Question 1

If the price elasticity of supply is 0.5, a 10 percent increase in price will cause a:

Accepted Answer

A) 5 percent increase in quantity supplied. 
B) 5 percent decrease in quantity supplied. 
C) 20 percent increase in quantity supplied. 
D) 20 percent decrease in quantity supplied. 
A) 5 percent increase in quantity supplied. 
B) 5 percent decrease in quantity supplied. 
C) 20 percent increase in quantity supplied. 
D) 20 percent decrease in quantity supplied.

Question 2

Suppose that the price elasticity of supply is 0.5.If price falls by 10% how much will quantity supplied fall?

Accepted Answer

A price elasticity of supply o

Question 3

As the price of beachfront cottages in Florida was raised from $400,000 to $500,000, their quantity supplied rose from 2,000 to 2,100. Rounding to the nearest tenth, the elasticity of supply of beachfront cottages is:

Accepted Answer

A) 0.4. 
B) 0.2. 
C) 1.0. 
D) 4.6. 
A) 0.4. 
B) 0.2. 
C) 1.0. 
D) 4.6.

Question 4

For substitutes:

Accepted Answer

A) cross-price elasticity of demand can be a negative value. 
B) cross-price elasticity of demand can be any positive value. 
C) cross-price elasticity of demand can be any value less than 1. 
D) price elasticity of demand can be any positive value. 
A) cross-price elasticity of demand can be a negative value. 
B) cross-price elasticity of demand can be any positive value. 
C) cross-price elasticity of demand can be any value less than 1. 
D) price elasticity of demand can be any positive value.

Question 5

When demand is perfectly inelastic, there is no change in quantity demanded after a change in price.

Accepted Answer

A) True 
 B)False

Question 6

When the demand curve is highly inelastic, there is a strong incentive for suppliers to find a way to collectively reduce the quantity sold in the market and raise the price of the product.

Accepted Answer

A) True 
 B)False

Question 7

As the price of samosas (a triangular pastry in India)was raised from 2 to 3 rupees (Indian currency), their quantity demanded fell from 15,000 to 12,000. Rounding to the nearest tenth, the elasticity of demand of samosas is:

Accepted Answer

A) 4. 
B) 0.6. 
C) 1.8. 
D) impossible to determine because we don't know the exchange rate of the rupee. 
A) 4. 
B) 0.6. 
C) 1.8. 
D) impossible to determine because we don't know the exchange rate of the rupee.

Question 8

During World War II, the price of rubber went up considerably. The rise in price stimulated research for alternatives. Today's automobile tires are made almost entirely from synthetic materials. As a result, the increase in the price of rubber eventually led to a very large drop in quantity demanded. This is an example of how the price elasticity of demand:

Accepted Answer

A) falls the less specifically the good is defined. 
B) rises the less specifically the good is defined. 
C) falls the greater the time frame considered. 
D) rises the greater the time frame considered. 
A) falls the less specifically the good is defined. 
B) rises the less specifically the good is defined. 
C) falls the greater the time frame considered. 
D) rises the greater the time frame considered.

Question 9

Under which of the following two scenarios would demand be more elastic? Explain.
(a)Demand for a new car.
(b)Demand for a tank of gas for your current car.

Accepted Answer

Demand would be more elastic in the firs

Question 10

Demonstrate graphically and explain verbally a perfectly inelastic demand curve.

Accepted Answer

A perfectly inelastic demand curve is on

Question 11

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 12

If the demand for agricultural output is highly inelastic, an improvement in the technology used in the agricultural industry most likely will cause a:

Accepted Answer

A) small drop in the price of agricultural output combined with a small increase in quantity. 
B) small drop in the price of agricultural output combined with a large increase in quantity. 
C) large drop in the price of agricultural output combined with a small increase in quantity. 
D) large drop in the price of agricultural output combined with a large decrease in quantity. 
A) small drop in the price of agricultural output combined with a small increase in quantity. 
B) small drop in the price of agricultural output combined with a large increase in quantity. 
C) large drop in the price of agricultural output combined with a small increase in quantity. 
D) large drop in the price of agricultural output combined with a large decrease in quantity.

Question 13

Consider the following demand curve:   What is the price elasticity at point A? At point B?

Accepted Answer

The price elasticity

Question 14

If milk and cookies are complements and the price of cookies falls, we would expect to see:

Accepted Answer

A) an increase in the demand for milk. 
B) a decrease in the demand for milk. 
C) an increase in the quantity demanded for milk but no change in demand. 
D) a decrease in the quantity demanded for milk but no change in demand. 
A) an increase in the demand for milk. 
B) a decrease in the demand for milk. 
C) an increase in the quantity demanded for milk but no change in demand. 
D) a decrease in the quantity demanded for milk but no change in demand.

Question 15

Refer to the following table to answer the question. Which of the following statements is true? $$\begin{array} { | c | c | c | c | } 
\hline \text { Price of } \mathbf { A } & \begin{array} { c } 
\text { Quantity Demanded } \
\text { of } \mathbf { A }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded of } \
\mathbf { B }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded } \
\text { of } \mathbf { C }
\end{array} \
\hline \$ 1.00 & 80 & 100 & 5 \
\hline \$ 1.50 & 60 & 98 & 10 \
\hline \$ 2.00 & 40 & 96 & 15 \
\hline \$ 2.50 & 20 & 94 & 20 \
\hline \$ 3.00 & 0 & 92 & 25 \
\hline
\end{array}$$

Accepted Answer

A) A and B are complements whereas A and C are substitutes. 
B) A and C are complements whereas A and B are substitutes. 
C) A and B are complements and A and C are complements. 
D) A and B are substitutes and A and C are substitutes. 
A) A and B are complements whereas A and C are substitutes. 
B) A and C are complements whereas A and B are substitutes. 
C) A and B are complements and A and C are complements. 
D) A and B are substitutes and A and C are substitutes.

Question 16

What is the difference between elastic and inelastic demand and supply?

Accepted Answer

The difference relates to whether the pe

Question 17

It is estimated that a 10 percent decline in income will reduce cigarette smoking by 1.4 percent. From this information one can conclude that cigarettes are most likely:

Accepted Answer

A) a luxury. 
B) a necessity. 
C) an inferior good. 
D) a large portion of one's budget. 
A) a luxury. 
B) a necessity. 
C) an inferior good. 
D) a large portion of one's budget.

Question 18

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

Accepted Answer

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

Question 19

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 20

Refer to the following graph.   The demand curve with the greatest elasticity is:

Accepted Answer

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

Exam 6: Describing Supply and Demand: Elasticities

If the price elasticity of supply is 0.5, a 10 percent increase in price will cause a:

Suppose that the price elasticity of supply is 0.5.If price falls by 10% how much will quantity supplied fall?

As the price of beachfront cottages in Florida was raised from $400,000 to $500,000, their quantity supplied rose from 2,000 to 2,100. Rounding to the nearest tenth, the elasticity of supply of beachfront cottages is:

For substitutes:

When demand is perfectly inelastic, there is no change in quantity demanded after a change in price.

When the demand curve is highly inelastic, there is a strong incentive for suppliers to find a way to collectively reduce the quantity sold in the market and raise the price of the product.

As the price of samosas (a triangular pastry in India)was raised from 2 to 3 rupees (Indian currency), their quantity demanded fell from 15,000 to 12,000. Rounding to the nearest tenth, the elasticity of demand of samosas is:

Under which of the following two scenarios would demand be more elastic? Explain. (a)Demand for a new car. (b)Demand for a tank of gas for your current car.

Demonstrate graphically and explain verbally a perfectly inelastic demand curve.

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

If the demand for agricultural output is highly inelastic, an improvement in the technology used in the agricultural industry most likely will cause a:

Consider the following demand curve: What is the price elasticity at point A? At point B?

If milk and cookies are complements and the price of cookies falls, we would expect to see:

Refer to the following table to answer the question. Which of the following statements is true? Price of Quantity Demanded of Quantity Demanded of Quantity Demanded of \ 1.00 80 100 5 \ 1.50 60 98 10 \ 2.00 40 96 15 \ 2.50 20 94 20 \ 3.00 0 92 25

What is the difference between elastic and inelastic demand and supply?

It is estimated that a 10 percent decline in income will reduce cigarette smoking by 1.4 percent. From this information one can conclude that cigarettes are most likely:

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

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

Refer to the following graph. The demand curve with the greatest elasticity is:

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