Question 1

A supply curve that is vertical________.

Accepted Answer

A)   is perfectly elastic
B)   is perfectly inelastic
C)   is impossible
D)   has an elasticity equal to 1E) None of the above
F) All of the above

Question 2

If the price of steel increases drastically,the quantity of steel demanded by the building industry will fall significantly over the long run because ________.

Accepted Answer

A)   buyers of steel are more sensitive to a price change if they have more time to adjust to the price change.
B)   buyers of steel are less sensitive to a price change if they have more time to adjust to the price change.
C)   sales revenue in the building industry will fall sharply.
D)   profits will fall by a greater amount in the long run than in the short run.E) A) and D)
F) None of the above

Question 3

To what is price elasticity of demand equal?

Accepted Answer

A)   The value of the slope of the demand curve
B)   The change in quantity demanded divided by the change in price
C)   The percentage change in price divided by the percentage change in quantity demanded
D)   The percentage change in quantity demanded divided by the percentage change in priceE) B) and C)
F) C) and D)

Question 4

Necessities tend to have more inelastic demands than luxuries.

Accepted Answer

A) True 
 B)False

Question 5

Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21.This indicates that________.

Accepted Answer

A)   wine and spirits are luxury goods
B)   wine is a luxury good and spirits are inferior goods
C)   wine and spirits are highly price elastic
D)   wine is a luxury good and spirits are necessitiesE) B) and C)
F) B) and D)

Question 6

With the increased usage of mobile services,what has happened to the price elasticity of demand for landline telephone services?

Accepted Answer

A)   It has become more price inelastic.
B)   It has become more price elastic.
C)   It has become more income elastic.
D)   The absolute value of the price elasticity coefficient has probably gone down.E) A) and D)
F) A) and C)

Question 7

If at a price of $24,Octavia sells 36 homegrown orchids and at $30 she sells 24 homegrown orchids,what is the demand for her orchids?

Accepted Answer

A)   Elastic
B)   Inelastic
C)   Unit-elastic
D)   Perfectly elasticE) A) and B)
F) None of the above

Question 8

If demand is inelastic,what is the absolute value of the price elasticity of demand?

Accepted Answer

A)   One
B)   Less than one
C)   Greater than one
D)   Greater than the absolute value of the slope of the demand curveE) C) and D)
F) B) and C)

Question 9

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

Accepted Answer

A) True 
 B)False

Question 10

What does total revenue equal?

Accepted Answer

A)   Price per unit times quantity sold
B)   Price per unit times quantity supplied
C)   Price per unit times change in quantity sold
D)   Change in price per unit times quantity soldE) A) and C)
F) None of the above

Question 11

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value) .This means that a 20 per cent increase in the price of beef,holding everything else constant,will cause the quantity of beef demanded to________.

Accepted Answer

A)   decrease by 12 per cent
B)   decrease by 26 per cent
C)   decrease by 32 per cent
D)   decrease by 60 per centE) A) and B)
F) None of the above

Question 12

The cross-price elasticity of demand between Coca-Cola and Pepsi-Cola is calculated by dividing________.

Accepted Answer

A)   the percentage change in quantity demanded of Coca-Cola by the percentage change in the quantity demanded of Pepsi-Cola
B)   the percentage change in the price of Pepsi-Cola by the percentage change in quantity demanded of Coca-Cola
C)   the percentage change in the price of Coca-Cola by the percentage change in the price of Pepsi-Cola
D)   the percentage change in the quantity demanded of Coca-Cola by the percentage change in the price of Pepsi-ColaE) B) and D)
F) A) and B)

Question 13

Suppose at the current price,the demand for copper is estimated at −3.14.What happens to sales revenue if the government imposes a price ceiling below the free market equilibrium price in the copper market?

Accepted Answer

A)   Sales revenue falls.
B)   Sales revenue rises.
C)   Sales revenue remains unchanged because copper is a necessity for most industries.
D)   It cannot be determined without information on prices.E) B) and D)
F) A) and D)

Question 14

If the slope of a demand curve is equal to −0.1,then________.

Accepted Answer

A)   demand is inelastic
B)   we do not know whether the demand is elastic or inelastic
C)   the demand is elastic at low prices and inelastic at high prices
D)   as price increases by 10 per cent, quantity demanded decreases by 1 per centE) None of the above
F) A) and B)

Question 15

Which of the following goods would have the most inelastic demand?

Accepted Answer

A)   Ski vacations
B)   Bread
C)   Luxury cars
D)   Big screen TVsE) B) and C)
F) A) and C)

Question 16

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15,what is the absolute value of the price elasticity of demand? Use the midpoint formula.

Accepted Answer

A)   0.17
B)   0.62
C)   1.62
D)   5E) A) and C)
F) A) and B)

Question 17

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8 000 units to 10 000 units.Use the midpoint formula to calculate the price elasticity of supply.

Accepted Answer

A)   1.22
B)   1.0
C)   0.82
D)   0.07E) A) and B)
F) B) and C)

Question 18

When Audrina raised the price of her home-made cookies,her total revenue increased.This suggests that the demand for Audrina's cookies is elastic.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements about price elasticity of demand is false?

Accepted Answer

A)   The value of the price elasticity of demand is the reciprocal of the value of the demand curve's slope.
B)   If quantity demanded changes by a larger percentage than the percentage change in price, demand is elastic.
C)   The value of the price elasticity of demand along a downward-sloping demand curve is always negative.
D)   A linear downward-sloping demand curve has a varying price elasticity coefficient.E) A) and C)
F) B) and C)

Question 20

If the quantity demanded for a good rises as income rises,then the income elasticity of demand for this good is ________ than 0,and the good is ________ good.

Accepted Answer

A)   greater; an inferior
B)   less; a normal
C)   less; an inferior
D)   greater; a normalE) C) and D)
F) None of the above

Exam 4: Elasticity: The Responsiveness of Demand and Supply

Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21.This indicates that________.

Correct AnswerverifiedShow Answer

With the increased usage of mobile services,what has happened to the price elasticity of demand for landline telephone services?

Correct AnswerverifiedShow Answer

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value) .This means that a 20 per cent increase in the price of beef,holding everything else constant,will cause the quantity of beef demanded to________.

Correct AnswerverifiedShow Answer

If the quantity demanded for a good rises as income rises,then the income elasticity of demand for this good is ________ than 0,and the good is ________ good.

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Which of the following goods would have the most inelastic demand?

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If demand is inelastic,what is the absolute value of the price elasticity of demand?

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If 50 units are sold at a price of $20 and 80 units are sold at a price of $15,what is the absolute value of the price elasticity of demand? Use the midpoint formula.

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If at a price of $24,Octavia sells 36 homegrown orchids and at $30 she sells 24 homegrown orchids,what is the demand for her orchids?

Correct AnswerverifiedShow Answer

Which of the following statements about price elasticity of demand is false?

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If the price of steel increases drastically,the quantity of steel demanded by the building industry will fall significantly over the long run because ________.

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If the slope of a demand curve is equal to −0.1,then________.

Correct AnswerverifiedShow Answer

When Audrina raised the price of her home-made cookies,her total revenue increased.This suggests that the demand for Audrina's cookies is elastic.

Correct AnswerverifiedShow Answer

Suppose at the current price,the demand for copper is estimated at −3.14.What happens to sales revenue if the government imposes a price ceiling below the free market equilibrium price in the copper market?

Correct AnswerverifiedShow Answer

A supply curve that is vertical________.

Correct AnswerverifiedShow Answer

The cross-price elasticity of demand between Coca-Cola and Pepsi-Cola is calculated by dividing________.

Correct AnswerverifiedShow Answer

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8 000 units to 10 000 units.Use the midpoint formula to calculate the price elasticity of supply.

Correct AnswerverifiedShow Answer

To what is price elasticity of demand equal?

Correct AnswerverifiedShow Answer

Necessities tend to have more inelastic demands than luxuries.

Correct AnswerverifiedShow Answer

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

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What does total revenue equal?

Correct AnswerverifiedShow Answer

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If the quantity demanded for a good rises as income rises,then the income elasticity of demand for this good is than 0,and the good is good.

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