Question 1

If the producers of a product do not respond to price changes at all, then an increase in demand results in

Accepted Answer

A) no change in price but a large increase in equilibrium quantity. 
B) an increase in price but no change in equilibrium quantity. 
C) as much an increase in price as in equilibrium quantity. 
D) no change in both price and equilibrium quantity. 
E) a large increase in price and a large decrease in equilibrium quantity . 
A) no change in price but a large increase in equilibrium quantity. 
B) an increase in price but no change in equilibrium quantity. 
C) as much an increase in price as in equilibrium quantity. 
D) no change in both price and equilibrium quantity. 
E) a large increase in price and a large decrease in equilibrium quantity .

Question 2

In the case of a price floor,

Accepted Answer

A) there will be a shortage. 
B) there is no need for government to buy any excess. 
C) government must require producers to increase production to meet demand. 
D) there is a redistribution of income from consumers to producers. 
E) supply decreases. 
A) there will be a shortage. 
B) there is no need for government to buy any excess. 
C) government must require producers to increase production to meet demand. 
D) there is a redistribution of income from consumers to producers. 
E) supply decreases.

Question 3

By knowing the price elasticity of demand, economists can anticipate the size of shifts in the supply of a commodity, such as oil.

Accepted Answer

A) True 
 B)False

Question 4

If supply is perfectly elastic, then the supply curve must

Accepted Answer

A) be vertical. 
B) be horizontal. 
C) be upward sloping. 
D) be downward sloping. 
E) have a slope of zero. 
A) be vertical. 
B) be horizontal. 
C) be upward sloping. 
D) be downward sloping. 
E) have a slope of zero.

Question 5

Suppose one market demand (D1) has a price elasticity of .65 and a second market demand (D2) has a price elasticity of .80. In comparing price elasticities of demand, it is proper to say that

Accepted Answer

A) D2 is elastic compared to D1. 
B) D2 is inelastic compared to D1. 
C) D2 is more inelastic than D1. 
D) D2 is more elastic than D1. 
E) the elasticity of D1 and D2 is the same. 
A) D2 is elastic compared to D1. 
B) D2 is inelastic compared to D1. 
C) D2 is more inelastic than D1. 
D) D2 is more elastic than D1. 
E) the elasticity of D1 and D2 is the same.

Question 6

Calculate the cross-price elasticity for the following goods. Are they substitutes or complements?

Accepted Answer

The answer of Calculate the cross-price elasticity for the following...

Question 7

A price floor would result in a(n)

Accepted Answer

A) surplus. 
B) shortage. 
C) increase in equilibrium price. 
D) decrease in equilibrium price. 
E) shift of the demand curve to the right. 
A) surplus. 
B) shortage. 
C) increase in equilibrium price. 
D) decrease in equilibrium price. 
E) shift of the demand curve to the right.

Question 8

A price ceiling would result in a(n)

Accepted Answer

A) surplus. 
B) shortage. 
C) increase in equilibrium price. 
D) decrease in equilibrium price. 
E) increase in quantity supplied. 
A) surplus. 
B) shortage. 
C) increase in equilibrium price. 
D) decrease in equilibrium price. 
E) increase in quantity supplied.

Question 9

If a 3 percent change in price results in a 1.5 percent change in quantity demanded, then the price elasticity of demand is ____ and demand is ____.

Accepted Answer

A) 1/2; inelastic 
B) 1/2; elastic 
C) 2; inelastic 
D) 1; unit elastic 
E) 2; elastic 
A) 1/2; inelastic 
B) 1/2; elastic 
C) 2; inelastic 
D) 1; unit elastic 
E) 2; elastic

Question 10

If supply decreases and total revenue in an industry increases,

Accepted Answer

A) demand elasticity must be equal to 1. 
B) demand must be horizontal. 
C) demand elasticity must be greater than 1. 
D) we have a perfectly implausible situation. 
E) demand elasticity must be less than 1. 
A) demand elasticity must be equal to 1. 
B) demand must be horizontal. 
C) demand elasticity must be greater than 1. 
D) we have a perfectly implausible situation. 
E) demand elasticity must be less than 1.

Question 11

For a given shift in demand, the less elastic is supply, the

Accepted Answer

A) greater is the shift in demand. 
B) greater is the change in equilibrium quantity. 
C) smaller is the shift in demand. 
D) greater is the change in price. 
E) smaller is the change in price. 
A) greater is the shift in demand. 
B) greater is the change in equilibrium quantity. 
C) smaller is the shift in demand. 
D) greater is the change in price. 
E) smaller is the change in price.

Question 12

The price elasticity of demand is negative because the demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 13

A product has elastic demand if, when price rises, total revenue falls.

Accepted Answer

A) True 
 B)False

Question 14

Total revenue decreases if price increases and demand is inelastic.

Accepted Answer

A) True 
 B)False

Question 15

If a good is considered to be an inferior good, its income elasticity of demand is

Accepted Answer

A) greater than 1. 
B) less than 0. 
C) equal to 0. 
D) between 0 and 1. 
E) equal to 1. 
A) greater than 1. 
B) less than 0. 
C) equal to 0. 
D) between 0 and 1. 
E) equal to 1.

Question 16

Consider two demand curves with different slopes. It is possible to predict ranges on each demand curve where the price elasticities of demand will be different.

Accepted Answer

A) True 
 B)False

Question 17

If a $1 increase in price changes quantity demanded by 4 units, the price elasticity of demand

Accepted Answer

A) must equal 0.25 percent. 
B) must equal 4 percent. 
C) must equal 1/4. 
D) cannot be calculated with this information. 
E) must equal 4. 
A) must equal 0.25 percent. 
B) must equal 4 percent. 
C) must equal 1/4. 
D) cannot be calculated with this information. 
E) must equal 4.

Question 18

Which of the following is a characteristic of an item with elastic demand?

Accepted Answer

A) A price that accounts for a small percentage of consumers' incomes 
B) A short time period under consideration 
C) A small number of competitors selling the product 
D) Many substitutes 
E) A high cost of production 
A) A price that accounts for a small percentage of consumers' incomes 
B) A short time period under consideration 
C) A small number of competitors selling the product 
D) Many substitutes 
E) A high cost of production

Question 19

Calculate the price elasticity of demand if a 8 percent change in the price of a product results in a 2.5 percent change in quantity demanded, and indicate whether demand is elastic, inelastic, or unit elastic.

Accepted Answer

2.5/8 = 0.

Question 20

Suppose that the price of product B increases from $10 to $15 and, in response, quantity demanded declines from 100 to 80. Using the midpoint formula, what is the elasticity of demand?

Accepted Answer

A) 2.5 
B) 1.33 
C) 0.4 
D) 0.56 
E) 0.75 
A) 2.5 
B) 1.33 
C) 0.4 
D) 0.56 
E) 0.75

Exam 4: Subtleties of the Supply and Demand Model

If the producers of a product do not respond to price changes at all, then an increase in demand results in

In the case of a price floor,

By knowing the price elasticity of demand, economists can anticipate the size of shifts in the supply of a commodity, such as oil.

If supply is perfectly elastic, then the supply curve must

Suppose one market demand (D1) has a price elasticity of .65 and a second market demand (D2) has a price elasticity of .80. In comparing price elasticities of demand, it is proper to say that

Calculate the cross-price elasticity for the following goods. Are they substitutes or complements?

A price floor would result in a(n)

A price ceiling would result in a(n)

If a 3 percent change in price results in a 1.5 percent change in quantity demanded, then the price elasticity of demand is ____ and demand is ____.

If supply decreases and total revenue in an industry increases,

For a given shift in demand, the less elastic is supply, the

The price elasticity of demand is negative because the demand curve slopes downward.

A product has elastic demand if, when price rises, total revenue falls.

Total revenue decreases if price increases and demand is inelastic.

If a good is considered to be an inferior good, its income elasticity of demand is

Consider two demand curves with different slopes. It is possible to predict ranges on each demand curve where the price elasticities of demand will be different.

If a $1 increase in price changes quantity demanded by 4 units, the price elasticity of demand

Which of the following is a characteristic of an item with elastic demand?

Calculate the price elasticity of demand if a 8 percent change in the price of a product results in a 2.5 percent change in quantity demanded, and indicate whether demand is elastic, inelastic, or unit elastic.

Suppose that the price of product B increases from $10 to $15 and, in response, quantity demanded declines from 100 to 80. Using the midpoint formula, what is the elasticity of demand?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

Filters

Suppose one market demand (D₁) has a price elasticity of .65 and a second market demand (D₂) has a price elasticity of .80. In comparing price elasticities of demand, it is proper to say that

If a 3 percent change in price results in a 1.5 percent change in quantity demanded, then the price elasticity of demand is and demand is .