Question 1

The flatter the demand curve that passes through a given point,the more elastic the demand.

Accepted Answer

A) True 
 B)False

Question 2

You and your college roommate eat three packages of Ramen noodles each week.After graduation last month,both of you were hired at several times your college income.Your roommate still enjoys Ramen noodles very much and buys even more,but you plan to buy fewer Ramen noodles in favor of foods you prefer more.When looking at income elasticity of demand for Ramen noodles,

Accepted Answer

A)  yours would be negative and your roommate's would be positive. 
B)  yours would be positive and your roommate's would be negative. 
C)  yours would be zero and your roommate's would approach infinity. 
D)  yours would approach infinity and your roommate's would be zero.

Question 3

Demand is said to be inelastic if the

Accepted Answer

A)  quantity demanded changes proportionately more than price. 
B)  price changes proportionately more than income. 
C)  quantity demanded changes proportionately less than price. 
D)  quantity demanded changes proportionately the same as price.

Question 4

The price elasticity of demand measures how much

Accepted Answer

A)  quantity demanded responds to a change in price. 
B)  quantity demanded responds to a change in income. 
C)  price responds to a change in demand. 
D)  demand responds to a change in supply.

Question 5

The price elasticity of demand for a good measures the willingness of

Accepted Answer

A)  consumers to buy less of the good as price rises. 
B)  consumers to avoid monopolistic markets in favor of competitive markets. 
C)  firms to produce more of a good as price rises. 
D)  firms to cater to the tastes of consumers.

Question 6

Figure 5-4 
-Refer to Figure 5-4.Assume the section of the demand curve from B to C corresponds to prices between $0 and $15.Then,when the price changes between $7 and $9,

Accepted Answer

A)  quantity demanded changes proportionately less than the price. 
B)  quantity demanded changes proportionately more than the price. 
C)  quantity demanded changes the same amount proportionately as price. 
D)  the price elasticity of demand equals zero.

Question 7

Holding all other factors constant and using the midpoint method,if a pencil manufacturer increases production from 40 to 50 boxes when price increases by 20 percent,then supply is

Accepted Answer

A)  inelastic,since the price elasticity of supply is equal to .91. 
B)  inelastic,since the price elasticity of supply is equal to 1.1. 
C)  elastic,since the price elasticity of supply is equal to 0.91. 
D)  elastic,since the price elasticity of supply is equal to 1.1.

Question 8

Economists compute the price elasticity of demand as the

Accepted Answer

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

Question 9

For a good that is a luxury,demand

Accepted Answer

A)  tends to be inelastic. 
B)  tends to be elastic. 
C)  has unit elasticity. 
D)  cannot be represented by a demand curve in the usual way.

Question 10

When demand is inelastic,an increase in price will cause

Accepted Answer

A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue,but an increase in quantity demanded. 
D)  no change in total revenue,but a decrease in quantity demanded.

Question 11

In the market for oil in the short run,demand

Accepted Answer

A)  and supply are both elastic. 
B)  and supply are both inelastic. 
C)  is elastic and supply is inelastic. 
D)  is inelastic and supply is elastic.

Question 12

In general,demand curves for necessities tend to be price elastic.

Accepted Answer

A) True 
 B)False

Question 13

For which of the following goods would demand be most inelastic?

Accepted Answer

A)  chocolate 
B)  Godiva chocolate 
C)  Hershey's chocolate 
D)  All three would have the same elasticity of demand since they are all related.

Question 14

Suppose demand is perfectly inelastic,and the supply of the good in question decreases.As a result,

Accepted Answer

A)  the equilibrium quantity decreases,and the equilibrium price is unchanged. 
B)  the equilibrium price increases,and the equilibrium quantity is unchanged. 
C)  the equilibrium quantity and the equilibrium price both are unchanged. 
D)  buyers' total expenditure on the good is unchanged.

Question 15

When demand is inelastic the price elasticity of demand is

Accepted Answer

A)  less than 1,and price and total revenue will move in the same direction. 
B)  less than 1,and price and total revenue will move in opposite directions. 
C)  greater than 1,and price and total revenue will move in the same direction. 
D)  greater than 1,and price and total revenue will move in opposite directions.

Question 16

When quantity demanded responds strongly to changes in price,demand is said to be

Accepted Answer

A)  fluid. 
B)  elastic. 
C)  dynamic. 
D)  highly variable.

Question 17

If two goods are complements,their cross-price elasticity will be

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  equal to the difference between the income elasticities of demand for the two goods.

Question 18

When a supply curve is relatively flat,

Accepted Answer

A)  sellers are not at all responsive to a change in price. 
B)  the equilibrium price changes substantially when the demand for the good changes. 
C)  the supply is relatively elastic. 
D)  the supply is relatively inelastic.

Question 19

If the quantity supplied responds only slightly to changes in price,then

Accepted Answer

A)  supply is said to be elastic. 
B)  supply is said to be inelastic. 
C)  an increase in price will not shift the supply curve very much. 
D)  even a large decrease in demand will change the equilibrium price only slightly.

Question 20

If the demand for donuts is elastic,then an increase in the price of donuts will

Accepted Answer

A)  increase total revenue of donut sellers. 
B)  decrease total revenue of donut sellers. 
C)  not change total revenue of donut sellers. 
D)  There is not enough information to answer this question.

Exam 5: Elasticity and Its Application