Question 1

If the elasticity of supply for a good is greater than the government expected:

Accepted Answer

A) Consumers will bear more of the burden of the tax than the government expected. 
B) Producers will bear more of the burden of the tax than the government expected. 
C) The tax will raise more revenue than the government expected. 
D) Both a. and c. are true. A

Question 2

The income elasticities of Products A and B and their cross price elasticities with respect to Product C are as follows:??Income ElasticityCross Price ElasticityProduct A-2.1+2.5Product B+0.6-0.75From this information, one can conclude that:

Accepted Answer

A) Product A is normal, Product B is inferior, Product A is a complement to Product C, and Product B is a substitute for Product C. 
B) Product A is normal, Product B is inferior, Product A is a substitute for Product C, and Product B is a complement to Product C. 
C) Product A is inferior, Product B is normal, Product A is a substitute for Product C, and Product B is a complement to Product C. 
D) Product A is inferior, Product B is normal, Product A is a complement to Product C, and Product B is a substitute for Product C. C

Question 3

Exhibit
The elasticity in the vicinity of five different points along a demand curve varies as follows:
 $\begin{array}{lccccc} 
\text { Point }& A & B & C & D & E \
\text { Elasticity} & 1.25 & 0.3 & 1.0 & 0.2 & 2.1
\end{array}$
-Refer to Exhibit. At which of these points would sellers of a product want to increase price to increase their total revenue?

Accepted Answer

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

Question 4

If the elasticity of supply for a good is greater than the government expected:

Accepted Answer

A) Consumers will bear more of the burden of the tax than the government expected. 
B) Producers will bear more of the burden of the tax than the government expected. 
C) The tax will raise less revenue than the government expected. 
D) Both a. and c. are true.

Question 5

If the income elasticity of demand for good A was 3.9 and the income elasticity of demand for B was 0.2:

Accepted Answer

A) Both good A and good B are normal. 
B) Both good A and good B are inferior. 
C) Good A is normal and good B is inferior. 
D) Good A is inferior and good B is normal.

Question 6

Exhibit
The elasticity in the vicinity of five different points along a demand curve varies as follows:
 $\begin{array}{lccccc} 
\text { Point }& A & B & C & D & E \
\text { Elasticity} & 1.25 & 0.3 & 1.0 & 0.2 & 2.1
\end{array}$
-Refer to Exhibit. In the vicinity of which of these points would sellers of a product want to decrease the price to increase their total revenue?

Accepted Answer

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

Question 7

Exhibit
The elasticity in the vicinity of five different points along a demand curve varies as follows:
 $\begin{array}{lccccc} 
\text { Point }& A & B & C & D & E \
\text { Elasticity} & 1.25 & 0.3 & 1.0 & 0.2 & 2.1
\end{array}$
-Refer to Exhibit. In the vicinity of which of these points would a price decrease be accompanied by an increase in total revenue?

Accepted Answer

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

Question 8

For a given change in demand:

Accepted Answer

A) The quantity exchanged will change relatively more in the long run than the short run. 
B) The quantity exchanged will change relatively more in the short run than the long run. 
C) The market price will change relatively more in the short run than the long run. 
D) Both a. and c. are true.

Question 9

The income elasticities of Products A and B and their cross-price elasticities with respect to Product C are as follows:??Income ElasticityCross-Price ElasticityProduct A+1.7-0.6Product B-0.8+0.9From this information, one can conclude that:

Accepted Answer

A) Product A is inferior, Product B is normal, Product A is a complement to Product C, and Product B is a substitute for Product C. 
B) Product A is normal, Product B is inferior, Product A is a complement to Product C, and Product B is a substitute for Product C. 
C) Product A is normal, Product B is inferior, Product A is a substitute for Product C, and Product B is a complement to Product C. 
D) Product A is inferior, Product B is normal, Product A is a substitute for Product C, and Product B is a complement to Product C.

