Question 1

Suppose that average incomes decreased from $38,000 to $36,000,and the quantity demanded of a product increased from 45 to 55.What type of product must this be?

Accepted Answer

A)  Substitute product.
B)  Inferior product.
C)  Luxury product.
D)  Necessity.
E)  Superior product. C

Question 2

-If a sales tax is imposed on a product,which of the following statements is correct?

Accepted Answer

A)  If the demand for the product is inelastic,the seller will pay a larger percentage of the tax than will the consumer.
B)  If the demand for the product is elastic,the seller will pay a smaller percentage of the product than will the consumer.
C)  The consumer will pay 100% of the tax.
D)  If the demand for the product is inelastic,the consumer will pay a larger percentage of the tax than will the seller. D

Question 3

Table 4.1 shows the demand and supply schedules for bottles of wine (in thousands)for the economy of Newtown.
Table 4.1
  a)If the government impose $4 per unit tax,what will be the new price and quantity?
b)What will be the total tax revenue?
c)What portion of the tax revenue is paid by the consumers?

Accepted Answer

a)The new equilibrium price is $32 and the quantity traded is 13 units.
b)Total tax revenue is $52.
c)A half is paid by the consumers,and a half by sellers.

Question 4

Below is a graphical representation of the wheat market in the distant land of Nod.
 
-Refer to the graph above to answer this question.At equilibrium,what is the total expenditure by consumers on wheat?

Accepted Answer

A)  $5.
B)  $40 million.
C)  $200 million.
D)  Cannot be determined.

Question 5

-Refer to the graph above to answer this question.What is the supply elasticity of S1 in the $2.50 to $4.00 range?

Accepted Answer

A)  0.23.
B)  0.92.
C)  1.08.
D)  2.17.

Question 6

What has happened to price if the price elasticity of demand is 2 and quantity demanded increases by 10%?

Accepted Answer

A)  It increases by 10%.
B)  It decreases by 5%.
C)  It decreases by 20%.
D)  It increases by 20%.

Question 7

Suppose that the price of a product increased from $18 to $22,and the quantity supplied increased from 200 to 240.What is the value of the supply elasticity?

Accepted Answer

A)  0.28.
B)  0.91.
C)  1.0.
D)  1.1.
E)  3.6.

Question 8

Demonstrate graphically and explain verbally the impact on price and quantity when supply decreases and demand is highly elastic.

Accepted Answer

The answer of Demonstrate graphically and explain verbally the impact...

Question 9

What is the term for the responsiveness of quantity demanded to a change in price?

Accepted Answer

A)  Elastic demand.
B)  The elasticity coefficient.
C)  Unitary elasticity.
D)  Price elasticity of demand.

Question 10

When is the percentage change in quantity exactly equal to the percentage change in price?

Accepted Answer

A)  When there is unitary elasticity.
B)  When demand is inelastic.
C)  When demand is elastic.
D)  When demand does not change.

Question 11

Suppose that the value of the income elasticity of demand for a product is 2 and average incomes increase by 16%.What will happen to the quantity demanded?

Accepted Answer

A)  It will increase by 8%.
B)  It will increase by 32%.
C)  It will decrease by 8%.
D)  It will decrease by 32%.
E)  It cannot be determined without further information.

Question 12

Refer to Table 4.10 to answer this question.What is the price elasticity for the product represented by Set II?

Accepted Answer

A)  0.16.
B)  0.71.
C)  1.4.
D)  6.25.

Question 13

What is meant by the term supply elasticity?

Accepted Answer

A)  The responsiveness of the change in the quantity demanded to a change in price of a product.
B)  The change in quantity supplied as a percentage of the change in the quantity demanded.
C)  The change in the price of a product as a result of a change in the quantity supplied.
D)  The responsiveness of a change in the quantity supplied of a product as a result of a change in price.

Question 14

Which of the following is the most likely explanation for the fact that the price elasticity of demand for celery is high?

Accepted Answer

A)  The average household spends a large percentage of its income on celery.
B)  There are a large number of substitute products available.
C)  The time needed to produce this product is short.
D)  The typical price of this product is low.

Question 15

The list below refers to the price elasticity of demand.
1)perfectly inelastic
2)perfectly elastic
3)unitary elasticity
4)elastic
5)inelastic
-Refer to the information above to answer this question.What is a demand when a decrease in price increases total revenue?

Accepted Answer

A)  1.
B)  2.
C)  3.
D)  4.
E)  5.

Question 16

Given the demand curve in the following graph:

Accepted Answer

The answer of Given the demand curve in the following...

Question 17

-Refer to the graphs above to answer this question.Suppose that the price of orange juice increases from P1 to P2 and the demand curve for apple juice shifts to the right from D1 to D2.What is the relationship between orange juice and apple juice?

Accepted Answer

A)  The demand for both types of juices must be elastic.
B)  Orange juice and apple juice must be substitutes.
C)  The demand for both types of juices must be inelastic.
D)  Orange juice and apple juice must be complements.
E)  There is no relationship between the two types of juices.

Question 18

What is unitary elasticity?

Accepted Answer

A)  An elasticity coefficient which is negative.
B)  An elasticity coefficient which is equal to zero.
C)  An elasticity coefficient which is equal to one.
D)  A percentage change in quantity which is exactly equal to the percentage change in demand.
E)  Where elasticity and inelasticity are balanced.

Question 19

What is total revenue?

Accepted Answer

A)  It is the profits from doing business.
B)  It is the total value of sales less cost.
C)  It is elasticity multiplied by quantity sold.
D)  It is price multiplied by quantity sold.

Question 20

-If the price of Digestive Fire herbal tablets increases from $35 to $45 a bottle and,as a result,the seller's total revenue increases from $77,000 to $94,500 per month,what is the elasticity of demand?

Accepted Answer

A)  0.08.
B)  0.19.
C)  0.82.
D)  1.26.
E)  2.14.

Exam 4: Elasticity