Question 1

The demand for oil is inelastic. So, does an increase in the price of oil mean an increase in total revenue or a decrease in total revenue for oil producers?

Accepted Answer

Because the demand is inelasti

Question 2

A straight-line demand curve along which the price elasticity of demand equals 0 is one that

Accepted Answer

A)  forms a 45 degree angle with the vertical axis. 
B)  forms a 60 degree angle with the horizontal axis. 
C)  is vertical. 
D)  is horizontal. 
A)  forms a 45 degree angle with the vertical axis. 
B)  forms a 60 degree angle with the horizontal axis. 
C)  is vertical. 
D)  is horizontal.

Question 3

Suppose that the price elasticity of supply for oil is 0.1. Then, if the price of oil rises by 20 percent, the quantity of oil supplied will increase

Accepted Answer

A)  by 200 percent. 
B)  by 20 percent. 
C)  by 2 percent. 
D)  by 0.2 percent. 
A)  by 200 percent. 
B)  by 20 percent. 
C)  by 2 percent. 
D)  by 0.2 percent.

Question 4

Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends on the

Accepted Answer

A)  price elasticity of demand. 
B)  the price elasticity of supply. 
C)  income elasticity of demand. 
D)  cross elasticity of demand. 
A)  price elasticity of demand. 
B)  the price elasticity of supply. 
C)  income elasticity of demand. 
D)  cross elasticity of demand.

Question 5

If a 5 percent increase in the price of good A leads to a 4 percent decrease in the demand for good B, then ________.

Accepted Answer

A)  the goods are substitutes 
B)  only one good is a normal good 
C)  the goods are complements 
D)  both goods are normal goods 
A)  the goods are substitutes 
B)  only one good is a normal good 
C)  the goods are complements 
D)  both goods are normal goods

Question 6

"The price elasticity of demand is constant along a straight-line demand curve." Is this statement true or false?

Accepted Answer

A) True 
 B)False

Question 7

Sara's Strawberry Market maximizes its total revenue by selling strawberries for $1.25 a basket. At a price of $1.25, you predict that ________.

Accepted Answer

A)  the demand for strawberries is inelastic 
B)  Sara's sells most of the strawberries that she grows 
C)  the demand for strawberries is elastic 
D)  the demand for strawberries is unit elastic 
A)  the demand for strawberries is inelastic 
B)  Sara's sells most of the strawberries that she grows 
C)  the demand for strawberries is elastic 
D)  the demand for strawberries is unit elastic

Question 8

If the demand for cigarettes decreases after the U.S. Surgeon General publicizes five new diseases associated with smoking, this is conclusive evidence that the demand for cigarettes is elastic.

Accepted Answer

A) True 
 B)False

Question 9

"The Department of Agriculture came out today with its prediction for food price next year-4 to 5 percent increases on top of this year's already steep gains… Eggs, dairy products and cereals are up 10 percent... But the USDA says another big part of the American diet has seen only moderate price increases. Beef, poultry and pork will be up only 3 percent this year." Suppose the price elasticity of demand for beef is elastic. Consumption would then

Accepted Answer

A)  decrease by greater than 3 percent. 
B)  increase by greater than 3 percent. 
C)  decrease by less than 3 percent. 
D)  increase by less than 3 percent. 
A)  decrease by greater than 3 percent. 
B)  increase by greater than 3 percent. 
C)  decrease by less than 3 percent. 
D)  increase by less than 3 percent.

Question 10

-The table above gives the supply schedule for a product. Using the midpoint method, find the price elasticity of supply between points A and B, between B and C, between C and D, and between D and E.

Accepted Answer

Between A and B, the elasticity of suppl

Question 11

The air route from Dallas to Mexico City is served by more than one airline. The demand for tickets from American Airlines for that route is probably

Accepted Answer

A)  inelastic but more elastic than the demand for all tickets for that route. 
B)  elastic and more elastic than the demand for all tickets for that route. 
C)  inelastic and less elastic than the demand for all tickets for that route. 
D)  elastic but less elastic than the demand for all tickets for that route. 
A)  inelastic but more elastic than the demand for all tickets for that route. 
B)  elastic and more elastic than the demand for all tickets for that route. 
C)  inelastic and less elastic than the demand for all tickets for that route. 
D)  elastic but less elastic than the demand for all tickets for that route.

Question 12

The elasticity of supply does NOT depend on

Accepted Answer

A)  resource substitution possibilities. 
B)  the fraction of income spent on the product. 
C)  the time elapsed since the price change. 
D)  none of the above because all of the factors listed affect the elasticity of supply. 
A)  resource substitution possibilities. 
B)  the fraction of income spent on the product. 
C)  the time elapsed since the price change. 
D)  none of the above because all of the factors listed affect the elasticity of supply.

Question 13

-In the above figure, the price elasticity of supply at any given quantity is

Accepted Answer

A)  highest along S1, next highest along S2, and lowest along S3. 
B)  highest along S3, next highest along S2, and lowest along S1. 
C)  equal to zero on each of the three supply curves. 
D)  equal to one on each of the three supply curves. 
A)  highest along S1, next highest along S2, and lowest along S3. 
B)  highest along S3, next highest along S2, and lowest along S1. 
C)  equal to zero on each of the three supply curves. 
D)  equal to one on each of the three supply curves.

