Question 1

Which of the following is a key determinant of the price elasticity of supply?

Accepted Answer

A)  The slope of the supply curve. 
B)  The availability of substitutes in production. 
C)  The available technology. 
D)  The time it takes to change output in response to a change in price.

Question 2

Which of the following could explain why the demand for table salt is inelastic?

Accepted Answer

A)  Salt is a luxury good. 
B)  Salt is a rare commodity. 
C)  Households devote a very small portion of their income to salt purchases. 
D)  Salt is a luxury for high-income consumers but a necessity for low-income consumers.

Question 3

Holding everything else constant,the absolute value of the price elasticity of demand for Saucony tennis shoes is ________ the price elasticity of demand for tennis shoes.

Accepted Answer

A)  less than 
B)  equal to 
C)  twice as great as 
D)  greater than

Question 4

Price elasticity of demand measures

Accepted Answer

A)  how responsive suppliers are to price changes. 
B)  how responsive sales are to changes in the price of a related good. 
C)  how responsive quantity demanded is to a change in price. 
D)  how responsive sales are to a change in buyers' incomes.

Question 5

The price elasticity of an upward-sloping supply curve is always

Accepted Answer

A)  positive. 
B)  negative. 
C)  greater than one. 
D)  impossible to determine.

Question 6

Suppose the current price of oil is $90 a barrel and the quantity supplied is 800 million barrels per day.If the price elasticity of supply for oil in the short run is estimated at 0.5,use the midpoint formula to calculate the percentage change in quantity supplied when the price of oil rises to $98 a barrel.

Accepted Answer

The answer of Suppose the current price of oil is...

Question 7

Suppose at a price of $50,Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40,it sells 25 tickets.Based on this information,the demand for Yoshi's jazz performance is elastic.

Accepted Answer

A) True 
 B)False

Question 8

Suppose a decrease in the supply of paper results in an increase in revenue.This indicates that

Accepted Answer

A)  the demand for paper is inelastic. 
B)  the demand for paper is elastic. 
C)  the supply of paper is inelastic. 
D)  the supply of paper is elastic.

Question 9

If a 35 per cent increase in the price of golf balls led to a 42 per cent decrease in quantity demanded,then the demand for golf balls is

Accepted Answer

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

Question 10

Jaycee Jeans sold 40 pairs of jeans at a price of $40.When it lowered its price to $20,the quantity sold increased to 60 pairs.Calculate the absolute value of the price elasticity of demand.Use the midpoint formula.

Accepted Answer

A)  1.67 
B)  1.0 
C)  0.6 
D)  0.53

Question 11

Suppose the supply curve for digital cameras shifts to the right.This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is true about the price elasticity of demand along a downward-sloping linear demand curve?

Accepted Answer

A)  It is inelastic at high prices and elastic at low prices. 
B)  It is unit-elastic throughout the demand curve. 
C)  It is elastic at high prices and inelastic at low prices. 
D)  It is perfectly elastic at very high prices and perfectly inelastic at very low prices.

Question 13

Jill Borts believes that the price elasticity of demand for her economics textbook is relatively inelastic.She argues 'I was told I had to purchase a book written by Hubbard and O'Brien that is required by my instructor.If I wanted to buy a mystery novel I would have many authors to choose from.Therefore,the demand for mystery novels is more elastic than the demand for my textbook.' Is Jill correct?

Accepted Answer

A)  The demand for the textbook is more inelastic, but Jill's reasoning is incorrect. The reason the textbook has an inelastic demand is that it is more expensive than any novel. 
B)  She is correct. 
C)  She is confused. She should have concluded that the textbook has a more elastic demand than a novel. 
D)  She is correct that the textbook has a more inelastic demand, but that is because most students pay for their textbooks with credit or debit cards. Most people pay for novels and other books with cash or by cheque.

Question 14

Consider the following pairs of items: 
a.shampoo and conditioner
b.iPhones and earbuds
c.a laptop computer and a desktop computer
d.beef and pork
e.air-travel and weed killer
Which of the pairs listed will have cross-price elasticity of zero?

Accepted Answer

A)  a and b only 
B)  c only, since most people cannot do without computers 
C)  e only 
D)  None of the pairs listed

Question 15

In recent years,the prices of new domestically produced cars have been falling.Suppose consumers respond by reducing their demand for used cars and mass transport services such as bus travel.This information suggests that the cross-price elasticity between new cars and used cars,and the cross-price elasticity between new cars and bus travel are negative.

Accepted Answer

A) True 
 B)False

Question 16

If a firm raised its price and discovered that its total revenue fell,then the demand for its product is

Accepted Answer

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

Question 17

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50,the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that

Accepted Answer

A)  beer and spirits are complements; spirits and wine are luxuries. 
B)  beer and spirits are normal goods; spirits and wine are luxuries. 
C)  beer and spirits are complements; spirits are substitutes. 
D)  beer and spirits are substitutes; spirits and wine are luxuries.

Question 18

During an economic expansion,as consumer incomes rise,holding everything else constant,

Accepted Answer

A)  the demand for most goods, except luxuries, will rise. 
B)  the demand for luxuries will rise while the demand for inferior goods will fall. 
C)  the demand for luxuries and inferior goods will rise. 
D)  the prices of luxuries will fall while the prices of inferior goods will rise.

Question 19

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future,the type of firm that would be able to increase its sales if your expectations are met is

Accepted Answer

A)  one that sells an inferior good. 
B)  one that sells a necessity good. 
C)  one that sells a luxury good. 
D)  one that sells a price inelastic good.

Question 20

Price elasticity of supply is used to gauge

Accepted Answer

A)  how responsive suppliers are to price changes. 
B)  how responsive suppliers are to changes in future prices. 
C)  how responsive suppliers are to a change in demand. 
D)  how responsive sales are to a change in input prices.

Exam 4: Market Efficiency and Market Failure

Which of the following is a key determinant of the price elasticity of supply?

Which of the following could explain why the demand for table salt is inelastic?

Holding everything else constant,the absolute value of the price elasticity of demand for Saucony tennis shoes is ________ the price elasticity of demand for tennis shoes.

Price elasticity of demand measures

The price elasticity of an upward-sloping supply curve is always

Suppose at a price of $50,Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40,it sells 25 tickets.Based on this information,the demand for Yoshi's jazz performance is elastic.

Suppose a decrease in the supply of paper results in an increase in revenue.This indicates that

If a 35 per cent increase in the price of golf balls led to a 42 per cent decrease in quantity demanded,then the demand for golf balls is

Jaycee Jeans sold 40 pairs of jeans at a price of $40.When it lowered its price to $20,the quantity sold increased to 60 pairs.Calculate the absolute value of the price elasticity of demand.Use the midpoint formula.

Suppose the supply curve for digital cameras shifts to the right.This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

Which of the following statements is true about the price elasticity of demand along a downward-sloping linear demand curve?

Consider the following pairs of items: a.shampoo and conditioner b.iPhones and earbuds c.a laptop computer and a desktop computer d.beef and pork e.air-travel and weed killer Which of the pairs listed will have cross-price elasticity of zero?

If a firm raised its price and discovered that its total revenue fell,then the demand for its product is

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50,the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that

During an economic expansion,as consumer incomes rise,holding everything else constant,

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future,the type of firm that would be able to increase its sales if your expectations are met is

Price elasticity of supply is used to gauge