Question 1

List the following goods in order of increasing price elasticity of demand: cameras, digital cameras, digital SLR cameras, Sony digital SLR cameras.

Accepted Answer

The answer of List the following goods in order of...

Question 2

The main determinant of the price elasticity of supply is:

Accepted Answer

A)  time 
B)  the definition of the market 
C)  the number of close substitutes 
D)  luxuries versus necessities

Question 3

Which of the following was NOT a reason why OPEC failed to keep the price of oil high?

Accepted Answer

A)  over the long run, producers of oil outside of OPEC responded to high prices by increasing oil exploration and by building new extraction capacity 
B)  consumers responded to higher prices with greater conservation 
C)  consumers replaced old inefficient cars with newer efficient ones 
D)  the agreement OPEC members signed allowed each country to produce as much oil as each wanted

Question 4

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to:

Accepted Answer

A)  increase the total revenue of wheat farmers 
B)  decrease the total revenue of wheat farmers 
C)  weaken the demand for wheat 
D)  weaken the supply of wheat

Question 5

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Accepted Answer

A) True 
 B)False

Question 6

At the midpoint of a downward-sloping linear demand curve, elasticity would be:

Accepted Answer

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

Question 7

The supply of farmland is more elastic than is the supply of wheat.

Accepted Answer

A) True 
 B)False

Question 8

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a 10-year period because:

Accepted Answer

A)  buyers tend to be much less sensitive to a change in price when given more time to react 
B)  buyers will have substantially more income over a 10-year period 
C)  buyers tend to be much more sensitive to a change in price when given more time to react 
D)  none of these answers are correct

Question 9

If an increase in income results in a decrease in the quantity demanded of a good, then the good is:

Accepted Answer

A)  a normal good 
B)  a necessity 
C)  an inferior good 
D)  a luxury

Question 10

Some Asian medicines have become very expensive as the wildlife used for ingredients has become endangered. The persistence of demand by some consumers for these medicines indicates that these customers have inelastic demand.

Accepted Answer

A) True 
 B)False

Question 11

What is the price elasticity of supply?

Accepted Answer

The answer of What is the price elasticity of supply?...

Question 12

What are the determinants of the price elasticity of supply and how does each affect elasticity?
Price elasticity of supply depends on the flexibility of sellers to changes in price. For resources like land of a specific type and location, there is practically no flexibility. For manufactured products, there is greater flexibility. In most markets, the time period over which supply is measured is a key determinant. Over short time periods, supply curves tend to be less elastic and over longer periods, supply curves tend to be more elastic.

Accepted Answer

The answer of What are the determinants of the price...

Question 13

Graph 5-3
 
-In Graph 5-3, as price falls from PA to PB, which demand curve is least elastic?

Accepted Answer

A)  D1 
B)  D2 
C)  D3 
D)  all of the above are equally elastic

Question 14

If a change in the price of a good results in no change in total revenue:

Accepted Answer

A)  the demand for the good must be elastic 
B)  the demand for the good must be inelastic 
C)  the demand for the good must be unit elastic 
D)  buyers must not respond very much to a change in price

Question 15

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. From this we can conclude that the demand for X in this price range:

Accepted Answer

A)  has declined 
B)  is of unit elasticity 
C)  is inelastic 
D)  is elastic

Question 16

Suppose the price of product X is reduced from $16.00 to $12.00 and, as a result, the quantity of X demanded increases from 300 to 450. Using the midpoint method, the price elasticity of demand for X in the given price range is:

Accepted Answer

A)  1.40 
B)  1.00 
C)  0.40 
D)  0.29

Question 17

Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand. If the producer's objective is to increase total revenue, she should:

Accepted Answer

A)  increase the price charged to customers with the price elastic demand and decrease the price charged to customers with the price inelastic demand 
B)  decrease the price charged to customers with the price elastic demand and increase the price charged to customers with the price inelastic demand 
C)  charge the same price to both groups of customers 
D)  increase the price for both groups of customers

Question 18

Economists compute the price elasticity of demand as the:

Accepted Answer

A)  percentage change in the price divided by the percentage change in quantity demanded 
B)  percentage change in the quantity demanded divided by the percentage change in price 
C)  change in quantity demanded divided by the change in the price 
D)  percentage change in the quantity demanded divided by the percentage change in income

Question 19

If the elasticity of supply of a product is greater than one, then supply is:

Accepted Answer

A)  elastic 
B)  inelastic 
C)  unit elastic 
D)  not very sensitive to change in price

Question 20

Alice says that she would buy one banana split a day regardless of the price. If this is the case:

Accepted Answer

A)  Alice's demand for banana splits is perfectly inelastic 
B)  Alice's price elasticity of demand for banana splits is one 
C)  Alice's income elasticity of demand for banana splits is negative 
D)  none of the above answers is correct

Exam 5: Elasticity and Its Application

List the following goods in order of increasing price elasticity of demand: cameras, digital cameras, digital SLR cameras, Sony digital SLR cameras.

The main determinant of the price elasticity of supply is:

Which of the following was NOT a reason why OPEC failed to keep the price of oil high?

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to:

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

At the midpoint of a downward-sloping linear demand curve, elasticity would be:

The supply of farmland is more elastic than is the supply of wheat.

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a 10-year period because:

If an increase in income results in a decrease in the quantity demanded of a good, then the good is:

Some Asian medicines have become very expensive as the wildlife used for ingredients has become endangered. The persistence of demand by some consumers for these medicines indicates that these customers have inelastic demand.

What is the price elasticity of supply?

Graph 5-3 -In Graph 5-3, as price falls from P_A to P_B, which demand curve is least elastic?

If a change in the price of a good results in no change in total revenue:

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. From this we can conclude that the demand for X in this price range:

Suppose the price of product X is reduced from $16.00 to $12.00 and, as a result, the quantity of X demanded increases from 300 to 450. Using the midpoint method, the price elasticity of demand for X in the given price range is:

Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand. If the producer's objective is to increase total revenue, she should:

Economists compute the price elasticity of demand as the:

If the elasticity of supply of a product is greater than one, then supply is:

Alice says that she would buy one banana split a day regardless of the price. If this is the case:

Exam 5: Elasticity and Its Application

List the following goods in order of increasing price elasticity of demand: cameras, digital cameras, digital SLR cameras, Sony digital SLR cameras.

The main determinant of the price elasticity of supply is:

Which of the following was NOT a reason why OPEC failed to keep the price of oil high?

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to:

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

At the midpoint of a downward-sloping linear demand curve, elasticity would be:

The supply of farmland is more elastic than is the supply of wheat.

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a 10-year period because:

If an increase in income results in a decrease in the quantity demanded of a good, then the good is:

Some Asian medicines have become very expensive as the wildlife used for ingredients has become endangered. The persistence of demand by some consumers for these medicines indicates that these customers have inelastic demand.

What is the price elasticity of supply?

Graph 5-3 -In Graph 5-3, as price falls from PA to PB, which demand curve is least elastic?

If a change in the price of a good results in no change in total revenue:

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. From this we can conclude that the demand for X in this price range:

Suppose the price of product X is reduced from $16.00 to $12.00 and, as a result, the quantity of X demanded increases from 300 to 450. Using the midpoint method, the price elasticity of demand for X in the given price range is:

Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand. If the producer's objective is to increase total revenue, she should:

Economists compute the price elasticity of demand as the:

If the elasticity of supply of a product is greater than one, then supply is:

Alice says that she would buy one banana split a day regardless of the price. If this is the case:

Graph 5-3 -In Graph 5-3, as price falls from P_A to P_B, which demand curve is least elastic?