Question 1

Other things being equal, demand is more elastic the

Accepted Answer

A)  less expensive the good. 
B)  shorter the time period for adjustment. 
C)  larger the percentage of a total budget that a family spends on the good. 
D)  more unique the good is. 
A)  less expensive the good. 
B)  shorter the time period for adjustment. 
C)  larger the percentage of a total budget that a family spends on the good. 
D)  more unique the good is.

Question 2

The responsiveness of quantity demanded of a good to changes in its price is the

Accepted Answer

A)  cross elasticity of demand. 
B)  price elasticity of supply. 
C)  income elasticity. 
D)  price elasticity of demand. 
A)  cross elasticity of demand. 
B)  price elasticity of supply. 
C)  income elasticity. 
D)  price elasticity of demand.

Question 3

Which of the following is more likely to have perfectly elastic or nearly perfectly elastic demand?

Accepted Answer

A)  a textbook required for an economics course 
B)  the guitar produced by a master craftsman 
C)  milk produced by a Wisconsin dairy farmer 
D)  the services offered by the only allergist in the community 
A)  a textbook required for an economics course 
B)  the guitar produced by a master craftsman 
C)  milk produced by a Wisconsin dairy farmer 
D)  the services offered by the only allergist in the community

Question 4

-In the above figure, along which range would total revenue remain unchanged by raising prices?

Accepted Answer

A)  Between point a and point b 
B)  Between point c and point d 
C)  Between point d and point e 
D)  Below point e and above point a. 
A)  Between point a and point b 
B)  Between point c and point d 
C)  Between point d and point e 
D)  Below point e and above point a.

Question 5

-Refer to the above table. For which prices is demand inelastic?

Accepted Answer

A)  In a range of prices below $6.00 
B)  In a range of prices above $6.00 
C)  In a range of prices between $5 and $1 
D)  In a range of prices above $9.00 
A)  In a range of prices below $6.00 
B)  In a range of prices above $6.00 
C)  In a range of prices between $5 and $1 
D)  In a range of prices above $9.00

Question 6

If the price elasticity of demand for good A is -1, then a 1% increase in

Accepted Answer

A)  consumer income will result in a 1% decrease in the demand for good A. 
B)  consumer income will result in a 1% increase in the demand for good A. 
C)  the market price of good A will result in a 1% increase in the quantity demanded of good A . 
D)  the market price of good A will result in a 1% decrease in the quantity demanded of good A . 
A)  consumer income will result in a 1% decrease in the demand for good A. 
B)  consumer income will result in a 1% increase in the demand for good A. 
C)  the market price of good A will result in a 1% increase in the quantity demanded of good A . 
D)  the market price of good A will result in a 1% decrease in the quantity demanded of good A .

Question 7

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

Accepted Answer

A)  -2 
B)  -1 
C)  0 
D)  +1 
A)  -2 
B)  -1 
C)  0 
D)  +1

Question 8

Color television prices rise by 10 percent, and in response the quantity of those TVs supplied increases by 6 percent. The supply elasticity for color television sets in that price range is

Accepted Answer

A)  0.6. 
B)  1.66. 
C)  6.0. 
D)  -1.66. 
A)  0.6. 
B)  1.66. 
C)  6.0. 
D)  -1.66.

Question 9

-Use the above figure. Which graph depicts complementary goods?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 10

If the price of apples went up by 25 percent, which of the following values of the cross price elasticity for cars 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 11

A product that has an elastic demand curve has all of the following characteristics EXCEPT

Accepted Answer

A)  it has many substitutes. 
B)  a consumer can wait to buy the product. 
C)  it has few or no substitutes. 
D)  it is a large part of a consumer's income. 
A)  it has many substitutes. 
B)  a consumer can wait to buy the product. 
C)  it has few or no substitutes. 
D)  it is a large part of a consumer's income.

Question 12

"Higher prices always yield higher revenues." Do you agree or disagree? Why?

Accepted Answer

Disagree. Higher prices generate higher

Question 13

An absolute price elasticity of demand equal to 0.4 indicates that a

Accepted Answer

A)  4 percent increase in price leads to a 10 percent decrease in quantity demanded. 
B)  1 percent increase in price leads to a 4 percent decrease in quantity demanded. 
C)  0.4 percent decrease in price leads to a 1 percent increase in quantity demanded. 
D)  10 percent decrease in price leads to a 4 percent increase in quantity demanded. 
A)  4 percent increase in price leads to a 10 percent decrease in quantity demanded. 
B)  1 percent increase in price leads to a 4 percent decrease in quantity demanded. 
C)  0.4 percent decrease in price leads to a 1 percent increase in quantity demanded. 
D)  10 percent decrease in price leads to a 4 percent increase in quantity demanded.

Question 14

After full adjustment to a price change has occurred, the absolute price elasticity of demand for an item is equal to 1. In the short run, the absolute price elasticity of demand for the item was probably

Accepted Answer

A)  less than 0. 
B)  greater than 0. 
C)  less than 1. 
D)  greater than 1. 
A)  less than 0. 
B)  greater than 0. 
C)  less than 1. 
D)  greater than 1.

Question 15

When the absolute price elasticity of demand equals 1, 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 16

"The slope of the demand curve gives the elasticity of demand." Do you agree or disagree? Why?

Accepted Answer

Disagree. The slope gives abso

Question 17

The supply curve for housing in the very short run is likely to be

Accepted Answer

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

Question 18

Suppose that the value of the short-run absolute elasticity of demand for a good is 0.38. Then, we know the long-run absolute price elasticity of demand will be

Accepted Answer

A)  0. 
B)  greater than 0.38. 
C)  elastic. 
D)  less than 0.38. 
A)  0. 
B)  greater than 0.38. 
C)  elastic. 
D)  less than 0.38.

Question 19

-Refer to the above figure. The supply curve is

Accepted Answer

A)  elastic at high prices and inelastic at low prices. 
B)  unitary for all prices. 
C)  perfectly elastic. 
D)  perfectly inelastic. 
A)  elastic at high prices and inelastic at low prices. 
B)  unitary for all prices. 
C)  perfectly elastic. 
D)  perfectly inelastic.

Question 20

When the calculated price elasticity of demand is -0.45, demand is

Accepted Answer

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

Exam 19: Demand and Supply Elasticity

Other things being equal, demand is more elastic the

The responsiveness of quantity demanded of a good to changes in its price is the

Which of the following is more likely to have perfectly elastic or nearly perfectly elastic demand?

-In the above figure, along which range would total revenue remain unchanged by raising prices?

-Refer to the above table. For which prices is demand inelastic?

If the price elasticity of demand for good A is -1, then a 1% increase in

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

Color television prices rise by 10 percent, and in response the quantity of those TVs supplied increases by 6 percent. The supply elasticity for color television sets in that price range is

-Use the above figure. Which graph depicts complementary goods?

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

A product that has an elastic demand curve has all of the following characteristics EXCEPT

"Higher prices always yield higher revenues." Do you agree or disagree? Why?

An absolute price elasticity of demand equal to 0.4 indicates that a

After full adjustment to a price change has occurred, the absolute price elasticity of demand for an item is equal to 1. In the short run, the absolute price elasticity of demand for the item was probably

When the absolute price elasticity of demand equals 1, demand is

"The slope of the demand curve gives the elasticity of demand." Do you agree or disagree? Why?

The supply curve for housing in the very short run is likely to be

Suppose that the value of the short-run absolute elasticity of demand for a good is 0.38. Then, we know the long-run absolute price elasticity of demand will be

-Refer to the above figure. The supply curve is

When the calculated price elasticity of demand is -0.45, 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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