Question 1

A perfectly inelastic demand curve is

Accepted Answer

A) a vertical straight line 
B) a horizontal straight line 
C) a downward-sloping straight line 
D) an upward-sloping straight line 
E) not a straight line 
A) a vertical straight line 
B) a horizontal straight line 
C) a downward-sloping straight line 
D) an upward-sloping straight line 
E) not a straight line

Question 2

Cross-price elasticity of demand is used to determine whether

Accepted Answer

A) a product is an inferior or normal good 
B) a product is a necessity or a luxury 
C) two products are substitutes or complements 
D) price and total revenue are directly or inversely related 
E) the product's demand curve is linear 
A) a product is an inferior or normal good 
B) a product is a necessity or a luxury 
C) two products are substitutes or complements 
D) price and total revenue are directly or inversely related 
E) the product's demand curve is linear

Question 3

Exhibit 5-16   Between points a and b in Exhibit 5-16, the demand curve is

Accepted Answer

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

Question 4

Exhibit 5-27   Consider Exhibit 5-27.Which graph depicts a unitary elastic demand?

Accepted Answer

A) Graph A 
B) Graph B 
C) Graph C 
D) Graph D 
E) none of the graphs depicts a unitary elastic demand 
A) Graph A 
B) Graph B 
C) Graph C 
D) Graph D 
E) none of the graphs depicts a unitary elastic demand

Question 5

Dusty Rags, Inc.provides janitorial services to retail stores.Dusty had been charging $10 per hour and selling 400 hours of service per week at that rate.When he raised his price to $15 per hour, his customers cut back to 300 weekly hours of service.Which of the following is true?

Accepted Answer

A) Revenue went from $4, 000 per week to $4, 500 per week, indicating that the demand curve for his services must have shifted to the right. 
B) Revenue went from $4, 000 per week to $4, 500 per week, indicating that the demand for his services must be elastic. 
C) Revenue went from $4, 000 per week to $4, 500 per week, indicating that the demand for his services must be inelastic. 
D) Revenue went from $400 to $300 per week, indicating that demand must be elastic. 
E) Revenue went from $10 to $15 per week, indicating that demand must be inelastic. 
A) Revenue went from $4, 000 per week to $4, 500 per week, indicating that the demand curve for his services must have shifted to the right. 
B) Revenue went from $4, 000 per week to $4, 500 per week, indicating that the demand for his services must be elastic. 
C) Revenue went from $4, 000 per week to $4, 500 per week, indicating that the demand for his services must be inelastic. 
D) Revenue went from $400 to $300 per week, indicating that demand must be elastic. 
E) Revenue went from $10 to $15 per week, indicating that demand must be inelastic.

Question 6

As DVDs become popular substitutes for video cassettes, demand for video cassettes is likely to

Accepted Answer

A) become less price elastic 
B) become more price elastic 
C) increase 
D) stay the same 
E) become unit elastic 
A) become less price elastic 
B) become more price elastic 
C) increase 
D) stay the same 
E) become unit elastic

Question 7

If the demand for ptyalin is unit elastic, then

Accepted Answer

A) total revenue decreases as quantity demanded increases 
B) total revenue increases as quantity demanded increases 
C) total revenue increases as price increases 
D) total revenue remains constant as price increases 
E) total revenue decreases as price increases 
A) total revenue decreases as quantity demanded increases 
B) total revenue increases as quantity demanded increases 
C) total revenue increases as price increases 
D) total revenue remains constant as price increases 
E) total revenue decreases as price increases

Question 8

John spends exactly the same dollar amount on candy bars each week, regardless of their price.John's demand curve for candy bars is

Accepted Answer

A) upward-sloping 
B) backward-bending 
C) perfectly inelastic 
D) perfectly elastic 
E) unit elastic 
A) upward-sloping 
B) backward-bending 
C) perfectly inelastic 
D) perfectly elastic 
E) unit elastic

Question 9

If the income elasticity of demand for a service is 0.6, then a 5 percent increase in income will generate a __________ in quantity demanded

Accepted Answer

A) 3 percent decrease 
B) 3 percent increase 
C) 8.33 percent decrease 
D) 8.33 percent increase 
E) 0.12 percent decrease 
A) 3 percent decrease 
B) 3 percent increase 
C) 8.33 percent decrease 
D) 8.33 percent increase 
E) 0.12 percent decrease

Question 10

Cross-price elasticity of demand measures

Accepted Answer

A) elasticity of demand at the intersection of the supply and demand curves 
B) elasticity of supply at the intersection of supply and demand curves 
C) the relative elasticity of supply and demand at the intersection of the two curves 
D) the relationship between the demand for one good and the price of another 
E) the relationship between the demand for one good and the supply of another 
A) elasticity of demand at the intersection of the supply and demand curves 
B) elasticity of supply at the intersection of supply and demand curves 
C) the relative elasticity of supply and demand at the intersection of the two curves 
D) the relationship between the demand for one good and the price of another 
E) the relationship between the demand for one good and the supply of another

Question 11

The demand for a particular brand of automobile is likely to be more inelastic than the demand for automobiles in general.

Accepted Answer

A) True 
 B)False

Question 12

If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the demand for Pepsi-Cola is

Accepted Answer

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

Question 13

For which of the following medical goods or services is the income elasticity of demand likely to be largest?

