Question 1

The demand for a luxury good whose purchase would exhaust a big portion of one's income is

Accepted Answer

A)  perfectly price inelastic.
B)  perfectly price elastic.
C)  relatively price inelastic.
D)  relatively price elastic.E) B) and D)
F) A) and B)

Question 2

We would expect the cross-elasticity of demand between popcorn and potato chips to be negative.

Accepted Answer

A) True 
 B)False

Question 3

We would expect

Accepted Answer

A)  the demand for Coca-Cola to be less price elastic than the demand for soft drinks in general.
B)  the demand for Coca-Cola to be more price elastic than the demand for soft drinks in general.
C)  no relationship between the price elasticity of demand for Coca-Cola and the price elasticity of demand for soft drinks in general.
D)  none of the other answers to hold true.E) All of the above
F) A) and B)

Question 4

If the government imposes an excise tax on a good, it will collect the most tax revenues from it if the demand for the good is

Accepted Answer

A)  elastic.
B)  inelastic.
C)  unit elastic.
D)  perfectly elastic.E) B) and D)
F) B) and C) B

Question 5

(Consider This)  Elasticity can be thought of as degree of relative

Accepted Answer

A)  video brightness.
B)  price bounce.
C)  audio volume.
D)  quantity stretch.E) None of the above
F) B) and C)

Question 6

Supply curves tend to be

Accepted Answer

A)  perfectly elastic in the long run because consumer demand will have sufficient time to adjust fully to changes in supply.
B)  more elastic in the long run because there is time for firms to enter or leave the industry.
C)  perfectly inelastic in the long run because the law of scarcity imposes absolute limits on production.
D)  less elastic in the long run because there is time for firms to enter or leave an industry.E) B) and C)
F) B) and D)

Question 7

If the percentage change in quantity demanded is less than the percentage change in price, then demand is said to be elastic.

Accepted Answer

A) True 
 B)False  False

Question 8

When the price of a product is increases by 15 percent, the quantity demanded decreases by 10 percent.We can therefore conclude that the demand for this product is

Accepted Answer

A)  elastic.
B)  inelastic.
C)  cross-elastic.
D)  unitary elastic.E) None of the above
F) B) and D)

Question 9

You are the only seller of eggs in town, and the price-elasticity coefficient for eggs is known to be 0.8.If you want to increase your sales quantity by 10 percent through a price change, what should you do to price?

Accepted Answer

A)  increase price by 12.5 percent
B)  reduce price by 12.5 percent
C)  increase price by 8 percent
D)  reduce price by 8 percentE) All of the above
F) A) and C) A

Question 10

The greater the ease of shifting resources from product X to product Y in the production process, the greater is the elasticity of supply of product Y.

Accepted Answer

A) True 
 B)False

Question 11

To economists, the main differences between "the short run" and "the long run" are that

Accepted Answer

A)  the law of diminishing returns applies in the long run, but not in the short run.
B)  in the short run all resources are fixed, while in the long run all resources are variable.
C)  fixed inputs are more important to decision making in the long run than they are in the short run.
D)  in the long run all resources are variable, while in the short run at least one resource is fixed.E) A) and D)
F) A) and C)

Question 12

If price and total revenue vary in opposite directions, demand is

Accepted Answer

A)  perfectly inelastic.
B)  perfectly elastic.
C)  relatively inelastic.
D)  relatively elastic.E) A) and D)
F) C) and D)

Question 13

The elasticity of supply of product X is unitary if the price of X rises by

Accepted Answer

A)  5 percent and quantity supplied rises by 7 percent.
B)  8 percent and quantity supplied rises by 8 percent.
C)  10 percent and quantity supplied stays the same.
D)  7 percent and quantity supplied rises by 5 percent.E) B) and C)
F) B) and D)

Question 14

In which price range of the accompanying demand schedule is demand elastic? Price Quantity Demanded
4 2
3 4
2 6
1 8

Accepted Answer

A)  $4-$3
B)  $3-$2
C)  $2-$1
D)  below $1E) A) and D)
F) B) and C)

Question 15

When the price of movie tickets in a certain town was reduced, the movietheaters' revenues did not change.This suggests that the demand for movie tickets in that town has a price- elasticity coefficient of

Accepted Answer

A)  1.0.
B)  greater than 1.
C)   0.5
D)   zeroE) A) and B)
F) A) and D)

