Question 1

An inelastic demand indicates that

Accepted Answer

A)  quantity demanded does not vary with changes in the price. 
B)  relatively small changes in price lead to relatively large changes in quantity demanded. 
C)  relatively large changes in price are required to obtain a relatively small change in quantity demanded. 
D)  relatively large changes in quantity demanded lead to relatively large changes in price. 
A)  quantity demanded does not vary with changes in the price. 
B)  relatively small changes in price lead to relatively large changes in quantity demanded. 
C)  relatively large changes in price are required to obtain a relatively small change in quantity demanded. 
D)  relatively large changes in quantity demanded lead to relatively large changes in price. C

Question 2

Whenever the absolute value of the price elasticity of demand is greater than 1, but less than infinite,

Accepted Answer

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

Question 3

The cross price elasticity between X and Y is -1.8. We can conclude that

Accepted Answer

A)  goods X and Y are substitutes. 
B)  goods X and Y are complements. 
C)  goods X and Y are unrelated. 
D)  perfect substitutes 
A)  goods X and Y are substitutes. 
B)  goods X and Y are complements. 
C)  goods X and Y are unrelated. 
D)  perfect substitutes B

Question 4

A 3 percent increase in the price of cotton leads to a 6 percent decrease in the quantity demanded of cotton. The absolute price elasticity of demand is

Accepted Answer

A)  3. 
B)  2. 
C)  0.5. 
D)  0.33. 
A)  3. 
B)  2. 
C)  0.5. 
D)  0.33.

Question 5

The price elasticity of supply is higher when

Accepted Answer

A)  the number of producers in the market increases over time. 
B)  the product in question is a complementary good. 
C)  the number of buyers in the market increases. 
D)  producers have less time to adjust to price changes. 
A)  the number of producers in the market increases over time. 
B)  the product in question is a complementary good. 
C)  the number of buyers in the market increases. 
D)  producers have less time to adjust to price changes.

Question 6

-Use the above table. The income elasticity of artisan bread is

Accepted Answer

A)  1.285. 
B)  0.780. 
C)  0.012. 
D)  8.330. 
A)  1.285. 
B)  0.780. 
C)  0.012. 
D)  8.330.

Question 7

In the long run, the supply curve

Accepted Answer

A)  is more elastic than it is in the short run. 
B)  is less elastic than it is in the short run. 
C)  exhibits no systematic sequence of changes in elasticity. 
D)  exhibits no change in elasticity at all. 
A)  is more elastic than it is in the short run. 
B)  is less elastic than it is in the short run. 
C)  exhibits no systematic sequence of changes in elasticity. 
D)  exhibits no change in elasticity at all.

Question 8

For an addictive drug such as heroin, if the price of heroin increases, then

Accepted Answer

A)  the quantity demanded never changes. 
B)  the quantity demanded will decrease by a relatively large amount. 
C)  the quantity demanded will actually increase. 
D)  the quantity demanded will decrease by a relatively small amount. 
A)  the quantity demanded never changes. 
B)  the quantity demanded will decrease by a relatively large amount. 
C)  the quantity demanded will actually increase. 
D)  the quantity demanded will decrease by a relatively small amount.

Question 9

The word best associated with price elasticity of demand is

Accepted Answer

A)  relative. 
B)  total. 
C)  absolute. 
D)  cumulative. 
A)  relative. 
B)  total. 
C)  absolute. 
D)  cumulative.

Question 10

When demand is elastic,

Accepted Answer

A)  quantity demanded is very responsive to a change in price. 
B)  quantity demanded is not very responsive to a change in price. 
C)  the proportional change in quantity demanded is equal to the proportional change in price. 
D)  producers react quickly to price changes. 
A)  quantity demanded is very responsive to a change in price. 
B)  quantity demanded is not very responsive to a change in price. 
C)  the proportional change in quantity demanded is equal to the proportional change in price. 
D)  producers react quickly to price changes.

Question 11

The price elasticity of demand measures

Accepted Answer

A)  the responsiveness of quantity demanded to a change in price. 
B)  the responsiveness of price to a change in competition. 
C)  the change in quantity demanded due to a change in price of a substitute good. 
D)  the change in price due to a change in demand. 
A)  the responsiveness of quantity demanded to a change in price. 
B)  the responsiveness of price to a change in competition. 
C)  the change in quantity demanded due to a change in price of a substitute good. 
D)  the change in price due to a change in demand.

Question 12

If the price of hamburger meat increases by 20 percent and the quantity supplied by meat packing companies increases by 30 percent, what is the price elasticity of supply?

