Question 1

A perfectly inelastic demand curve exhibits

Accepted Answer

A)  zero responsiveness to changes in price. 
B)  zero quantity demanded when there is a slight change in price. 
C)  a change in quantity demanded that is proportional to the change in price. 
D)  a change in quantity demanded that is always twenty percent of the change in price. 
A)  zero responsiveness to changes in price. 
B)  zero quantity demanded when there is a slight change in price. 
C)  a change in quantity demanded that is proportional to the change in price. 
D)  a change in quantity demanded that is always twenty percent of the change in price.

Question 2

Which of the following would NOT affect a good's price elasticity of demand?

Accepted Answer

A)  The ease of substitution between goods 
B)  The cost of producing the good 
C)  The number of substitute goods available 
D)  The proportion of one's budget spent on an item 
A)  The ease of substitution between goods 
B)  The cost of producing the good 
C)  The number of substitute goods available 
D)  The proportion of one's budget spent on an item

Question 3

The income elasticity of demand is

Accepted Answer

A)  the percentage change in demand divided by the percentage change in income. 
B)  the change in income divided by the percentage change in price. 
C)  the change in quantity demanded divided by the change in price. 
D)  the percentage change in income divided by the percentage change in quantity demanded. 
A)  the percentage change in demand divided by the percentage change in income. 
B)  the change in income divided by the percentage change in price. 
C)  the change in quantity demanded divided by the change in price. 
D)  the percentage change in income divided by the percentage change in quantity demanded.

Question 4

The income elasticity of demand for all goods taken together must be

Accepted Answer

A)  zero. 
B)  -1. 
C)  +1. 
D)  between 0 and 1. 
A)  zero. 
B)  -1. 
C)  +1. 
D)  between 0 and 1.

Question 5

When the price of a pound of apples is $1.00, 7500 pounds of apples are demanded. When the price of a pound of apples decreases to $0.80, 10,000 pounds of apples are demanded. In this price range the demand for apples is

Accepted Answer

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

Question 6

Elastic demand implies

Accepted Answer

A)  that a one percent increase in price results in a smaller than one percent decrease in quantity demanded. 
B)  that a one percent increase in price results in a larger than one percent decrease in quantity demanded. 
C)  that a one percent cut in price results in a larger than one percent increase in quantity demanded. 
D)  that a one percent decrease or increase in price induces no change in total revenue. 
A)  that a one percent increase in price results in a smaller than one percent decrease in quantity demanded. 
B)  that a one percent increase in price results in a larger than one percent decrease in quantity demanded. 
C)  that a one percent cut in price results in a larger than one percent increase in quantity demanded. 
D)  that a one percent decrease or increase in price induces no change in total revenue.

Question 7

If demand is elastic and the price of a product decreases by 10 percent, then

Accepted Answer

A)  the change in quantity demanded is less than 10 percent. 
B)  the change in quantity demanded is equal to 10 percent. 
C)  the change in quantity demanded is greater than 10 percent. 
D)  the decrease in quantity demanded is greater than 0 percent. 
A)  the change in quantity demanded is less than 10 percent. 
B)  the change in quantity demanded is equal to 10 percent. 
C)  the change in quantity demanded is greater than 10 percent. 
D)  the decrease in quantity demanded is greater than 0 percent.

Question 8

When the price of cable modems decreased from $100 to $85, the number of cable modems produced fell from 1,000 per week to 850 per week. Using this information, we know the supply of cable modems is

Accepted Answer

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

Question 9

A firm could lower prices and still increase revenue if

Accepted Answer

A)  demand is elastic. 
B)  elasticity of demand is equal to unity. 
C)  demand is inelastic. 
D)  elasticity of demand is equal to zero. 
A)  demand is elastic. 
B)  elasticity of demand is equal to unity. 
C)  demand is inelastic. 
D)  elasticity of demand is equal to zero.

Question 10

-Refer to the above table. What is the absolute price elasticity of demand when price changes from $6.00 to $6.50?

Accepted Answer

A)  1.60 
B)  1.00 
C)  0.65 
D)  0.60 
A)  1.60 
B)  1.00 
C)  0.65 
D)  0.60

Question 11

-According to the above table, what is the absolute price elasticity of demand if price falls from $8.00 to $7.50?

Accepted Answer

A)  4.00 
B)  2.82 
C)  1.80 
D)  1.21 
A)  4.00 
B)  2.82 
C)  1.80 
D)  1.21

Question 12

The price elasticity of supply

Accepted Answer

A)  is the slope of the supply curve. 
B)  is the percentage change in quantity supplied divided by the percentage change in price. 
C)  is always negative. 
D)  does not vary between the long and the short run. 
A)  is the slope of the supply curve. 
B)  is the percentage change in quantity supplied divided by the percentage change in price. 
C)  is always negative. 
D)  does not vary between the long and the short run.

Question 13

The price elasticity of supply measures

Accepted Answer

A)  the responsiveness of quantity demanded to a change in price. 
B)  the responsiveness of quantity supplied to a change in price. 
C)  the change in supply due to a change in input prices. 
D)  the change in price due to a change in quantity supplied. 
A)  the responsiveness of quantity demanded to a change in price. 
B)  the responsiveness of quantity supplied to a change in price. 
C)  the change in supply due to a change in input prices. 
D)  the change in price due to a change in quantity supplied.

Question 14

The longer any price change lasts over time, the

Accepted Answer

A)  more difficult it is to alter quantity demanded. 
B)  the more quickly quantity demanded will return to its original level. 
C)  the longer the short-run equilibrium will continue to be the short-run equilibrium. 
D)  more quantity demanded will change. 
A)  more difficult it is to alter quantity demanded. 
B)  the more quickly quantity demanded will return to its original level. 
C)  the longer the short-run equilibrium will continue to be the short-run equilibrium. 
D)  more quantity demanded will change.

Question 15

If the absolute price elasticity of demand of a good is 1.46, then the total revenues will increase if its market price

Accepted Answer

A)  increases. 
B)  decreases. 
C)  stays the same. 
D)  changes, but we can't tell without more information if the price increases or decreases. 
A)  increases. 
B)  decreases. 
C)  stays the same. 
D)  changes, but we can't tell without more information if the price increases or decreases.

Question 16

A demand relationship that is a vertical line up from the quantity axis is

Accepted Answer

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

Question 17

-Refer to the above table. What is the absolute price elasticity of demand when price changes from $5.50 to $5.00?

Accepted Answer

A)  0.72 
B)  0.79 
C)  1.38 
D)  5.0 
A)  0.72 
B)  0.79 
C)  1.38 
D)  5.0

Question 18

If the absolute value of the price elasticity of demand for a product is greater than 1, then

Accepted Answer

A)  quantity demanded is not very sensitive to price changes. 
B)  demand is elastic. 
C)  demand is unit-elastic. 
D)  demand is inelastic. 
A)  quantity demanded is not very sensitive to price changes. 
B)  demand is elastic. 
C)  demand is unit-elastic. 
D)  demand is inelastic.

Question 19

The longer any price change persists, the

Accepted Answer

A)  more difficult it is to alter quantity demanded. 
B)  greater is the price elasticity of demand. 
C)  lower is the price elasticity of demand. 
D)  more likely price will return to its original level. 
A)  more difficult it is to alter quantity demanded. 
B)  greater is the price elasticity of demand. 
C)  lower is the price elasticity of demand. 
D)  more likely price will return to its original level.

Question 20

Compared to the short-run price elasticity of demand, the long-run price elasticity of demand is

Accepted Answer

A)  smaller. 
B)  the same. 
C)  greater. 
D)  either greater than or less, depending on the number of substitutes the good has. 
A)  smaller. 
B)  the same. 
C)  greater. 
D)  either greater than or less, depending on the number of substitutes the good has.

Exam 19: Demand and Supply Elasticity

A perfectly inelastic demand curve exhibits

Which of the following would NOT affect a good's price elasticity of demand?

The income elasticity of demand is

The income elasticity of demand for all goods taken together must be

When the price of a pound of apples is $1.00, 7500 pounds of apples are demanded. When the price of a pound of apples decreases to $0.80, 10,000 pounds of apples are demanded. In this price range the demand for apples is

Elastic demand implies

If demand is elastic and the price of a product decreases by 10 percent, then

When the price of cable modems decreased from $100 to $85, the number of cable modems produced fell from 1,000 per week to 850 per week. Using this information, we know the supply of cable modems is

A firm could lower prices and still increase revenue if

-Refer to the above table. What is the absolute price elasticity of demand when price changes from $6.00 to $6.50?

-According to the above table, what is the absolute price elasticity of demand if price falls from $8.00 to $7.50?

The price elasticity of supply

The price elasticity of supply measures

The longer any price change lasts over time, the

If the absolute price elasticity of demand of a good is 1.46, then the total revenues will increase if its market price

A demand relationship that is a vertical line up from the quantity axis is

-Refer to the above table. What is the absolute price elasticity of demand when price changes from $5.50 to $5.00?

If the absolute value of the price elasticity of demand for a product is greater than 1, then

The longer any price change persists, the

Compared to the short-run price elasticity of demand, the long-run price elasticity of demand is

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

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