Question 1

If two demand curves intersect, the flatter demand curve will be more inelastic and the steeper demand curve will be more elastic.

Accepted Answer

A) True 
 B)False

Question 2

Empirical research indicates that the demand for most agricultural products is

Accepted Answer

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

Question 3

Price elasticity of demand is a measure of the

Accepted Answer

A)  relative increase in the demand curve in response to a decrease in price 
B)  relative decrease in the demand curve in response to an increase in price 
C)  responsiveness of the quantity demanded to an increase or a decrease in price 
D)  responsiveness of consumers to advertising expenditures of firms

Question 4

If the University of Wisconsin increases its tuition and its tuition revenue decreases, the demand curve for attending the University of Wisconsin must be

Accepted Answer

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

Question 5

Most likely, a tax on a luxury good such as yachts will result in

Accepted Answer

A)  more yachts being bought 
B)  less revenue than expected 
C)  high unemployment for yacht workers 
D)  an increase in the quantity demanded of yachts

Question 6

If government sets a ceiling on rent that is below the market equilibrium rent, the result will be

Accepted Answer

A)  greater profits for landlords 
B)  an increase in the quantity supplied of apartments 
C)  a surplus of apartments 
D)  a shortage of apartments

Question 7

If the price elasticity of demand for taxi services is estimated to be 1.0, then the demand for taxi services is inelastic.

Accepted Answer

A) True 
 B)False

Question 8

If an airline increases the price of a ticket to New York and its total revenue decreases, the demand curve for airline tickets to New York must be

Accepted Answer

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

Question 9

If the U.S. Postal Service increases the price of first-class mail to generate additional revenues, it estimates that the demand for mail is relatively elastic.

Accepted Answer

A) True 
 B)False

Question 10

When the price of corn increases, the increase in quantity supplied will be greater in the long run than the short run.

Accepted Answer

A) True 
 B)False

Question 11

If a 10 percent increase in new car prices results in a 20 percent decrease in the quantity of new cars purchased by consumers, then the

Accepted Answer

A)  price elasticity of demand for new cars is 2.0 
B)  price elasticity of demand for new cars is 0.5 
C)  demand curve for new cars is upward sloping 
D)  total revenue of new car dealers will increase as price rises

Question 12

Most people spend a small part of their income on birthday candles. This would suggest the demand for birthday candles is elastic.

Accepted Answer

A) True 
 B)False

Question 13

The demand for a product is more elastic if the product has many close substitutes in consumption.

Accepted Answer

A) True 
 B)False

Question 14

Suppose there is another terrorist anthrax scare. The U.S. Post Office finds that it now has extra costs associated with de-contaminating all first class mail for anthrax. It is considering a rate hike, but it will only be successful in raising more revenue to pay for these additional costs if

Accepted Answer

A)  there are many substitutes for first class mail service 
B)  no anthrax is found on the mail 
C)  the demand for first class mail services is inelastic 
D)  the rate increase is a very large one

Question 15

The demand for a product is relatively elastic if

Accepted Answer

A)  only a few close-substitute products are available 
B)  spending on the product constitutes a small portion of consumer income 
C)  the product is considered to be a necessity 
D)  the consumer has considerable time to adjust to price changes

Question 16

If the percentage change in quantity demanded is less than the percentage change in price, demand in that price range is

Accepted Answer

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

Question 17

If the price elasticity of demand for movie tickets is 3.0, then a new $1 tax on movie tickets would probably cause the price of a movie ticket to go up by less than $1.

Accepted Answer

A) True 
 B)False

Question 18

If there is a rightward shift in the wheat supply curve, total revenue will increase only if wheat demand is inelastic.

Accepted Answer

A) True 
 B)False

Question 19

Suppose the government imposes a ceiling on rent charged for residential apartments. If the ceiling is below the market equilibrium rent, some people would likely have a difficult time finding residential apartments to rent.

Accepted Answer

A) True 
 B)False

Question 20

The Pittsburgh Pirates found out in 2002 that the demand for home game seats was elastic.

Accepted Answer

A) True 
 B)False

Exam 3: Demand and Supply Applications

If two demand curves intersect, the flatter demand curve will be more inelastic and the steeper demand curve will be more elastic.

Empirical research indicates that the demand for most agricultural products is

Price elasticity of demand is a measure of the

If the University of Wisconsin increases its tuition and its tuition revenue decreases, the demand curve for attending the University of Wisconsin must be

Most likely, a tax on a luxury good such as yachts will result in

If government sets a ceiling on rent that is below the market equilibrium rent, the result will be

If the price elasticity of demand for taxi services is estimated to be 1.0, then the demand for taxi services is inelastic.

If an airline increases the price of a ticket to New York and its total revenue decreases, the demand curve for airline tickets to New York must be

If the U.S. Postal Service increases the price of first-class mail to generate additional revenues, it estimates that the demand for mail is relatively elastic.

When the price of corn increases, the increase in quantity supplied will be greater in the long run than the short run.

If a 10 percent increase in new car prices results in a 20 percent decrease in the quantity of new cars purchased by consumers, then the

Most people spend a small part of their income on birthday candles. This would suggest the demand for birthday candles is elastic.

The demand for a product is more elastic if the product has many close substitutes in consumption.

Suppose there is another terrorist anthrax scare. The U.S. Post Office finds that it now has extra costs associated with de-contaminating all first class mail for anthrax. It is considering a rate hike, but it will only be successful in raising more revenue to pay for these additional costs if

The demand for a product is relatively elastic if

If the percentage change in quantity demanded is less than the percentage change in price, demand in that price range is

If the price elasticity of demand for movie tickets is 3.0, then a new $1 tax on movie tickets would probably cause the price of a movie ticket to go up by less than $1.

If there is a rightward shift in the wheat supply curve, total revenue will increase only if wheat demand is inelastic.

Suppose the government imposes a ceiling on rent charged for residential apartments. If the ceiling is below the market equilibrium rent, some people would likely have a difficult time finding residential apartments to rent.

The Pittsburgh Pirates found out in 2002 that the demand for home game seats was elastic.