Question 1

Dollar receipts for sellers of some commodities will be lower at higher prices.

Accepted Answer

A) True 
 B)False

Question 2

The government reduces the excise tax on the sellers in a competitive industry by $10 per unit sold.Both supply and demand curves have some elasticity with respect to price.This reduction in tax means that:

Accepted Answer

A) supply curve shifts down by $10, but (unless demand is perfectly elastic)price remain constant. 
B) supply curve shifts down by less than $10, but (unless demand is highly inelastic)price falls by more than $10. 
C) supply curve shifts down by less than $10, but (unless demand is highly elastic)price falls by $10. 
D) supply curve shifts down by $10, but (unless supply is perfectly elastic)any price decline is less than $10. 
E) demand curve shift down by $10 and price falls by $10.

Question 3

Imposing a minimum wage may cause the quantity of labor services demanded to fall short of the quantity that laborers are willing to supply at the minimum wage.

Accepted Answer

A) True 
 B)False

Question 4

When all farmers have a small harvest, their total (combined)revenue may actually go up.This shows that the market demand for these agricultural products is relatively price inelastic in this price range.

Accepted Answer

A) True 
 B)False

Question 5

When demand displays unitary price elasticity at all parts, total revenue is the same at all prices.

Accepted Answer

A) True 
 B)False

Question 6

A bumper harvest automatically means that farmers will have higher incomes.

Accepted Answer

A) True 
 B)False

Question 7

How do companies use price elasticity to improve their business?

Accepted Answer

A) By separating customers into groups, companies can attract different groups with different prices. 
B) Companies can force everyone to pay the same price regardless of demand. 
C) Companies can ignore price elasticity, it cannot improve business. 
D) Customers are all the same and price elasticity is the same for all of them. 
E) None of the above.

Question 8

Use the following to answer questions :
Figure 4-2 
-Refer again to Figure 4-2.At what point along the demand curve DD is price elasticity exactly 1?

Accepted Answer

A) P = 5, Q = 40 
B) P = 4, Q = 60 
C) P = 3,Q = 80 
D) P = 2, Q = 100 
E) P = 3.50, Q = 70

Question 9

An increase in population will increase the rent of land.

Accepted Answer

A) True 
 B)False

Question 10

Use the following to answer questions :
Figure 4-1 
-The price elasticity of supply shown in Figure 4-1 between points A and B is:

Accepted Answer

A) .1. 
B) .5. 
C) 1. 
D) 5. 
E) none of the above.

Question 11

Sales of the common necessities of life tend to decrease sharply when there is an increase in their price.

Accepted Answer

A) True 
 B)False

Question 12

If a demand curve displays unitary elasticity, an upward shift in the supply curve will:

Accepted Answer

A) raise total revenue. 
B) lower total revenue. 
C) have no effect on total revenue. 
D) have an indeterminant effect on total revenue.

Question 13

An increase in the minimum wage will automatically accomplish the following:

Accepted Answer

A) everyone's wages will go up. 
B) everyone's wages will go down. 
C) wages won't change. 
D) unemployment will likely go down. 
E) unemployment will likely go up.

Question 14

Use the following to answer questions :
Figure 4-4 
-The elasticity of S'S' in Figure 4-4 at equilibrium is negative.

Accepted Answer

A) True 
 B)False

Question 15

Use the following to answer questions :
Figure 4-2 
-Refer to Figure 4-2.Assume that the sellers in this market wish to maximize their total revenue.What price should they set along DD in order to maximize total revenue?

Accepted Answer

A) $5 
B) $4 
C) $3 
D) S2 
E) None of the above

Question 16

Dollar receipts for every commodity will always be higher at lower prices.

Accepted Answer

A) True 
 B)False

Question 17

Economists distinguish between an increase in the quantity demanded and an increase in demand.

Accepted Answer

A) True 
 B)False

Question 18

If a good is in fixed supply, then the incidence of a tax

Accepted Answer

A) falls entirely on the consumers. 
B) falls mostly on the producers and partly on consumers. 
C) falls entirely on the producers. 
D) depends on the elasticity of demand. 
E) none of the above.

Question 19

Consider some price range in which a slight change in either direction will have practically no effect on total revenue.This part of the demand curve is said to have unitary elasticity.

Accepted Answer

A) True 
 B)False

Question 20

With all of the new technology available, farmers have been able to greatly increase the supply of agricultural goods.

Accepted Answer

A) True 
 B)False

Exam 4: Supply and Demand: Elasticity and Applications

Dollar receipts for sellers of some commodities will be lower at higher prices.

The government reduces the excise tax on the sellers in a competitive industry by $10 per unit sold.Both supply and demand curves have some elasticity with respect to price.This reduction in tax means that:

Imposing a minimum wage may cause the quantity of labor services demanded to fall short of the quantity that laborers are willing to supply at the minimum wage.

When all farmers have a small harvest, their total (combined)revenue may actually go up.This shows that the market demand for these agricultural products is relatively price inelastic in this price range.

When demand displays unitary price elasticity at all parts, total revenue is the same at all prices.

A bumper harvest automatically means that farmers will have higher incomes.

How do companies use price elasticity to improve their business?

Use the following to answer questions : Figure 4-2 -Refer again to Figure 4-2.At what point along the demand curve DD is price elasticity exactly 1?

An increase in population will increase the rent of land.

Use the following to answer questions : Figure 4-1 -The price elasticity of supply shown in Figure 4-1 between points A and B is:

Sales of the common necessities of life tend to decrease sharply when there is an increase in their price.

If a demand curve displays unitary elasticity, an upward shift in the supply curve will:

An increase in the minimum wage will automatically accomplish the following:

Use the following to answer questions : Figure 4-4 -The elasticity of S'S' in Figure 4-4 at equilibrium is negative.

Use the following to answer questions : Figure 4-2 -Refer to Figure 4-2.Assume that the sellers in this market wish to maximize their total revenue.What price should they set along DD in order to maximize total revenue?

Dollar receipts for every commodity will always be higher at lower prices.

Economists distinguish between an increase in the quantity demanded and an increase in demand.

If a good is in fixed supply, then the incidence of a tax

Consider some price range in which a slight change in either direction will have practically no effect on total revenue.This part of the demand curve is said to have unitary elasticity.

With all of the new technology available, farmers have been able to greatly increase the supply of agricultural goods.