Question 1

The elastic portion of the downward-sloping straight-line demand curve lies:

Accepted Answer

A)  at the intersection with the supply curve. 
B)  above the point of unit elasticity. 
C)  anywhere to the right of the current market price. 
D)  below the point where total revenue is maximized. 
A)  at the intersection with the supply curve. 
B)  above the point of unit elasticity. 
C)  anywhere to the right of the current market price. 
D)  below the point where total revenue is maximized.

Question 2

Good A has a price elasticity of demand of .27, while good B has a price elasticity of demand of 2.9. To raise the most tax revenue, the government should:

Accepted Answer

A)  place a unit tax on good A. 
B)  place a unit tax on good B. 
C)  raise the price elasticity of demand for good A. 
D)  subsidize the production of good B. 
A)  place a unit tax on good A. 
B)  place a unit tax on good B. 
C)  raise the price elasticity of demand for good A. 
D)  subsidize the production of good B.

Question 3

Exhibit 5-1 Demand curve
​
 
In Exhibit 5-1, between points a and b, the price elasticity of demand is:

Accepted Answer

A)  0.67. 
B)  1.5. 
C)  2.0. 
D)  1.0. 
A)  0.67. 
B)  1.5. 
C)  2.0. 
D)  1.0.

Question 4

In the long run, price elasticities of demand are usually

Accepted Answer

A)  greater than they are in the short run because consumers have time to adjust. 
B)  the same as they are in the short run because tastes don't change. 
C)  less than they are in the short run because prices rise over time. 
D)  less than they are in the short run because real prices fall over time. 
A)  greater than they are in the short run because consumers have time to adjust. 
B)  the same as they are in the short run because tastes don't change. 
C)  less than they are in the short run because prices rise over time. 
D)  less than they are in the short run because real prices fall over time.

Question 5

In order to prove that Dr. Pepper and 7-Up are substitutes, economists should test the ____ and get a ____.

Accepted Answer

A)  price elasticity of demand; number less than 1 
B)  income elasticity; positive number 
C)  cross-price elasticity; positive number 
D)  price elasticity of demand; number greater than 1 
A)  price elasticity of demand; number less than 1 
B)  income elasticity; positive number 
C)  cross-price elasticity; positive number 
D)  price elasticity of demand; number greater than 1

Question 6

Exhibit 5-8 Supply and demand curves for good X
​
 
In Exhibit 5-8, the price elasticity of supply for good X between points E and X is:

Accepted Answer

A)  7/5 = 1.40. 
B)  1/5 = 0.20. 
C)  5/7 = 0.71. 
D)  1. 
A)  7/5 = 1.40. 
B)  1/5 = 0.20. 
C)  5/7 = 0.71. 
D)  1.

Question 7

Exhibit 5-9 Supply and Demand Curves for Good X
​
 
In Exhibit 5-9, assume the government places a $200 per unit sales tax on Good X. The percentage of the burden of taxation paid by consumers of Good X is:

Accepted Answer

A)  zero. 
B)  25 percent. 
C)  50 percent. 
D)  100 percent. 
A)  zero. 
B)  25 percent. 
C)  50 percent. 
D)  100 percent.

Question 8

If demand for a good is elastic, then the price elasticity will be:

Accepted Answer

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

Question 9

The responsiveness of suppliers to changing prices is called the:

Accepted Answer

A)  cross elasticity. 
B)  supply elasticity. 
C)  supply period. 
D)  income elasticity. 
A)  cross elasticity. 
B)  supply elasticity. 
C)  supply period. 
D)  income elasticity.

Question 10

Using supply and demand analysis, which of the following is true ?

Accepted Answer

A)  The burden of a tax on production cannot be determined on the basis of who actually pays the tax. 
B)  The burden of a tax on production is always split evenly between consumers and sellers. 
C)  Consumers bear the entire burden of a per unit tax on production. 
D)  Sellers bear the entire burden of a per unit tax on production. 
A)  The burden of a tax on production cannot be determined on the basis of who actually pays the tax. 
B)  The burden of a tax on production is always split evenly between consumers and sellers. 
C)  Consumers bear the entire burden of a per unit tax on production. 
D)  Sellers bear the entire burden of a per unit tax on production.

Question 11

The demand for a product is likely to be more elastic

Accepted Answer

A)  the shorter the time the consumer has to adjust to price changes. 
B)  the lower the price of the good. 
C)  the fewer the number of good substitutes. 
D)  the less the essential nature of the good. 
A)  the shorter the time the consumer has to adjust to price changes. 
B)  the lower the price of the good. 
C)  the fewer the number of good substitutes. 
D)  the less the essential nature of the good.

Question 12

If the quantity of rental units increases by 10 percent when the monthly rental price doubles, the supply of rental units, other factors held constant, is:

Accepted Answer

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

Question 13

When the price of bread increases by 3 percent, the quantity demanded of crackers increases by 2 percent. The cross elasticity of demand between crackers and bread is:

Accepted Answer

A)  0.67. 
B)  1.5. 
C)  2.5. 
D)  3.2. 
A)  0.67. 
B)  1.5. 
C)  2.5. 
D)  3.2.

