Question 1

Refer to the above graph.When the quantity of product X increases from 14,000 to 16,000,the price elasticity of demand for product X is:

Accepted Answer

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

Question 2

Economists distinguish between the short run and the long run by noting that:

Accepted Answer

A)   no inputs can be varied in the long run.
B)   some inputs cannot be varied in the short run.
C)   input prices are subject to fluctuations in the short run.
D)   output prices are subject to fluctuations in the long run.E) A) and C)
F) None of the above

Question 3

The income elasticity of demand for a food is unity.A consumer's monthly income is $2,000,of which 20 percent is spent on food.If income doubles,the amount spent on food will be:

Accepted Answer

A)   $400 per month.
B)   $500 per month.
C)   $800 per month.
D)   $1,000 per month.E) B) and C)
F) C) and D)

Question 4

When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available,they are assuming that students who pay full tuition:

Accepted Answer

A)   have elastic demand and students who use financial aid have inelastic demand.
B)   have inelastic demand and students who use financial aid have elastic demand.
C)   view a college education as an inferior good and students who use financial aid view it as a normal good.
D)   view a college education as a normal good and students who use financial aid view it as an inferior good.E) C) and D)
F) All of the above

Question 5

For which product is the income elasticity of demand most likely to be positive?

Accepted Answer

A)   Retreaded tires
B)   Cabbage
C)   Used clothing
D)   ComputersE) A) and D)
F) None of the above

Question 6

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 10 percent.
C)   decrease the quantity of jewelry purchased by 10 percent.
D)   increase the quantity of jewelry purchased by 20 percent.E) A) and B)
F) A) and C)

Question 7

If a union argues that a price cut will boost revenues of the firm and management argues that the opposite is true,then the price elasticity of demand is:

Accepted Answer

A)   unit-elastic from the union's perspective and unit-inelastic from management's perspective.
B)   perfectly inelastic from the union's perspective and perfectly elastic from management's perspective.
C)   elastic from the union's perspective;inelastic from management's perspective.
D)   inelastic from the union's perspective;elastic from management's perspective.E) All of the above
F) A) and B)

Question 8

Refer to the figure above.The elasticity of supply for a product will be 2 when:

Accepted Answer

A)   a 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied.
B)   a 2 percent decrease in price causes a 1 percent decrease in quantity supplied.
C)   a 1 percent decrease in price causes a 2 percent decrease in quantity supplied.
D)   a 2 percent decrease in price causes a 2 percent decrease in quantity supplied.E) A) and C)
F) None of the above

Question 9

A good with a price elasticity of demand equal to .75 is described as price-inelastic.

Accepted Answer

A) True 
 B)False

Question 10

1 and P2? A)  D1 B)  D2 C)  D3 D)  D4" class="answers-bank-image d-inline" rel="preload" > Refer to the figure above.Which demand curve above is relatively more elastic between P1 and P2?

Accepted Answer

A)   D1
B)   D2
C)   D3
D)   D4E) A) and B)
F) A) and C)

Question 11

Generally,which pairs of variables could be positively or negatively related depending on the characteristic of the product?

Accepted Answer

A)   The income of consumers and the demand for a product
B)   The price of a product and the quantity of that product demanded
C)   The price of a product and the demand for a complementary product
D)   The supply of a product and the cost of resources required to make itE) A) and C)
F) B) and C)

Question 12

The price elasticity of demand for a textbook is estimated to be 1 no matter what the price or quantity demanded.In this case:

Accepted Answer

A)   a 10 percent increase in price will result in a 10 percent increase in the quantity demanded.
B)   a 10 percent increase in price will result in a 10 percent decrease in the quantity demanded.
C)   an increase in price will decrease the total revenue of sellers.
D)   a decrease in price will increase the total revenue of sellers.E) A) and B)
F) A) and C)

Question 13

A positive cross-elasticity of demand for two products indicates that they are substitutes.

Accepted Answer

A) True 
 B)False

Question 14

For which product is the income elasticity of demand most likely to be negative?

