Question 1

When quantity is measured in gallons,the price elasticity of demand for milk will be _____ the price elasticity when quantity is measured in quarts.

Accepted Answer

A)   the same as
B)   four times
C)   one quarter
D)   two times
E)   less than

Question 2

Exhibit 5-20
 
-What is the price elasticity of supply between $10 and $20 on supply curve S in Exhibit 5-20?

Accepted Answer

A)   0
B)   infinity
C)   1
D)   2
E)   10

Question 3

All other things constant,goods will have more _____ demand if their price uses up a _____ proportion of a consumer's budget.

Accepted Answer

A)   price-elastic;greater
B)   unit-elastic;smaller
C)   price-elastic;smaller
D)   price-inelastic;greater
E)   stable;greater

Question 4

Dusty Rags,Inc.provides janitorial services to retail stores.Dusty had been charging $10 per hour and selling 400 hours of service per week at that rate.When he raised his price to $15 per hour,his customers cut back to 300 weekly hours of service.Which of the following is true?

Accepted Answer

A)   Revenue went from $4,000 per week to $4,500 per week,indicating that the demand curve for his services must have shifted to the right.
B)   Revenue went from $4,000 per week to $4,500 per week,indicating that the demand for his services must be elastic.
C)   Revenue went from $4,000 per week to $4,500 per week,indicating that the demand for his services must be inelastic.
D)   Revenue went from $400 to $300 per week,indicating that demand must be elastic.
E)   Revenue went from $10 to $15 per week,indicating that demand must be inelastic.

Question 5

The demand for wine is inelastic.In order for the "Vino for all" winery to increase revenues,they must:

Accepted Answer

A)   Increase the price of wine
B)   Decrease the price of wine
C)   Increase the supply of wine
D)   Decrease the supply of wine
E)   Increase the demand for wine

Question 6

Exhibit 5-8
 
-Which of the following is not true in the range of the total revenue curve labeled A in Exhibit 5-8?

Accepted Answer

A)   Demand is inelastic.
B)   Total revenue is increasing.
C)   Total revenue is positive.
D)   Demand is elastic.
E)   Demand elasticity decreases as total revenue increases.

Question 7

Suppose consumers spent $42 million on Christmas trees last year when the average tree cost $30 and this year spent $42 million when the average tree costs $25.Assuming nothing else changed,this data suggests that

Accepted Answer

A)   consumers bought the same number of Christmas trees this year as last year
B)   the price of Christmas trees stayed the same
C)   total revenues to tree producers rose this year
D)   the demand for trees is unit elastic
E)   the demand for trees is inelastic

Question 8

Luis wonders why commercials appear more frequently at the end of a TV movie than at the beginning.Carol says that this pattern can be explained by the

Accepted Answer

A)   share of the viewer's budget spent on TV watching
B)   length of the adjustment period
C)   cost of supplying additional minutes of the movie
D)   high elasticity of demand for watching the end of a TV movie
E)   availability of substitutes

Question 9

The demand curve for a good that has many perfect substitutes in consumption is likely to be

Accepted Answer

A)   upward sloping
B)   steep
C)   highly inelastic
D)   horizontal
E)   vertical

Question 10

The more narrowly a product is defined,the less elastic the demand for that product will be.

Accepted Answer

A) True 
 B)False

Question 11

A 10 percent increase in the price of root beer causes a 5 percent increase in the quantity demanded of orange soda.This means that

Accepted Answer

A)   root beer and orange soda are substitutes
B)   root beer and orange soda are complements
C)   the cross-price elasticity of demand is elastic
D)   the cross-price elasticity of demand is equal to 2
E)   the cross-price elasticity of demand is equal to -2

Question 12

Exhibit 5-20
 
-What is the price elasticity of supply between $20 and $40 on supply curve S' in Exhibit 5-20?

Accepted Answer

A)   0
B)   infinity
C)   1
D)   2
E)   10

Question 13

The total revenue curve that corresponds to a downward-sloping linear demand curve

Accepted Answer

A)   slopes downward
B)   slopes upward
C)   is a horizontal line
D)   first rises,then falls
E)   first falls,then rises

Question 14

When the price of cookies increases from $1.50 to $2.00,the quantity demanded of milk decreases from 120 to 100 gallons.The cross-price elasticity is:

Accepted Answer

A)   11/7
B)   -11/7
C)   7/11
D)   -7/11
E)   -9/13

Question 15

Elasticity rises as price falls along a linear,downward-sloping demand curve.