Accepted Answer

A) emergency services after a car accident 
B) measles shots 
C) physical examinations for life insurance applications 
D) medical tests to diagnose specific symptoms 
E) face-lifts 
A) emergency services after a car accident 
B) measles shots 
C) physical examinations for life insurance applications 
D) medical tests to diagnose specific symptoms 
E) face-lifts

Question 14

Unit elastic demand occurs when

Accepted Answer

A) a one-unit increase in price leads to a one-unit decrease in quantity demanded 
B) a 1% increase in price leads to a one-unit decrease in quantity demanded 
C) price elasticity of demand is positive 
D) price elasticity of demand is exactly zero 
E) price elasticity of demand is exactly -1 
A) a one-unit increase in price leads to a one-unit decrease in quantity demanded 
B) a 1% increase in price leads to a one-unit decrease in quantity demanded 
C) price elasticity of demand is positive 
D) price elasticity of demand is exactly zero 
E) price elasticity of demand is exactly -1

Question 15

If the demand for a good is elastic, then total revenue

Accepted Answer

A) increases as price increases 
B) remains constant as quantity demanded increases 
C) increases as price decreases 
D) decreases as quantity demanded increases 
E) decreases as price decreases 
A) increases as price increases 
B) remains constant as quantity demanded increases 
C) increases as price decreases 
D) decreases as quantity demanded increases 
E) decreases as price decreases

Question 16

Which of the following describes a situation in which demand must be inelastic?

Accepted Answer

A) Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B) Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C) Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D) Total revenue decreases by $10 when the price of spats rises by $10. 
E) Total revenue decreases by more than $10 when the price of spats rises by $10. 
A) Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B) Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C) Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D) Total revenue decreases by $10 when the price of spats rises by $10. 
E) Total revenue decreases by more than $10 when the price of spats rises by $10.

Question 17

Economists distinguish between normal and inferior goods using

Accepted Answer

A) price elasticity of demand 
B) price elasticity of supply 
C) income elasticity of demand 
D) cross-price elasticity of demand 
E) tax incidence 
A) price elasticity of demand 
B) price elasticity of supply 
C) income elasticity of demand 
D) cross-price elasticity of demand 
E) tax incidence

Question 18

As the economy recovers from a recession, we should expect that

Accepted Answer

A) demand for inferior goods will fall and demand for normal goods will rise 
B) demand for both inferior and normal goods will rise 
C) demand for inferior goods will rise and demand for normal goods will fall 
D) demand for both inferior and normal goods will fall 
E) demand for complements will fall 
A) demand for inferior goods will fall and demand for normal goods will rise 
B) demand for both inferior and normal goods will rise 
C) demand for inferior goods will rise and demand for normal goods will fall 
D) demand for both inferior and normal goods will fall 
E) demand for complements will fall

Question 19

Which of the following tends to make demand for a good more elastic?

Accepted Answer

A) A reduction in the number of substitutes for the good. 
B) Consumers have a long time to adjust to a price change. 
C) The amount spent on the good is a small proportion of the consumer's budget. 
D) The good is broadly defined. 
E) The good is a necessity. 
A) A reduction in the number of substitutes for the good. 
B) Consumers have a long time to adjust to a price change. 
C) The amount spent on the good is a small proportion of the consumer's budget. 
D) The good is broadly defined. 
E) The good is a necessity.

Question 20

Exhibit 5-2   Use the information in Exhibit 5-2 to calculate the value of price elasticity of demand.

Accepted Answer

A) -2/3 
B) -1/3 
C) -3/5 
D) -5/3 
E) 0 
A) -2/3 
B) -1/3 
C) -3/5 
D) -5/3 
E) 0

Exam 5: Elasticity of Demand and Supply

A perfectly inelastic demand curve is

Cross-price elasticity of demand is used to determine whether

Exhibit 5-16 Between points a and b in Exhibit 5-16, the demand curve is

Exhibit 5-27 Consider Exhibit 5-27.Which graph depicts a unitary elastic demand?

Dusty Rags, Inc.provides janitorial services to retail stores.Dusty had been charging $10 per hour and selling 400 hours of service per week at that rate.When he raised his price to $15 per hour, his customers cut back to 300 weekly hours of service.Which of the following is true?

As DVDs become popular substitutes for video cassettes, demand for video cassettes is likely to

If the demand for ptyalin is unit elastic, then

John spends exactly the same dollar amount on candy bars each week, regardless of their price.John's demand curve for candy bars is

If the income elasticity of demand for a service is 0.6, then a 5 percent increase in income will generate a __________ in quantity demanded

Cross-price elasticity of demand measures

The demand for a particular brand of automobile is likely to be more inelastic than the demand for automobiles in general.

If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the demand for Pepsi-Cola is

For which of the following medical goods or services is the income elasticity of demand likely to be largest?

Unit elastic demand occurs when

If the demand for a good is elastic, then total revenue

Which of the following describes a situation in which demand must be inelastic?

Economists distinguish between normal and inferior goods using

As the economy recovers from a recession, we should expect that

Which of the following tends to make demand for a good more elastic?

Exhibit 5-2 Use the information in Exhibit 5-2 to calculate the value of price elasticity of demand.

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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