Accepted Answer

A)   Computer software
B)   Used clothing
C)   Golf balls
D)   BreadE) A) and C)
F) A) and B)

Question 15

If the price elasticity of demand for a product is equal to 0.5,then a 10 percent decrease in price will:

Accepted Answer

A)   increase quantity demanded by 5 percent.
B)   increase quantity demanded by 0.5 percent.
C)   decrease quantity demanded by 5 percent.
D)   decrease quantity demanded by 0.5 percent.The numerator in the elasticity equation is increased by 5 percent and the denominator has decreased 10 percent,so the elasticity coefficient is (5/10) = 0.5.E) B) and D)
F) C) and D)

Question 16

A consumer's weekly income is $300 and the consumer buys 5 bars of chocolate per week.When income increases to $330,the consumer buys 6 bars per week.The income elasticity of demand for chocolate by this consumer is about:

Accepted Answer

A)   0.
B)   0.5.
C)   1.
D)  2E) A) and B)
F) A) and C)

Question 17

Which is not characteristic of a product with relatively inelastic demand?

Accepted Answer

A)   The good is regarded by consumers as a necessity.
B)   There are a large number of good substitutes for the good.
C)   Buyers spend a small percentage of their total income on the product.
D)   Consumers have had only a short time period to adjust to changes in price.E) A) and B)
F) B) and C)

Question 18

Refer to the table above.What is the price with the maximum total revenue?

Accepted Answer

A)   $2
B)   $3
C)   $4
D)   $5Total Revenue = P*Q and this is maximized at $3 when TR = $3*30 = $90.E) All of the above
F) A) and B)

Question 19

Refer to the graphs above.For which graph is the supply perfectly inelastic?

Accepted Answer

A)   Graph A
B)   Graph B
C)   Graph C
D)   Graph DE) A) and B)
F) A) and D)

Question 20

An inferior good is best defined as a product for which the:

Accepted Answer

A)   price elasticity of demand is negative.
B)   income elasticity of demand is negative.
C)   price elasticity of demand is zero.
D)   income elasticity of demand is zero.E) A) and C)
F) None of the above

Exam 4: Elasticity of Demand and Supply

If the price elasticity of demand for a product is equal to 0.5,then a 10 percent decrease in price will:

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A consumer's weekly income is $300 and the consumer buys 5 bars of chocolate per week.When income increases to $330,the consumer buys 6 bars per week.The income elasticity of demand for chocolate by this consumer is about:

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A good with a price elasticity of demand equal to .75 is described as price-inelastic.

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

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Which is not characteristic of a product with relatively inelastic demand?

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The income elasticity of demand for a food is unity.A consumer's monthly income is $2,000,of which 20 percent is spent on food.If income doubles,the amount spent on food will be:

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Refer to the figure above.The elasticity of supply for a product will be 2 when:

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Refer to the figure above.Which demand curve above is relatively more elastic between P1 and P2?

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For which product is the income elasticity of demand most likely to be positive?

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Generally,which pairs of variables could be positively or negatively related depending on the characteristic of the product?

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Refer to the table above.What is the price with the maximum total revenue?

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Economists distinguish between the short run and the long run by noting that:

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An inferior good is best defined as a product for which the:

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When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available,they are assuming that students who pay full tuition:

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Refer to the graphs above.For which graph is the supply perfectly inelastic?

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The price elasticity of demand for a textbook is estimated to be 1 no matter what the price or quantity demanded.In this case:

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A positive cross-elasticity of demand for two products indicates that they are substitutes.

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Refer to the above graph.When the quantity of product X increases from 14,000 to 16,000,the price elasticity of demand for product X is:

Correct AnswerverifiedShow Answer

If a union argues that a price cut will boost revenues of the firm and management argues that the opposite is true,then the price elasticity of demand is:

Correct AnswerverifiedShow Answer

For which product is the income elasticity of demand most likely to be negative?

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Refer to the figure above.Which demand curve above is relatively more elastic between P₁ and P₂?

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