Question 1

The price elasticity of demand is measured by the

Accepted Answer

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

Question 2

If demand for a good is perfectly inelastic, then

Accepted Answer

A)  a price increase would cause a fall in quantity demanded. 
B)  a price increase would cause no change in quantity demanded. 
C)  a price increase would cause an increase in quantity demanded. 
D)  a price increase would cause a fall in total revenue. 
A)  a price increase would cause a fall in quantity demanded. 
B)  a price increase would cause no change in quantity demanded. 
C)  a price increase would cause an increase in quantity demanded. 
D)  a price increase would cause a fall in total revenue.

Question 3

If the price of good X increases by 1 percent, then the quantity supplied increases by more than 1 percent. This means

Accepted Answer

A)  supply is elastic. 
B)  supply is unit-elastic. 
C)  supply is inelastic. 
D)  the good has good substitutes. 
A)  supply is elastic. 
B)  supply is unit-elastic. 
C)  supply is inelastic. 
D)  the good has good substitutes.

Question 4

To say that demand is inelastic means that

Accepted Answer

A)  people do not like the good very much. 
B)  quantity demanded not very responsive to price changes. 
C)  relatively small changes in price lead to relatively large changes in quantity demanded. 
D)  relatively small changes in quantity demanded lead to relatively small changes in price. 
A)  people do not like the good very much. 
B)  quantity demanded not very responsive to price changes. 
C)  relatively small changes in price lead to relatively large changes in quantity demanded. 
D)  relatively small changes in quantity demanded lead to relatively small changes in price.

Question 5

-In the above figure, the range of unit elasticity occurs

Accepted Answer

A)  on the vertical axis. 
B)  on the horizontal axis. 
C)  between point c and point d. 
D)  below point e. 
A)  on the vertical axis. 
B)  on the horizontal axis. 
C)  between point c and point d. 
D)  below point e.

Question 6

-Use the above table. The income elasticity of jam is

Accepted Answer

A)  -0.33. 
B)  0.33. 
C)  3.00. 
D)  -3.00. 
A)  -0.33. 
B)  0.33. 
C)  3.00. 
D)  -3.00.

Question 7

Suppose 1000 units of a good are sold at $10 a unit. If price increases to $15 and total revenue increases to $15,000 and increases by $1000 for every dollar increase in price after that, we know that

Accepted Answer

A)  demand is perfectly elastic. 
B)  the demand curve is vertical. 
C)  the demand curve is downward sloping and the firm is on the inelastic portion of the demand curve. 
D)  the demand curve is a rectangular hyperbola. 
A)  demand is perfectly elastic. 
B)  the demand curve is vertical. 
C)  the demand curve is downward sloping and the firm is on the inelastic portion of the demand curve. 
D)  the demand curve is a rectangular hyperbola.

Question 8

We expect the price elasticity of supply to be

Accepted Answer

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

Question 9

A perfectly elastic demand curve is

Accepted Answer

A)  vertical. 
B)  horizontal. 
C)  a rectangular hyperbola. 
D)  a downward sloping straight line. 
A)  vertical. 
B)  horizontal. 
C)  a rectangular hyperbola. 
D)  a downward sloping straight line.

Question 10

An increase in total revenue will result if

Accepted Answer

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

Question 11

When very few substitutes for a good exist, demand will be

Accepted Answer

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

Question 12

If the absolute price elasticity of demand is 2.0, a 5 percent decrease in price will increase quantity demanded by

Accepted Answer

A)  10 percent. 
B)  20 percent. 
C)  25 percent. 
D)  5 percent. 
A)  10 percent. 
B)  20 percent. 
C)  25 percent. 
D)  5 percent.

Question 13

The price elasticity of demand is the

Accepted Answer

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

Question 14

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

Accepted Answer

A)  consumers are relatively insensitive to price changes. 
B)  consumers are relatively sensitive to price changes. 
C)  there is a positive relationship between price changes and total revenue. 
D)  producers are relatively insensitive to price changes. 
A)  consumers are relatively insensitive to price changes. 
B)  consumers are relatively sensitive to price changes. 
C)  there is a positive relationship between price changes and total revenue. 
D)  producers are relatively insensitive to price changes.

Question 15

When the Gizmo Company could sell a gizmo for $10, it produced 2,500 per month. More recently, the price of a gizmo has fallen to $9 and so Gizmo is only producing 2,000 units per month. What is the price elasticity of supply for gizmos?

Accepted Answer

A)  0.47 
B)  -0.47 
C)  -2.11 
D)  2.11 
A)  0.47 
B)  -0.47 
C)  -2.11 
D)  2.11

Question 16

-Refer to the above figure. Demand will be 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 17

If the price of a good increases and the total revenue remains the same, the demand for the good is

Accepted Answer

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

Question 18

-Refer to the above table. What is the absolute price elasticity of demand when a price rises from $8 to $8.50?

Accepted Answer

A)  5.15 
B)  1.94 
C)  0.515 
D)  0.194 
A)  5.15 
B)  1.94 
C)  0.515 
D)  0.194

Question 19

The price elasticity of demand measures

Accepted Answer

A)  the consumers' sensitivity to a price change. 
B)  the producers' sensitivity to a price change. 
C)  how much the market price changes in response to a change in demand. 
D)  how much the demand changes in response to a change in income. 
A)  the consumers' sensitivity to a price change. 
B)  the producers' sensitivity to a price change. 
C)  how much the market price changes in response to a change in demand. 
D)  how much the demand changes in response to a change in income.

Question 20

If the price of corn chips increases from $2.00 per bag to $3.00 per bag and the quantity demanded goes down from 100 million bags per week to 50 million bags per week, the absolute value of price elasticity of demand in that price range is

Accepted Answer

A)  0.50. 
B)  1.67. 
C)  0.93. 
D)  2.33. 
A)  0.50. 
B)  1.67. 
C)  0.93. 
D)  2.33.

Exam 19: Demand and Supply Elasticity

The price elasticity of demand is measured by the

If demand for a good is perfectly inelastic, then

If the price of good X increases by 1 percent, then the quantity supplied increases by more than 1 percent. This means

To say that demand is inelastic means that

-In the above figure, the range of unit elasticity occurs

-Use the above table. The income elasticity of jam is

Suppose 1000 units of a good are sold at $10 a unit. If price increases to $15 and total revenue increases to $15,000 and increases by $1000 for every dollar increase in price after that, we know that

We expect the price elasticity of supply to be

A perfectly elastic demand curve is

An increase in total revenue will result if

When very few substitutes for a good exist, demand will be

If the absolute price elasticity of demand is 2.0, a 5 percent decrease in price will increase quantity demanded by

The price elasticity of demand is the

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

When the Gizmo Company could sell a gizmo for $10, it produced 2,500 per month. More recently, the price of a gizmo has fallen to $9 and so Gizmo is only producing 2,000 units per month. What is the price elasticity of supply for gizmos?

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

If the price of a good increases and the total revenue remains the same, the demand for the good is

-Refer to the above table. What is the absolute price elasticity of demand when a price rises from $8 to $8.50?

The price elasticity of demand measures

If the price of corn chips increases from $2.00 per bag to $3.00 per bag and the quantity demanded goes down from 100 million bags per week to 50 million bags per week, the absolute value of price elasticity of demand in that price range 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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