Accepted Answer

A) True 
 B)False

Question 16

Along a linear demand curve,total revenue is maximized when demand is

Accepted Answer

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

Question 17

Perfectly elastic demand curves are

Accepted Answer

A)   downward sloping
B)   upward sloping
C)   vertical
D)   horizontal
E)   steep

Question 18

Elasticity measures

Accepted Answer

A)   whether a price increase causes quantity demanded to increase or decrease
B)   the strength of an economy's tendency to recover from recession
C)   the responsiveness of decision makers to changes in prices,income,or other variables
D)   the profitability of investment in an industry
E)   the long-run flexibility of prices in the economy

Question 19

Demand for a necessity,such as food,is

Accepted Answer

A)   both income and price inelastic
B)   income inelastic and price elastic
C)   income elastic and price inelastic
D)   both income and price elastic
E)   income elastic and perfectly price inelastic

Question 20

As consumers have a longer time period to respond,the demand for a product typically becomes more inelastic.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity of Demand and Supply

All other things constant,goods will have more _____ demand if their price uses up a _____ proportion of a consumer's budget.

Correct AnswerverifiedShow Answer

The more narrowly a product is defined,the less elastic the demand for that product will be.

Correct AnswerverifiedShow Answer

Luis wonders why commercials appear more frequently at the end of a TV movie than at the beginning.Carol says that this pattern can be explained by the

Correct AnswerverifiedShow Answer

Exhibit 5-8 -Which of the following is not true in the range of the total revenue curve labeled A in Exhibit 5-8?

Correct AnswerverifiedShow Answer

Along a linear demand curve,total revenue is maximized when demand is

Correct AnswerverifiedShow Answer

Demand for a necessity,such as food,is

Correct AnswerverifiedShow Answer

Suppose consumers spent $42 million on Christmas trees last year when the average tree cost $30 and this year spent $42 million when the average tree costs $25.Assuming nothing else changed,this data suggests that

Correct AnswerverifiedShow Answer

Exhibit 5-20 -What is the price elasticity of supply between $10 and $20 on supply curve S in Exhibit 5-20?

Correct AnswerverifiedShow Answer

Perfectly elastic demand curves are

Correct AnswerverifiedShow Answer

When the price of cookies increases from $1.50 to $2.00,the quantity demanded of milk decreases from 120 to 100 gallons.The cross-price elasticity is:

Correct AnswerverifiedShow Answer

As consumers have a longer time period to respond,the demand for a product typically becomes more inelastic.

Correct AnswerverifiedShow Answer

The demand curve for a good that has many perfect substitutes in consumption is likely to be

Correct AnswerverifiedShow Answer

The demand for wine is inelastic.In order for the "Vino for all" winery to increase revenues,they must:

Correct AnswerverifiedShow Answer

Dusty Rags,Inc.provides janitorial services to retail stores.Dusty had been charging $10 per hour and selling 400 hours of service per week at that rate.When he raised his price to $15 per hour,his customers cut back to 300 weekly hours of service.Which of the following is true?

Correct AnswerverifiedShow Answer

When quantity is measured in gallons,the price elasticity of demand for milk will be _____ the price elasticity when quantity is measured in quarts.

Correct AnswerverifiedShow Answer

Exhibit 5-20 -What is the price elasticity of supply between $20 and $40 on supply curve S' in Exhibit 5-20?

Correct AnswerverifiedShow Answer

Elasticity rises as price falls along a linear,downward-sloping demand curve.

Correct AnswerverifiedShow Answer

The total revenue curve that corresponds to a downward-sloping linear demand curve

Correct AnswerverifiedShow Answer

A 10 percent increase in the price of root beer causes a 5 percent increase in the quantity demanded of orange soda.This means that

Correct AnswerverifiedShow Answer

Elasticity measures

Correct AnswerverifiedShow Answer

All other things constant,goods will have more _ demand if their price uses up a _ proportion of a consumer's budget.

Correct Answer
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