Question 1

If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then the price elasticity of demand is equal to:

Accepted Answer

A) 0.05. 
B) 0.5. 
C) 2. 
D) 5.

Question 2

Refer to the accompanying graph. What is the price elasticity of demand when the price of rice is $3 per pound?

Accepted Answer

A) 0.5 
B) 0.67 
C) 0.75 
D) 2

Question 3

When the price of NBA tickets is $25 each, 30,000 tickets are sold. After the price rises to $30 each, 20,000 tickets are sold. At the original price, the demand for NBA ticket is:

Accepted Answer

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

Question 4

If the price elasticity of demand for cigarettes is 0.55, and the price of cigarettes increases by 10 percent, then the quantity of cigarettes demanded will fall by:

Accepted Answer

A) 0.55 percent. 
B) 5.5 percent. 
C) 55 percent. 
D) 550 percent.

Question 5

If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then demand for textbooks is:

Accepted Answer

A) negative. 
B) inelastic. 
C) elastic. 
D) unit elastic.

Question 6

If consumers cannot readily switch to a close substitute when the price of a good increases, the demand for that good is likely to be:

Accepted Answer

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

Question 7

Refer to the accompanying figure. Assume the slopes of the two demand curves are the same. Let eA denote the price elasticity of demand at point A, and let eB denote the price elasticity of demand at point B.  Which of the following statements is correct?

Accepted Answer

A) eA > eB 
B) eA < eB 
C) eA = eB 
D) eA ÷ eB < 0

Question 8

Suppose an increase in the price of hamburger from $3 to $4 leads to an increase in quantity supplied from 100 units to 150 units. At the original price, the price elasticity of supply for hamburgers is ________ so supply is ________.

Accepted Answer

A) 2/3; elastic 
B) 2/3; inelastic 
C) 3/2; elastic 
D) 3/2; inelastic

Question 9

For which of the following products is demand likely to be least elastic with respect to price?

Accepted Answer

A) Food 
B) Vegetables 
C) Green vegetables 
D) Green beans

Question 10

Suppose the price of a Snickers candy bar is $2.00 at both the airport and the grocery store. The price elasticity of demand for a Snickers candy bar at an airport is likely to be ________ the price elasticity of demand for a Snickers candy bar at the grocery store.

Accepted Answer

A) less than 
B) equal to 
C) greater than 
D) the reciprocal of

Question 11

Refer to the accompanying figure. At P = 4, how does the price elasticity of demand for D1 compare to that for D2?

Accepted Answer

A) It will be equal for D1 and D2. 
B) It will be greater for D1 than for D2. 
C) It will be lower for D1 than D2. 
D) The price elasticity of demand for both D1 and D2 will be greater than one.

Question 12

Suppose that there is only one small clothing store in the remote village of Green Acres, and until recently the townspeople bought their shirts there. As more people in Green Acres become connected to the Internet, the price elasticity of demand for shirts at the Green Acres store will:

Accepted Answer

A) increase because the Internet offers more substitutes. 
B) decrease because the Internet offers more substitutes. 
C) remain the same, but the quantity demanded will decrease as more people shop online. 
D) remain the same, but the demand will decrease as more people shop online.

Question 13

Suppose that the short-run price elasticity of demand for electricity is 0.03, and the long-run price elasticity of demand is 1.2. One would classify the short-run elasticity as being ________ and the long-run elasticity as being ________.

Accepted Answer

A) elastic; elastic 
B) elastic; inelastic 
C) inelastic; unit elastic 
D) inelastic; elastic

Question 14

The price elasticity of supply for the Hope Diamond is zero because there is only one. Therefore, the supply curve for the Hope Diamond is

Accepted Answer

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

Question 15

The accompanying graph depicts demand.    At point D, demand is:

Accepted Answer

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

Question 16

At a price of $20 each, the demand for t-shirts from a group's fundraising activity is unit elastic. Thus, the group's total revenue from selling t-shirts ________ at a price of $20 each.

Accepted Answer

A) will equal $0 
B) reaches its minimum 
C) reaches its maximum 
D) will equal $1

Question 17

When the price of hot dogs is $1.50 each, 500 hot dogs are sold every day. After the price falls to $1.35 each, 510 hot dogs are sold every day. At the original price, what is the price elasticity of demand for hot dogs?

Accepted Answer

A) 66.67 
B) 5 
C) 2 
D) 0.2

Question 18

Suppose that the demand for electricity has been found to be price inelastic. The most likely explanation for this finding is that:

Accepted Answer

A) electricity is a luxury good. 
B) the fraction of income spent on electricity is large. 
C) few substitutes for electricity exist. 
D) electricity is sold in a monopoly market.

Question 19

You would expect the price elasticity of demand for transportation generally to be:

Accepted Answer

A) the same as price elasticity of the demand for bus tickets. 
B) greater than price elasticity of the demand for bus tickets. 
C) less than price elasticity of the demand for bus tickets. 
D) greater than price elasticity of the demand for bus tickets when bus tickets are expensive, but less than price elasticity of the demand for bus tickets when the prices of bus tickets fall.

Question 20

A change in consumers' incomes causes a change in:

Accepted Answer

A) demand. 
B) supply. 
C) the demand for normal goods but not the demand for inferior goods. 
D) the cross-price elasticity of demand.

Exam 4: Elasticity