Question 1

The price elasticity of supply measures how:

Accepted Answer

A) easily labour and capital can be substituted for one another in the production process 
B) responsive the quantity supplied of X is to changes in the price of X 
C) responsive the quantity supplied of Y is to changes in the price of X 
D) responsive quantity supplied is to a change in incomes 
E) responsive the quantity supplied of X is to changes in resource prices

Question 2

Assume that the price of product X rises by 13 percent and the quantity supplied of X increases by 15 percent.The supply for good X is:

Accepted Answer

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

Question 3

A rise in the price of butter from $3 to $5 per kilogram causes the quantity demanded of margarine to increase from 100 000 to 200 000 kilograms.The numerical value of the cross-price elasticity between these two goods is therefore:

Accepted Answer

A) -0.75 
B) 0.75 
C) 1.33 
D) 1.50 
E) -1.33

Question 4

A perfectly elastic demand curve:

Accepted Answer

A) is impossible to graph given only the variables of price and quantity demanded 
B) can be represented by a line parallel to the horizontal axis 
C) slopes downward, reflecting the law of demand 
D) can be represented by a line parallel to the vertical axis 
E) slopes upward and to the right, breaking the law of demand

Question 5

A rise in the price of apples from $3 to $4 per kilogram raises quantity supplied from 3 million to 5 million kilograms.Therefore the numerical value of the price elasticity of supply is:

Accepted Answer

A) 1.20 
B) 2.00 
C) 1.75 
D) 0.57 
E) 2.67

Question 6

If a business can sell 20 000 units of a product at $2 per unit and 10 000 units at $4 per unit,its demand is:

Accepted Answer

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

Question 7

The demand for such products as salt,bread,and electricity tends to be:

Accepted Answer

A) perfectly inelastic 
B) perfectly elastic 
C) unit-elastic 
D) relatively inelastic 
E) relatively elastic

Question 8

The elasticity of demand for a product is likely to be greater:

Accepted Answer

A) if the product is a "necessity" rather than a "luxury" good 
B) the greater the amount of time over which producers adjust to a price change 
C) the smaller the proportion of one's income spent on the product 
D) the smaller the number of substitute products 
E) the greater the amount of time over which buyers adjust to a price change

Question 9

The price elasticity of demand indicates:

Accepted Answer

A) the extent to which consumers respond to a change in price 
B) the extent to which a demand curve shifts as income changes 
C) the slope of the demand curve 
D) how far business executives can stretch their fixed costs 
E) the extent to which changes in a product's price affect consumers' incomes

Question 10

The price and quantity demanded of a particular smartphone app are shown in the table below.

$\begin{array} { | l | c | c | c | c | c | c | c | c | } 
\hline \begin{array} { l } 
\text { Price } \
\text { (\$ per download) }
\end{array} & \$ 0 & \$ 1 & \$ 2 & \$ 3 & \$ 4 & \$ 5 & \$ 6 & \$ 7 \
\hline \begin{array} { l } 
\text { Quantity Demanded } \
\text { (millions of downloads) }
\end{array} & 7 & 6 & 5 & 4 & 3 & 2 & 1&0 \
\hline
\end{array}$
-Between prices $3 and $4,the numerical value of the price elasticity of demand is:

Accepted Answer

A) 0.08 
B) 7.0 
C) 0.17 
D) 13.0 
E) 1.0

Question 11

Marx's labour theory of value has current significance because it has:

Accepted Answer

A) minimized payments to entrepreneurs 
B) minimized the implementation of socialist theories in most countries 
C) limited the role of government in countries such as Canada 
D) became the dominant theory of value in modern times 
E) provided philosophical support for labour movements

Question 12

Supply for a particular product:

Accepted Answer

A) has the same elasticity in the short run and long run 
B) is more elastic in the long run than in the short run 
C) is more elastic in the short run than in the long run 
D) is more elastic the larger the product is in buyers' budgets 
E) is more elastic when the product is a necessity than when it is a luxury

Question 13

Is it possible to calculate the numerical value of the price elasticity of supply for an item if all you are told is that a $1 rise in price leads to an increase in quantity supplied of 10 units?

Accepted Answer

A) Yes, the value of the price elasticity of supply is 10. 
B) Yes, the value of the price elasticity of supply is 0.1. 
C) No, but one can calculate this value if given the initial values for both price and quantity supplied. 
D) No, but one can calculate this value if given the final values for both price and quantity supplied. 
E) No, but one can calculate this value if given the initial and final values for both price and quantity supplied.

Question 14

The quantity demanded of smartphones increases by 15 million units from an initial quantity of 22.5 million phones when its price drops from $500 to $300.Therefore the price elasticity of demand has a numerical value of:

Accepted Answer

A) 0.80 
B) 1.20 
C) 1.00 
D) 1.67 
E) 0.67

Question 15

An elastic demand curve is one for which:

Accepted Answer

A) the absolute change in price is smaller than the absolute change in quantity demanded 
B) a given percentage change in price causes a larger percentage change in quantity demanded 
C) the absolute change in price is bigger than the absolute change in quantity demanded 
D) a given percentage change in price causes a smaller percentage change in quantity demanded 
E) the absolute changes in price and quantity demanded are the same

Question 16

A product's price rises from $4 to $6,causing consumption to fall from 2 million to 1 million units.The numerical value of price elasticity of demand is therefore:

Accepted Answer

A) 1.50 
B) 1.67 
C) 2.00 
D) 3.00 
E) 1.00

Question 17

A supply curve that is parallel to the horizontal axis suggests that:

Accepted Answer

A) when quantity supplied increases, price rises 
B) the relationship between price and quantity supplied is inverse 
C) a change in demand will change price in the same direction 
D) the relevant time period is the immediate run 
E) in the long run, additional units of output will be forthcoming without an increase in price, in a constant cost industry

Question 18

A drop in the price of gasoline from $1.75 to $1.25 per litre causes purchases of cars to rise from 20 000 to 40 000.The numerical value of the cross-price elasticity between these two goods is therefore:

Accepted Answer

A) -1.0 
B) -2.0 
C) 2.0 
D) 0.5 
E) -0.5

Question 19

Karl Marx based his attack on capitalism on the:

Accepted Answer

A) unfairly high rents of agricultural landlords 
B) labour theory of value 
C) mass exodus of the British population from rural areas 
D) unequal distribution of wealth in rural areas 
E) unfairly low rents for agricultural landlords

Question 20

With a rise in the price of digitally streamed music from $0.50 to $1.00 per song,the number of songs bought falls from 3 million to 1 million.Hence the numerical value of the price of elasticity of demand for this product is:

Accepted Answer

A) 1.50 
B) 4.00 
C) 2.00 
D) 1.33 
E) 0.67

Exam 3: Elasticity