Question 1

If an increase in the supply of a product in the market results in a decrease in price, but no change in the quantity traded, then

Accepted Answer

A)   the price elasticity of supply is zero.
B)   the price elasticity of supply is infinite.
C)   the price elasticity of demand is unitary.
D)   the price elasticity of demand is zero.E) None of the above
F) B) and C)

Question 2

For a linear demand curve,

Accepted Answer

A)   elasticity is constant along the curve.
B)   elasticity is unity at every point on the curve.
C)   demand is elastic at relatively low prices.
D)   demand is elastic at relatively high prices.E) B) and D)
F) All of the above

Question 3

The income elasticity of demand for food is roughly 1. A consumer's monthly income is $2,000, of which 20 percent is spent on food. If the income of this consumer doubles, the amount she'll spend on food will be

Accepted Answer

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

Question 4

The price-elasticity of demand is always negative because of

Accepted Answer

A)   the law of demand.
B)   percentage changes being used in the formula.
C)   the midpoint formula.
D)   scarcity.E) B) and C)
F) A) and C)

Question 5

Which of these pairs of concepts can be positively, as well as negatively, related?

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 cost of resources required to make a product and its supplyE) B) and D)
F) A) and B)

Question 6

(Consider This)  Elastic demand is analogous to a , and inelastic demand to a .

Accepted Answer

A)   normal wrench; socket wrench
B)   tight rubber band; loose rubber band
C)   Ace bandage; firm rubber tie-down
D)   one-foot ruler; tape measureE) B) and C)
F) All of the above

Question 7

The main determinant of elasticity of supply is the

Accepted Answer

A)   number of close substitutes for the product available to consumers.
B)   amount of time the producer has to adjust inputs in response to a price change.
C)   urgency of consumer wants for the product.
D)   number of uses for the product.E) A) and D)
F) None of the above

Question 8

(Consider This)  Which of the following best explains the significant increases in the equilibrium prices for higher education in the United States since the 1980s?

Accepted Answer

A)   The demand for higher education is highly price inelastic, and the supply has decreased substantially.
B)   The demand for higher education is highly price elastic, and the supply has decreased substantially.
C)   The supply of higher education is highly price inelastic, and demand has increased substantially.
D)   The supply of higher education is highly price elastic, and demand has increased substantially.E) C) and D)
F) A) and C)

Question 9

Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in

Accepted Answer

A)   the price of some other product.
B)   the price of that same product.
C)   income.
D)   the general price level.E) A) and B)
F) None of the above

Question 10

In the immediate market period for a highly perishable crop like tomatoes, the individual farmer's supply curve tends to be

Accepted Answer

A)   perfectly inelastic.
B)   perfectly elastic.
C)   quite flat.
D)   downward-sloping.E) B) and C)
F) All of the above

Question 11

(Last Word)  Based on the concept of price elasticity of demand, which of the following cases is most likely to occur?

Accepted Answer

A)   golf courses charging higher prices for golf during the week than on weekends
B)   movie theaters charging higher prices for senior citizens
C)   colleges charging lower tuition for low-income students
D)   airlines charging lower fares for business travelersE) A) and B)
F) A) and C)

Question 12

The price elasticity of demand for widgets is 0.80. Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a

Accepted Answer

A)   1 percent reduction in price.
B)   12 percent reduction in price.
C)   20 percent reduction in price.
D)   40 percent reduction in price.E) All of the above
F) C) and D)

Question 13

If the demand for product X is inelastic, a 4 percent decrease in the price of X will

Accepted Answer

A)   decrease the quantity of X demanded by more than 4 percent.
B)   decrease the quantity of X demanded by less than 4 percent.
C)   increase the quantity of X demanded by more than 4 percent.
D)   increase the quantity of X demanded by less than 4 percent.E) A) and B)
F) A) and C)

Question 14

The Bear Corporation finds that its total spending on machine parts increases after the price of machine parts falls, other things being equal. Which of the following is true about the Bear Corporation's demand for machine parts with the price change?

