Question 1

Along a downward-sloping straight-line demand curve beginning at the price where demand intersects the price axis, as price declines, revenue:

Accepted Answer

A)  declines. 
B)  rises. 
C)  declines and then rises. 
D)  rises and then declines. 
A)  declines. 
B)  rises. 
C)  declines and then rises. 
D)  rises and then declines.

Question 2

Refer to the graph shown. At point D demand is:

Accepted Answer

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

Question 3

Online music streaming services, such as Spotify, have decimated the market for CDs. Based on this information, you can conclude that streaming services:

Accepted Answer

A)  and CDs are complementary goods. 
B)  and CDs are substitutes. 
C)  has a higher income elasticity than CDs. 
D)  has a higher price elasticity than CDs. 
A)  and CDs are complementary goods. 
B)  and CDs are substitutes. 
C)  has a higher income elasticity than CDs. 
D)  has a higher price elasticity than CDs.

Question 4

Refer to the following graph.   Elasticity is greatest at point:

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  It is the same everywhere along this supply curve. 
A)  A. 
B)  B. 
C)  C. 
D)  It is the same everywhere along this supply curve.

Question 5

Compute the approximate elasticity of demand from the following data:

Accepted Answer

A)  .87. 
B)  1.15. 
C)  1.5. 
D)  5.0. 
A)  .87. 
B)  1.15. 
C)  1.5. 
D)  5.0.

Question 6

Refer to the graph shown. Which supply curve is perfectly elastic?

Accepted Answer

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

Question 7

Elizabeth Savoca estimated that for every 1 percent increase in tuition costs at a college, 2.4 percent fewer students applied to that college. This indicates that the elasticity of applying to college is:

Accepted Answer

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

Question 8

If demand is highly elastic and supply shifts to the right:

Accepted Answer

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

Question 9

If the amount of land supplied remains the same even when the price of land increases, the:

Accepted Answer

A)  supply of land must be perfectly elastic. 
B)  supply of land must be perfectly inelastic. 
C)  demand for land must be perfectly elastic. 
D)  demand for land must be perfectly inelastic. 
A)  supply of land must be perfectly elastic. 
B)  supply of land must be perfectly inelastic. 
C)  demand for land must be perfectly elastic. 
D)  demand for land must be perfectly inelastic.

Question 10

Revenue remains unchanged along a straight-line demand curve.

Accepted Answer

A) True 
 B)False

Question 11

Refer to the graph shown. The approximate elasticity of segment AB is:

Accepted Answer

A)  1/2. 
B)  2/3. 
C)  3/2. 
D)  1/3. 
A)  1/2. 
B)  2/3. 
C)  3/2. 
D)  1/3.

Question 12

If a $100 drop in the price of a $10,000 car resulted in an increase in the quantity of cars purchased from 100 to 110 and a $100 drop in the price of a $1,000 vacation rental resulted in an increase in the quantity of weekly vacation homes rented from 100 to 110, the price elasticity of demand is:

Accepted Answer

A)  greater for the car. 
B)  less for the car. 
C)  the same for both the car and the vacation rental. 
D)  not comparable. 
A)  greater for the car. 
B)  less for the car. 
C)  the same for both the car and the vacation rental. 
D)  not comparable.

Question 13

Refer to the graph shown. At which point is elasticity infinite?

Accepted Answer

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

Question 14

Demand is said to be elastic when the:

Accepted Answer

A)  percentage change in quantity demanded is less than the percentage change in price. 
B)  percentage change in quantity demanded is greater than the percentage change in price. 
C)  change in quantity demanded is less than the change in price. 
D)  change in quantity demanded is greater than the change in price. 
A)  percentage change in quantity demanded is less than the percentage change in price. 
B)  percentage change in quantity demanded is greater than the percentage change in price. 
C)  change in quantity demanded is less than the change in price. 
D)  change in quantity demanded is greater than the change in price.

Question 15

If elasticity of demand is less than 1:

Accepted Answer

A)  a rise in price decreases total revenue. 
B)  a decline in price increases total revenue. 
C)  a decline in price will not change total revenue. 
D)  a rise in price increases total revenue. 
A)  a rise in price decreases total revenue. 
B)  a decline in price increases total revenue. 
C)  a decline in price will not change total revenue. 
D)  a rise in price increases total revenue.

Question 16

Refer to the graph shown. Which of the following curves demonstrates a perfectly elastic demand curve?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  None of the curves 
A)  A 
B)  B 
C)  C 
D)  None of the curves

Question 17

For luxuries, 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 18

Suppose the demand for roses increases from 500 to 600 stems when income rises from $10,000 to $20,000. Income elasticity for roses is:

Accepted Answer

A)  0.27. 
B)  3.6. 
C)  0.02. 
D)  2. 
A)  0.27. 
B)  3.6. 
C)  0.02. 
D)  2.

Question 19

Charlie will purchase 10 percent more cans of Coke if the price of a can of Coke falls by 5 percent. Charlie's price elasticity of demand for cans of Coke is:

Accepted Answer

A)  10. 
B)  5. 
C)  2. 
D)  1/2. 
A)  10. 
B)  5. 
C)  2. 
D)  1/2.

Question 20

When the price of a good increases, what would we expect to see in the markets for its substitutes?

Accepted Answer

A)  Higher prices and increased sales 
B)  Higher prices and decreased sales 
C)  Lower prices and decreased sales 
D)  Lower prices and increased sales 
A)  Higher prices and increased sales 
B)  Higher prices and decreased sales 
C)  Lower prices and decreased sales 
D)  Lower prices and increased sales

Exam 6: Describing Supply and Demand: Elasticities

Along a downward-sloping straight-line demand curve beginning at the price where demand intersects the price axis, as price declines, revenue:

Refer to the graph shown. At point D demand is:

Online music streaming services, such as Spotify, have decimated the market for CDs. Based on this information, you can conclude that streaming services:

Refer to the following graph. Elasticity is greatest at point:

Compute the approximate elasticity of demand from the following data:

Refer to the graph shown. Which supply curve is perfectly elastic?

Elizabeth Savoca estimated that for every 1 percent increase in tuition costs at a college, 2.4 percent fewer students applied to that college. This indicates that the elasticity of applying to college is:

If demand is highly elastic and supply shifts to the right:

If the amount of land supplied remains the same even when the price of land increases, the:

Revenue remains unchanged along a straight-line demand curve.

Refer to the graph shown. The approximate elasticity of segment AB is:

If a $100 drop in the price of a $10,000 car resulted in an increase in the quantity of cars purchased from 100 to 110 and a $100 drop in the price of a $1,000 vacation rental resulted in an increase in the quantity of weekly vacation homes rented from 100 to 110, the price elasticity of demand is:

Refer to the graph shown. At which point is elasticity infinite?

Demand is said to be elastic when the:

If elasticity of demand is less than 1:

Refer to the graph shown. Which of the following curves demonstrates a perfectly elastic demand curve?

For luxuries, income elasticity is:

Suppose the demand for roses increases from 500 to 600 stems when income rises from $10,000 to $20,000. Income elasticity for roses is:

Charlie will purchase 10 percent more cans of Coke if the price of a can of Coke falls by 5 percent. Charlie's price elasticity of demand for cans of Coke is:

When the price of a good increases, what would we expect to see in the markets for its substitutes?

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