Question 1

How would an increase in cigarette taxes succeed according to the following criteria: collecting a large amount of tax revenue; distorting demand as little as possible; discouraging consumption of harmful commodities?

Accepted Answer

The answer of How would an increase in cigarette taxes...

Question 2

Which of the following will lead to a movement along the same demand curve?

Accepted Answer

A) Changes in income. 
B) Changes in the price of substitute goods. 
C) Changes in the price of the product. 
D) Changes in the preference of the consumer.

Question 3

Explain what happens to the magnitude of price elasticity of demand as price increases along a straight-line demand curve.

Accepted Answer

The answer of Explain what happens to the magnitude of...

Question 4

Sun City's public bus line has been operating at a deficit.The city decides to raise the fare from 50 cents to 75 cents, anticipating enough additional revenue to cover the deficit.What assumption is the city making about price elasticity?

Accepted Answer

The answer of Sun City's public bus line has been...

Question 5

The demand for a new effective drug for the cure of AIDS would most likely be

Accepted Answer

A) elastic. 
B) unit elastic. 
C) perfectly elastic. 
D) highly inelastic.

Question 6

Figure 6-6 
-An article in the Wall Street Journal reports that "most cable TV operators are aware that cable is price sensitive, and there comes a point where people won't pay the price." Which demand curve in Figure 6-6 best illustrates this situation?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4

Question 7

If a 10 percent rise in price leads to a reduction in quantity demanded of more than 10 percent,

Accepted Answer

A) demand is elastic. 
B) demand is inelastic. 
C) elasticity of demand is unitary. 
D) None of the above is correct.

Question 8

A good will tend to be more price elastic if it

Accepted Answer

A) is a luxury good. 
B) has no close substitutes. 
C) is a small part of the household budget. 
D) is a necessity.

Question 9

The cross elasticity between two goods has been measured at −1.2.How are the goods related? Explain.Give an example of goods for which this might be a reasonable measure of cross elasticity.

Accepted Answer

The answer of The cross elasticity between two goods has...

Question 10

As one moves down a straight-line demand curve, the elasticity increases.

Accepted Answer

A) True 
 B)False

Question 11

If demand is elastic, a rise in price will decrease total expenditure.

Accepted Answer

A) True 
 B)False

Question 12

A vertical demand curve has an elasticity of demand equal to zero.

Accepted Answer

A) True 
 B)False

Question 13

Demand is said to be price elastic at a point on a demand curve if a

Accepted Answer

A) 1 percent rise in price reduces the quantity demanded by more than 1 percent. 
B) 1 percent rise in price reduces the quantity demanded by less than 1 percent. 
C) 1 percent rise in price reduces the quantity demanded by more than 10 percent. 
D) 10 percent rise in price reduces the quantity demanded by less than 10 percent.

Question 14

The emigration of some of Whoville's workers reduces the quantity of thingamabobs supplied at every price by 50.The new supply curve will ____ the old supply curve.

Accepted Answer

A) be steeper and less elastic at every price than 
B) have the same slope and the same elasticity at every price as 
C) have the same slope and be more elastic at every price than 
D) More information is needed to predict the relationship between the elasticities of the two supply curves.

Question 15

Buyers' expenditures and sellers' revenues are always identical.

Accepted Answer

A) True 
 B)False

Question 16

A study of New York City (NYC) tax rates concluded that taxes on the nonmanufacturing sector should be higher since that sector has fewer alternatives.Manufacturers are more mobile and may move to avoid higher taxes.This means that

Accepted Answer

A) nonmanufacturing firms have a more elastic demand for NYC locations. 
B) manufacturing firms have an inelastic demand for the NYC locations. 
C) nonmanufacturing firms have relatively inelastic demand for the NYC locations. 
D) nonmanufacturing demand for NYC locations is perfectly elastic.

Question 17

A decrease in the price of rice from 50 cents to 40 cents a pound increases consumption from 16 to 20 tons a week in Gainesville and from 160 to 200 tons in the larger city of Miami.The elasticity of demand for rice is

Accepted Answer

A) greater in Miami than in Gainesville, even taking into account the population difference. 
B) greater in Gainesville than in Miami in spite of the population difference. 
C) equal in Gainesville and Miami regardless of the population difference. 
D) impossible to compare because of the population difference.

Question 18

Figure 6-3 
-In Figure 6-3(a), demand is

Accepted Answer

A) perfectly elastic. 
B) perfectly inelastic. 
C) unit elastic. 
D) fixed at one particular quantity.

Question 19

If the price elasticity of supply of doodads equals 0.50 and the price rises by 3 percent, then the quantity supplied of doodads will rise by ____.

Accepted Answer

A) 0.50 percent. 
B) 1.50 percent. 
C) 6.00 percent. 
D) 15 percent.

Question 20

A demand curve with unit elasticity can never touch either the vertical or horizontal axes.

Accepted Answer

A) True 
 B)False

Exam 6: Demand and Elasticity

How would an increase in cigarette taxes succeed according to the following criteria: collecting a large amount of tax revenue; distorting demand as little as possible; discouraging consumption of harmful commodities?

Which of the following will lead to a movement along the same demand curve?

Explain what happens to the magnitude of price elasticity of demand as price increases along a straight-line demand curve.

Sun City's public bus line has been operating at a deficit.The city decides to raise the fare from 50 cents to 75 cents, anticipating enough additional revenue to cover the deficit.What assumption is the city making about price elasticity?

The demand for a new effective drug for the cure of AIDS would most likely be

Figure 6-6 -An article in the Wall Street Journal reports that "most cable TV operators are aware that cable is price sensitive, and there comes a point where people won't pay the price." Which demand curve in Figure 6-6 best illustrates this situation?

If a 10 percent rise in price leads to a reduction in quantity demanded of more than 10 percent,

A good will tend to be more price elastic if it

The cross elasticity between two goods has been measured at −1.2.How are the goods related? Explain.Give an example of goods for which this might be a reasonable measure of cross elasticity.

As one moves down a straight-line demand curve, the elasticity increases.

If demand is elastic, a rise in price will decrease total expenditure.

A vertical demand curve has an elasticity of demand equal to zero.

Demand is said to be price elastic at a point on a demand curve if a

The emigration of some of Whoville's workers reduces the quantity of thingamabobs supplied at every price by 50.The new supply curve will ____ the old supply curve.

Buyers' expenditures and sellers' revenues are always identical.

A study of New York City (NYC) tax rates concluded that taxes on the nonmanufacturing sector should be higher since that sector has fewer alternatives.Manufacturers are more mobile and may move to avoid higher taxes.This means that

A decrease in the price of rice from 50 cents to 40 cents a pound increases consumption from 16 to 20 tons a week in Gainesville and from 160 to 200 tons in the larger city of Miami.The elasticity of demand for rice is

Figure 6-3 -In Figure 6-3(a) , demand is

If the price elasticity of supply of doodads equals 0.50 and the price rises by 3 percent, then the quantity supplied of doodads will rise by ____.

A demand curve with unit elasticity can never touch either the vertical or horizontal axes.