Question 1

If the supply of a product is inelastic, this implies that a specific percentage change in price leads to:

Accepted Answer

A) an equal percentage change in the quantity supplied. 
B) a larger percentage change in the quantity supplied. 
C) a smaller percentage change in the quantity supplied. 
D) no percentage change in the quantity supplied. 
A) an equal percentage change in the quantity supplied. 
B) a larger percentage change in the quantity supplied. 
C) a smaller percentage change in the quantity supplied. 
D) no percentage change in the quantity supplied. C

Question 2

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. D

Question 3

Income elasticity is defined as the:

Accepted Answer

A) change in demand divided by the change in income. 
B) percentage change in demand divided by the percentage change in income. 
C) change in income divided by the change in demand. 
D) percentage change in income divided by the percentage change in demand. 
A) change in demand divided by the change in income. 
B) percentage change in demand divided by the percentage change in income. 
C) change in income divided by the change in demand. 
D) percentage change in income divided by the percentage change in demand. B

Question 4

Define the price elasticity of demand.

Accepted Answer

The price elasticity of demand is a meas

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

Suppose that the price elasticity of demand is 6.If price rises by 10% how much will quantity demanded fall?

Accepted Answer

A price elasticity of demand o

Question 7

Most likely, the elasticity of demand for transportation is greater than the elasticity of demand for cars.

Accepted Answer

A) True 
 B)False

Question 8

In California, the price elasticity for vanity license plates is .5 and their price is $78. California is:

Accepted Answer

A) maximizing revenue since elasticity is less than 1 and revenue will increase after a price increase when demand is inelastic. 
B) not maximizing revenue since elasticity is less than 1 and revenue will increase after a price increase when demand is inelastic. 
C) maximizing revenue since elasticity is less than 1 and revenue will decrease after a price increase when demand is inelastic. 
D) not maximizing revenue since elasticity is less than 1 and revenue will decrease after a price increase when demand is inelastic. 
A) maximizing revenue since elasticity is less than 1 and revenue will increase after a price increase when demand is inelastic. 
B) not maximizing revenue since elasticity is less than 1 and revenue will increase after a price increase when demand is inelastic. 
C) maximizing revenue since elasticity is less than 1 and revenue will decrease after a price increase when demand is inelastic. 
D) not maximizing revenue since elasticity is less than 1 and revenue will decrease after a price increase when demand is inelastic.

Question 9

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 10

Consider the following demand curve:   (a)Calculate the elasticity of demand between points A and B.
(b)Calculate the elasticity of demand between points B and C.

Accepted Answer

(a)The elasticity of demand between poin

Question 11

If two goods have a cross-price elasticity value of +3,are they substitutes or complements?

Accepted Answer

When a cross-price elasticity

Question 12

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

Accepted Answer

A) price will rise 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 rise 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 13

Refer to the following table to answer the question. A local government is looking to reduce "undesirable" behavior on the part of its citizens: drinking alcoholic beverages and smoking. Assuming people cannot shop for alcoholic beverages out of town, a 10 percent tax on all alcoholic beverages would have the largest proportionate effect on the sale of: $\begin{array}{|c|c|}
\hline \text { Good } & \text { Elasticity } \
\hline \text { Cigarettes } & .3 \
\hline \text { Liquor } & .5 \
\hline \text { Wine } & .4 \
\hline \text { Beer } & .1\
\hline 
\end{array}$

Accepted Answer

A) cigarettes. 
B) liquor. 
C) beer. 
D) wine. 
A) cigarettes. 
B) liquor. 
C) beer. 
D) wine.

Question 14

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 15

The supply of Russian caviar from the Caspian Sea diminished after the collapse of Soviet communism. The price of caviar rose from $395 a pound to $595 a pound. Still, revenue from the sale of caviar rose 30 percent. You can conclude that:

Accepted Answer

A) an elastic supply curve for caviar has shifted to the left. 
B) an inelastic supply curve for caviar has shifted to the left. 
C) the supply curve for caviar has shifted to the left along an inelastic demand curve. 
D) the supply curve for caviar has shifted to the left along an elastic demand curve. 
A) an elastic supply curve for caviar has shifted to the left. 
B) an inelastic supply curve for caviar has shifted to the left. 
C) the supply curve for caviar has shifted to the left along an inelastic demand curve. 
D) the supply curve for caviar has shifted to the left along an elastic demand curve.

Question 16

Cross-price elasticity of demand is defined as the:

Accepted Answer

A) percentage change in quantity demanded divided by percentage change in the price of the same good. 
B) percentage change in demand divided by percentage change in the price of another good. 
C) change in the price of another good divided by the change in quantity demanded. 
D) percentage change in the price of another good divided by the percentage change in quantity demanded. 
A) percentage change in quantity demanded divided by percentage change in the price of the same good. 
B) percentage change in demand divided by percentage change in the price of another good. 
C) change in the price of another good divided by the change in quantity demanded. 
D) percentage change in the price of another good divided by the percentage change in quantity demanded.

Question 17

The short-run elasticity of demand for gasoline sold at gasoline stations is 0.20. If terrorism causes the supply of gasoline to fall, resulting in a 5 percent drop in quantity, and other things remain the same, the price per gallon will increase by:

Accepted Answer

A) 4 percent. 
B) 5 percent. 
C) 20 percent. 
D) 25 percent. 
A) 4 percent. 
B) 5 percent. 
C) 20 percent. 
D) 25 percent.

Question 18

Refer to the graph shown. Which of the following curves demonstrates a perfectly inelastic 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 19

Refer to the graph shown. When price declines by 11 percent, quantity supplied falls by 8 percent. Which curve best demonstrates the 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 20

Along a straight-line demand curve, elasticity:

Accepted Answer

A) rises as price rises. 
B) declines as price rises. 
C) is equal to slope. 
D) is always zero. 
A) rises as price rises. 
B) declines as price rises. 
C) is equal to slope. 
D) is always zero.

Exam 6: Describing Supply and Demand: Elasticities

If the supply of a product is inelastic, this implies that a specific percentage change in price leads to:

If elasticity of demand is less than 1:

Income elasticity is defined as the:

Define the price elasticity of demand.

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

Suppose that the price elasticity of demand is 6.If price rises by 10% how much will quantity demanded fall?

Most likely, the elasticity of demand for transportation is greater than the elasticity of demand for cars.

In California, the price elasticity for vanity license plates is .5 and their price is $78. California is:

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

Consider the following demand curve: (a)Calculate the elasticity of demand between points A and B. (b)Calculate the elasticity of demand between points B and C.

If two goods have a cross-price elasticity value of +3,are they substitutes or complements?

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

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

The supply of Russian caviar from the Caspian Sea diminished after the collapse of Soviet communism. The price of caviar rose from $395 a pound to $595 a pound. Still, revenue from the sale of caviar rose 30 percent. You can conclude that:

Cross-price elasticity of demand is defined as the:

The short-run elasticity of demand for gasoline sold at gasoline stations is 0.20. If terrorism causes the supply of gasoline to fall, resulting in a 5 percent drop in quantity, and other things remain the same, the price per gallon will increase by:

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

Refer to the graph shown. When price declines by 11 percent, quantity supplied falls by 8 percent. Which curve best demonstrates the elasticity in this example?

Along a straight-line demand curve, elasticity:

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