Question 16

Suppose the price elasticity of demand for bread is 0.20.If the price of bread falls by 10 percent, the quantity demanded will increase by

Accepted Answer

A)  2 percent and total expenditures on bread will rise.
B)  2 percent and total expenditures on bread will fall.
C)  20 percent and total expenditures on bread will fall.
D)  20 percent and total expenditures on bread will rise.E) A) and C)
F) C) and D)

Question 17

The income elasticity of demand for jewelry is +2.Other things equal, a 10 percent increase in consumer income will

Accepted Answer

A)  decrease the quantity of jewelry purchased by 20 percent.
B)  increase the quantity of jewelry purchased by 5 percent.
C)  decrease the quantity of jewelry purchased by 5 percent.
D)  increase the quantity of jewelry purchased by 20 percent.E) A) and D)
F) B) and C)

Question 18

Refer to the table.Over the $10-$8 price range, the elasticity coefficient of supply is

Accepted Answer

A)  1.
B)  zero.
C)  less than 1.
D)  greater than 1.E) All of the above
F) B) and D)

Question 19

The price elasticity of supply measures how

Accepted Answer

A)  easily labor and capital can be substituted for one another in the production process.
B)  responsive the quantity supplied of X is to changes in the price of X.
C)  responsive the quantity supplied of Y is to changes in the price of X.
D)  responsive quantity supplied is to a change in incomes.E) None of the above
F) C) and D)

Question 20

Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent.We can conclude that quantity demanded

Accepted Answer

A)  increased by 7 percent.
B)  decreased by 7 percent.
C)  decreased by 9 percent.
D)  decreased by 1.75 percent.E) B) and C)
F) A) and D)

Exam 6: Elasticity

The demand for a luxury good whose purchase would exhaust a big portion of one's income is

Correct AnswerverifiedShow Answer

We would expect the cross-elasticity of demand between popcorn and potato chips to be negative.

Correct AnswerverifiedShow Answer

We would expect

Correct AnswerverifiedShow Answer

If the government imposes an excise tax on a good, it will collect the most tax revenues from it if the demand for the good is

Correct AnswerverifiedB

(Consider This) Elasticity can be thought of as degree of relative

Correct AnswerverifiedShow Answer

Supply curves tend to be

Correct AnswerverifiedShow Answer

If the percentage change in quantity demanded is less than the percentage change in price, then demand is said to be elastic.

Correct AnswerverifiedFalse

When the price of a product is increases by 15 percent, the quantity demanded decreases by 10 percent.We can therefore conclude that the demand for this product is

Correct AnswerverifiedShow Answer

You are the only seller of eggs in town, and the price-elasticity coefficient for eggs is known to be 0.8.If you want to increase your sales quantity by 10 percent through a price change, what should you do to price?

Correct AnswerverifiedA

The greater the ease of shifting resources from product X to product Y in the production process, the greater is the elasticity of supply of product Y.

Correct AnswerverifiedShow Answer

To economists, the main differences between "the short run" and "the long run" are that

Correct AnswerverifiedShow Answer

If price and total revenue vary in opposite directions, demand is

Correct AnswerverifiedShow Answer

The elasticity of supply of product X is unitary if the price of X rises by

Correct AnswerverifiedShow Answer

In which price range of the accompanying demand schedule is demand elastic? Price Quantity Demanded 4 2 3 4 2 6 1 8

Correct AnswerverifiedShow Answer

When the price of movie tickets in a certain town was reduced, the movietheaters' revenues did not change.This suggests that the demand for movie tickets in that town has a price- elasticity coefficient of

Correct AnswerverifiedShow Answer

Suppose the price elasticity of demand for bread is 0.20.If the price of bread falls by 10 percent, the quantity demanded will increase by

Correct AnswerverifiedShow Answer

The income elasticity of demand for jewelry is +2.Other things equal, a 10 percent increase in consumer income will

Correct AnswerverifiedShow Answer

Refer to the table.Over the $10-$8 price range, the elasticity coefficient of supply is

Correct AnswerverifiedShow Answer

The price elasticity of supply measures how

Correct AnswerverifiedShow Answer

Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent.We can conclude that quantity demanded

Correct AnswerverifiedShow Answer

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False

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A

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