Question 14

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then demand is:

Accepted Answer

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

Question 15

If the price elasticity of demand for football tickets is estimated to be 4.5, then a 10 percent increase in football ticket prices would be expected to cause a:

Accepted Answer

A)  4.5 percent decrease in quantity demanded. 
B)  4.5 percent increase in quantity demanded. 
C)  45 percent decrease in quantity demanded. 
D)  45 percent increase in quantity demanded. 
A)  4.5 percent decrease in quantity demanded. 
B)  4.5 percent increase in quantity demanded. 
C)  45 percent decrease in quantity demanded. 
D)  45 percent increase in quantity demanded.

Question 16

In the country of Bora Bora, consumers buy large quantities of alcohol, tobacco, and coffee. Last year, the prices of these goods each increased by 10 percent. The quantities demanded for these goods fell by 10, 3, and 8 percent, respectively. If the government is thinking about imposing a unit tax on one of these goods, which good should they choose to tax to raise the most tax revenue, and why?

Accepted Answer

A)  Alcohol; because the price elasticity is highest. 
B)  Tobacco; because the price elasticity is lowest. 
C)  Coffee; because it will have the lowest tax elasticity. 
D)  Tobacco; because it will have the highest tax elasticity. 
A)  Alcohol; because the price elasticity is highest. 
B)  Tobacco; because the price elasticity is lowest. 
C)  Coffee; because it will have the lowest tax elasticity. 
D)  Tobacco; because it will have the highest tax elasticity.

Question 17

Exhibit 5-5 Demand curve for computers
​
 
In Exhibit 5-5, the total revenue at point B on the demand curve equals:

Accepted Answer

A)  OA. 
B)  CB. 
C)  AB. 
D)  OABC. 
A)  OA. 
B)  CB. 
C)  AB. 
D)  OABC.

Question 18

If a demand curve for a good were completely vertical, it would be considered:

Accepted Answer

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

Question 19

Which of the following goods is likely to have the most elastic demand curve?

Accepted Answer

A)  Tobacco products. 
B)  Gasoline. 
C)  Medical care. 
D)  Honda automobiles. 
A)  Tobacco products. 
B)  Gasoline. 
C)  Medical care. 
D)  Honda automobiles.

Question 20

Suppose the price elasticity of demand for Good A is 2.4 and the price elasticity of demand for Good B is 1.2. Which of the following statements is consistent with these values?

Accepted Answer

A)  Good A is a luxury and Good B is a necessity. 
B)  Good A is a good several days after a price increase while Good B is that same good several years after the price increase. 
C)  Good A is ice cream and Good B is mint chocolate chip ice cream. 
D)  Good A is salt and Good B is college tuition. 
A)  Good A is a luxury and Good B is a necessity. 
B)  Good A is a good several days after a price increase while Good B is that same good several years after the price increase. 
C)  Good A is ice cream and Good B is mint chocolate chip ice cream. 
D)  Good A is salt and Good B is college tuition.

Exam 5: Price Elasticity of Demand and Supply

The elastic portion of the downward-sloping straight-line demand curve lies:

Good A has a price elasticity of demand of .27, while good B has a price elasticity of demand of 2.9. To raise the most tax revenue, the government should:

Exhibit 5-1 Demand curve ​ In Exhibit 5-1, between points a and b, the price elasticity of demand is:

In the long run, price elasticities of demand are usually

In order to prove that Dr. Pepper and 7-Up are substitutes, economists should test the ____ and get a ____.

Exhibit 5-8 Supply and demand curves for good X ​ In Exhibit 5-8, the price elasticity of supply for good X between points E and X is:

Exhibit 5-9 Supply and Demand Curves for Good X ​ In Exhibit 5-9, assume the government places a $200 per unit sales tax on Good X. The percentage of the burden of taxation paid by consumers of Good X is:

If demand for a good is elastic, then the price elasticity will be:

The responsiveness of suppliers to changing prices is called the:

Using supply and demand analysis, which of the following is true ?

The demand for a product is likely to be more elastic

If the quantity of rental units increases by 10 percent when the monthly rental price doubles, the supply of rental units, other factors held constant, is:

When the price of bread increases by 3 percent, the quantity demanded of crackers increases by 2 percent. The cross elasticity of demand between crackers and bread is:

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then demand is:

If the price elasticity of demand for football tickets is estimated to be 4.5, then a 10 percent increase in football ticket prices would be expected to cause a:

Exhibit 5-5 Demand curve for computers ​ In Exhibit 5-5, the total revenue at point B on the demand curve equals:

If a demand curve for a good were completely vertical, it would be considered:

Which of the following goods is likely to have the most elastic demand curve?

Suppose the price elasticity of demand for Good A is 2.4 and the price elasticity of demand for Good B is 1.2. Which of the following statements is consistent with these values?

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 5-1 Demand curve In Exhibit 5-1, between points a and b, the price elasticity of demand is:

In order to prove that Dr. Pepper and 7-Up are substitutes, economists should test the and get a .

Exhibit 5-8 Supply and demand curves for good X In Exhibit 5-8, the price elasticity of supply for good X between points E and X is:

Exhibit 5-9 Supply and Demand Curves for Good X In Exhibit 5-9, assume the government places a $200 per unit sales tax on Good X. The percentage of the burden of taxation paid by consumers of Good X is:

Exhibit 5-5 Demand curve for computers In Exhibit 5-5, the total revenue at point B on the demand curve equals: