Question 1

The quantity demanded of good A rises as income rises. It follows that income elasticity of demand is __________than 0, and good A is a(n) __________ good.

Accepted Answer

A) greater; inferior 
B) greater; normal 
C) greater; substitute 
D) greater; complementary 
E) less; normal 
A) greater; inferior 
B) greater; normal 
C) greater; substitute 
D) greater; complementary 
E) less; normal

Question 2

If the price elasticity of demand for a given product is 0.7, this means that

Accepted Answer

A) the percentage change in quantity demanded is 0.7 times the percentage change in price. 
B) if quantity demanded fell by 1 percent, price would fall by 7 percent. 
C) if price was raised 7 percent, quantity demanded would fall by 0.7 percent. 
D) if price was raised 7 percent, quantity demanded would rise 0.7 percent. 
E) the percentage change in price is 0.7 times the percentage change in quantity demanded. 
A) the percentage change in quantity demanded is 0.7 times the percentage change in price. 
B) if quantity demanded fell by 1 percent, price would fall by 7 percent. 
C) if price was raised 7 percent, quantity demanded would fall by 0.7 percent. 
D) if price was raised 7 percent, quantity demanded would rise 0.7 percent. 
E) the percentage change in price is 0.7 times the percentage change in quantity demanded.

Question 3

Government wants to maximize its tax revenue and it can only place a $2 per-unit tax on one of two goods. It should place the tax (on the production) of the good whose demand curve has the

Accepted Answer

A) higher price elasticity of demand. 
B) lower price elasticity of demand. 
C) greater length. 
D) shorter length. 
E) a or c 
A) higher price elasticity of demand. 
B) lower price elasticity of demand. 
C) greater length. 
D) shorter length. 
E) a or c

Question 4

Exhibit 19-5
​
  
-Refer to Exhibit 19-5. For graph (3), what is the price elasticity of demand going between $2.00 and $1.50?

Accepted Answer

A) 1.0 
B) 0 
C) 50.0 
D) 0.02 
A) 1.0 
B) 0 
C) 50.0 
D) 0.02

Question 5

A Broadway play company can only charge one price for tickets to a given performance of its play. The company manager notices that the company earns greater total revenue when they charge a higher ticket price and its theater is three-quarters full than when they charge a lower ticket price and the theater is completely full. It follows that demand for this play is

Accepted Answer

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

Question 6

Exhibit 19-7
​
  
-Refer to Exhibit 19-7. Which of the graphs shows a perfectly elastic demand curve?

Accepted Answer

A) (1) 
B) (2) 
C) (3) and (4) 
D) none of the above 
A) (1) 
B) (2) 
C) (3) and (4) 
D) none of the above

Question 7

The longer the period of time allowed for the ___________ of a good to adjust to a change in the price of the good, the ___________ the price elasticity of supply will be. This statement assumes that the quantity supplied __________ be altered with time.

Accepted Answer

A) producer; higher; can 
B) consumer; higher; can 
C) producer; lower; can 
D) producer; lower; cannot 
A) producer; higher; can 
B) consumer; higher; can 
C) producer; lower; can 
D) producer; lower; cannot

Question 8

If the demand for a good is unit elastic and the price of the good increases, then

Accepted Answer

A) total revenue increases. 
B) total revenue decreases. 
C) total revenue is not affected. 
D) the direction of the change in total revenue cannot be determined from the information given. 
A) total revenue increases. 
B) total revenue decreases. 
C) total revenue is not affected. 
D) the direction of the change in total revenue cannot be determined from the information given.

Question 9

Exhibit 19-9
​
  
-Refer to Exhibit 19-9. What is the price elasticity of supply between $4 and $6?

Accepted Answer

A) 0.825 
B) 0.833 
C) 1.25 
D) 1.20 
A) 0.825 
B) 0.833 
C) 1.25 
D) 1.20

Question 10

Exhibit 19-7
​
  
-Refer to Exhibit 19-7. If the government wants to impose a per-unit tax in order to raise revenues, which of the depicted markets should it choose in order to maximize tax revenues?

Accepted Answer

A) (1) 
B) (2) 
C) (3) 
D) (4) 
A) (1) 
B) (2) 
C) (3) 
D) (4)

Question 11

If total revenue rises as a result of a decrease in the price of a given good, it follows that demand is

Accepted Answer

A) inelastic. 
B) perfectly inelastic. 
C) elastic. 
D) unit elastic. 
E) none of the above 
A) inelastic. 
B) perfectly inelastic. 
C) elastic. 
D) unit elastic. 
E) none of the above

Question 12

If the percentage change in quantity supplied is greater than the percentage change in price, then supply is elastic.

Accepted Answer

A) True 
 B)False

Question 13

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. It follows that the tax is equal to

Accepted Answer

A) $1 per unit. 
B) $2 per unit. 
C) $12 in total. 
D) $10 in total. 
E) none of the above 
A) $1 per unit. 
B) $2 per unit. 
C) $12 in total. 
D) $10 in total. 
E) none of the above

Question 14

When the cross elasticity of demand between two goods is __________, the goods are __________.

Accepted Answer

A) negative; substitutes for one another 
B) negative; complements for one another 
C) positive; normal goods 
D) positive; inferior goods 
A) negative; substitutes for one another 
B) negative; complements for one another 
C) positive; normal goods 
D) positive; inferior goods

Question 15

Income elasticity of demand for a normal good is always

Accepted Answer

A) less than zero. 
B) greater than zero. 
C) equal to zero. 
D) less than one. 
A) less than zero. 
B) greater than zero. 
C) equal to zero. 
D) less than one.

Question 16

Suppose the demand for a particular good is perfectly inelastic and the government decides to impose a tax on the production of this good. Who will pay the greater share of such a tax?

Accepted Answer

A) The buyers will pay the entire share. 
B) The sellers will pay the entire share. 
C) The buyers and the sellers will pay equal shares. 
D) The sellers will bear the greater share of the tax. 
A) The buyers will pay the entire share. 
B) The sellers will pay the entire share. 
C) The buyers and the sellers will pay equal shares. 
D) The sellers will bear the greater share of the tax.

Question 17

The price elasticity of demand would most likely be highest for which of the following goods?

Accepted Answer

A) food (in general) 
B) cars (in general) 
C) clothing (in general) 
D) Ford cars 
E) a, b, or c 
A) food (in general) 
B) cars (in general) 
C) clothing (in general) 
D) Ford cars 
E) a, b, or c

Question 18

Income rises from $3,500 to $4,000 a month and the quantity demanded of good X falls from 7 to 5 units a month. Income elasticity of demand (for good X) is __________ and good X is a(n) __________ good.

Accepted Answer

A) -2.50; inferior 
B) 0.40; normal 
C) -2.28; inferior 
D) 2.50; normal 
A) -2.50; inferior 
B) 0.40; normal 
C) -2.28; inferior 
D) 2.50; normal

Question 19

If Cassandra bought 12 blouses last year when her income was $46,000 and she buys 14 blouses this year when her income is $52,000, then her income elasticity of demand for blouses is approximately

Accepted Answer

A) -1.26. 
B) +1.26. 
C) -0.80. 
D) +0.80. 
E) -2.52. 
A) -1.26. 
B) +1.26. 
C) -0.80. 
D) +0.80. 
E) -2.52.

Question 20

If demand for a product is perfectly inelastic, a tax of $1 per unit imposed on sellers will

Accepted Answer

A) not affect the market price of the product. 
B) cause the market price to rise by $1 per unit. 
C) cause the market price to decline by $1 per unit. 
D) cause the market price to rise by less than $1 per unit. 
E) none of the above 
A) not affect the market price of the product. 
B) cause the market price to rise by $1 per unit. 
C) cause the market price to decline by $1 per unit. 
D) cause the market price to rise by less than $1 per unit. 
E) none of the above

Exam 19: Elasticity

The quantity demanded of good A rises as income rises. It follows that income elasticity of demand is __________than 0, and good A is a(n) __________ good.

If the price elasticity of demand for a given product is 0.7, this means that

Government wants to maximize its tax revenue and it can only place a $2 per-unit tax on one of two goods. It should place the tax (on the production) of the good whose demand curve has the

Exhibit 19-5 ​ -Refer to Exhibit 19-5. For graph (3), what is the price elasticity of demand going between $2.00 and $1.50?

Exhibit 19-7 ​ -Refer to Exhibit 19-7. Which of the graphs shows a perfectly elastic demand curve?

The longer the period of time allowed for the ___________ of a good to adjust to a change in the price of the good, the ___________ the price elasticity of supply will be. This statement assumes that the quantity supplied __________ be altered with time.

If the demand for a good is unit elastic and the price of the good increases, then

Exhibit 19-9 ​ -Refer to Exhibit 19-9. What is the price elasticity of supply between $4 and $6?

Exhibit 19-7 ​ -Refer to Exhibit 19-7. If the government wants to impose a per-unit tax in order to raise revenues, which of the depicted markets should it choose in order to maximize tax revenues?

If total revenue rises as a result of a decrease in the price of a given good, it follows that demand is

If the percentage change in quantity supplied is greater than the percentage change in price, then supply is elastic.

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. It follows that the tax is equal to

When the cross elasticity of demand between two goods is __________, the goods are __________.

Income elasticity of demand for a normal good is always

Suppose the demand for a particular good is perfectly inelastic and the government decides to impose a tax on the production of this good. Who will pay the greater share of such a tax?

The price elasticity of demand would most likely be highest for which of the following goods?

Income rises from $3,500 to $4,000 a month and the quantity demanded of good X falls from 7 to 5 units a month. Income elasticity of demand (for good X) is __________ and good X is a(n) __________ good.

If Cassandra bought 12 blouses last year when her income was $46,000 and she buys 14 blouses this year when her income is $52,000, then her income elasticity of demand for blouses is approximately

If demand for a product is perfectly inelastic, a tax of $1 per unit imposed on sellers will

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Filters

The quantity demanded of good A rises as income rises. It follows that income elasticity of demand is than 0, and good A is a(n) good.

Exhibit 19-5 -Refer to Exhibit 19-5. For graph (3), what is the price elasticity of demand going between $2.00 and $1.50?

Exhibit 19-7 -Refer to Exhibit 19-7. Which of the graphs shows a perfectly elastic demand curve?

The longer the period of time allowed for the _____ of a good to adjust to a change in the price of the good, the _ the price elasticity of supply will be. This statement assumes that the quantity supplied ______ be altered with time.

Exhibit 19-9 -Refer to Exhibit 19-9. What is the price elasticity of supply between $4 and $6?

Exhibit 19-7 -Refer to Exhibit 19-7. If the government wants to impose a per-unit tax in order to raise revenues, which of the depicted markets should it choose in order to maximize tax revenues?

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. It follows that the tax is equal to

When the cross elasticity of demand between two goods is , the goods are .

Income rises from $3,500 to $4,000 a month and the quantity demanded of good X falls from 7 to 5 units a month. Income elasticity of demand (for good X) is and good X is a(n) good.