Question 1

When the absolute price elasticity of demand equals 0.67, demand is

Accepted Answer

A)  elastic. 
B)  unit-elastic. 
C)  inelastic. 
D)  undetermined without more information. 
A)  elastic. 
B)  unit-elastic. 
C)  inelastic. 
D)  undetermined without more information.

Question 2

If a good has an absolute price elasticity of 0, the demand for the good is

Accepted Answer

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

Question 3

Suppose the short-run supply curve is a straight line of slope +1 that intersects the origin. The long-run supply curve will be

Accepted Answer

A)  horizontal. 
B)  steeper. 
C)  shallower. 
D)  vertical. 
A)  horizontal. 
B)  steeper. 
C)  shallower. 
D)  vertical.

Question 4

Which of the following statements about demand and price elasticity of demand is TRUE?

Accepted Answer

A)  As the demand curve has a positive slope, the price elasticity of demand is positive. 
B)  As the demand curve has a negative slope, the price elasticity of demand is negative. 
C)  As the demand curve has a positive slope, the price elasticity of demand is negative. 
D)  As the demand curve has a negative slope, the price elasticity of demand is positive. 
A)  As the demand curve has a positive slope, the price elasticity of demand is positive. 
B)  As the demand curve has a negative slope, the price elasticity of demand is negative. 
C)  As the demand curve has a positive slope, the price elasticity of demand is negative. 
D)  As the demand curve has a negative slope, the price elasticity of demand is positive.

Question 5

Price elasticity of demand is the responsiveness of

Accepted Answer

A)  the quantity demanded to a change in price. 
B)  demand to a change in supply. 
C)  demand to a change in income. 
D)  demand for a good to a change in the demand for another good. 
A)  the quantity demanded to a change in price. 
B)  demand to a change in supply. 
C)  demand to a change in income. 
D)  demand for a good to a change in the demand for another good.

Question 6

The actual value of the price elasticity of demand is always

Accepted Answer

A)  positive because of the law of demand. 
B)  negative because of the law of demand. 
C)  positive because of diminishing marginal utility. 
D)  negative because percentages can only be negative. 
A)  positive because of the law of demand. 
B)  negative because of the law of demand. 
C)  positive because of diminishing marginal utility. 
D)  negative because percentages can only be negative.

Question 7

A 10 percent increase in the price of neckties leads to a 5 percent decrease in the quantity demanded of neckties. The absolute price elasticity of demand is

Accepted Answer

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

Question 8

The absolute price elasticity of demand for good X is 1.2 when price is measured in dollars. If price were measured in cents, the price elasticity elasticity of demand would equal

Accepted Answer

A)  1200 
B)  12 
C)  1.2 
D)  0.012 
A)  1200 
B)  12 
C)  1.2 
D)  0.012

Question 9

If the price elasticity of supply is equal to 1, we would say the supply of the item is

Accepted Answer

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

Question 10

A value of the absolute price elasticity of demand equal to 2.5 indicates that

Accepted Answer

A)  a 5% decrease in price leads to a 2% increase in quantity demanded. 
B)  a 2% decrease in price leads to a 25% increase in quantity demanded. 
C)  a 1% decrease in price leads to a 2.5% increase in quantity demanded. 
D)  a 0.25% decrease in price leads to a 1% increase in quantity. 
A)  a 5% decrease in price leads to a 2% increase in quantity demanded. 
B)  a 2% decrease in price leads to a 25% increase in quantity demanded. 
C)  a 1% decrease in price leads to a 2.5% increase in quantity demanded. 
D)  a 0.25% decrease in price leads to a 1% increase in quantity.

Question 11

If the price of one good increases, and as a result the demand for another good increases, the goods are

Accepted Answer

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

Question 12

If the cross price elasticity of demand between two goods is negative, then the two goods are

Accepted Answer

A)  substitutes. 
B)  complements. 
C)  unrelated. 
D)  independent. 
A)  substitutes. 
B)  complements. 
C)  unrelated. 
D)  independent.

