Question 1

If goods A and B have a cross elasticity of demand that is positive, this is evidence that goods A and B are __________ goods.

Accepted Answer

A) complementary 
B) substitute 
C) normal 
D) inferior 
A) complementary 
B) substitute 
C) normal 
D) inferior

Question 2

If the cross elasticity of demand for good A with respect to good B is -0.87, then good A is

Accepted Answer

A) an inferior good. 
B) a normal good. 
C) a substitute for good B. 
D) a complement to good B. 
A) an inferior good. 
B) a normal good. 
C) a substitute for good B. 
D) a complement to good B.

Question 3

If tobacco is a normal, income inelastic good, it follows that a 10 percent decrease in income will __________ quantity demanded by __________ than 10 percent.

Accepted Answer

A) increase; less 
B) increase; more 
C) decrease; less 
D) decrease; more 
A) increase; less 
B) increase; more 
C) decrease; less 
D) decrease; more

Question 4

Exhibit 19-6
​
  
-Refer to Exhibit 19-6. Suppose the three equilibrium quantities are 700, 800, and 900, and the two other equilibrium prices are $2.20 and $2.75. What is the change in total revenue when a per-unit tax shifts S1 to S2, given that D2 is the relevant demand curve?

Accepted Answer

A) $260 
B) -$260 
C) $900 
D) $700 
E) -$200 
A) $260 
B) -$260 
C) $900 
D) $700 
E) -$200

Question 5

From the sellers' perspective, it is most desirable for a product to be perfectly elastic in demand.

Accepted Answer

A) True 
 B)False

Question 6

Suppose a producer decides that if the price of his or her product is $10, the quantity supplied will be 1,000 units, and if the price is $11, the quantity supplied will be 1,100. The supply of the good is

Accepted Answer

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

Question 7

It is very important for the seller of a good to know whether the good is elastic, unit elastic, or inelastic in demand so that she will know what will happen to total revenue when she changes the price of the good.

Accepted Answer

A) True 
 B)False

Question 8

Price elasticity of supply and price elasticity of demand are likely to be __________ in the __________ than in the __________.

Accepted Answer

A) higher; short run; long run 
B) lower; long run; short run 
C) higher; long run; short run 
D) lower; past; future 
E) higher; past; future 
A) higher; short run; long run 
B) lower; long run; short run 
C) higher; long run; short run 
D) lower; past; future 
E) higher; past; future

Question 9

Exhibit 19-9
​
  
-Refer to Exhibit 19-9. What is the price elasticity of supply between $2 and $4?

Accepted Answer

A) 2.0 
B) 0.75 
C) 1.33 
D) 0.50 
A) 2.0 
B) 0.75 
C) 1.33 
D) 0.50

Question 10

If a 5 percent reduction in the price of a commodity results in a 3 percent increase in the quantity demanded, demand is said to be

Accepted Answer

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

Question 11

The price elasticity of demand indicates

Accepted Answer

A) buyers' responsiveness to price changes. 
B) the slope of the demand curve. 
C) how far demand stretches over time. 
D) the extent to which a demand curve shifts as incomes change. 
E) none of the above 
A) buyers' responsiveness to price changes. 
B) the slope of the demand curve. 
C) how far demand stretches over time. 
D) the extent to which a demand curve shifts as incomes change. 
E) none of the above

Question 12

Exhibit 19-2
​
  
-Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. As a result, the equilibrium price

Accepted Answer

A) rises from $5.00 to $6.25. 
B) falls from $5.00 to $4.00. 
C) remains constant at $5.00. 
D) none of the above 
A) rises from $5.00 to $6.25. 
B) falls from $5.00 to $4.00. 
C) remains constant at $5.00. 
D) none of the above

Question 13

Exhibit 19-3
  
-Refer to Exhibit 19-3. If price decreases from $1.50 to $0.50, total revenue along the demand curve

Accepted Answer

A) increases to $67.50. 
B) increases to $87.50. 
C) remains at $87.50. 
D) decreases to $67.50. 
E) decreases to $27.50. 
A) increases to $67.50. 
B) increases to $87.50. 
C) remains at $87.50. 
D) decreases to $67.50. 
E) decreases to $27.50.

Question 14

Which of the following is a determinant of price elasticity of demand for good Z?

Accepted Answer

A) the number of substitutes for good Z 
B) the percentage of one's budget spent on good Z 
C) the amount of time that has passed since the price of good Z has changed 
D) b and c 
E) all of the above 
A) the number of substitutes for good Z 
B) the percentage of one's budget spent on good Z 
C) the amount of time that has passed since the price of good Z has changed 
D) b and c 
E) all of the above

Question 15

Exhibit 19-2
​
  
-Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a tax on the producers of good X, taxing them on each unit of good X they sell. As a result, the supply curve

Accepted Answer

A) shifts (down and) rightward from S2 to S1. 
B) shifts (up and) leftward from S1 to S2. 
C) does not shift from S1. 
D) There is not enough information to answer the question. 
A) shifts (down and) rightward from S2 to S1. 
B) shifts (up and) leftward from S1 to S2. 
C) does not shift from S1. 
D) There is not enough information to answer the question.

Question 16

Exhibit 19-4
​
  
-Refer to Exhibit 19-4. As a consequence of the depicted change in supply of X, the demand curve for Y shifted from D1 to D2. What is true of the cross elasticity of demand for Y?

Accepted Answer

A) Ec > 0 
B) Ec c = 0 
D) It cannot be determined from the information provided. 
A) Ec > 0 
B) Ec c = 0 
D) It cannot be determined from the information provided.

Question 17

Exhibit 19-3
  
-Refer to Exhibit 19-3. When price decreases from $5.50 to $4.50, the price elasticity of supply is

Accepted Answer

A) 0. 
B) 0.1. 
C) 0.5. 
D) 1.0. 
E) 5.0. 
A) 0. 
B) 0.1. 
C) 0.5. 
D) 1.0. 
E) 5.0.

Question 18

Cross elasticity of demand measures the responsiveness of the

Accepted Answer

A) demand for one good to changes in the demand for another good. 
B) demand for one good to changes in the price of another good. 
C) quantity demanded of one good to changes in the quantity demanded of another good. 
D) quantity demanded of one good to changes in the price of another good. 
E) b and d 
A) demand for one good to changes in the demand for another good. 
B) demand for one good to changes in the price of another good. 
C) quantity demanded of one good to changes in the quantity demanded of another good. 
D) quantity demanded of one good to changes in the price of another good. 
E) b and d

Question 19

Which of the following would result in higher price elasticity of good X?

Accepted Answer

A) more substitutes for good X 
B) a shorter period of time has passed since the change in the price of good X 
C) lower costs of labor in the production of good X 
D) good X is more of a necessity than a luxury 
A) more substitutes for good X 
B) a shorter period of time has passed since the change in the price of good X 
C) lower costs of labor in the production of good X 
D) good X is more of a necessity than a luxury

Question 20

Exhibit 19-8
​
  
-Refer to Exhibit 19-8. The market for good X is initially at point A. A tax is then placed on the production of good X. As a result, the equilibrium price changes to __________, and sellers now receive __________ per unit they sell and they get to keep __________ for each unit they sell.

Accepted Answer

A) $11; $10; $9 
B) $11; $11; $9 
C) $12; $11; $10 
D) $12; $11; $9 
E) $11; $12; $10 
A) $11; $10; $9 
B) $11; $11; $9 
C) $12; $11; $10 
D) $12; $11; $9 
E) $11; $12; $10

Exam 19: Elasticity

If goods A and B have a cross elasticity of demand that is positive, this is evidence that goods A and B are __________ goods.

If the cross elasticity of demand for good A with respect to good B is -0.87, then good A is

If tobacco is a normal, income inelastic good, it follows that a 10 percent decrease in income will __________ quantity demanded by __________ than 10 percent.

Exhibit 19-6 ​ -Refer to Exhibit 19-6. Suppose the three equilibrium quantities are 700, 800, and 900, and the two other equilibrium prices are $2.20 and $2.75. What is the change in total revenue when a per-unit tax shifts S1 to S2, given that D2 is the relevant demand curve?

From the sellers' perspective, it is most desirable for a product to be perfectly elastic in demand.

Suppose a producer decides that if the price of his or her product is $10, the quantity supplied will be 1,000 units, and if the price is $11, the quantity supplied will be 1,100. The supply of the good is

It is very important for the seller of a good to know whether the good is elastic, unit elastic, or inelastic in demand so that she will know what will happen to total revenue when she changes the price of the good.

Price elasticity of supply and price elasticity of demand are likely to be __________ in the __________ than in the __________.

Exhibit 19-9 ​ -Refer to Exhibit 19-9. What is the price elasticity of supply between $2 and $4?

If a 5 percent reduction in the price of a commodity results in a 3 percent increase in the quantity demanded, demand is said to be

The price elasticity of demand indicates

Exhibit 19-2 ​ -Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. As a result, the equilibrium price

Exhibit 19-3 -Refer to Exhibit 19-3. If price decreases from $1.50 to $0.50, total revenue along the demand curve

Which of the following is a determinant of price elasticity of demand for good Z?

Exhibit 19-2 ​ -Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a tax on the producers of good X, taxing them on each unit of good X they sell. As a result, the supply curve

Exhibit 19-4 ​ -Refer to Exhibit 19-4. As a consequence of the depicted change in supply of X, the demand curve for Y shifted from D1 to D2. What is true of the cross elasticity of demand for Y?

Exhibit 19-3 -Refer to Exhibit 19-3. When price decreases from $5.50 to $4.50, the price elasticity of supply is

Cross elasticity of demand measures the responsiveness of the

Which of the following would result in higher price elasticity of good X?

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If tobacco is a normal, income inelastic good, it follows that a 10 percent decrease in income will quantity demanded by than 10 percent.

Exhibit 19-6 -Refer to Exhibit 19-6. Suppose the three equilibrium quantities are 700, 800, and 900, and the two other equilibrium prices are $2.20 and $2.75. What is the change in total revenue when a per-unit tax shifts S₁ to S₂, given that D₂ is the relevant demand curve?

Price elasticity of supply and price elasticity of demand are likely to be in the than in the __.

Exhibit 19-9 -Refer to Exhibit 19-9. What is the price elasticity of supply between $2 and $4?

Exhibit 19-2 -Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S₁ to S₂. As a result, the equilibrium price

Exhibit 19-2 -Refer to Exhibit 19-2. The market for good X is initially in equilibrium at $5. The government then places a tax on the producers of good X, taxing them on each unit of good X they sell. As a result, the supply curve

Exhibit 19-4 -Refer to Exhibit 19-4. As a consequence of the depicted change in supply of X, the demand curve for Y shifted from D₁ to D₂. What is true of the cross elasticity of demand for Y?