demand elasticity must be less than 1.

Question 15

Exhibit 4-1 
-Refer to Exhibit 4-1. The price elasticity of demand is most likely to be elastic

Accepted Answer

A)  at point A. 
B)  at point B. 
C)  at point C. 
D)  anywhere along the demand curve. 
E)  nowhere along the demand curve.

Question 16

If the price of a good decreases by 5 percent and total revenue does not change, then the price elasticity of demand is

Accepted Answer

A)  perfectly elastic. 
B)  unit elastic. 
C)  equal to .05. 
D)  equal to 1.05. 
E)  perfectly inelastic.

Question 17

The measurement for the price elasticity of demand is

Accepted Answer

A)  unit free. 
B)  in percentage terms. 
C)  in dollar terms. 
D)  in terms of the quantity measurement of the good involved. 
E)  in terms of the currency used to purchase the good.

Question 18

Use the following data for a demand curve.   
(A)Use the midpoint formula to calculate the elasticity between a price of $14 and $15.
(B)Use the midpoint formula to calculate the elasticity between $7 and $8.
(C)Because this is a linear demand curve, why does the elasticity change?
(D)At what point is price $\times$ quantity maximized? What is the elasticity at that point?

Accepted Answer

The answer of Use the following data for a demand...

Question 19

To say that gasoline has a low price elasticity of demand is to say the quantity demanded of gasoline

Accepted Answer

A)  has a relatively flat demand curve. 
B)  has a horizontal demand curve. 
C)  is not sensitive to changes in gasoline prices. 
D)  is very sensitive to changes in gasoline prices. 
E)  is very sensitive to changes in consumer income.

Question 20

Which of the following is not a likely result of a price floor?

Accepted Answer

A)  Excess supply of a good 
B)  A persistent shortage 
C)  A market price higher than equilibrium 
D)  The quantity supplied exceeds the quantity demanded. 
E)  Resources are diverted away from other activities to deal with the extra output.

Exam 4: Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

Suppose there is a sudden decrease in the supply of oranges. Compare the effect of the change in orange supply on the price of oranges in a market with high demand elasticity and a market with low demand elasticity.

Calculate the price elasticity of demand if a 2.6 percent change in the price of a product results in a 10.5 percent change in quantity demanded, and indicate whether demand is elastic, inelastic, or unit elastic.

Suppose that the government imposes a sales tax on the consumption of natural gas, which of the following would have the least impact on the producers of natural gas?

Suppose the price of a good falls from $200 to $150, and the quantity demanded changes from 45,000 units to 50,500 units. Calculate the price elasticity of demand using the midpoint formula, and indicate whether demand is elastic, inelastic, or unit elastic.

The concept of price elasticity of demand makes it possible to

If the cross-price elasticity between two goods is positive, then it is most likely that the two goods are

Suppose the price of a good rises from $2.25 to $3.15, and the quantity demanded changes from 2,360 units to 1,250 units. Calculate the price elasticity of demand using the midpoint formula, and indicate whether demand is elastic, inelastic, or unit elastic.

If demand for a product is unit elastic, then increasing the price of the product leaves total revenue unchanged.

The minimum wage is an example of a

The price elasticity of demand is expressed in dollar changes in price and quantity demanded.

The elasticity of demand changes

Total revenue decreases if price increases and demand is inelastic.

When price rises by 3 percent and quantity demanded changes by 6 percent,

If supply decreases and total revenue in an industry increases,

Exhibit 4-1 -Refer to Exhibit 4-1. The price elasticity of demand is most likely to be elastic

If the price of a good decreases by 5 percent and total revenue does not change, then the price elasticity of demand is

The measurement for the price elasticity of demand is

To say that gasoline has a low price elasticity of demand is to say the quantity demanded of gasoline

Which of the following is not a likely result of a price floor?