Question 13

If the quantity supplied stays the same no matter what the price is, then supply is

Accepted Answer

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

Question 14

Price elasticity of demand basically measures

Accepted Answer

A)  the reliability of a product. 
B)  the responsiveness of consumers to price changes. 
C)  the variability of price changes. 
D)  the percentage change in market price as a result of a change in demand. 
A)  the reliability of a product. 
B)  the responsiveness of consumers to price changes. 
C)  the variability of price changes. 
D)  the percentage change in market price as a result of a change in demand.

Question 15

When total revenue and price are inversely related, demand is

Accepted Answer

A)  unit-elastic. 
B)  inelastic. 
C)  elastic. 
D)  not related. 
A)  unit-elastic. 
B)  inelastic. 
C)  elastic. 
D)  not related.

Question 16

Income elasticity of demand is defined as

Accepted Answer

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

Question 17

If the price of apples went up by 25 percent, which of the following values of the cross price elasticity for oranges would be most reasonable to anticipate?

Accepted Answer

A)  0.0 
B)  1.2 
C)  -2.5 
D)  -1.0 
A)  0.0 
B)  1.2 
C)  -2.5 
D)  -1.0

Question 18

Other things being equal, the longer a price change persists,

Accepted Answer

A)  the less is the elasticity of demand. 
B)  the less chance a consumer will be able to adjust. 
C)  the more the consumer will be willing to pay. 
D)  the greater is the elasticity of demand. 
A)  the less is the elasticity of demand. 
B)  the less chance a consumer will be able to adjust. 
C)  the more the consumer will be willing to pay. 
D)  the greater is the elasticity of demand.

Question 19

-Refer to the above figure. Demand is

Accepted Answer

A)  perfectly elastic. 
B)  unitary elastic. 
C)  perfectly inelastic. 
D)  undetermined without more information. 
A)  perfectly elastic. 
B)  unitary elastic. 
C)  perfectly inelastic. 
D)  undetermined without more information.

Question 20

If the price of good A increases from $15 to $20 per unit and quantity demanded falls from 1500 to 1000 units, then by using the method of average values, we can calculate the absolute price elasticity of demand to be

Accepted Answer

A)  2.6. 
B)  0.75. 
C)  1.4. 
D)  2.4. 
A)  2.6. 
B)  0.75. 
C)  1.4. 
D)  2.4.

Exam 19: Demand and Supply Elasticity

When the absolute price elasticity of demand equals 0.67, demand is

If a good has an absolute price elasticity of 0, the demand for the good is

Suppose the short-run supply curve is a straight line of slope +1 that intersects the origin. The long-run supply curve will be

Which of the following statements about demand and price elasticity of demand is TRUE?

Price elasticity of demand is the responsiveness of

The actual value of the price elasticity of demand is always

A 10 percent increase in the price of neckties leads to a 5 percent decrease in the quantity demanded of neckties. The absolute price elasticity of demand is

The absolute price elasticity of demand for good X is 1.2 when price is measured in dollars. If price were measured in cents, the price elasticity elasticity of demand would equal

If the price elasticity of supply is equal to 1, we would say the supply of the item is

A value of the absolute price elasticity of demand equal to 2.5 indicates that

If the price of one good increases, and as a result the demand for another good increases, the goods are

If the cross price elasticity of demand between two goods is negative, then the two goods are

If the quantity supplied stays the same no matter what the price is, then supply is

Price elasticity of demand basically measures

When total revenue and price are inversely related, demand is

Income elasticity of demand is defined as

If the price of apples went up by 25 percent, which of the following values of the cross price elasticity for oranges would be most reasonable to anticipate?

Other things being equal, the longer a price change persists,

-Refer to the above figure. Demand is

If the price of good A increases from $15 to $20 per unit and quantity demanded falls from 1500 to 1000 units, then by using the method of average values, we can calculate the absolute price elasticity of demand to be

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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