Accepted Answer

A)   It is unit elastic.
B)   It is price elastic.
C)   It is price inelastic.
D)   It is perfectly inelastic.E) All of the above
F) A) and B)

Question 15

Answer the question on the basis of the following demand schedule.  If this demand schedule were graphed, we would find that

Accepted Answer

A)   its slope diminishes as we move southeast down the curve.
B)   its slope diminishes as we move northwest up the curve.
C)   its slope is constant throughout.
D)   the data are inconsistent with the law of demand.E) All of the above
F) None of the above

Question 16

If a firm's demand for labor is elastic, a union-negotiated wage increase will

Accepted Answer

A)   necessarily be inflationary.
B)   cause the firm's total payroll to increase.
C)   cause the firm's total payroll to decline.
D)   cause a shortage of labor.E) B) and D)
F) B) and C)

Question 17

If price and total revenue are directly related, demand is inelastic.

Accepted Answer

A) True 
 B)False

Question 18

Suppose the price of a product rises and the total revenue of sellers increases.

Accepted Answer

A)   It can be concluded that the demand for the product is elastic.
B)   It can be concluded that the supply of the product is elastic.
C)   It can be concluded that the supply of the product is inelastic.
D)   No conclusion can be reached with respect to the elasticity of supply.E) B) and C)
F) All of the above

Question 19

If a firm can sell 3,000 units of product A at $10 per unit and 5,000 at $8, then

Accepted Answer

A)   the price elasticity of demand is 0.44.
B)   A is a complementary good.
C)   the price elasticity of demand is 2.25.
D)   A is an inferior good.E) None of the above
F) A) and B)

Question 20

The demand for autos is likely to be

Accepted Answer

A)   less price elastic than the demand for Honda Accords.
B)   more price elastic than the demand for Honda Accords.
C)   of the same price elasticity as the demand for Honda Accords.
D)   perfectly inelastic.E) C) and D)
F) All of the above

Exam 6: Elasticity

(Consider This) Elastic demand is analogous to a , and inelastic demand to a .

Correct AnswerverifiedShow Answer

The price-elasticity of demand is always negative because of

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If a firm can sell 3,000 units of product A at $10 per unit and 5,000 at $8, then

Correct AnswerverifiedShow Answer

Suppose the price of a product rises and the total revenue of sellers increases.

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The income elasticity of demand for food is roughly 1. A consumer's monthly income is $2,000, of which 20 percent is spent on food. If the income of this consumer doubles, the amount she'll spend on food will be

Correct AnswerverifiedShow Answer

The Bear Corporation finds that its total spending on machine parts increases after the price of machine parts falls, other things being equal. Which of the following is true about the Bear Corporation's demand for machine parts with the price change?

Correct AnswerverifiedShow Answer

The demand for autos is likely to be

Correct AnswerverifiedShow Answer

In the immediate market period for a highly perishable crop like tomatoes, the individual farmer's supply curve tends to be

Correct AnswerverifiedShow Answer

Cross elasticity of demand measures how sensitive purchases of a specific product are to changes in

Correct AnswerverifiedShow Answer

(Last Word) Based on the concept of price elasticity of demand, which of the following cases is most likely to occur?

Correct AnswerverifiedShow Answer

If a firm's demand for labor is elastic, a union-negotiated wage increase will

Correct AnswerverifiedShow Answer

If the demand for product X is inelastic, a 4 percent decrease in the price of X will

Correct AnswerverifiedShow Answer

For a linear demand curve,

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following demand schedule. If this demand schedule were graphed, we would find that

Correct AnswerverifiedShow Answer

Which of these pairs of concepts can be positively, as well as negatively, related?

Correct AnswerverifiedShow Answer

The main determinant of elasticity of supply is the

Correct AnswerverifiedShow Answer

(Consider This) Which of the following best explains the significant increases in the equilibrium prices for higher education in the United States since the 1980s?

Correct AnswerverifiedShow Answer

If price and total revenue are directly related, demand is inelastic.

Correct AnswerverifiedShow Answer

If an increase in the supply of a product in the market results in a decrease in price, but no change in the quantity traded, then

Correct AnswerverifiedShow Answer

The price elasticity of demand for widgets is 0.80. Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a

Correct AnswerverifiedShow Answer

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