Accepted Answer

A)  1.65 
B)  1.20 
C)  0.67 
D)  1.50 
A)  1.65 
B)  1.20 
C)  0.67 
D)  1.50

Question 13

Over the inelastic range of a demand curve, there is

Accepted Answer

A)  a positive relationship between a given percentage change in price and a change in total revenues. 
B)  a negative relationship between a given percentage change in price and a change in total revenues. 
C)  an increase in total revenues regardless of an increase or decrease in price. 
D)  no relationship between changes in price and changes in total revenues. 
A)  a positive relationship between a given percentage change in price and a change in total revenues. 
B)  a negative relationship between a given percentage change in price and a change in total revenues. 
C)  an increase in total revenues regardless of an increase or decrease in price. 
D)  no relationship between changes in price and changes in total revenues.

Question 14

If a seller lowers the price of a product when demand is price inelastic, the seller can expect revenues to

Accepted Answer

A)  rise. 
B)  fall. 
C)  stay the same. 
D)  either rise or fall, but it is impossible to determine which. 
A)  rise. 
B)  fall. 
C)  stay the same. 
D)  either rise or fall, but it is impossible to determine which.

Question 15

If the price elasticity of supply of television sets is constant and equal to 3, a 10 percent increase in price will result in a change in quantity supplied equal to

Accepted Answer

A)  3 1/3 percent. 
B)  30 percent. 
C)  1/3 percent. 
D)  -30 percent. 
A)  3 1/3 percent. 
B)  30 percent. 
C)  1/3 percent. 
D)  -30 percent.

Question 16

At a price of $10, quantity demanded is 30 units. When the price rises to $11, quantity demanded is 24 units. What is the absolute price elasticity of demand?

Accepted Answer

A)  0.5 
B)  0.43 
C)  2.33 
D)  6.0 
A)  0.5 
B)  0.43 
C)  2.33 
D)  6.0

Question 17

The cross-price elasticity of demand of products "M" and "N" is zero. This implies that "M" and "N" are

Accepted Answer

A)  substitute products. 
B)  complementary products. 
C)  independent products. 
D)  unique goods, as the price elasticity of demand for one of them is zero. 
A)  substitute products. 
B)  complementary products. 
C)  independent products. 
D)  unique goods, as the price elasticity of demand for one of them is zero.

Question 18

The less sensitive quantity demanded is to a change in price, the

Accepted Answer

A)  smaller a change in price must be to induce a certain change in quantity demanded. 
B)  greater the absolute price elasticity of demand. 
C)  smaller the absolute price elasticity of demand. 
D)  closer the absolute price elasticity of demand is to one. 
A)  smaller a change in price must be to induce a certain change in quantity demanded. 
B)  greater the absolute price elasticity of demand. 
C)  smaller the absolute price elasticity of demand. 
D)  closer the absolute price elasticity of demand is to one.

Question 19

Suppose that the demand for pizza is inelastic. If a pizzeria decided to lower the price of pizza, total revenue would

Accepted Answer

A)  increase. 
B)  decrease. 
C)  stay the same. 
D)  be maximized. 
A)  increase. 
B)  decrease. 
C)  stay the same. 
D)  be maximized.

Question 20

While the slope of the perfectly inelastic supply curve ________, the slope of the perfectly elastic supply curve ________.

Accepted Answer

A)  is zero, approaches infinity 
B)  approaches infinity, is zero 
C)  is zero, is zero 
D)  approaches infinity, approaches infinity 
A)  is zero, approaches infinity 
B)  approaches infinity, is zero 
C)  is zero, is zero 
D)  approaches infinity, approaches infinity

Exam 19: Demand and Supply Elasticity

An inelastic demand indicates that

Whenever the absolute value of the price elasticity of demand is greater than 1, but less than infinite,

The cross price elasticity between X and Y is -1.8. We can conclude that

A 3 percent increase in the price of cotton leads to a 6 percent decrease in the quantity demanded of cotton. The absolute price elasticity of demand is

The price elasticity of supply is higher when

-Use the above table. The income elasticity of artisan bread is

In the long run, the supply curve

For an addictive drug such as heroin, if the price of heroin increases, then

The word best associated with price elasticity of demand is

When demand is elastic,

The price elasticity of demand measures

If the price of hamburger meat increases by 20 percent and the quantity supplied by meat packing companies increases by 30 percent, what is the price elasticity of supply?

Over the inelastic range of a demand curve, there is

If a seller lowers the price of a product when demand is price inelastic, the seller can expect revenues to

If the price elasticity of supply of television sets is constant and equal to 3, a 10 percent increase in price will result in a change in quantity supplied equal to

At a price of $10, quantity demanded is 30 units. When the price rises to $11, quantity demanded is 24 units. What is the absolute price elasticity of demand?

The cross-price elasticity of demand of products "M" and "N" is zero. This implies that "M" and "N" are

The less sensitive quantity demanded is to a change in price, the

Suppose that the demand for pizza is inelastic. If a pizzeria decided to lower the price of pizza, total revenue would

While the slope of the perfectly inelastic supply curve ________, the slope of the perfectly elastic supply curve ________.

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

While the slope of the perfectly inelastic supply curve , the slope of the perfectly elastic supply curve .