Question 1

A perfectly inelastic supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 2

Evaluate the following statements:
I.The slope of the demand curve is always equal to the elasticity of demand.
II.Moving down along a downward-sloping,straight-line demand curve,the elasticity of demand falls.

Accepted Answer

A)  (I) and (II) are both true. 
B)  (I) is true and (II) is false. 
C)  (I) is false and (II) is true. 
D)  (I) and (II) are both false. 
A)  (I) and (II) are both true. 
B)  (I) is true and (II) is false. 
C)  (I) is false and (II) is true. 
D)  (I) and (II) are both false.

Question 3

If the cross price elasticity between Goods A and B equals -1.3,then a reduction in the price of Good B will:

Accepted Answer

A)  increase the demand for Good A and increase Good A's price as a result. 
B)  increase the demand for Good A and decrease Good A's price as a result. 
C)  decrease the demand for Good A and increase Good A's price as a result. 
D)  decrease the demand for Good A and decrease Good A's price as a result. 
A)  increase the demand for Good A and increase Good A's price as a result. 
B)  increase the demand for Good A and decrease Good A's price as a result. 
C)  decrease the demand for Good A and increase Good A's price as a result. 
D)  decrease the demand for Good A and decrease Good A's price as a result.

Question 4

If the elasticity of demand coefficient for a good is 6 (in absolute terms),we know:

Accepted Answer

A)  that for every 1% increase in quantity, there will be a 6% increase in price. 
B)  that for every 1% increase in quantity, there will be a 6% decrease in price. 
C)  that for every 6% increase in quantity, there will be a 1% increase in price. 
D)  that for every 6% increase in quantity, there will be a 1% decrease in price. 
A)  that for every 1% increase in quantity, there will be a 6% increase in price. 
B)  that for every 1% increase in quantity, there will be a 6% decrease in price. 
C)  that for every 6% increase in quantity, there will be a 1% increase in price. 
D)  that for every 6% increase in quantity, there will be a 1% decrease in price.

Question 5

In the graph below,a tax increase would be paid:

Accepted Answer

A)  largely by the sellers. 
B)  largely by the buyers. 
C)  equally by the sellers and buyers. 
D)  by the government. 
A)  largely by the sellers. 
B)  largely by the buyers. 
C)  equally by the sellers and buyers. 
D)  by the government.

Question 6

The elasticity of supply coefficient for bicycles is estimated to be equal to 1.5.It is expected,therefore,that a 4% increase in price would lead to:

Accepted Answer

A)  a 4% decrease in the quantity of bicycles supplied. 
B)  a 4% increase in the quantity of bicycles supplied. 
C)  a 6% decrease in the quantity of bicycles supplied. 
D)  a 6% increase in the quantity of bicycles supplied. 
A)  a 4% decrease in the quantity of bicycles supplied. 
B)  a 4% increase in the quantity of bicycles supplied. 
C)  a 6% decrease in the quantity of bicycles supplied. 
D)  a 6% increase in the quantity of bicycles supplied.

Question 7

When a product's price increases from $800 to $1,200,the quantity demanded decreases from 11,000 to 9,000.Based on this information,the price elasticity of demand (in absolute terms)is estimated to be equal to:

Accepted Answer

A)  0.5. 
B)  2.0. 
C)  0.25. 
D)  4.0. 
A)  0.5. 
B)  2.0. 
C)  0.25. 
D)  4.0.

Question 8

If demand is unit elastic:

Accepted Answer

A)  revenue and prices rise and fall together. 
B)  revenue rises as price falls. 
C)  revenue falls as price rises. 
D)  revenue remains constant as price rises or falls. 
A)  revenue and prices rise and fall together. 
B)  revenue rises as price falls. 
C)  revenue falls as price rises. 
D)  revenue remains constant as price rises or falls.

Question 9

If a good has a perfectly inelastic short-run supply curve,an increase in demand will:

Accepted Answer

A)  increase the price and quantity exchanged in the short run. 
B)  increase the price and but leave the quantity exchanged the same in the short run. 
C)  increase the quantity exchanged but leave the price the same in the short run. 
D)  leave both price and quantity exchanged the same in the short run. 
A)  increase the price and quantity exchanged in the short run. 
B)  increase the price and but leave the quantity exchanged the same in the short run. 
C)  increase the quantity exchanged but leave the price the same in the short run. 
D)  leave both price and quantity exchanged the same in the short run.

Question 10

Which of the following is associated with elastic demand?

Accepted Answer

A)  availability of many close substitutes 
B)  a greater amount of time for consumers to respond to a price change 
C)  a large percentage of income spent on the good in question 
D)  all of the above 
A)  availability of many close substitutes 
B)  a greater amount of time for consumers to respond to a price change 
C)  a large percentage of income spent on the good in question 
D)  all of the above

Question 11

Total revenue represents the amount that:

Accepted Answer

A)  sellers receive for a good or service which is computed as P / Q. 
B)  sellers receive for a good or service which is computed as P ´ Q. 
C)  one buyer spends on a good or service which is computed as P ´ Q. 
D)  one buyer spends on a good or service which is computed as P / Q. 
A)  sellers receive for a good or service which is computed as P / Q. 
B)  sellers receive for a good or service which is computed as P ´ Q. 
C)  one buyer spends on a good or service which is computed as P ´ Q. 
D)  one buyer spends on a good or service which is computed as P / Q.

Question 12

Exhibit 6-2   Refer to Exhibit 6-2.Elasticity varies along a linear demand curve.Graph B represents the section of the curve where:

Accepted Answer

A)  the curve is elastic. 
B)  Ed is > 1. 
C)  starting at P1, an increase in price will lead to a decrease in total revenue. 
D)  all of the above are correct. 
A)  the curve is elastic. 
B)  Ed is > 1. 
C)  starting at P1, an increase in price will lead to a decrease in total revenue. 
D)  all of the above are correct.

Question 13

In the graph below,a tax increase would be paid:

Accepted Answer

A)  largely by the sellers. 
B)  largely by the buyers. 
C)  equally by the sellers and buyers. 
D)  by the government. 
A)  largely by the sellers. 
B)  largely by the buyers. 
C)  equally by the sellers and buyers. 
D)  by the government.

Question 14

Assume the price of widgets increases by 22 percent and the quantity supplied increases by 27 percent as a result.The elasticity of supply coefficient is:

Accepted Answer

A)  greater than 1, implying that widgets are normal goods. 
B)  less than 1, implying that widgets are inferior goods. 
C)  greater than 1, implying that supply is elastic. 
D)  greater than 1, implying that supply is inelastic. 
A)  greater than 1, implying that widgets are normal goods. 
B)  less than 1, implying that widgets are inferior goods. 
C)  greater than 1, implying that supply is elastic. 
D)  greater than 1, implying that supply is inelastic.

Question 15

If an increase in price causes total expenditure on a product to decrease,then the price elasticity of demand is:

Accepted Answer

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

Question 16

The nation's largest cable TV company tested the effect of a price increase for premium sports channels.It increased prices from $7.95 to $9.95 and found that the number of customers decreased by more than 40%.This means:

Accepted Answer

A)  the demand curve for the premium sports channels shifted to the right. 
B)  the supply curve for premium sports channels shifted to the left. 
C)  the demand for premium sports channels is elastic in this price range. 
D)  the demand for premium sports channels is inelastic in this price range. 
A)  the demand curve for the premium sports channels shifted to the right. 
B)  the supply curve for premium sports channels shifted to the left. 
C)  the demand for premium sports channels is elastic in this price range. 
D)  the demand for premium sports channels is inelastic in this price range.

Question 17

Moving along an inelastic portion of a demand curve,the change in quantity demanded will always be proportionally less than the change in price.

Accepted Answer

A) True 
 B)False

Question 18

Demand is said to be ____ when the quantity demanded is very responsive to changes in price.

Accepted Answer

A)  independent 
B)  inelastic 
C)  unit elastic 
D)  elastic 
A)  independent 
B)  inelastic 
C)  unit elastic 
D)  elastic

Question 19

Demand is relatively elastic when the price elasticity coefficient exceeds 1.0.

Accepted Answer

A) True 
 B)False

Question 20

A tax is imposed on orange juice.Consumers will bear no burden from this tax if the:

Accepted Answer

A)  demand for orange juice is perfectly inelastic. 
B)  demand for orange juice is unit elastic. 
C)  supply curve for orange juice is perfectly inelastic. 
D)  none of the above 
A)  demand for orange juice is perfectly inelastic. 
B)  demand for orange juice is unit elastic. 
C)  supply curve for orange juice is perfectly inelastic. 
D)  none of the above

Exam 6: Elasticities

A perfectly inelastic supply curve is vertical.

Evaluate the following statements: I.The slope of the demand curve is always equal to the elasticity of demand. II.Moving down along a downward-sloping,straight-line demand curve,the elasticity of demand falls.

If the cross price elasticity between Goods A and B equals -1.3,then a reduction in the price of Good B will:

If the elasticity of demand coefficient for a good is 6 (in absolute terms),we know:

In the graph below,a tax increase would be paid:

The elasticity of supply coefficient for bicycles is estimated to be equal to 1.5.It is expected,therefore,that a 4% increase in price would lead to:

When a product's price increases from $800 to $1,200,the quantity demanded decreases from 11,000 to 9,000.Based on this information,the price elasticity of demand (in absolute terms)is estimated to be equal to:

If demand is unit elastic:

If a good has a perfectly inelastic short-run supply curve,an increase in demand will:

Which of the following is associated with elastic demand?

Total revenue represents the amount that:

Exhibit 6-2 Refer to Exhibit 6-2.Elasticity varies along a linear demand curve.Graph B represents the section of the curve where:

In the graph below,a tax increase would be paid:

Assume the price of widgets increases by 22 percent and the quantity supplied increases by 27 percent as a result.The elasticity of supply coefficient is:

If an increase in price causes total expenditure on a product to decrease,then the price elasticity of demand is:

The nation's largest cable TV company tested the effect of a price increase for premium sports channels.It increased prices from $7.95 to $9.95 and found that the number of customers decreased by more than 40%.This means:

Moving along an inelastic portion of a demand curve,the change in quantity demanded will always be proportionally less than the change in price.

Demand is said to be ____ when the quantity demanded is very responsive to changes in price.

Demand is relatively elastic when the price elasticity coefficient exceeds 1.0.

A tax is imposed on orange juice.Consumers will bear no burden from this tax if the:

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

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