Question 1

If the demand curve for a product is vertical, then what is the elasticity of demand?

Accepted Answer

A)   equal to zero
B)   equal to one
C)   greater than one, but less than infinity
D)   equal to infinity A

Question 2

Moving along an elastic portion of a demand curve, the change in price will always be proportionately less than the change in the quantity demanded.

Accepted Answer

A) True 
 B)False  True

Question 3

The nation's largest cable TV company tested the effect of a price reduction for premium movie channels. It lowered prices from $12 to $9.95 and found that the number of customers rose by almost 50 percent. What does this illustrate?

Accepted Answer

A)   The supply curve for premium movie channels has shifted to the left.
B)   The demand curve for the premium movie channels has shifted to the right.
C)   The demand for premium movie channels is elastic in this price range.
D)   The demand for premium movie channels is inelastic in this price range. C

Question 4

Ceteris paribus, if an 8 percent increase in price leads to a 6 percent increase in the quantity supplied, how would supply be described?

Accepted Answer

A)   The supply curve is perfectly vertical.
B)   Supply is inelastic.
C)   Supply is elastic.
D)   Supply is unit elastic.

Question 5

When demand is more elastic than supply, the largest portion of a tax is paid by the consumer.

Accepted Answer

A) True 
 B)False

Question 6

When a 9 percent increase in price leads to a 6 percent increase in quantity supplied, supply is inelastic.

Accepted Answer

A) True 
 B)False

Question 7

The following schedule represents a portion of Kate's demand for sandwiches.
TABLE 5-1
 
-Refer to Table 5-1. Along this portion of Kate's demand curve for sandwiches, what is the price elasticity of demand?

Accepted Answer

A)   equal to zero
B)   less than one
C)   equal to one
D)   greater than one

Question 8

When the local symphony recently raised its price for tickets to their summer concerts in the park, the symphony's total revenue actually decreased. What does this indicate about the elasticity of demand for symphony tickets?

Accepted Answer

A)   It is elastic.
B)   It is unit elastic.
C)   It is unit inelastic.
D)   It is inelastic.

Question 9

If the income elasticity of demand for lobster is +1.5, a 5 percent increase in income will cause a 7.5 percent increase in the demand for lobster.

Accepted Answer

A) True 
 B)False

Question 10

Price elasticity of demand is a measure of the responsiveness of the change in price to a change in quantity demanded.

Accepted Answer

A) True 
 B)False

Question 11

The demand for gasoline is highly inelastic and the supply is highly elastic. If a tax is imposed on gasoline, how will it be paid?

Accepted Answer

A)   largely by the sellers of gasoline
B)   solely by the sellers
C)   equally by the sellers and buyers of gasoline
D)   largely by the buyers of gasoline

Question 12

If the demand curve for a product is horizontal, then what is the elasticity of demand?

Accepted Answer

A)   equal to zero
B)   equal to one
C)   greater than one, but less than infinity
D)   equal to infinity

Question 13

Which of the following statements best describes the demand for toothpaste?

Accepted Answer

A)   It will likely be income elastic and price elastic.
B)   It will likely be income inelastic and price elastic.
C)   It will likely be income inelastic and price inelastic.
D)   It will likely be income elastic and price inelastic.

Question 14

If cola and iced tea are good substitutes for consumers, what can we conclude about their elasticity from this information?

Accepted Answer

A)   Their cross-price elasticities are greater than zero.
B)   Their income elasticities are less than zero.
C)   Their price elasticities of supply are less than one.
D)   Their price elasticities of demand are less than one.

Question 15

A "war on drugs" is waged and, as a result, a larger quantity of drugs flowing into Canada is seized and more drug traffickers are arrested. If demand for drugs is inelastic, what effect would one expect this to have on the total expenditure on drugs?

Accepted Answer

A)   It would be zero.
B)   It would increase.
C)   It would stay constant.
D)   It would decrease.

Question 16

The elasticity in the vicinity of five different points along a demand curve varies as follows:
TABLE 5-4
 
-Refer to Table 5-4. In the vicinity of what points would a price decrease be accompanied by an increase in total revenue?

Accepted Answer

A)   A and D
B)   A and E
C)   B, C, and D
D)   B and D

Question 17

Price elasticity of demand is a measure of the responsiveness of the change in quantity demanded to a change in price.

Accepted Answer

A) True 
 B)False

Question 18

The price of peanut butter decreases. As a result, the price of jelly (a complement to peanut butter) rises by 5 percent and the quantity of jelly sold rises by 10 percent. What can we conclude from this information?

Accepted Answer

A)   The cross-price elasticity between peanut butter and jelly equals 0.5.
B)   The elasticity of demand equals 2.0.
C)   The elasticity of supply equals 2.0.
D)   The cross-price elasticity between peanut butter and jelly equals 2.0.

Question 19

If the supply curve for aspirin is perfectly elastic, what effect will a reduction in demand have on the equilibrium price and equilibrium quantity?

Accepted Answer

A)   The price will rise and the quantity will fall.
B)   The price will rise and the quantity will stay the same.
C)   The price will fall and the quantity will fall.
D)   The price will stay the same and the quantity will fall.

Question 20

If the income elasticity of demand for lobster is +1.5, a 5 percent increase in price will cause a 7.5 percent reduction in the quantity of lobster consumed.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity

If the demand curve for a product is vertical, then what is the elasticity of demand?

Moving along an elastic portion of a demand curve, the change in price will always be proportionately less than the change in the quantity demanded.

The nation's largest cable TV company tested the effect of a price reduction for premium movie channels. It lowered prices from $12 to $9.95 and found that the number of customers rose by almost 50 percent. What does this illustrate?

Ceteris paribus, if an 8 percent increase in price leads to a 6 percent increase in the quantity supplied, how would supply be described?

When demand is more elastic than supply, the largest portion of a tax is paid by the consumer.

When a 9 percent increase in price leads to a 6 percent increase in quantity supplied, supply is inelastic.

The following schedule represents a portion of Kate's demand for sandwiches. TABLE 5-1 -Refer to Table 5-1. Along this portion of Kate's demand curve for sandwiches, what is the price elasticity of demand?

When the local symphony recently raised its price for tickets to their summer concerts in the park, the symphony's total revenue actually decreased. What does this indicate about the elasticity of demand for symphony tickets?

If the income elasticity of demand for lobster is +1.5, a 5 percent increase in income will cause a 7.5 percent increase in the demand for lobster.

Price elasticity of demand is a measure of the responsiveness of the change in price to a change in quantity demanded.

The demand for gasoline is highly inelastic and the supply is highly elastic. If a tax is imposed on gasoline, how will it be paid?

If the demand curve for a product is horizontal, then what is the elasticity of demand?

Which of the following statements best describes the demand for toothpaste?

If cola and iced tea are good substitutes for consumers, what can we conclude about their elasticity from this information?

A "war on drugs" is waged and, as a result, a larger quantity of drugs flowing into Canada is seized and more drug traffickers are arrested. If demand for drugs is inelastic, what effect would one expect this to have on the total expenditure on drugs?

The elasticity in the vicinity of five different points along a demand curve varies as follows: TABLE 5-4 -Refer to Table 5-4. In the vicinity of what points would a price decrease be accompanied by an increase in total revenue?

Price elasticity of demand is a measure of the responsiveness of the change in quantity demanded to a change in price.

The price of peanut butter decreases. As a result, the price of jelly (a complement to peanut butter) rises by 5 percent and the quantity of jelly sold rises by 10 percent. What can we conclude from this information?

If the supply curve for aspirin is perfectly elastic, what effect will a reduction in demand have on the equilibrium price and equilibrium quantity?

If the income elasticity of demand for lobster is +1.5, a 5 percent increase in price will cause a 7.5 percent reduction in the quantity of lobster consumed.