Question 1

When the Blue Ocean Surfboard Company lowered the price of surfboards by 20%,it sold 10% more surfboards.The price elasticity coefficient for surfboards is:

Accepted Answer

A)  2. 
B)  1/2. 
C)  1. 
D)  20. 
A)  2. 
B)  1/2. 
C)  1. 
D)  20.

Question 2

If the demand curve for a product is horizontal,then the elasticity of demand is:

Accepted Answer

A)  equal to zero. 
B)  equal to one. 
C)  greater than one, but less than infinity. 
D)  equal to infinity. 
A)  equal to zero. 
B)  equal to one. 
C)  greater than one, but less than infinity. 
D)  equal to infinity.

Question 3

Assume an industry initially in equilibrium has a price floor imposed at a price above the equilibrium price.Total revenue received by the producers from sales will:

Accepted Answer

A)  rise as a result. 
B)  rise as a result only if supply is elastic. 
C)  rise as a result only if demand is elastic. 
D)  rise as a result only if demand is inelastic. 
A)  rise as a result. 
B)  rise as a result only if supply is elastic. 
C)  rise as a result only if demand is elastic. 
D)  rise as a result only if demand is inelastic.

Question 4

Say that a consumer's income elasticity of demand over the relevant range is equal to 2.When she has a monthly income of $2,000,she spends $600 on food.If her monthly income rose to $4,000,how much would she spend on food?

Accepted Answer

A)  $900. 
B)  $1200. 
C)  $1800. 
D)  $2400. 
A)  $900. 
B)  $1200. 
C)  $1800. 
D)  $2400.

Question 5

If the supply curve for a product is vertical,then the elasticity of supply is:

Accepted Answer

A)  equal to zero. 
B)  equal to one. 
C)  greater than one but less than infinity. 
D)  equal to infinity. 
A)  equal to zero. 
B)  equal to one. 
C)  greater than one but less than infinity. 
D)  equal to infinity.

Question 6

Based upon the following estimates of price elasticity of demand,which markets are the best markets to tax if the government's goal is to raise tax revenue? Why?

Accepted Answer

If the government's goal is to increase

Question 7

The definition of cross-elasticity of demand with regard to two products X and Y is:

Accepted Answer

A)  the percentage change in the quantity of X demanded divided by the percentage change in the quantity of Y demanded. 
B)  the percentage change in the price of Y divided by the percentage change in the quantity of X demanded. 
C)  the percentage change in the price of Y divided by the percentage change in the price of X. 
D)  the percentage change in the demand of one good (good X) divided by the percentage change in the price of another good (good Y). 
A)  the percentage change in the quantity of X demanded divided by the percentage change in the quantity of Y demanded. 
B)  the percentage change in the price of Y divided by the percentage change in the quantity of X demanded. 
C)  the percentage change in the price of Y divided by the percentage change in the price of X. 
D)  the percentage change in the demand of one good (good X) divided by the percentage change in the price of another good (good Y).

Question 8

If the supply curve for a product is horizontal,then the elasticity of supply is:

Accepted Answer

A)  equal to zero. 
B)  equal to one. 
C)  greater than one but less than infinity. 
D)  equal to infinity. 
A)  equal to zero. 
B)  equal to one. 
C)  greater than one but less than infinity. 
D)  equal to infinity.

Question 9

A price cut will increase the total revenue a firm receives if the demand for its product is:

Accepted Answer

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

Question 10

Demand is said to be ____ when the quantity demanded changes the same proportion as the price.

Accepted Answer

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

Question 11

To determine whether or not a pair of goods are complements,economists are interested in the cross price elasticity of demand between the two goods.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following would most likely feature elastic demand?

Accepted Answer

A)  heart surgery 
B)  a required textbook 
C)  fresh green beans 
D)  all of the above 
A)  heart surgery 
B)  a required textbook 
C)  fresh green beans 
D)  all of the above

Question 13

When a product's price increases from $9 to $11,the quantity demanded decreases from 1200 to 800.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 14

If one is interested in knowing whether or not a pair of products are substitutes,one would be interested in the value of the:

Accepted Answer

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

Question 15

Fantastic Cuts Hair Salon knows that a 15% increase in the price of their haircuts will result in a 5% decrease in the number of haircuts sold.What is the elasticity of demand facing Fantastic Cuts?

