Question 1

-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 2

The price elasticity of demand shows

Accepted Answer

A)  the relationship between market price and household income. 
B)  the proportionate amount by which the quantity demanded changes in response to a proportionate change in price. 
C)  the quantity demanded at a given price. 
D)  the proportionate amount by which the price changes in response to a proportionate change in quantity demanded. 
A)  the relationship between market price and household income. 
B)  the proportionate amount by which the quantity demanded changes in response to a proportionate change in price. 
C)  the quantity demanded at a given price. 
D)  the proportionate amount by which the price changes in response to a proportionate change in quantity demanded.

Question 3

When total revenue remain unchanged when there is a change in price, 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 4

Why is the price elasticity of supply greater if there is more time for adjustment to an increase in the price of an item?

Accepted Answer

If more time is available for adjustment

Question 5

The range to the right of the midpoint on a linear demand curve is

Accepted Answer

A)  elastic. 
B)  infinite. 
C)  one. 
D)  inelastic. 
A)  elastic. 
B)  infinite. 
C)  one. 
D)  inelastic.

Question 6

The actual value of price elasticity of demand

Accepted Answer

A)  measures the relative change in quantity demanded when there is a change in price. 
B)  will change when the units good is measured in changes. 
C)  varies with changes in supply. 
D)  is always negative. 
A)  measures the relative change in quantity demanded when there is a change in price. 
B)  will change when the units good is measured in changes. 
C)  varies with changes in supply. 
D)  is always negative.

Question 7

The longer the time frame involved, the more likely it is that the demand will be relatively

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  steep. 
D)  flat. 
A)  elastic. 
B)  inelastic. 
C)  steep. 
D)  flat.

Question 8

If the supply curve is vertical, then supply is

Accepted Answer

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

Question 9

The price elasticity of demand would most likely be the lowest for

Accepted Answer

A)  a McDonald's hamburger. 
B)  salt. 
C)  a Toyota sport utility vehicle. 
D)  Shell gasoline. 
A)  a McDonald's hamburger. 
B)  salt. 
C)  a Toyota sport utility vehicle. 
D)  Shell gasoline.

Question 10

Explain why an increase in price can raise total revenues if the price elasticity of demand is inelastic.

Accepted Answer

Total revenues equal price times quantit

Question 11

-Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7 to $6.50?

Accepted Answer

A)  0.85 
B)  1.08 
C)  1.17 
D)  0.92 
A)  0.85 
B)  1.08 
C)  1.17 
D)  0.92

Question 12

If the absolute price elasticity of demand for automobiles is equal to 0.75, we say

Accepted Answer

A)  that demand is inelastic. 
B)  that demand is elastic. 
C)  that there is a strong responsiveness of quantity demanded to automobiles price cuts. 
D)  none of the above is correct. 
A)  that demand is inelastic. 
B)  that demand is elastic. 
C)  that there is a strong responsiveness of quantity demanded to automobiles price cuts. 
D)  none of the above is correct.

Question 13

If the absolute value of the price elasticity of demand for a product is 1.5, and the price of a product increased 30 percent, then the quantity demanded will decline by

Accepted Answer

A)  45 percent. 
B)  20 percent. 
C)  5 percent. 
D)  10 percent. 
A)  45 percent. 
B)  20 percent. 
C)  5 percent. 
D)  10 percent.

Question 14

A measure of the responsiveness of demand to changes in income, all other things being constant, is

Accepted Answer

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

Question 15

Which of the following is FALSE regarding inelastic demand?

Accepted Answer

A)  Price elasticity of demand is less than 1 (    1). 
D)  If a firm lowers price, total revenues will fall. 
A)  Price elasticity of demand is less than 1 (    1). 
D)  If a firm lowers price, total revenues will fall.

Question 16

A university raises annual tuition by 10 percent. No other events have occurred, and the university's revenues have increased. It must be true that

Accepted Answer

A)  the associated change in quantity demanded was smaller than 10 percent. 
B)  the associated change in quantity demanded was equal to 10 percent. 
C)  the associated change in quantity demanded was greater than 10 percent. 
D)  there was no associated change in quantity demanded. 
A)  the associated change in quantity demanded was smaller than 10 percent. 
B)  the associated change in quantity demanded was equal to 10 percent. 
C)  the associated change in quantity demanded was greater than 10 percent. 
D)  there was no associated change in quantity demanded.

Question 17

Suppose that the income elasticity of demand for peanut butter is 0.75. Which of the following is true?

Accepted Answer

A)  Peanut butter is a normal good, because income elasticity is positive. 
B)  Peanut butter is an inferior good, because income elasticity is positive. 
C)  Peanut butter is a normal good, because income elasticity is less than 1. 
D)  Peanut butter is an inferior good, because income elasticity is less than 1. 
A)  Peanut butter is a normal good, because income elasticity is positive. 
B)  Peanut butter is an inferior good, because income elasticity is positive. 
C)  Peanut butter is a normal good, because income elasticity is less than 1. 
D)  Peanut butter is an inferior good, because income elasticity is less than 1.

Question 18

Income elasticity relates to

Accepted Answer

A)  a movement down a demand curve. 
B)  a movement up a demand curve. 
C)  a horizontal shift in a demand curve. 
D)  the percentage change in quantity demanded divided by the percentage change in the price. 
A)  a movement down a demand curve. 
B)  a movement up a demand curve. 
C)  a horizontal shift in a demand curve. 
D)  the percentage change in quantity demanded divided by the percentage change in the price.

Question 19

The price elasticity of supply is

Accepted Answer

A)  negative. 
B)  zero. 
C)  positive. 
D)  unknown, depending on other factors. 
A)  negative. 
B)  zero. 
C)  positive. 
D)  unknown, depending on other factors.

Question 20

Which of the following is NOT characteristic of a good with elastic demand?

Accepted Answer

A)  The absolute price elasticity of demand is less than 1. 
B)  Total revenue decreases if price is increased. 
C)  Buyers are relatively sensitive to price changes. 
D)  The percentage change in quantity demanded is greater than the percentage change in price. 
A)  The absolute price elasticity of demand is less than 1. 
B)  Total revenue decreases if price is increased. 
C)  Buyers are relatively sensitive to price changes. 
D)  The percentage change in quantity demanded is greater than the percentage change in price.

Exam 19: Demand and Supply Elasticity

-Refer to the above figure. Demand is

The price elasticity of demand shows

When total revenue remain unchanged when there is a change in price, demand is

Why is the price elasticity of supply greater if there is more time for adjustment to an increase in the price of an item?

The range to the right of the midpoint on a linear demand curve is

The actual value of price elasticity of demand

The longer the time frame involved, the more likely it is that the demand will be relatively

If the supply curve is vertical, then supply is

The price elasticity of demand would most likely be the lowest for

Explain why an increase in price can raise total revenues if the price elasticity of demand is inelastic.

-Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7 to $6.50?

If the absolute price elasticity of demand for automobiles is equal to 0.75, we say

If the absolute value of the price elasticity of demand for a product is 1.5, and the price of a product increased 30 percent, then the quantity demanded will decline by

A measure of the responsiveness of demand to changes in income, all other things being constant, is

Which of the following is FALSE regarding inelastic demand?

A university raises annual tuition by 10 percent. No other events have occurred, and the university's revenues have increased. It must be true that

Suppose that the income elasticity of demand for peanut butter is 0.75. Which of the following is true?

Income elasticity relates to

The price elasticity of supply is

Which of the following is NOT characteristic of a good with elastic demand?

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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