Question 1

Exhibit 5-1 Demand curve
​
 
If demand price elasticity is 2, consumers would:

Accepted Answer

A)  buy twice as much of the product in response to a 10 percent decrease in prie. 
B)  require a 2 percent drop in price to increase their purchases by 1 percent. 
C)  buy 2 percent more of the product in response to a 1 percent decrease in price. 
D)  buy twice as much of the product in response to a 1 percent decrease in price. 
A)  buy twice as much of the product in response to a 10 percent decrease in prie. 
B)  require a 2 percent drop in price to increase their purchases by 1 percent. 
C)  buy 2 percent more of the product in response to a 1 percent decrease in price. 
D)  buy twice as much of the product in response to a 1 percent decrease in price.

Question 2

All things equal, the price elasticity of supply:

Accepted Answer

A)  will be greater in the short run than in the long run. 
B)  will be greater in the long run than in the short run. 
C)  is the same for the short run and the long run. 
D)  approaches zero in the long run. 
A)  will be greater in the short run than in the long run. 
B)  will be greater in the long run than in the short run. 
C)  is the same for the short run and the long run. 
D)  approaches zero in the long run.

Question 3

Suppose the president of a textbook publisher argues that a 10 percent increase in the price of textbooks will raise total revenue for the publisher. It can be concluded that the company president thinks that demand for textbooks is:

Accepted Answer

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

Question 4

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

Accepted Answer

A)  OD. 
B)  FE. 
C)  DE. 
D)  ODEF. 
A)  OD. 
B)  FE. 
C)  DE. 
D)  ODEF.

Question 5

Which of the following statements is not true?

Accepted Answer

A)  Price elasticity of demand for basic foods is low. 
B)  When price elasticity of demand is very high, we say there is brand loyalty. 
C)  The availability and price of substitutes affect the elasticity of demand for a good or service. 
D)  When goods have very low prices, the elasticity of demand is usually quite low. 
A)  Price elasticity of demand for basic foods is low. 
B)  When price elasticity of demand is very high, we say there is brand loyalty. 
C)  The availability and price of substitutes affect the elasticity of demand for a good or service. 
D)  When goods have very low prices, the elasticity of demand is usually quite low.

Question 6

If a decrease in the price of movie tickets increases the total revenue of movie theaters, this is evidence that demand is:

Accepted Answer

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

Question 7

As the period for firms to expand output is lengthened, the elasticity of the market supply curve will:

Accepted Answer

A)  approach zero. 
B)  increase. 
C)  decrease. 
D)  remain the same since time does not affect the elasticity of market supply. 
A)  approach zero. 
B)  increase. 
C)  decrease. 
D)  remain the same since time does not affect the elasticity of market supply.

Question 8

If the demand for cigarettes is highly inelastic, this indicates that:

Accepted Answer

A)  higher cigarette prices will increase the demand for cigarettes. 
B)  the price elasticity coefficient of cigarettes exceeds 1. 
C)  the price elasticity coefficient of cigarettes equals 1. 
D)  the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes. 
A)  higher cigarette prices will increase the demand for cigarettes. 
B)  the price elasticity coefficient of cigarettes exceeds 1. 
C)  the price elasticity coefficient of cigarettes equals 1. 
D)  the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes.

Question 9

Suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is 0.25, by how much would you have to raise the price of water?

Accepted Answer

A)  10 percent 
B)  25 percent 
C)  40 percent 
D)  100 percent 
A)  10 percent 
B)  25 percent 
C)  40 percent 
D)  100 percent

Question 10

Price elasticities of supply are always:

Accepted Answer

A)  the same as price elasticities of demand. 
B)  negative numbers. 
C)  positive numbers. 
D)  greater than one. 
A)  the same as price elasticities of demand. 
B)  negative numbers. 
C)  positive numbers. 
D)  greater than one.

Question 11

Exhibit 5-1 Demand curve
​
 
In Exhibit 5-1, between points b and c, the price elasticity of demand measures

Accepted Answer

A)  0.425. 
B)  1.571. 
C)  0.143 
D)  0.636. 
A)  0.425. 
B)  1.571. 
C)  0.143 
D)  0.636.

Exam 5: Price Elasticity of Demand and Supply

Exhibit 5-1 Demand curve ​ If demand price elasticity is 2, consumers would:

All things equal, the price elasticity of supply:

Suppose the president of a textbook publisher argues that a 10 percent increase in the price of textbooks will raise total revenue for the publisher. It can be concluded that the company president thinks that demand for textbooks is:

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

Which of the following statements is not true?

If a decrease in the price of movie tickets increases the total revenue of movie theaters, this is evidence that demand is:

As the period for firms to expand output is lengthened, the elasticity of the market supply curve will:

If the demand for cigarettes is highly inelastic, this indicates that:

Suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is 0.25, by how much would you have to raise the price of water?

Price elasticities of supply are always:

Exhibit 5-1 Demand curve ​ In Exhibit 5-1, between points b and c, the price elasticity of demand measures

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 If demand price elasticity is 2, consumers would:

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

Exhibit 5-1 Demand curve In Exhibit 5-1, between points b and c, the price elasticity of demand measures