Question 1

If demand for farm crops is inelastic,a good harvest will cause farm revenues to:

Accepted Answer

A)   increase because of the increase in the quantity that farmers can sell.
B)   increase because of a downward movement along the supply curve,encouraging an increase in demand.
C)   decrease because of a percentage fall in price greater than the percentage increase in quantity sold.
D)   remain unchanged because the increase in quantity that can be sold will be matched by an equal decrease in price.E) B) and D)
F) B) and C)

Question 2

If price declines from $450 to $350 and,as a result,quantity demanded rises from 1200 to 1500,price elasticity of demand is:

Accepted Answer

A)   1.78.
B)   0.89.
C)   1.12.
D)   3.42.The change in quantity is (1500 - 1200) /(1500 + 1200) = 0.011 and the change in price is (350 - 450) /(350 + 450) = 0.125.Thus,elasticity is 0.89,which is inelastic.E) A) and C)
F) A) and D)

Question 3

If the quantity demanded for good A increases from 40 to 60 when price decreases from $9 to $7,price elasticity of demand in this price range is 1.6.

Accepted Answer

A) True 
 B)False

Question 4

Refer to the graph above.If the price of the product decreases from $6 to $5 because of a decrease in demand (not shown) ,total revenue would:

Accepted Answer

A)   increase by $300.
B)   increase by $100.
C)   decrease.
D)   stay the same.E) A) and B)
F) None of the above

Question 5

Which of the following pairs of goods is most likely to have a positive cross-price-elasticity of demand?

Accepted Answer

A)   Steak and hamburger.
B)   Fighter jets and pencils.
C)   Hamburgers and hamburger buns.
D)   College professors and textbooks.E) All of the above
F) C) and D)

Question 6

Refer to the graph above.If demand decreased:

Accepted Answer

A)   quantity would stay the same and price would increase.
B)   quantity would stay the same and price would decrease.
C)   price would stay the same and quantity would decrease.
D)   price would stay the same and quantity would increase.E) A) and B)
F) None of the above

Question 7

Which products are most likely to be most price elastic?

Accepted Answer

A)   Sugar and eggs
B)   Clothing and auto repair
C)   China and glassware
D)   Electricity and housingE) A) and B)
F) All of the above

Question 8

The supply of tickets to a major sporting event such as the Super Bowl or a World Series game is perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 9

The demand for most agricultural goods is elastic.Consequently,an increase in supply will increase the total income of producers of agricultural goods.

Accepted Answer

A) True 
 B)False

Question 10

A 4 percent reduction in the price of a product causes consumer expenditure to remain the same.The price elasticity of demand is:

Accepted Answer

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

Question 11

Product demand is more elastic the longer the time period under consideration.

Accepted Answer

A) True 
 B)False

Question 12

The Mear 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 Mear 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) C) and D)
F) B) and D)

Question 13

If average consumer incomes increase proportionately faster than the demand for a product,then the income elasticity of demand for the product is:

Accepted Answer

A)   zero.
B)   greater than zero but less than 1.
C)   greater than 1.
D)   equal to 1.E) B) and C)
F) C) and D)

Question 14

Which will cause a demand curve to be relatively elastic?

Accepted Answer

A)   Few substitutes exist.
B)   The time interval considered is long.
C)   The good is considered a necessity.
D)   Purchases of the good require a small portion of consumers' budgets.E) B) and D)
F) B) and C)

Question 15

Suppose the price elasticity of supply for crude oil is 2.5.How much would price have to rise to increase production by 20 percent?

Accepted Answer

A)   8 percent
B)   12.5 percent
C)   20 percent
D)   45 percentE) All of the above
F) A) and B)

Question 16

The elasticity coefficients of demand are 2.6,0.5,1.4,and 0.18 for demand schedules D1,D2,D3,and D4.A 2 percent price increase will result in an increase in total revenues in the cases of:

Accepted Answer

A)   D1 and D3.
B)   D1 and D4.
C)   D2 and D4.
D)   D1,D2,and D3.E) A) and B)
F) B) and C)

Question 17

If a 2 percent increase in the price of product X causes the demand for product Y to increase by 6 percent,then:

Accepted Answer

A)   X and Y are substitutes.
B)   X and Y are complements.
C)   X and Y are independent goods.
D)   the demand for X is elastic.E) A) and D)
F) B) and D)

Question 18

Which is not a determinant of the price elasticity of demand for most products?

Accepted Answer

A)   The slope of the demand curve for a product
B)   The number of good substitutes available for the product
C)   The proportion of most consumers' budget spent on the product
D)   The amount of time consumers have to adjust their purchases of a product to a change in its priceE) A) and D)
F) B) and C)

Question 19

Refer to the above graphs.Which shows a perfectly elastic demand curve?

Accepted Answer

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

Question 20

One reason the luxury tax on yachts imposed by the U.S.Congress in 1991 failed to produce much tax revenue was that the demand for yachts was elastic.

Accepted Answer

A) True 
 B)False

Exam 4: Elasticity of Demand and Supply

Which of the following pairs of goods is most likely to have a positive cross-price-elasticity of demand?

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Refer to the graph above.If demand decreased:

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Which will cause a demand curve to be relatively elastic?

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If a 2 percent increase in the price of product X causes the demand for product Y to increase by 6 percent,then:

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Refer to the graph above.If the price of the product decreases from $6 to $5 because of a decrease in demand (not shown) ,total revenue would:

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Refer to the above graphs.Which shows a perfectly elastic demand curve?

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If price declines from $450 to $350 and,as a result,quantity demanded rises from 1200 to 1500,price elasticity of demand is:

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Product demand is more elastic the longer the time period under consideration.

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A 4 percent reduction in the price of a product causes consumer expenditure to remain the same.The price elasticity of demand is:

Correct AnswerverifiedShow Answer

One reason the luxury tax on yachts imposed by the U.S.Congress in 1991 failed to produce much tax revenue was that the demand for yachts was elastic.

Correct AnswerverifiedShow Answer

The Mear 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 Mear Corporation's demand for machine parts with the price change?

Correct AnswerverifiedShow Answer

If demand for farm crops is inelastic,a good harvest will cause farm revenues to:

Correct AnswerverifiedShow Answer

If average consumer incomes increase proportionately faster than the demand for a product,then the income elasticity of demand for the product is:

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Suppose the price elasticity of supply for crude oil is 2.5.How much would price have to rise to increase production by 20 percent?

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Which products are most likely to be most price elastic?

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If the quantity demanded for good A increases from 40 to 60 when price decreases from $9 to $7,price elasticity of demand in this price range is 1.6.

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The elasticity coefficients of demand are 2.6,0.5,1.4,and 0.18 for demand schedules D1,D2,D3,and D4.A 2 percent price increase will result in an increase in total revenues in the cases of:

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The demand for most agricultural goods is elastic.Consequently,an increase in supply will increase the total income of producers of agricultural goods.

Correct AnswerverifiedShow Answer

Which is not a determinant of the price elasticity of demand for most products?

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The supply of tickets to a major sporting event such as the Super Bowl or a World Series game is perfectly inelastic.

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The elasticity coefficients of demand are 2.6,0.5,1.4,and 0.18 for demand schedules D₁,D₂,D₃,and D₄.A 2 percent price increase will result in an increase in total revenues in the cases of:

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