Accepted Answer

A)  0.05 
B)  0.10 
C)  0.33 
D)  3.0 
A)  0.05 
B)  0.10 
C)  0.33 
D)  3.0

Question 16

A perfectly elastic demand curve is vertical.

Accepted Answer

A) True 
 B)False

Question 17

For a given increase in price,the greater is the elasticity of supply,the greater is the resulting

Accepted Answer

A)  decrease in quantity supplied. 
B)  decrease in supply. 
C)  increase in quantity supplied. 
D)  increase in supply. 
A)  decrease in quantity supplied. 
B)  decrease in supply. 
C)  increase in quantity supplied. 
D)  increase in supply.

Question 18

The nation's largest cable TV company tested the effect of a price reduction for premium movie channels.It lowered prices from $12 to $9.95 and found that the number of customers rose by almost 50%.This means:

Accepted Answer

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

Question 19

A subsidy to wheat farmers reduces the price of a bushel of wheat from $2.50 to $2 per bushel.The equilibrium quantity of wheat sold prior to the subsidy was equal to 200,000 bushels.Predict the new equilibrium quantity of wheat after the imposition of the subsidy given that the demand for wheat is known to be unit elastic.

Accepted Answer

A)  100,000 bushels 
B)  200,000 bushels 
C)  250,000 bushels 
D)  400,000 bushels 
A)  100,000 bushels 
B)  200,000 bushels 
C)  250,000 bushels 
D)  400,000 bushels

Question 20

The longer the time period considered,the price elasticity of demand tends to:

Accepted Answer

A)  decrease. 
B)  remain constant. 
C)  increase. 
D)  converge to zero. 
A)  decrease. 
B)  remain constant. 
C)  increase. 
D)  converge to zero.

Exam 6: Elasticities

When the Blue Ocean Surfboard Company lowered the price of surfboards by 20%,it sold 10% more surfboards.The price elasticity coefficient for surfboards is:

If the demand curve for a product is horizontal,then the elasticity of demand is:

Assume an industry initially in equilibrium has a price floor imposed at a price above the equilibrium price.Total revenue received by the producers from sales will:

Say that a consumer's income elasticity of demand over the relevant range is equal to 2.When she has a monthly income of $2,000,she spends $600 on food.If her monthly income rose to $4,000,how much would she spend on food?

If the supply curve for a product is vertical,then the elasticity of supply is:

Based upon the following estimates of price elasticity of demand,which markets are the best markets to tax if the government's goal is to raise tax revenue? Why?

The definition of cross-elasticity of demand with regard to two products X and Y is:

If the supply curve for a product is horizontal,then the elasticity of supply is:

A price cut will increase the total revenue a firm receives if the demand for its product is:

Demand is said to be ____ when the quantity demanded changes the same proportion as the price.

To determine whether or not a pair of goods are complements,economists are interested in the cross price elasticity of demand between the two goods.

Which of the following would most likely feature elastic demand?

When a product's price increases from $9 to $11,the quantity demanded decreases from 1200 to 800.Based on this information,the price elasticity of demand (in absolute terms)is estimated to be equal to:

If one is interested in knowing whether or not a pair of products are substitutes,one would be interested in the value of the:

Fantastic Cuts Hair Salon knows that a 15% increase in the price of their haircuts will result in a 5% decrease in the number of haircuts sold.What is the elasticity of demand facing Fantastic Cuts?

A perfectly elastic demand curve is vertical.

For a given increase in price,the greater is the elasticity of supply,the greater is the resulting

The nation's largest cable TV company tested the effect of a price reduction for premium movie channels.It lowered prices from $12 to $9.95 and found that the number of customers rose by almost 50%.This means:

The longer the time period considered,the price elasticity of demand tends to:

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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