Question 1

Other factors held constant,if there are few close substitutes for a good,demand is more elastic for it.

Accepted Answer

A) True 
 B)False

Question 2

The income elasticity of demand:

Accepted Answer

A) can only be zero or unity. 
B) can only be positive. 
C) can only be negative. 
D) can be positive or negative.

Question 3

The income elasticity coefficient is:

Accepted Answer

A) important because we need to know the impact of recession on sales. 
B) irrelevant because we cannot compute it. 
C) too complicated and therefore is not widely used in economics. 
D) never used to estimate the impact on inferior goods.

Question 4

Any change in price along a perfectly inelastic demand curve produces:

Accepted Answer

A) greater change in the quantity demanded. 
B) less change in the quantity demanded. 
C) no change in the quantity demanded. 
D) infinite change in the quantity demanded.

Question 5

The longer the time period under study:

Accepted Answer

A) the more elastic is the price elasticity of demand. 
B) the less sensitive consumers will be to price changes. 
C) the less adjustment consumers will make to price changes. 
D) the more inelastic is the price elasticity of demand. 
E) the more likely any given price cut will result in a smaller reaction by the consumer.

Question 6

Exhibit 5-4 Supply and demand curves for cigarettes
 
-As shown in Exhibit 5-4,the $1 per pack tax on cigarettes raises tax revenue per day totalling:

Accepted Answer

A) $5 million. 
B) $6 million. 
C) $10 million. 
D) $15 million.

Question 7

The president of Tucker Motors says,'Lowering the price won't sell a single additional Tucker car'.The president believes that the price elasticity of demand is:

Accepted Answer

A) perfectly elastic. 
B) perfectly inelastic. 
C) unitary elastic. 
D) elastic. 
E) inelastic.

Question 8

The price elasticity of demand for a vertical demand curve is:

Accepted Answer

A) perfectly elastic. 
B) perfectly inelastic. 
C) unitary elastic. 
D) elastic. 
E) inelastic.

Question 9

Within different price ranges along a linear demand curve,elasticities are:

Accepted Answer

A) constant. 
B) different. 
C) equal. 
D) the same as slope. 
E) negative 1.

Question 10

The smaller the proportion of your income is spent on a good,the more likely it is to be:

Accepted Answer

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

Question 11

Exhibit 5-1 Demand curves
 
-In Exhibit 5-1,between points a and b,the price elasticity of demand measures:

Accepted Answer

A) 0.67. 
B) 1.5. 
C) 2. 
D) 1.56. 
E) 1.

Question 12

The income elasticity of demand is the ratio of the percentage change in:

Accepted Answer

A) the quality demanded of a good to the percentage change in income. 
B) the quantity demanded of a good to the percentage change in income. 
C) income to the percentage change in quantity demanded of a good. 
D) the quantity demanded of a good to the percentage change in price.

Question 13

Suppose that when price of a good is $1.50,quantity supplied is 15.When price is $2.50,quantity supplied is 25.According to the midpoint formula,the price elasticity of supply is:

Accepted Answer

A) 0.4. 
B) 0.8. 
C) 1. 
D) 1.5. 
E) 2.

Question 14

Exhibit 5-1 Demand curves
 
-In Exhibit 5-1,the demand curve between points a and b is:

Accepted Answer

A) price elastic. 
B) price inelastic. 
C) unit elastic. 
D) perfectly elastic. 
E) perfectly inelastic.

Question 15

A horizontal demand curve indicates perfectly elastic demand.

Accepted Answer

A) True 
 B)False

Question 16

In the very short run:

Accepted Answer

A) the price elasticity of supply is very elastic. 
B) the price elasticity of demand is very elastic. 
C) the cross elasticity of demand is very inelastic. 
D) income elasticity is very elastic. 
E) the price elasticity of supply is very inelastic.

Question 17

The price elasticity of demand coefficient for a good will be greater:

Accepted Answer

A) if close substitutes exist. 
B) if minor complements exist. 
C) in the short run. 
D) if a small portion of the budget will be spent on it.

Question 18

Assuming the demand curve is more elastic (flatter)than the supply curve,which of the following is true?

Accepted Answer

A) The full tax is always passed on to the consumer no matter how flat (elastic) the demand curve is. 
B) The full tax is always passed on to the seller no matter how flat (elastic) the demand curve is. 
C) A smaller portion of sales tax is passed on to the consumer. 
D) It does not make any difference how flat (elastic) the demand curve is; the tax is always split evenly between buyer and seller.

Question 19

Along a straight-line demand curve,the elasticity of demand:

Accepted Answer

A) is approximated by the slope of the curve. 
B) is constant at every point on the curve. 
C) is less elastic than along a non-linear demand curve. 
D) is equal to one. 
E) becomes more inelastic as price falls.

Question 20

If a government tax has as its purpose the raising of revenue,it would be best to place the tax on a product which:

Accepted Answer

A) is a non-essential. 
B) has a highly elastic demand. 
C) has many good substitutes. 
D) has a highly inelastic demand. 
E) has a unit elastic demand curve.

Exam 5: Elasticity of demand and supply