Question 1

One of the most important determinants of a good's price elasticity of demand is

Accepted Answer

A)  the profits of suppliers. 
B)  the numbers of buyers in the market. 
C)  the ease with which consumers can substitute other goods for that product. 
D)  the cost of producing the good. 
A)  the profits of suppliers. 
B)  the numbers of buyers in the market. 
C)  the ease with which consumers can substitute other goods for that product. 
D)  the cost of producing the good.

Question 2

A supply curve that is parallel to the quantity 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.

Question 3

Demand is said to be inelastic when

Accepted Answer

A)  a given percentage change in price will result in a less than proportionate percentage change in the quantity demanded. 
B)  demand exhibits zero responsiveness to price changes. 
C)  small price increases will lead to zero quantity demanded. 
D)  a given percentage change in price will result in a greater than proportionate percentage change in the quantity demanded. 
A)  a given percentage change in price will result in a less than proportionate percentage change in the quantity demanded. 
B)  demand exhibits zero responsiveness to price changes. 
C)  small price increases will lead to zero quantity demanded. 
D)  a given percentage change in price will result in a greater than proportionate percentage change in the quantity demanded.

Question 4

A demand relationship in which the quantity demanded changes exactly in proportion to the change in price is

Accepted Answer

A)  elastic. 
B)  unit-elastic. 
C)  inelastic. 
D)  consistent with zero elasticity. 
A)  elastic. 
B)  unit-elastic. 
C)  inelastic. 
D)  consistent with zero elasticity.

Question 5

The most important determinant of price elasticity of supply is

Accepted Answer

A)  the number of close substitutes there are for the good. 
B)  the time period firms have to adjust to the new price. 
C)  the price of the good. 
D)  the importance of the good in the budgets of consumers. 
A)  the number of close substitutes there are for the good. 
B)  the time period firms have to adjust to the new price. 
C)  the price of the good. 
D)  the importance of the good in the budgets of consumers.

Question 6

When Mary earned $3,200 per month, she bought 2 concert tickets each month. Now her monthly income is $5,600, and the number of concert tickets she purchases has risen to 3 per month. Mary's income elasticity of demand for concert tickets equals ________ and the tickets are a(n) ________ good for Mary.

Accepted Answer

A)  -1.36; normal 
B)  -0.21; inferior 
C)  +0.21; complementary 
D)  +0.73; normal 
A)  -1.36; normal 
B)  -0.21; inferior 
C)  +0.21; complementary 
D)  +0.73; normal

Question 7

If goods are completely unrelated, their cross price elasticity will

Accepted Answer

A)  be greater than one. 
B)  be less than one. 
C)  be equal to zero. 
D)  be negative. 
A)  be greater than one. 
B)  be less than one. 
C)  be equal to zero. 
D)  be negative.

Question 8

Moving down a straight-line demand curve, the absolute price elasticity of demand

Accepted Answer

A)  increases. 
B)  is constant. 
C)  decreases. 
D)  varies in uncertain ways. 
A)  increases. 
B)  is constant. 
C)  decreases. 
D)  varies in uncertain ways.

Question 9

Robert must always have cream in his coffee. For Robert, the cross price elasticity of demand for coffee and cream is

Accepted Answer

A)  equal to 0. 
B)  negative. 
C)  positive. 
D)  impossible to determine without more information. 
A)  equal to 0. 
B)  negative. 
C)  positive. 
D)  impossible to determine without more information.

Question 10

A perfectly elastic supply curve is

Accepted Answer

A)  a straight line that crosses the horizontal axis. 
B)  a straight line coming out of the origin. 
C)  a horizontal straight line. 
D)  a vertical straight line. 
A)  a straight line that crosses the horizontal axis. 
B)  a straight line coming out of the origin. 
C)  a horizontal straight line. 
D)  a vertical straight line.

Question 11

-Refer to the above table. Suppose the price of Y rises from $18 to $20. What is the cross price elasticity of demand between Y and Z?

Accepted Answer

A)  -1.7273 
B)  -1.1176 
C)  -0.8947 
D)  +1.7273 
A)  -1.7273 
B)  -1.1176 
C)  -0.8947 
D)  +1.7273

Question 12

-Refer to the above figure. Demand will be unit-elastic when quantity is between

Accepted Answer

A)  0 and A. 
B)  0 and B. 
C)  A and B. 
D)  B and C. 
A)  0 and A. 
B)  0 and B. 
C)  A and B. 
D)  B and C.

Question 13

-Consider the above figure. Which of the following statements is correct?

Accepted Answer

A)  In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D1 is equal to the price elasticity of demand associated with demand curve D2. 
B)  In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D1 is less than the price elasticity of demand associated with demand curve D2. 
C)  In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D1 is greater than the price elasticity of demand associated with demand curve D2. 
D)  In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand is infinite. 
A)  In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D1 is equal to the price elasticity of demand associated with demand curve D2. 
B)  In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D1 is less than the price elasticity of demand associated with demand curve D2. 
C)  In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D1 is greater than the price elasticity of demand associated with demand curve D2. 
D)  In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand is infinite.

Question 14

-Refer to the above figure. Demand will be inelastic when quantity is between

Accepted Answer

A)  0 and A. 
B)  0 and B. 
C)  A and B. 
D)  B and C. 
A)  0 and A. 
B)  0 and B. 
C)  A and B. 
D)  B and C.

Question 15

Suppose that the demand for men's ties is price inelastic for the range of prices between $10 and $12. If Joe raises the price of the ties in his shop from $10 to $12, what will happen to Joe's total revenues?

Accepted Answer

A)  Total revenues will decrease. 
B)  Total revenues will increase. 
C)  Total revenues will not change. 
D)  Total revenues will have no relationship to the quantity of ties demanded. 
A)  Total revenues will decrease. 
B)  Total revenues will increase. 
C)  Total revenues will not change. 
D)  Total revenues will have no relationship to the quantity of ties demanded.

Question 16

-Use the above figure. When the price increases from $2 to $10, total revenue

Accepted Answer

A)  increases from areas A + B to areas B + C and demand is inelastic. 
B)  increases from areas B + C to areas A + B and demand is inelastic. 
C)  increases from areas B + C to areas A + D and demand is elastic. 
D)  increases from areas C + D to areas B + A and demand is elastic. 
A)  increases from areas A + B to areas B + C and demand is inelastic. 
B)  increases from areas B + C to areas A + B and demand is inelastic. 
C)  increases from areas B + C to areas A + D and demand is elastic. 
D)  increases from areas C + D to areas B + A and demand is elastic.

Question 17

-Refer to the above table. At a price below $5, the absolute price elasticity of demand is

Accepted Answer

A)  1.0. 
B)  below 1. 
C)  between 0.8 and 1.0. 
D)  greater than 1. 
A)  1.0. 
B)  below 1. 
C)  between 0.8 and 1.0. 
D)  greater than 1.

Question 18

The demand for diet soft drinks (as a group) is relatively inelastic because

Accepted Answer

A)  there are many of them on the market. 
B)  there are few substitutes. 
C)  the purchase of a soft drink represents a large portion of a person's budget. 
D)  none of the above. 
A)  there are many of them on the market. 
B)  there are few substitutes. 
C)  the purchase of a soft drink represents a large portion of a person's budget. 
D)  none of the above.

Question 19

The price elasticity of demand is

Accepted Answer

A)  always positive, so there is no reason to consider the absolute value of the price elasticity of demand. 
B)  always negative, but by convention, economists typically express the price elasticity of demand as an absolute value. 
C)  always equal to -1, which by convention economists typically express as an absolute value, or 1. 
D)  always equal to zero, so there is no reason to consider the absolute value of the price elasticity of demand. 
A)  always positive, so there is no reason to consider the absolute value of the price elasticity of demand. 
B)  always negative, but by convention, economists typically express the price elasticity of demand as an absolute value. 
C)  always equal to -1, which by convention economists typically express as an absolute value, or 1. 
D)  always equal to zero, so there is no reason to consider the absolute value of the price elasticity of demand.

Question 20

"The price elasticity of demand for a particular good is smaller in the long run because consumers adapt to higher prices over time." Do you agree or disagree? Explain.

Accepted Answer

Disagree. Price elasticity of demand is

Exam 19: Demand and Supply Elasticity

One of the most important determinants of a good's price elasticity of demand is

A supply curve that is parallel to the quantity axis is

Demand is said to be inelastic when

A demand relationship in which the quantity demanded changes exactly in proportion to the change in price is

The most important determinant of price elasticity of supply is

If goods are completely unrelated, their cross price elasticity will

Moving down a straight-line demand curve, the absolute price elasticity of demand

Robert must always have cream in his coffee. For Robert, the cross price elasticity of demand for coffee and cream is

A perfectly elastic supply curve is

-Refer to the above table. Suppose the price of Y rises from $18 to $20. What is the cross price elasticity of demand between Y and Z?

-Refer to the above figure. Demand will be unit-elastic when quantity is between

-Consider the above figure. Which of the following statements is correct?

-Refer to the above figure. Demand will be inelastic when quantity is between

Suppose that the demand for men's ties is price inelastic for the range of prices between $10 and $12. If Joe raises the price of the ties in his shop from $10 to $12, what will happen to Joe's total revenues?

-Use the above figure. When the price increases from $2 to $10, total revenue

-Refer to the above table. At a price below $5, the absolute price elasticity of demand is

The demand for diet soft drinks (as a group) is relatively inelastic because

The price elasticity of demand is

"The price elasticity of demand for a particular good is smaller in the long run because consumers adapt to higher prices over time." Do you agree or disagree? Explain.

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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