Question 1

If Pete raises his price of muffins from $2 to $3 and his total revenue increases from $35,000 to $38,000, then:

Accepted Answer

A)  the demand for Pete's muffins in this range is elastic. 
B)  the demand for Pete's muffins in this range is inelastic. 
C)  the demand for Pete's muffins in this range is unit elastic. 
D)  the percentage change in quantity demanded must exceed the percentage change in product price. 
A)  the demand for Pete's muffins in this range is elastic. 
B)  the demand for Pete's muffins in this range is inelastic. 
C)  the demand for Pete's muffins in this range is unit elastic. 
D)  the percentage change in quantity demanded must exceed the percentage change in product price.

Question 2

If a good has a price elasticity of demand coefficient less than one, then:

Accepted Answer

A)  this good has an elastic demand. 
B)  this good has an inelastic demand. 
C)  a 10 percent increase in the price will result in a greater than 10 percent decrease in the quantity demanded. 
D)  the demand curve will be vertical. 
A)  this good has an elastic demand. 
B)  this good has an inelastic demand. 
C)  a 10 percent increase in the price will result in a greater than 10 percent decrease in the quantity demanded. 
D)  the demand curve will be vertical.

Question 3

A lower price elasticity of demand coefficient occurs when:

Accepted Answer

A)  many substitutes exist. 
B)  the quantity demanded is more responsive. 
C)  few substitutes exist. 
D)  the market is broadly defined. 
A)  many substitutes exist. 
B)  the quantity demanded is more responsive. 
C)  few substitutes exist. 
D)  the market is broadly defined.

Question 4

Any change in price along a perfectly inelastic demand curve produces:

Accepted Answer

A)  greater change in the quantity demanded. 
B)  less change in the quantity demanded. 
C)  no change in the quantity demanded. 
D)  infinite change in the quantity demanded. 
A)  greater change in the quantity demanded. 
B)  less change in the quantity demanded. 
C)  no change in the quantity demanded. 
D)  infinite change in the quantity demanded.

Question 5

Exhibit 5-5 Demand curve for computers
​
 
In Exhibit 5-5, the change in total revenue resulting from a change in price from A to D indicates that the demand curve is:

Accepted Answer

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

Question 6

The more elastic the supply of a product, the more the actual burden of a tax on the product will:

Accepted Answer

A)  fall on sellers. 
B)  fall on buyers. 
C)  fall equally on both buyers and sellers. 
D)  create a smaller deadweight loss (or excess burden). 
A)  fall on sellers. 
B)  fall on buyers. 
C)  fall equally on both buyers and sellers. 
D)  create a smaller deadweight loss (or excess burden).

Question 7

The price elasticity of demand between milk and soda 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 8

Suppose the quantity demanded is 1,000 million bushels of peaches per year when the price is $3 per bushel and 1,500 million bushels when the price is $1 per bushel. The price elasticity of demand in this range of the demand curve is:

Accepted Answer

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

Question 9

If a 1 percent decrease in the price of product A brings about a 3 percent increase in the sales of product B, then:

Accepted Answer

A)  products A and B are complementary. 
B)  the cross elasticity of demand between these two products is positive. 
C)  products A and B are substitutes. 
D)  the demand for these products is inelastic. 
A)  products A and B are complementary. 
B)  the cross elasticity of demand between these two products is positive. 
C)  products A and B are substitutes. 
D)  the demand for these products is inelastic.

Question 10

Price elasticity of demand measures:

Accepted Answer

A)  the change in price brought about by a change in consumer demand. 
B)  how consumers change their purchases in response to a change in income. 
C)  how consumers change their purchases in response to a change in the price of a substitute good. 
D)  how consumers change their purchases in response to a change in the price of a product. 
A)  the change in price brought about by a change in consumer demand. 
B)  how consumers change their purchases in response to a change in income. 
C)  how consumers change their purchases in response to a change in the price of a substitute good. 
D)  how consumers change their purchases in response to a change in the price of a product.

Question 11

A perfectly elastic supply curve is expressed graphically as a(n):

Accepted Answer

A)  downward sloping line or curve. 
B)  upward sloping line or curve. 
C)  vertical line. 
D)  horizontal line. 
A)  downward sloping line or curve. 
B)  upward sloping line or curve. 
C)  vertical line. 
D)  horizontal line.

Question 12

The demand for gasoline will be most elastic

Accepted Answer

A)  1 day after the price change. 
B)  1 week after the price change. 
C)  1 month after the price change. 
D)  1 year after the price change. 
A)  1 day after the price change. 
B)  1 week after the price change. 
C)  1 month after the price change. 
D)  1 year after the price change.

Question 13

If an excise tax is placed on a product that has a perfectly inelastic demand, then:

Accepted Answer

A)  the entire tax will be paid by the consumer. 
B)  the entire tax will be paid by the producer. 
C)  the consumer and producer will each pay a share of the tax. 
D)  the incidence of the tax cannot be determined unless we know the coefficient of price elasticity of supply. 
A)  the entire tax will be paid by the consumer. 
B)  the entire tax will be paid by the producer. 
C)  the consumer and producer will each pay a share of the tax. 
D)  the incidence of the tax cannot be determined unless we know the coefficient of price elasticity of supply.

Question 14

A good is classified as inferior if:

Accepted Answer

A)  consumers buy less when the price rises. 
B)  consumers buy less when income rises. 
C)  consumers buy less when the price falls. 
D)  consumers buy more when income rises. 
A)  consumers buy less when the price rises. 
B)  consumers buy less when income rises. 
C)  consumers buy less when the price falls. 
D)  consumers buy more when income rises.

Question 15

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a:

Accepted Answer

A)  flat (elastic) demand curve and a steep (inelastic) supply curve. 
B)  steep (inelastic) demand curve and a flat (elastic) supply curve. 
C)  steep (inelastic) demand curve and steep (inelastic) demand curve. 
D)  flat (elastic) demand curve and a flat (elastic) supply curve. 
A)  flat (elastic) demand curve and a steep (inelastic) supply curve. 
B)  steep (inelastic) demand curve and a flat (elastic) supply curve. 
C)  steep (inelastic) demand curve and steep (inelastic) demand curve. 
D)  flat (elastic) demand curve and a flat (elastic) supply curve.

Question 16

Which of the following pairs is most likely to represent substitute goods?

Accepted Answer

A)  Hamburgers and hamburger rolls 
B)  Movies and popcorn 
C)  Pork and beef 
D)  Shoes and shoelaces 
A)  Hamburgers and hamburger rolls 
B)  Movies and popcorn 
C)  Pork and beef 
D)  Shoes and shoelaces

Question 17

A public transit company finds that when it reduces the price of a bus ticket, total revenues remain the same. One can conclude from this that:

Accepted Answer

A)  the demand curve is horizontal, reflecting infinite price elasticity. 
B)  if the price is lowered further total revenue will increase. 
C)  the demand curve for bus tickets must have shifted to the right. 
D)  the firm is operating in a range of the demand curve that is unit elastic. 
A)  the demand curve is horizontal, reflecting infinite price elasticity. 
B)  if the price is lowered further total revenue will increase. 
C)  the demand curve for bus tickets must have shifted to the right. 
D)  the firm is operating in a range of the demand curve that is unit elastic.

Question 18

If the cross-elasticity of demand for two goods is positive, this means that the goods are:

Accepted Answer

A)  normal goods. 
B)  inferior goods. 
C)  substitutes. 
D)  complements. 
A)  normal goods. 
B)  inferior goods. 
C)  substitutes. 
D)  complements.

Question 19

What does the "price elasticity of demand" measure? What does a price elasticity of demand coefficient of 1.2 mean? Does the product have an elastic, unitary elastic or inelastic demand?

Accepted Answer

The price elasticity of demand measures

Question 20

The price elasticity of demand for a vertical demand curve 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.

Exam 5: Price Elasticity of Demand and Supply

If Pete raises his price of muffins from $2 to $3 and his total revenue increases from $35,000 to $38,000, then:

If a good has a price elasticity of demand coefficient less than one, then:

A lower price elasticity of demand coefficient occurs when:

Any change in price along a perfectly inelastic demand curve produces:

Exhibit 5-5 Demand curve for computers ​ In Exhibit 5-5, the change in total revenue resulting from a change in price from A to D indicates that the demand curve is:

The more elastic the supply of a product, the more the actual burden of a tax on the product will:

The price elasticity of demand between milk and soda is likely to be:

Suppose the quantity demanded is 1,000 million bushels of peaches per year when the price is $3 per bushel and 1,500 million bushels when the price is $1 per bushel. The price elasticity of demand in this range of the demand curve is:

If a 1 percent decrease in the price of product A brings about a 3 percent increase in the sales of product B, then:

Price elasticity of demand measures:

A perfectly elastic supply curve is expressed graphically as a(n):

The demand for gasoline will be most elastic

If an excise tax is placed on a product that has a perfectly inelastic demand, then:

A good is classified as inferior if:

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a:

Which of the following pairs is most likely to represent substitute goods?

A public transit company finds that when it reduces the price of a bus ticket, total revenues remain the same. One can conclude from this that:

If the cross-elasticity of demand for two goods is positive, this means that the goods are:

What does the "price elasticity of demand" measure? What does a price elasticity of demand coefficient of 1.2 mean? Does the product have an elastic, unitary elastic or inelastic demand?

The price elasticity of demand for a vertical demand curve is:

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 5-5 Demand curve for computers In Exhibit 5-5, the change in total revenue resulting from a change in price from A to D indicates that the demand curve is: