Question 1

The price elasticity of demand between rifles and bullets is likely to be:

Accepted Answer

A)  negative, because the goods are complements. 
B)  positive, because the goods are complements. 
C)  negative, because the goods are substitutes. 
D)  positive, because the goods are substitutes. 
A)  negative, because the goods are complements. 
B)  positive, because the goods are complements. 
C)  negative, because the goods are substitutes. 
D)  positive, because the goods are substitutes.

Question 2

If the price elasticity is supply coefficient is greater than one, then supply is:

Accepted Answer

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

Question 3

An economist estimates that the price elasticity of demand for disposable diapers is 0.67. This suggests that disposable diaper producers could:

Accepted Answer

A)  advertise more to raise the price elasticity of demand. 
B)  encourage more parents to use cloth diapers. 
C)  lower the price of disposable diapers to raise more revenue. 
D)  raise the price of disposable diapers to raise more revenue. 
A)  advertise more to raise the price elasticity of demand. 
B)  encourage more parents to use cloth diapers. 
C)  lower the price of disposable diapers to raise more revenue. 
D)  raise the price of disposable diapers to raise more revenue.

Question 4

Along the elastic range of a demand curve, a price change causes:

Accepted Answer

A)  a change in total revenue in the opposite direction. 
B)  a change in total revenue in the same direction. 
C)  no change in total revenue. 
D)  an unpredictable change in the total revenue. 
A)  a change in total revenue in the opposite direction. 
B)  a change in total revenue in the same direction. 
C)  no change in total revenue. 
D)  an unpredictable change in the total revenue.

Question 5

If the price elasticity of demand is elastic, then:

Accepted Answer

A)  Ed 
B)  consumers are relatively not very responsive to a price increase. 
C)  an increase in the price will increase total revenue. 
D)  there are likely a large number of substitute products available. 
A)  Ed 
B)  consumers are relatively not very responsive to a price increase. 
C)  an increase in the price will increase total revenue. 
D)  there are likely a large number of substitute products available.

Question 6

Assuming the demand curve is more elastic (flatter) than the supply curve, which of the following is true ?

Accepted Answer

A)  The full tax is always passed to the consumer no matter how flat (elastic) the demand curve is. 
B)  The full tax is always passed to the seller no matter how flat (elastic) the demand curve is. 
C)  The smaller the portion of a sales tax that is passed to the consumer. 
D)  It does not make any difference how flat (elastic) the demand curve is; the tax is always split evenly between buyer and seller. 
A)  The full tax is always passed to the consumer no matter how flat (elastic) the demand curve is. 
B)  The full tax is always passed to the seller no matter how flat (elastic) the demand curve is. 
C)  The smaller the portion of a sales tax that is passed to the consumer. 
D)  It does not make any difference how flat (elastic) the demand curve is; the tax is always split evenly between buyer and seller.

Question 7

If the value of the price elasticity of demand is 0.2, this means that:

Accepted Answer

A)  a 20 percent decrease in price causes a 1 percent increase in quantity demanded. 
B)  a 0.2 percent decrease in price causes a 1 percent increase in quantity demanded. 
C)  a 5 percent decrease in price causes a 1 percent increase in quantity demanded. 
D)  a 0.2 percent decrease in price causes a 0.2 percent increase in quantity demanded. 
A)  a 20 percent decrease in price causes a 1 percent increase in quantity demanded. 
B)  a 0.2 percent decrease in price causes a 1 percent increase in quantity demanded. 
C)  a 5 percent decrease in price causes a 1 percent increase in quantity demanded. 
D)  a 0.2 percent decrease in price causes a 0.2 percent increase in quantity demanded.

Question 8

Which of the following describes a situation in which demand must be inelastic?

Accepted Answer

A)  Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of spats rises by $10. 
A)  Total revenue decreases by 10 percent when the price of spats rises by 10 percent. 
B)  Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. 
C)  Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. 
D)  Total revenue decreases by $10 when the price of spats rises by $10.

Question 9

If a 5 percent decrease in the price of a good produces a 5 percent increase in the quantity demanded, the price elasticity of demand is:

Accepted Answer

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

Question 10

Exhibit 5-2 Price and quantity demanded data
 
Using Exhibit 5-2, what is the price elasticity of demand when the price falls from five dollars to four?

Accepted Answer

A)  1. 
B)  1.25. 
C)  0.8. 
D)  2.0. 
A)  1. 
B)  1.25. 
C)  0.8. 
D)  2.0.

Question 11

Suppose an increase in symphony tickets prices reduces the total revenue. This is evidence that demand is:

Accepted Answer

A)  price elastic. 
B)  price inelastic. 
C)  unitary elastic. 
D)  perfectly elastic. 
A)  price elastic. 
B)  price inelastic. 
C)  unitary elastic. 
D)  perfectly elastic.

Question 12

If automobiles and gasoline are complements, then their cross-elasticity coefficient will be:

Accepted Answer

A)  strictly greater than one. 
B)  positive. 
C)  equal to zero. 
D)  negative. 
A)  strictly greater than one. 
B)  positive. 
C)  equal to zero. 
D)  negative.

Question 13

If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect:

Accepted Answer

A)  no change in his total revenues. 
B)  everyone to begin buying his product. 
C)  a complete loss of revenues. 
D)  a new demand curve. 
A)  no change in his total revenues. 
B)  everyone to begin buying his product. 
C)  a complete loss of revenues. 
D)  a new demand curve.

Question 14

Exhibit 5-6 Demand curve for concert tickets
​
 
In Exhibit 5-6, if promoters lower their ticket price from $30 to $20, then:

Accepted Answer

A)  ticket sales will increase but total revenue will decrease because demand is inelastic between $30 and $20. 
B)  both ticket sales and total revenue will increase because demand is inelastic between $30 and $20. 
C)  ticket sales will decrease but total revenue will increase because demand is elastic between $30 and $20. 
D)  both ticket sales and total revenue will increase because demand is elastic between $30 and $20. 
A)  ticket sales will increase but total revenue will decrease because demand is inelastic between $30 and $20. 
B)  both ticket sales and total revenue will increase because demand is inelastic between $30 and $20. 
C)  ticket sales will decrease but total revenue will increase because demand is elastic between $30 and $20. 
D)  both ticket sales and total revenue will increase because demand is elastic between $30 and $20.

Question 15

If a government tax has as its purpose the raising of revenue, it would be best to place the tax on a product which:

Accepted Answer

A)  is a non-essential. 
B)  has a highly elastic demand. 
C)  has many good substitutes. 
D)  has a highly inelastic demand. 
A)  is a non-essential. 
B)  has a highly elastic demand. 
C)  has many good substitutes. 
D)  has a highly inelastic demand.

Question 16

To raise the most tax revenue, governments should tax which of the following goods?

Accepted Answer

A)  SUVs 
B)  gasoline 
C)  designer shoes 
D)  sofas 
A)  SUVs 
B)  gasoline 
C)  designer shoes 
D)  sofas

Question 17

The long-run price elasticity of demand is usually larger than the short-run price elasticity of demand because:

Accepted Answer

A)  demand curves tend to become steeper over time. 
B)  economists take the absolute value of long-run price elasticities but not of short-run elasticities. 
C)  people have more time to find substitute goods. 
D)  incomes tend to rise over time. 
A)  demand curves tend to become steeper over time. 
B)  economists take the absolute value of long-run price elasticities but not of short-run elasticities. 
C)  people have more time to find substitute goods. 
D)  incomes tend to rise over time.

Question 18

The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:

Accepted Answer

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

Question 19

If the income elasticity of a good is − 1.8, this means this good is a(n):

Accepted Answer

A)  luxury good. 
B)  substitute good. 
C)  complementary good. 
D)  inferior good. 
A)  luxury good. 
B)  substitute good. 
C)  complementary good. 
D)  inferior good.

Question 20

Price elasticity of demand depends on all of the following except:

Accepted Answer

A)  the amount of time a consumer has to adjust to price changes. 
B)  the sensitivity of firms' output to changes in the product's price. 
C)  the consumer's income. 
D)  the availability and closeness of substitutes. 
A)  the amount of time a consumer has to adjust to price changes. 
B)  the sensitivity of firms' output to changes in the product's price. 
C)  the consumer's income. 
D)  the availability and closeness of substitutes.

Exam 5: Price Elasticity of Demand and Supply

The price elasticity of demand between rifles and bullets is likely to be:

If the price elasticity is supply coefficient is greater than one, then supply is:

An economist estimates that the price elasticity of demand for disposable diapers is 0.67. This suggests that disposable diaper producers could:

Along the elastic range of a demand curve, a price change causes:

If the price elasticity of demand is elastic, then:

Assuming the demand curve is more elastic (flatter) than the supply curve, which of the following is true ?

If the value of the price elasticity of demand is 0.2, this means that:

Which of the following describes a situation in which demand must be inelastic?

If a 5 percent decrease in the price of a good produces a 5 percent increase in the quantity demanded, the price elasticity of demand is:

Exhibit 5-2 Price and quantity demanded data Using Exhibit 5-2, what is the price elasticity of demand when the price falls from five dollars to four?

Suppose an increase in symphony tickets prices reduces the total revenue. This is evidence that demand is:

If automobiles and gasoline are complements, then their cross-elasticity coefficient will be:

If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect:

Exhibit 5-6 Demand curve for concert tickets ​ In Exhibit 5-6, if promoters lower their ticket price from $30 to $20, then:

If a government tax has as its purpose the raising of revenue, it would be best to place the tax on a product which:

To raise the most tax revenue, governments should tax which of the following goods?

The long-run price elasticity of demand is usually larger than the short-run price elasticity of demand because:

The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The president believes that the price elasticity of demand is:

If the income elasticity of a good is − 1.8, this means this good is a(n):

Price elasticity of demand depends on all of the following except:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Understanding Direct and Inverse Relationships between Variables

Filters

Exhibit 5-6 Demand curve for concert tickets In Exhibit 5-6, if promoters lower their ticket price from $30 to $20, then: