Question 1

When many substitutes exist for a good, demand will be

Accepted Answer

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

Question 2

If a one percent increase in the price of bananas leads to a one percent decrease in the quantity of bananas demanded, then the demand for bananas is

Accepted Answer

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

Question 3

When demand is inelastic,

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 4

Janice earns an income of $2,000 a week and goes out to lunch 3 times a week. If her income increased to $2,100 she would go out to lunch 4 times a week. Compute Janice's income elasticity of demand.

Accepted Answer

A)  0.17 
B)  5.86 
C)  7 
D)  100 
A)  0.17 
B)  5.86 
C)  7 
D)  100

Question 5

When demand is perfectly inelastic, an increase in price will

Accepted Answer

A)  leave total revenue unchanged. 
B)  increase total revenue. 
C)  decrease total revenue. 
D)  either increase total revenue or decrease total revenue, but it is impossible to tell which. 
A)  leave total revenue unchanged. 
B)  increase total revenue. 
C)  decrease total revenue. 
D)  either increase total revenue or decrease total revenue, but it is impossible to tell which.

Question 6

Why can cross price elasticity of demand be positive or negative, unlike the price elasticity of demand with respect to the item's own price?

Accepted Answer

Cross price elasticity of demand is the

Question 7

In which of the following situations is the absolute price elasticity of demand for an item most likely to exceed a value of 1?

Accepted Answer

A)  when there are very few close substitutes for the item 
B)  when there are very few producers of the item 
C)  when the item's share of expenses in consumers' budgets is very small 
D)  when there is considerable time to adjust to a change in the price of the item 
A)  when there are very few close substitutes for the item 
B)  when there are very few producers of the item 
C)  when the item's share of expenses in consumers' budgets is very small 
D)  when there is considerable time to adjust to a change in the price of the item

Question 8

The most important determinant of the elasticity of supply is

Accepted Answer

A)  whether the good is a durable good or a nondurable good. 
B)  the price of the good. 
C)  the time period firms have to adjust to the new price. 
D)  the proportion of the good in the budget of consumers. 
A)  whether the good is a durable good or a nondurable good. 
B)  the price of the good. 
C)  the time period firms have to adjust to the new price. 
D)  the proportion of the good in the budget of consumers.

Question 9

Six months ago, the price of gasoline was $2.20 per gallon. Now, the price is $2.40 per gallon. In response to this price increase, the number of gallons of gasoline purchased has declined by 2 percent. Based on this information, what is the absolute price elasticity of demand for gasoline?

Accepted Answer

A)  4.35 
B)  1.20 
C)  0.23 
D)  0.10 
A)  4.35 
B)  1.20 
C)  0.23 
D)  0.10

Question 10

If the slope of a demand curve is constant, then we know that

Accepted Answer

A)  elasticity of demand is also elastic everywhere. 
B)  elasticity of demand is constant and elastic. 
C)  elasticity of demand is inelastic everywhere. 
D)  elasticity of demand varies along the demand curve. 
A)  elasticity of demand is also elastic everywhere. 
B)  elasticity of demand is constant and elastic. 
C)  elasticity of demand is inelastic everywhere. 
D)  elasticity of demand varies along the demand curve.

Question 11

A decrease in total revenue will result if

Accepted Answer

A)  demand is inelastic and price decreases. 
B)  demand is elastic and price increases. 
C)  demand is elastic and price decreases. 
D)  demand is unitary elastic and price decreases. 
A)  demand is inelastic and price decreases. 
B)  demand is elastic and price increases. 
C)  demand is elastic and price decreases. 
D)  demand is unitary elastic and price decreases.

Question 12

When demand is elastic,

Accepted Answer

A)  changes in price and changes in total revenue move in the same direction. 
B)  there is no relationship between changes in price and changes in total revenue. 
C)  changes in price and changes in total revenue move in opposite directions. 
D)  for any change in price, total revenue will not change. 
A)  changes in price and changes in total revenue move in the same direction. 
B)  there is no relationship between changes in price and changes in total revenue. 
C)  changes in price and changes in total revenue move in opposite directions. 
D)  for any change in price, total revenue will not change.

Question 13

-Refer to the above table. Based on the information in the table, we can say that

Accepted Answer

A)  all three goods are substitutes for each other. 
B)  all three goods are complements. 
C)  X and Y are substitutes, Y and Z are complements, and X and Z are substitutes. 
D)  X and Y are complements, Y and Z are substitutes, and X and Z are complements. 
A)  all three goods are substitutes for each other. 
B)  all three goods are complements. 
C)  X and Y are substitutes, Y and Z are complements, and X and Z are substitutes. 
D)  X and Y are complements, Y and Z are substitutes, and X and Z are complements.

Question 14

A cafeteria is willing to produce 100 cups of coffee when the price is $1 and 150 cups of coffee when the price is $1.30, other things being equal. The price elasticity of supply of coffee is

Accepted Answer

A)  1.53. 
B)  0.67. 
C)  0.10. 
D)  0.50. 
A)  1.53. 
B)  0.67. 
C)  0.10. 
D)  0.50.

Question 15

If the price elasticity of demand (Ep) equals one in the short run, then, other things being equal, in the long run Ep will be

Accepted Answer

A)  one. 
B)  less than one. 
C)  greater than one. 
D)  indeterminate without more information. 
A)  one. 
B)  less than one. 
C)  greater than one. 
D)  indeterminate without more information.

Question 16

If the price of wireless phone service decreases and the demand for wired phone services decreases, then wired and wireless phone services are

Accepted Answer

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

Question 17

Consider the following data: Price of A Quantity Demanded of A
$5 6
$4 10
The absolute value of the price elasticity of demand for product A is

Accepted Answer

A)  0.44. 
B)  1.80. 
C)  0.56. 
D)  2.25. 
A)  0.44. 
B)  1.80. 
C)  0.56. 
D)  2.25.

Question 18

The quantity of raspberries sold at a local store increases from 100 pints to 1,500 pints when the price is reduced from $4.00 to $1.00. In this situation, the absolute price elasticity of demand for raspberries is approximately

Accepted Answer

A)  0.69. 
B)  6.7. 
C)  1.46. 
D)  4.3. 
A)  0.69. 
B)  6.7. 
C)  1.46. 
D)  4.3.

Question 19

Which of the following statements is correct?

Accepted Answer

A)  Supply is more elastic in the short run than in long run. 
B)  Supply is more elastic in the long run than in short run. 
C)  Price elasticity of supply is constant along the supply curve. 
D)  Price elasticity of supply is always a negative number. 
A)  Supply is more elastic in the short run than in long run. 
B)  Supply is more elastic in the long run than in short run. 
C)  Price elasticity of supply is constant along the supply curve. 
D)  Price elasticity of supply is always a negative number.

Question 20

A supply curve that is parallel to the price axis is

Accepted Answer

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

Exam 19: Demand and Supply Elasticity

When many substitutes exist for a good, demand will be

If a one percent increase in the price of bananas leads to a one percent decrease in the quantity of bananas demanded, then the demand for bananas is

When demand is inelastic,

Janice earns an income of $2,000 a week and goes out to lunch 3 times a week. If her income increased to $2,100 she would go out to lunch 4 times a week. Compute Janice's income elasticity of demand.

When demand is perfectly inelastic, an increase in price will

Why can cross price elasticity of demand be positive or negative, unlike the price elasticity of demand with respect to the item's own price?

In which of the following situations is the absolute price elasticity of demand for an item most likely to exceed a value of 1?

The most important determinant of the elasticity of supply is

Six months ago, the price of gasoline was $2.20 per gallon. Now, the price is $2.40 per gallon. In response to this price increase, the number of gallons of gasoline purchased has declined by 2 percent. Based on this information, what is the absolute price elasticity of demand for gasoline?

If the slope of a demand curve is constant, then we know that

A decrease in total revenue will result if

When demand is elastic,

-Refer to the above table. Based on the information in the table, we can say that

A cafeteria is willing to produce 100 cups of coffee when the price is $1 and 150 cups of coffee when the price is $1.30, other things being equal. The price elasticity of supply of coffee is

If the price elasticity of demand (Ep) equals one in the short run, then, other things being equal, in the long run Ep will be

If the price of wireless phone service decreases and the demand for wired phone services decreases, then wired and wireless phone services are

Consider the following data: Price of A Quantity Demanded of A $5 6 $4 10 The absolute value of the price elasticity of demand for product A is

The quantity of raspberries sold at a local store increases from 100 pints to 1,500 pints when the price is reduced from $4.00 to $1.00. In this situation, the absolute price elasticity of demand for raspberries is approximately

Which of the following statements is correct?

A supply curve that is parallel to the price axis 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

Filters