Question 14

The price of gasoline rises by 33 percent to $3.50 a gallon and stays at that price for the next two years. The quantity of gasoline demanded two years from now will be

Accepted Answer

A)  the same as one month after the price hike. 
B)  greater than one month after the price hike. 
C)  less than one month after the price hike. 
D)  the same as it would be if the price hike had never occurred. 
A)  the same as one month after the price hike. 
B)  greater than one month after the price hike. 
C)  less than one month after the price hike. 
D)  the same as it would be if the price hike had never occurred.

Question 15

Along a perfectly vertical demand curve, the price elasticity of demand

Accepted Answer

A)  equals 0. 
B)  is greater than 0 but less than 1.0. 
C)  equals 1.0. 
D)  is negative. 
A)  equals 0. 
B)  is greater than 0 but less than 1.0. 
C)  equals 1.0. 
D)  is negative.

Question 16

If the supply for a good is elastic, that means that when price increases, the

Accepted Answer

A)  supply will increase. 
B)  quantity supplied will decrease. 
C)  quantity supplied will increase by a smaller percentage than the price increased. 
D)  quantity supplied will increase by a greater percentage than the price increased. 
A)  supply will increase. 
B)  quantity supplied will decrease. 
C)  quantity supplied will increase by a smaller percentage than the price increased. 
D)  quantity supplied will increase by a greater percentage than the price increased.

Question 17

This summer the lobster catch in Maine has been especially large, but instead of celebrating the fisherman are suffering from a lower total revenue. (Source: New York Times, July 28, 2012) As the lobster catch increases there is

Accepted Answer

A)  a movement along the demand curve, resulting in a higher price and a decreased quantity. 
B)  a movement along the demand curve, resulting in a lower price and an increased quantity. 
C)  no change in either the price or the quantity. 
D)  a movement along the demand curve, resulting in a higher price and an increased quantity. 
A)  a movement along the demand curve, resulting in a higher price and a decreased quantity. 
B)  a movement along the demand curve, resulting in a lower price and an increased quantity. 
C)  no change in either the price or the quantity. 
D)  a movement along the demand curve, resulting in a higher price and an increased quantity.

Question 18

If a good is produced using inputs for which there are no substitutes, the good's

Accepted Answer

A)  elasticity of supply is likely to be small. 
B)  elasticity of supply is likely to be large. 
C)  elasticity of demand will be small. 
D)  elasticity of demand will be large. 
A)  elasticity of supply is likely to be small. 
B)  elasticity of supply is likely to be large. 
C)  elasticity of demand will be small. 
D)  elasticity of demand will be large.

Question 19

-The above figure shows the demand curve for movie rentals from Blockbuster. If Blockbuster lowered its price from $2.00 to $1.50, then total revenue would ________ because demand is ________.

Accepted Answer

A)  decrease; elastic 
B)  increase; elastic 
C)  decrease; inelastic 
D)  increase; inelastic 
A)  decrease; elastic 
B)  increase; elastic 
C)  decrease; inelastic 
D)  increase; inelastic

Question 20

An increase in subway fares in New York City will boost your expenditures on subway rides if

Accepted Answer

A)  the supply of subway rides is elastic. 
B)  the supply of subway rides is inelastic. 
C)  your demand for subway rides is elastic. 
D)  your demand for subway rides is inelastic. 
A)  the supply of subway rides is elastic. 
B)  the supply of subway rides is inelastic. 
C)  your demand for subway rides is elastic. 
D)  your demand for subway rides is inelastic.

Exam 4: Elasticity

The demand for oil is inelastic. So, does an increase in the price of oil mean an increase in total revenue or a decrease in total revenue for oil producers?

A straight-line demand curve along which the price elasticity of demand equals 0 is one that

Suppose that the price elasticity of supply for oil is 0.1. Then, if the price of oil rises by 20 percent, the quantity of oil supplied will increase

Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends on the

If a 5 percent increase in the price of good A leads to a 4 percent decrease in the demand for good B, then ________.

"The price elasticity of demand is constant along a straight-line demand curve." Is this statement true or false?

Sara's Strawberry Market maximizes its total revenue by selling strawberries for $1.25 a basket. At a price of $1.25, you predict that ________.

If the demand for cigarettes decreases after the U.S. Surgeon General publicizes five new diseases associated with smoking, this is conclusive evidence that the demand for cigarettes is elastic.

-The table above gives the supply schedule for a product. Using the midpoint method, find the price elasticity of supply between points A and B, between B and C, between C and D, and between D and E.

The air route from Dallas to Mexico City is served by more than one airline. The demand for tickets from American Airlines for that route is probably

The elasticity of supply does NOT depend on

-In the above figure, the price elasticity of supply at any given quantity is

The price of gasoline rises by 33 percent to $3.50 a gallon and stays at that price for the next two years. The quantity of gasoline demanded two years from now will be

Along a perfectly vertical demand curve, the price elasticity of demand

If the supply for a good is elastic, that means that when price increases, the

This summer the lobster catch in Maine has been especially large, but instead of celebrating the fisherman are suffering from a lower total revenue. (Source: New York Times, July 28, 2012) As the lobster catch increases there is

If a good is produced using inputs for which there are no substitutes, the good's

-The above figure shows the demand curve for movie rentals from Blockbuster. If Blockbuster lowered its price from $2.00 to $1.50, then total revenue would ________ because demand is ________.

An increase in subway fares in New York City will boost your expenditures on subway rides if

What Is Economics

The Economic Problem

Demand and Supply

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

-The above figure shows the demand curve for movie rentals from Blockbuster. If Blockbuster lowered its price from $2.00 to $1.50, then total revenue would because demand is .