Question 1

If the slope of a demand curve is constant, then we know that

Accepted Answer

A)  elasticity of demand is also elastic everywhere. 
B)  elasticity of demand is constant and elastic. 
C)  elasticity of demand is inelastic everywhere. 
D)  elasticity of demand varies along the demand curve. 
A)  elasticity of demand is also elastic everywhere. 
B)  elasticity of demand is constant and elastic. 
C)  elasticity of demand is inelastic everywhere. 
D)  elasticity of demand varies along the demand curve.

Question 2

If the price elasticity of demand for pineapples is greater than 1, an increase in pineapple prices will

Accepted Answer

A)  raise total revenue. 
B)  lower total revenue. 
C)  not affect total revenue. 
D)  either raise or lower total revenue, but it is impossible to determine which. 
A)  raise total revenue. 
B)  lower total revenue. 
C)  not affect total revenue. 
D)  either raise or lower total revenue, but it is impossible to determine which.

Question 3

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

Accepted Answer

A)  a house. 
B)  salt. 
C)  a Toyota sport utility vehicle. 
D)  Shell gasoline. 
A)  a house. 
B)  salt. 
C)  a Toyota sport utility vehicle. 
D)  Shell gasoline.

Question 4

How does the cross elasticity of demand differ from the price elasticity of demand? How are they related?

Accepted Answer

The cross elasticity of demand is the re

Question 5

When the absolute price elasticity of demand equals 2.5, 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 6

The percentage change in the demand for one good divided by the percentage change in the price of a related good is the

Accepted Answer

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

Question 7

-Use the above figure. When the price increases from $2 to $10, total revenue

Accepted Answer

A)  increases from areas A + B to areas B + C and demand is inelastic. 
B)  increases from areas B + C to areas A + B and demand is inelastic. 
C)  increases from areas B + C to areas A + D and demand is elastic. 
D)  increases from areas C + D to areas B + A and demand is elastic. 
A)  increases from areas A + B to areas B + C and demand is inelastic. 
B)  increases from areas B + C to areas A + B and demand is inelastic. 
C)  increases from areas B + C to areas A + D and demand is elastic. 
D)  increases from areas C + D to areas B + A and demand is elastic.

Question 8

A 2 percent increase in the price of rice leads to a 2 percent decrease in the quantity demanded of rice. The absolute price elasticity of demand is

Accepted Answer

A)  3. 
B)  1. 
C)  0.1. 
D)  6. 
A)  3. 
B)  1. 
C)  0.1. 
D)  6.

Question 9

Which of the following is a determinant of the price elasticity of demand for an item?

Accepted Answer

A)  the availability of a close substitute for the item 
B)  the percentage of a consumers budget allocated to expenditures on the item 
C)  the amount of time available to adjust to a change in the price of the item 
D)  All of the above are correct. 
A)  the availability of a close substitute for the item 
B)  the percentage of a consumers budget allocated to expenditures on the item 
C)  the amount of time available to adjust to a change in the price of the item 
D)  All of the above are correct.

Question 10

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 11

If ice cream has an absolute price elasticity of demand that is greater than 1, then the demand for ice cream is

Accepted Answer

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

Question 12

If the absolute price elasticity of demand for automobiles is equal to 1.25, we say

Accepted Answer

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

Question 13

-In the above table, the cross price elasticity of demand for good C with good B when PB rises from $15 to $18 is

Accepted Answer

A)  -2.20. 
B)  +2.20. 
C)  +1.10. 
D)  -1.10. 
A)  -2.20. 
B)  +2.20. 
C)  +1.10. 
D)  -1.10.

Question 14

-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 15

The cross-price elasticity of demand of products "A" and "B" is zero. This implies that "A" and "B" are

Accepted Answer

A)  substitute products. 
B)  complementary products. 
C)  independent products. 
D)  unique goods, as the price elasticity of demand for one of them is zero. 
A)  substitute products. 
B)  complementary products. 
C)  independent products. 
D)  unique goods, as the price elasticity of demand for one of them is zero.

Question 16

-In the above table, the cross price elasticity of demand for good A with good B when PB falls from $20 to $18 is

Accepted Answer

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

Question 17

Compared to the short-run price elasticity of demand, the long-run price elasticity of demand is

Accepted Answer

A)  smaller. 
B)  the same. 
C)  greater. 
D)  either greater than or less, depending on the number of substitutes the good has. 
A)  smaller. 
B)  the same. 
C)  greater. 
D)  either greater than or less, depending on the number of substitutes the good has.

Question 18

When discussing the price elasticity of demand we generally refer to the absolute price elasticity of demand by consumers. This means that we will

Accepted Answer

A)  disregard the law of demand. 
B)  ignore its relationship to demand. 
C)  disregard the minus sign. 
D)  consider absolute rather than relative changes. 
A)  disregard the law of demand. 
B)  ignore its relationship to demand. 
C)  disregard the minus sign. 
D)  consider absolute rather than relative changes.

Question 19

When the absolute percentage change in quantity demanded is just equal to the percentage change in price, demand is

Accepted Answer

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

Question 20

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.

Exam 19: Demand and Supply Elasticity

If the slope of a demand curve is constant, then we know that

If the price elasticity of demand for pineapples is greater than 1, an increase in pineapple prices will

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

How does the cross elasticity of demand differ from the price elasticity of demand? How are they related?

When the absolute price elasticity of demand equals 2.5, demand is

The percentage change in the demand for one good divided by the percentage change in the price of a related good is the

-Use the above figure. When the price increases from $2 to $10, total revenue

A 2 percent increase in the price of rice leads to a 2 percent decrease in the quantity demanded of rice. The absolute price elasticity of demand is

Which of the following is a determinant of the price elasticity of demand for an item?

The price elasticity of supply is

If ice cream has an absolute price elasticity of demand that is greater than 1, then the demand for ice cream is

If the absolute price elasticity of demand for automobiles is equal to 1.25, we say

-In the above table, the cross price elasticity of demand for good C with good B when PB rises from $15 to $18 is

-Refer to the above figure. The supply curve is

The cross-price elasticity of demand of products "A" and "B" is zero. This implies that "A" and "B" are

-In the above table, the cross price elasticity of demand for good A with good B when PB falls from $20 to $18 is

Compared to the short-run price elasticity of demand, the long-run price elasticity of demand is

When discussing the price elasticity of demand we generally refer to the absolute price elasticity of demand by consumers. This means that we will

When the absolute percentage change in quantity demanded is just equal to the percentage change in price, demand is

The price elasticity of demand is measured by the

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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