Question 1

The demand for a good is inelastic. Which of the following would be an explanation for this?

Accepted Answer

A)  The good is a necessity. 
B)  The good is specifically defined. 
C)  The good costs a large portion of one's total income. 
D)  The time interval considered is long. 
A)  The good is a necessity. 
B)  The good is specifically defined. 
C)  The good costs a large portion of one's total income. 
D)  The time interval considered is long.

Question 2

Refer to the table shown to answer the question. Between $1.60 and $1.80, demand is: $$\begin{array} { | c | c | } 
\hline \text { Price } & \text { Quantity Demanded } \
\hline \$ 1.60 & 130 \
\hline \$ 1.80 & 120 \
\hline \$ 2.00 & 110 \
\hline \$ 2.20 & 100 \
\hline \$ 2.40 & 90 \
\hline \$ 2.60 & 80 \
\hline
\end{array}$$

Accepted Answer

A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  perfectly elastic. 
A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  perfectly elastic.

Question 3

Refer to the graph shown. When price rises by 20 percent, quantity supplied rises by 25 percent. Which curve best demonstrates elasticity in this example?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  None of the answers is correct. 
A)  A 
B)  B 
C)  C 
D)  None of the answers is correct.

Question 4

Refer to the graph shown. Which point has an elasticity less than 1?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 5

If demand is highly inelastic and supply shifts to the left:

Accepted Answer

A)  neither price nor quantity will rise much. 
B)  price will hardly rise at all; quantity will decline significantly. 
C)  price probably will rise significantly, as will quantity. 
D)  price will rise significantly; quantity hardly changes at all. 
A)  neither price nor quantity will rise much. 
B)  price will hardly rise at all; quantity will decline significantly. 
C)  price probably will rise significantly, as will quantity. 
D)  price will rise significantly; quantity hardly changes at all.

Question 6

Susan's price elasticity of restaurant meals is 2.27. If the price of a restaurant meal falls by 2 percent, the quantity of restaurant meals Susan demands will:

Accepted Answer

A)  increase by 2.27 percent. 
B)  fall by 2.27 percent. 
C)  increase by 4.54 percent. 
D)  increase by 22.7 percent. 
A)  increase by 2.27 percent. 
B)  fall by 2.27 percent. 
C)  increase by 4.54 percent. 
D)  increase by 22.7 percent.

Question 7

An economist estimates that with every 20 percent increase in income, the quantity of grapes purchased rises by 11.2 percent. From this information one would conclude that grapes are:

Accepted Answer

A)  a luxury. 
B)  not demanded. 
C)  an inferior good. 
D)  a normal good. 
A)  a luxury. 
B)  not demanded. 
C)  an inferior good. 
D)  a normal good.

Question 8

For complements:

Accepted Answer

A)  cross-price elasticity of demand is negative. 
B)  cross-price elasticity of demand is positive. 
C)  price elasticity of income is negative. 
D)  price elasticity of income is positive. 
A)  cross-price elasticity of demand is negative. 
B)  cross-price elasticity of demand is positive. 
C)  price elasticity of income is negative. 
D)  price elasticity of income is positive.

Question 9

Refer to the graph shown. The elasticity of demand is closest to 1 on line segment:

Accepted Answer

A)  AB. 
B)  BC. 
C)  CD. 
D)  The elasticity is not close to 1 on any of these line segments. 
A)  AB. 
B)  BC. 
C)  CD. 
D)  The elasticity is not close to 1 on any of these line segments.

Question 10

Refer to the graph shown. Demand is unit elastic when revenue is:

Accepted Answer

A)  $4,000. 
B)  $6,000. 
C)  $8,000. 
D)  $10,000. 
A)  $4,000. 
B)  $6,000. 
C)  $8,000. 
D)  $10,000.

Question 11

If supply is highly inelastic and demand shifts to the left:

Accepted Answer

A)  price will fall significantly; quantity hardly changes at all. 
B)  price will hardly change at all; quantity will fall significantly. 
C)  price will fall significantly as will quantity. 
D)  price and quantity will hardly change at all. 
A)  price will fall significantly; quantity hardly changes at all. 
B)  price will hardly change at all; quantity will fall significantly. 
C)  price will fall significantly as will quantity. 
D)  price and quantity will hardly change at all.

Question 12

Refer to the following table to answer the question. Supply shown by the table is: $$\begin{array} { | c | c | } 
\hline \text { Price } & \text { Quantity Demanded } \
\hline \$ 6.00 & \mathbf { 8 0 } \
\hline \$ 8.00 & 90 \
\hline \$ 10.00 & 100 \
\hline \$ 12.00 & 110 \
\hline \$ 14.00 & 120 \
\hline
\end{array}$$

Accepted Answer

A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  changing as price changes. 
A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  changing as price changes.

Question 13

Refer to the graph shown. Area F is:

Accepted Answer

A)  smaller than areas B and C, because demand is elastic between $10 and $30. 
B)  larger than areas B and C, because demand is elastic between $10 and $30. 
C)  larger than areas B and C, because demand is inelastic between $10 and $30. 
D)  smaller than areas B and C, because demand is inelastic between $10 and $30. 
A)  smaller than areas B and C, because demand is elastic between $10 and $30. 
B)  larger than areas B and C, because demand is elastic between $10 and $30. 
C)  larger than areas B and C, because demand is inelastic between $10 and $30. 
D)  smaller than areas B and C, because demand is inelastic between $10 and $30.

Question 14

Refer to the graph shown. Calculate the approximate elasticity of demand for the line segment CD:

Accepted Answer

A)  3. 
B)  1/3. 
C)  1/5. 
D)  5. 
A)  3. 
B)  1/3. 
C)  1/5. 
D)  5.

Question 15

An economist estimates that for every 1 percent increase in the price of natural Christmas trees, the demand for artificial trees rises by .2 percent. From this information one can conclude that:

Accepted Answer

A)  the income elasticity of demand for natural Christmas trees is less than 1. 
B)  natural Christmas trees are luxuries. 
C)  natural and artificial Christmas trees are substitutes. 
D)  natural and artificial Christmas trees are complements. 
A)  the income elasticity of demand for natural Christmas trees is less than 1. 
B)  natural Christmas trees are luxuries. 
C)  natural and artificial Christmas trees are substitutes. 
D)  natural and artificial Christmas trees are complements.

Question 16

Compared to the elasticity of demand for off-peak trains, one would expect elasticity of demand for peak-time trains to be:

Accepted Answer

A)  greater. 
B)  less. 
C)  unrelated. 
D)  the same. 
A)  greater. 
B)  less. 
C)  unrelated. 
D)  the same.

Question 17

The demand for a good is elastic. Which of the following would be the most likely explanation for this?

Accepted Answer

A)  The good is a necessity. 
B)  The good is broadly defined. 
C)  The good costs a small portion of one's total income. 
D)  The time interval considered is long. 
A)  The good is a necessity. 
B)  The good is broadly defined. 
C)  The good costs a small portion of one's total income. 
D)  The time interval considered is long.

Question 18

For normal goods, income elasticity is:

Accepted Answer

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

Question 19

Refer to the table shown to answer the question. Between $2.20 and $2.40, demand is: $$\begin{array} { | c | c | } 
\hline \text { Price } & \text { Qu.ntity Demanded } \
\hline \$ 1.60 & 130 \
\hline \$ 1.80 & 120 \
\hline \$ 2.00 & 110 \
\hline \$ 2.20 & 100 \
\hline \$ 2.40 & 90 \
\hline \$ 2.60 & 80 \
\hline
\end{array}$$

Accepted Answer

A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  perfectly elastic. 
A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  perfectly elastic.

Question 20

Refer to the graph shown. Which point has an elasticity greater than 1?

Accepted Answer

A)  E 
B)  B 
C)  C 
D)  D 
A)  E 
B)  B 
C)  C 
D)  D

Exam 6: Describing Supply and Demand: Elasticities

The demand for a good is inelastic. Which of the following would be an explanation for this?

Refer to the table shown to answer the question. Between $1.60 and $1.80, demand is: Price Quantity Demanded \ 1.60 130 \ 1.80 120 \ 2.00 110 \ 2.20 100 \ 2.40 90 \ 2.60 80

Refer to the graph shown. When price rises by 20 percent, quantity supplied rises by 25 percent. Which curve best demonstrates elasticity in this example?

Refer to the graph shown. Which point has an elasticity less than 1?

If demand is highly inelastic and supply shifts to the left:

Susan's price elasticity of restaurant meals is 2.27. If the price of a restaurant meal falls by 2 percent, the quantity of restaurant meals Susan demands will:

An economist estimates that with every 20 percent increase in income, the quantity of grapes purchased rises by 11.2 percent. From this information one would conclude that grapes are:

For complements:

Refer to the graph shown. The elasticity of demand is closest to 1 on line segment:

Refer to the graph shown. Demand is unit elastic when revenue is:

If supply is highly inelastic and demand shifts to the left:

Refer to the following table to answer the question. Supply shown by the table is: Price Quantity Demanded \ 6.00 \ 8.00 90 \ 10.00 100 \ 12.00 110 \ 14.00 120

Refer to the graph shown. Area F is:

Refer to the graph shown. Calculate the approximate elasticity of demand for the line segment CD:

An economist estimates that for every 1 percent increase in the price of natural Christmas trees, the demand for artificial trees rises by .2 percent. From this information one can conclude that:

Compared to the elasticity of demand for off-peak trains, one would expect elasticity of demand for peak-time trains to be:

The demand for a good is elastic. Which of the following would be the most likely explanation for this?

For normal goods, income elasticity is:

Refer to the table shown to answer the question. Between $2.20 and $2.40, demand is: Price Qu.ntity Demanded \ 1.60 130 \ 1.80 120 \ 2.00 110 \ 2.20 100 \ 2.40 90 \ 2.60 80

Refer to the graph shown. Which point has an elasticity greater than 1?

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

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Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

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Perfect Competition

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Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

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