Question 10

The price of a new toy increases from $5 to $7 and the quantity demanded decreases from 12,000 to 6,000 per month as a result. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

Accepted Answer

A) 0.5, indicating relatively elastic demand. 
B) 0.5, indicating relatively inelastic demand. 
C) 2.0, indicating relatively elastic demand. 
D) 2.0, indicating relatively inelastic demand.

Question 11

If the elasticity of demand for a good is greater than the government expected:

Accepted Answer

A) Consumers will bear more of the burden of the tax than the government expected. 
B) Producers will bear more of the burden of the tax than the government expected. 
C) The tax will raise less revenue than the government expected. 
D) Both b. and c. are true.

Question 12

If a decrease in prices increases total revenue for a product in the short run, in the long run, it will:

Accepted Answer

A) Increase total revenue by more. 
B) Increase total revenue by less. 
C) Decrease total revenue. 
D) Either b. or c. could result in the long run.

Question 13

If an increase in prices increases total revenue for a product in the short run, in the long run, it will:

Accepted Answer

A) Increase total revenue by more. 
B) Increase total revenue by less. 
C) Decrease total revenue. 
D) Either b. or c. could result in the long run.

Question 14

The definition of cross-elasticity of demand with regard to two products X and Y is:

Accepted Answer

A) the percentage change in the quantity of X demanded divided by the percentage change in the quantity of Y demanded. 
B) the percentage change in the price of Y divided by the percentage change in the quantity of X demanded. 
C) the percentage change in the price of Y divided by the percentage change in the price of X. 
D) the percentage change in the demand of one good (good X) divided by the percentage change in the price of another good (good Y).

Question 15

An increase in price will cause a firm's total revenue to increase if demand is price elastic.

Accepted Answer

A) True 
 B)False

Question 16

For a given change in demand:

Accepted Answer

A) Quantity will change relatively more in the long run than the short run. 
B) Quantity will change relatively more in the short run than the long run. 
C) Price will change relatively more in the long run than the short run. 
D) Both b. and c. are true.

Question 17

Exhibit
The elasticity in the vicinity of five different points along a demand curve varies as follows:
 $\begin{array}{lccccc} 
\text { Point }& A & B & C & D & E \
\text { Elasticity} & 1.25 & 0.3 & 1.0 & 0.2 & 2.1
\end{array}$
-Refer to Exhibit. At which of these points would a price increase be accompanied by an increase in total revenue?

Accepted Answer

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

Question 18

Exhibit
The elasticity in the vicinity of five different points along a demand curve varies as follows:
 $\begin{array}{lccccc} 
\text { Point }& A & B & C & D & E \
\text { Elasticity} & 1.25 & 0.3 & 1.0 & 0.2 & 2.1
\end{array}$
-Refer to Exhibit. In the vicinity of which of these points would sellers find that their total revenue remained essentially unchanged as they changed their price?

Accepted Answer

A) B and D 
B) A and E 
C) C 
D) None of the above. That could never happen.

Exam 2: Elasticities

If the elasticity of supply for a good is greater than the government expected:

The income elasticities of Products A and B and their cross price elasticities with respect to Product C are as follows:??Income ElasticityCross Price ElasticityProduct A-2.1+2.5Product B+0.6-0.75From this information, one can conclude that:

If the elasticity of supply for a good is greater than the government expected:

If the income elasticity of demand for good A was 3.9 and the income elasticity of demand for B was 0.2:

For a given change in demand:

The income elasticities of Products A and B and their cross-price elasticities with respect to Product C are as follows:??Income ElasticityCross-Price ElasticityProduct A+1.7-0.6Product B-0.8+0.9From this information, one can conclude that:

The price of a new toy increases from $5 to $7 and the quantity demanded decreases from 12,000 to 6,000 per month as a result. Based on this information, the price elasticity of demand (in absolute terms) is estimated to be equal to:

If the elasticity of demand for a good is greater than the government expected:

If a decrease in prices increases total revenue for a product in the short run, in the long run, it will:

If an increase in prices increases total revenue for a product in the short run, in the long run, it will:

The definition of cross-elasticity of demand with regard to two products X and Y is:

An increase in price will cause a firm's total revenue to increase if demand is price elastic.

For a given change in demand: