Question 1

If the price of corn increases by 20 percent and the quantity supplied of corn increases by 30 percent,then supply is

Accepted Answer

A)  elastic and the elasticity of supply equals 1.5. 
B)  inelastic and the elasticity of supply equals 1.5. 
C)  elastic and the elasticity of supply equals 0.66. 
D)  inelastic and the elasticity of supply equals 0.66. 
E)  either elastic or inelastic but more information about the elasticity of demand is needed to determine which. 
A)  elastic and the elasticity of supply equals 1.5. 
B)  inelastic and the elasticity of supply equals 1.5. 
C)  elastic and the elasticity of supply equals 0.66. 
D)  inelastic and the elasticity of supply equals 0.66. 
E)  either elastic or inelastic but more information about the elasticity of demand is needed to determine which.

Question 2

A ________ curve means that ________.

Accepted Answer

A)  horizontal demand; a change in price does not change total revenue 
B)  horizontal demand; the elasticity of demand is less than 1 
C)  horizontal supply; the elasticity of supply is infinite 
D)  horizontal supply; the elasticity of demand is infinite 
E)  vertical demand; a change in price does not change total revenue 
A)  horizontal demand; a change in price does not change total revenue 
B)  horizontal demand; the elasticity of demand is less than 1 
C)  horizontal supply; the elasticity of supply is infinite 
D)  horizontal supply; the elasticity of demand is infinite 
E)  vertical demand; a change in price does not change total revenue

Question 3

The total revenue test says that if a price decrease leads to

Accepted Answer

A)  an increase in total revenue, supply is elastic. 
B)  a decrease in total revenue, supply is unit elastic. 
C)  a decrease in total revenue, supply is inelastic. 
D)  an increase in total revenue, supply is inelastic. 
E)  None of the above answers is correct. 
A)  an increase in total revenue, supply is elastic. 
B)  a decrease in total revenue, supply is unit elastic. 
C)  a decrease in total revenue, supply is inelastic. 
D)  an increase in total revenue, supply is inelastic. 
E)  None of the above answers is correct.

Question 4

A Minnesota snowmobile dealer lowers its prices in February by 16 percent and the quantity demanded increases by 2 percent.Thus the demand for snowmobiles from this dealer is ________ and the dealer's total revenue will ________.

Accepted Answer

A)  elastic; increase 
B)  elastic; decrease 
C)  inelastic; increase 
D)  inelastic; decrease 
E)  unit elastic; decrease 
A)  elastic; increase 
B)  elastic; decrease 
C)  inelastic; increase 
D)  inelastic; decrease 
E)  unit elastic; decrease

Question 5

Suppose a 20 percent increase in the price of gasoline results in a 25 percent increase in the quantity supplied.This response means that gasoline has an

Accepted Answer

A)  elastic supply. 
B)  inelastic supply. 
C)  unit elastic supply. 
D)  inelastic demand. 
E)  elastic demand. 
A)  elastic supply. 
B)  inelastic supply. 
C)  unit elastic supply. 
D)  inelastic demand. 
E)  elastic demand.

Question 6

If the demand for insulin is inelastic,an increase in insulin prices leads to

Accepted Answer

A)  less total revenue for insulin makers. 
B)  more total revenue for insulin makers. 
C)  no change in total revenue for insulin makers. 
D)  first a decrease, then an increase in total revenue for insulin makers. 
E)  total revenue probably changes but we need more information about the change in total expenditures on insulin to determine if the total revenue rises, falls, or stays the same. 
A)  less total revenue for insulin makers. 
B)  more total revenue for insulin makers. 
C)  no change in total revenue for insulin makers. 
D)  first a decrease, then an increase in total revenue for insulin makers. 
E)  total revenue probably changes but we need more information about the change in total expenditures on insulin to determine if the total revenue rises, falls, or stays the same.

Question 7

What is the formula for the cross elasticity of demand? The percentage change in the

Accepted Answer

A)  quantity demanded divided by the percentage change in the price of a substitute or complement. 
B)  quantity supplied divided by the percentage change in price. 
C)  quantity demanded divided by the percentage change in price. 
D)  quantity demanded divided by the percentage change in income. 
E)  equilibrium quantity demanded divided by the equilibrium quantity supplied. 
A)  quantity demanded divided by the percentage change in the price of a substitute or complement. 
B)  quantity supplied divided by the percentage change in price. 
C)  quantity demanded divided by the percentage change in price. 
D)  quantity demanded divided by the percentage change in income. 
E)  equilibrium quantity demanded divided by the equilibrium quantity supplied.

Question 8

Suppose the demand for rescue services in our national parks is perfectly inelastic.This fact would mean that a 31 percent increase in rescue fees leads to

Accepted Answer

A)  a 31 percent decrease in the quantity demanded. 
B)  a 31 percent increase in demand. 
C)  a 31 percent decrease in demand. 
D)  no change in the quantity demanded. 
E)  a decrease in the quantity demanded to 0 rescues. 
A)  a 31 percent decrease in the quantity demanded. 
B)  a 31 percent increase in demand. 
C)  a 31 percent decrease in demand. 
D)  no change in the quantity demanded. 
E)  a decrease in the quantity demanded to 0 rescues.

Question 9

Economists use elasticity to measure the responsiveness of quantity to a change in price rather than the slope of the demand curve because elasticity is

Accepted Answer

A)  independent of the units of measurement. 
B)  dependent on the units of measurement. 
C)  easier to calculate. 
D)  harder to calculate. 
E)  always negative whereas the slope is always positive. 
A)  independent of the units of measurement. 
B)  dependent on the units of measurement. 
C)  easier to calculate. 
D)  harder to calculate. 
E)  always negative whereas the slope is always positive.

Question 10

-In the figure above,using the midpoint method,the price elasticity of demand when the price falls from $6 to $5 is equal to

Accepted Answer

A)  2.50. 
B)  1.63. 
C)  1.10. 
D)  0.91. 
E)  1.00. 
A)  2.50. 
B)  1.63. 
C)  1.10. 
D)  0.91. 
E)  1.00.

Question 11

-The data in the table above give two points on the demand curve for pizza.Using the midpoint method,when the price of a pizza falls from $10 to $9,what is the percentage change in price?

Accepted Answer

A)  8.2 percent 
B)  15.5 percent 
C)  10.5 percent 
D)  5.0 percent 
E)  1.0 percent 
A)  8.2 percent 
B)  15.5 percent 
C)  10.5 percent 
D)  5.0 percent 
E)  1.0 percent

Question 12

How does elasticity of supply differ for a product that can be stored,compared to a product that cannot be stored?

Accepted Answer

A product that can be stored can be with

Question 13

-Based on the data in the table above,ice cream and cake are ________ goods.

Accepted Answer

A)  inferior 
B)  normal 
C)  substitute 
D)  complementary 
E)  Both answers B and D are correct. 
A)  inferior 
B)  normal 
C)  substitute 
D)  complementary 
E)  Both answers B and D are correct.

Question 14

Moving downward along a linear (straight-line)downward sloping demand curve,the

Accepted Answer

A)  slope is constant. 
B)  price is constant. 
C)  quantity is constant. 
D)  elasticity is constant. 
E)  None of the above answers is correct. 
A)  slope is constant. 
B)  price is constant. 
C)  quantity is constant. 
D)  elasticity is constant. 
E)  None of the above answers is correct.

Question 15

Studies have shown that the price elasticity of demand for necessities,such as food,are higher in developing countries and lower in developed countries.What is the reason for this difference in elasticity?

Accepted Answer

One of the determinants of elasticity is

Question 16

If we are trying to determine if two different products are substitutes,complements,or not related at all,we should find the value of the

Accepted Answer

A)  price elasticity of demand for both goods. 
B)  price elasticity of supply for both goods. 
C)  income elasticity of demand for both goods. 
D)  cross elasticity of demand. 
E)  price elasticity of demand and the price elasticity of supply for both goods. 
A)  price elasticity of demand for both goods. 
B)  price elasticity of supply for both goods. 
C)  income elasticity of demand for both goods. 
D)  cross elasticity of demand. 
E)  price elasticity of demand and the price elasticity of supply for both goods.

Question 17

If a product is a normal good,then its income elasticity of demand is

Accepted Answer

A)  zero. 
B)  positive. 
C)  negative. 
D)  indeterminate. 
E)  greater than 1. 
A)  zero. 
B)  positive. 
C)  negative. 
D)  indeterminate. 
E)  greater than 1.

Question 18

Suppose Starbucks currently charges $2.50 per cup for its latte.If Starbucks raises the price to $3.00 per cup,based on the demand curve in the figure above its total revenue will ________ because the demand for Starbucks latte is ________ over this price range.

Accepted Answer

A)  increase; elastic 
B)  decrease; elastic 
C)  increase; inelastic 
D)  increase; unit elastic 
E)  not change; unit elastic 
A)  increase; elastic 
B)  decrease; elastic 
C)  increase; inelastic 
D)  increase; unit elastic 
E)  not change; unit elastic

Question 19

When the price of a pizza is $10,the quantity of soda demanded is 300 drinks.When the price of a pizza is $15,the quantity soda demanded is 100 drinks.The cross elasticity of demand is equal to

Accepted Answer

A)  -0.25. 
B)  -0.40. 
C)  -2.50. 
D)  -25.00. 
E)  4.00. 
A)  -0.25. 
B)  -0.40. 
C)  -2.50. 
D)  -25.00. 
E)  4.00.

Question 20

-The table above gives the supply schedule for a product.Using the midpoint method,find the price elasticity of supply between points A and B,between B and C,between C and D,and between D and E.

Accepted Answer

Between A and B,the elasticity

If the price of corn increases by 20 percent and the quantity supplied of corn increases by 30 percent,then supply is

A curve means that .

The total revenue test says that if a price decrease leads to

A Minnesota snowmobile dealer lowers its prices in February by 16 percent and the quantity demanded increases by 2 percent.Thus the demand for snowmobiles from this dealer is and the dealer's total revenue will .

Suppose a 20 percent increase in the price of gasoline results in a 25 percent increase in the quantity supplied.This response means that gasoline has an

If the demand for insulin is inelastic,an increase in insulin prices leads to

What is the formula for the cross elasticity of demand? The percentage change in the

Suppose the demand for rescue services in our national parks is perfectly inelastic.This fact would mean that a 31 percent increase in rescue fees leads to

Economists use elasticity to measure the responsiveness of quantity to a change in price rather than the slope of the demand curve because elasticity is

-In the figure above,using the midpoint method,the price elasticity of demand when the price falls from $6 to $5 is equal to

-The data in the table above give two points on the demand curve for pizza.Using the midpoint method,when the price of a pizza falls from $10 to $9,what is the percentage change in price?

How does elasticity of supply differ for a product that can be stored,compared to a product that cannot be stored?

-Based on the data in the table above,ice cream and cake are ________ goods.

Moving downward along a linear (straight-line)downward sloping demand curve,the

Studies have shown that the price elasticity of demand for necessities,such as food,are higher in developing countries and lower in developed countries.What is the reason for this difference in elasticity?

If we are trying to determine if two different products are substitutes,complements,or not related at all,we should find the value of the

If a product is a normal good,then its income elasticity of demand is

Suppose Starbucks currently charges $2.50 per cup for its latte.If Starbucks raises the price to $3.00 per cup,based on the demand curve in the figure above its total revenue will because the demand for Starbucks latte is over this price range.

When the price of a pizza is $10,the quantity of soda demanded is 300 drinks.When the price of a pizza is $15,the quantity soda demanded is 100 drinks.The cross elasticity of demand is equal to

-The table above gives the supply schedule for a product.Using the midpoint method,find the price elasticity of supply between points A and B,between B and C,between C and D,and between D and E.

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 5: Elasticities of Demand and Supply

If the price of corn increases by 20 percent and the quantity supplied of corn increases by 30 percent,then supply is

A ________ curve means that ________.

The total revenue test says that if a price decrease leads to

A Minnesota snowmobile dealer lowers its prices in February by 16 percent and the quantity demanded increases by 2 percent.Thus the demand for snowmobiles from this dealer is ________ and the dealer's total revenue will ________.

Suppose a 20 percent increase in the price of gasoline results in a 25 percent increase in the quantity supplied.This response means that gasoline has an

If the demand for insulin is inelastic,an increase in insulin prices leads to

What is the formula for the cross elasticity of demand? The percentage change in the

Suppose the demand for rescue services in our national parks is perfectly inelastic.This fact would mean that a 31 percent increase in rescue fees leads to

Economists use elasticity to measure the responsiveness of quantity to a change in price rather than the slope of the demand curve because elasticity is

-In the figure above,using the midpoint method,the price elasticity of demand when the price falls from $6 to $5 is equal to

-The data in the table above give two points on the demand curve for pizza.Using the midpoint method,when the price of a pizza falls from $10 to $9,what is the percentage change in price?

How does elasticity of supply differ for a product that can be stored,compared to a product that cannot be stored?

-Based on the data in the table above,ice cream and cake are ________ goods.

Moving downward along a linear (straight-line)downward sloping demand curve,the

Studies have shown that the price elasticity of demand for necessities,such as food,are higher in developing countries and lower in developed countries.What is the reason for this difference in elasticity?

If we are trying to determine if two different products are substitutes,complements,or not related at all,we should find the value of the

If a product is a normal good,then its income elasticity of demand is

Suppose Starbucks currently charges $2.50 per cup for its latte.If Starbucks raises the price to $3.00 per cup,based on the demand curve in the figure above its total revenue will ________ because the demand for Starbucks latte is ________ over this price range.

When the price of a pizza is $10,the quantity of soda demanded is 300 drinks.When the price of a pizza is $15,the quantity soda demanded is 100 drinks.The cross elasticity of demand is equal to

-The table above gives the supply schedule for a product.Using the midpoint method,find the price elasticity of supply between points A and B,between B and C,between C and D,and between D and E.

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

A curve means that .

A Minnesota snowmobile dealer lowers its prices in February by 16 percent and the quantity demanded increases by 2 percent.Thus the demand for snowmobiles from this dealer is and the dealer's total revenue will .

Suppose Starbucks currently charges $2.50 per cup for its latte.If Starbucks raises the price to $3.00 per cup,based on the demand curve in the figure above its total revenue will because the demand for Starbucks latte is over this price range.