Question 1

Consider the following data for a hypothetical economy.  TABLE 4-4
-If demand is inelastic, an increase in price will cause total expenditure to

Accepted Answer

A)   fall to zero.
B)   remain constant.
C)   decrease.
D)   increase.
E)   be negative.

Question 2

An upward-sloping straight-line supply curve through the origin has an elasticity of

Accepted Answer

A)   zero.
B)   infinity.
C)   greater than one.
D)   less than one.
E)   one.

Question 3

If the price elasticity of demand is 1.4, a 10 percent increase in the price of the good results in

Accepted Answer

A)   a 14 percent increase in the quantity demanded.
B)   a 1.4 percent increase in the quantity demanded.
C)   a 1.4 percent decrease in the quantity demanded.
D)   a 14 percent decrease in the quantity demanded.
E)   There is not enough information to answer this question.

Question 4

Which of the following statements would you expect to be true about the demand elasticities for cornflakes and food?

Accepted Answer

A)   Compared with food, cornflakes has a lower price elasticity of demand because it is specifically defined.
B)   Food has a lower price elasticity of demand than cornflakes because it is more broadly defined.
C)   Food has a higher price elasticity of demand because it is a necessity.
D)   Because cornflakes is food, cornflakes would have the same price elasticity of demand as food.
E)   Because cornflakes is food, but not all food is cornflakes, cornflakes would have a lower price elasticity of demand.

Question 5

Suppose the current level of output of some good is 100 units. If market demand is inelastic at that quantity, total expenditure on this product would be higher if output was

Accepted Answer

A)   kept constant.
B)   maximized.
C)   less than 100 units.
D)   minimized.
E)   greater than 100 units.

Question 6

The price elasticity of demand for a product tends to be greater the

Accepted Answer

A)   more close substitutes for it there are.
B)   fewer close substitutes for it there are.
C)   lower its price.
D)   more broadly the product is defined.
E)   shorter the time span being considered.

Question 7

A value of infinity for the elasticity of supply of some product implies that

Accepted Answer

A)   no product will be supplied at any price.
B)   the supply curve is vertical.
C)   supply is very unresponsive to price.
D)   the supply curve is horizontal.
E)   the product will be supplied at any price.

Question 8

Income elasticity of demand measures the extent to which

Accepted Answer

A)   one household's income changes when there is a change in the income of another household.
B)   the quantity demanded of a good changes when income changes.
C)   the price of a good changes when there is a change in income.
D)   quantity demanded changes when there is a change in price.
E)   real household income changes when there is a change in the price of a good.

Question 9

Suppose that the quantity demanded of skipping ropes rises from 1250 to 1750 units when the price falls from $1.25 to $0.75 per unit. The price elasticity of demand for this product is

Accepted Answer

A)   2.
B)   2/3.
C)   1/3.
D)   3/2.
E)   1.

Question 10

Suppose that as the price of some product increases from $4.00 to $5.00 per unit the quantitysupplied rises from 500 to 1000 units per month. The price elasticity of supply for this product is

Accepted Answer

A)   3.0.
B)   1.0.
C)   2.0.
D)   0.33.
E)   2.5.

Question 11

A perfectly horizontal demand curve shows that the own-price elasticity of demand is

Accepted Answer

A)   unity.
B)   less than one.
C)   zero.
D)   not defined.
E)   infinite.

Question 12

A vertical demand curve shows that the own-price elasticity of demand is

Accepted Answer

A)   less than one.
B)   unity.
C)   zero.
D)   not defined.
E)   infinity.

Question 13

Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit. The price elasticity of demand for this product is

Accepted Answer

A)   1.0
B)   4.0
C)   0.5
D)   2.0
E)   1.5

Question 14

Suppose you are advising the government on changes in the gasoline market. The current price is$1.00 per litre and the quantity demanded is 2.5 million litres per day. Long-run price elasticity ofdemand is constant at 0.8. If the supply of gasoline is reduced so that the price rises to $1.50 per litre, then quantity demanded is predicted to fall in the long run by

Accepted Answer

A)   32 percent, and total expenditure will rise.
B)   50 percent, and total expenditure will rise.
C)   15 percent, and total expenditure will fall.
D)   15 percent, and total expenditure will rise.
E)   12 percent, and total expenditure will fall.

Question 15

Suppose that the quantity of lemonade demanded falls from 103 000 litres per week to 97 000 litresper week as a result of a 10 percent increase in its price. The price elasticity of demand forlemonade is therefore

Accepted Answer

A)   6.0.
B)   1.03.
C)   0.6.
D)   1.97.
E)   impossible to compute unless we know the before and after prices.

Question 16

Which of the following tends to be true of the income elasticity of demand for food?

Accepted Answer

A)   At low levels of income, it tends to be fairly high; but as the level of income rises, it tends to fall.
B)   It tends to be well above unity only at high levels of income.
C)   It is usually zero, since we can only eat so much.
D)   It tends to be well below unity only at low levels of income.
E)   It tends to remain fairly constant at all levels of income.

Question 17

If total expenditure on a product rises and falls directly with a product's price, then demand for this product has an elasticity of

Accepted Answer

A)   zero.
B)   greater than one.
C)   less than one.
D)   one.
E)   direct proportions.

Question 18

The table below shows the demand schedule for museum admissions in a small city.  TABLE 4-1
-Refer to Table 4-1. Between the prices of $8 and $10, the elasticity of demand is

Accepted Answer

A)   1/3.
B)   3.
C)   2.
D)   2/3.
E)   1.

Question 19

If Vicky's income increases by 8% and she increases her consumption of music downloads by 4%,then her income elasticity of demand for music downloads is

Accepted Answer

A)   2.0.
B)   -0.5.
C)   -2.0.
D)   4.0.
E)   0.5.

Question 20

The "economic incidence" of an excise tax illustrates

Accepted Answer

A)   who is legally responsible for paying it to the government.
B)   who bears the burden of the tax.
C)   the legislative process it must pass through.
D)   the political process for implementing a tax.
E)   the economic costs of avoiding it.

Exam 4: Elasticity

Correct Answer
verified

Suppose that the quantity of lemonade demanded falls from 103 000 litres per week to 97 000 litresper week as a result of a 10 percent increase in its price. The price elasticity of demand forlemonade is therefore

Correct Answer
verified

Suppose that the quantity demanded of skipping ropes rises from 1250 to 1750 units when the price falls from $1.25 to $0.75 per unit. The price elasticity of demand for this product is

Correct Answer
verified

Suppose that as the price of some product increases from $4.00 to $5.00 per unit the quantitysupplied rises from 500 to 1000 units per month. The price elasticity of supply for this product is

Correct Answer
verified

Which of the following statements would you expect to be true about the demand elasticities for cornflakes and food?

Correct Answer
verified

Suppose the current level of output of some good is 100 units. If market demand is inelastic at that quantity, total expenditure on this product would be higher if output was

Correct Answer
verified

A value of infinity for the elasticity of supply of some product implies that

Correct Answer
verified

Consider the following data for a hypothetical economy. TABLE 4-4 -If demand is inelastic, an increase in price will cause total expenditure to

Correct Answer
verified

Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit. The price elasticity of demand for this product is

Correct Answer
verified

If total expenditure on a product rises and falls directly with a product's price, then demand for this product has an elasticity of

Correct Answer
verified

Which of the following tends to be true of the income elasticity of demand for food?

Correct Answer
verified

An upward-sloping straight-line supply curve through the origin has an elasticity of

Correct Answer
verified

If Vicky's income increases by 8% and she increases her consumption of music downloads by 4%,then her income elasticity of demand for music downloads is

Correct Answer
verified

The "economic incidence" of an excise tax illustrates

Correct Answer
verified

Income elasticity of demand measures the extent to which

Correct Answer
verified

If the price elasticity of demand is 1.4, a 10 percent increase in the price of the good results in

Correct Answer
verified

The price elasticity of demand for a product tends to be greater the

Correct Answer
verified

The table below shows the demand schedule for museum admissions in a small city. TABLE 4-1 -Refer to Table 4-1. Between the prices of $8 and $10, the elasticity of demand is

Correct Answer
verified

A vertical demand curve shows that the own-price elasticity of demand is

Correct Answer
verified

A perfectly horizontal demand curve shows that the own-price elasticity of demand is

Correct Answer
verified

Exam 4: Elasticity

Correct AnswerverifiedShow Answer

Suppose that the quantity of lemonade demanded falls from 103 000 litres per week to 97 000 litresper week as a result of a 10 percent increase in its price. The price elasticity of demand forlemonade is therefore

Correct AnswerverifiedShow Answer

Suppose that the quantity demanded of skipping ropes rises from 1250 to 1750 units when the price falls from $1.25 to $0.75 per unit. The price elasticity of demand for this product is

Correct AnswerverifiedShow Answer

Suppose that as the price of some product increases from $4.00 to $5.00 per unit the quantitysupplied rises from 500 to 1000 units per month. The price elasticity of supply for this product is

Correct AnswerverifiedShow Answer

Which of the following statements would you expect to be true about the demand elasticities for cornflakes and food?

Correct AnswerverifiedShow Answer

Suppose the current level of output of some good is 100 units. If market demand is inelastic at that quantity, total expenditure on this product would be higher if output was

Correct AnswerverifiedShow Answer

A value of infinity for the elasticity of supply of some product implies that

Correct AnswerverifiedShow Answer

Consider the following data for a hypothetical economy. TABLE 4-4 -If demand is inelastic, an increase in price will cause total expenditure to

Correct AnswerverifiedShow Answer

Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit. The price elasticity of demand for this product is

Correct AnswerverifiedShow Answer

If total expenditure on a product rises and falls directly with a product's price, then demand for this product has an elasticity of

Correct AnswerverifiedShow Answer

Which of the following tends to be true of the income elasticity of demand for food?

Correct AnswerverifiedShow Answer

An upward-sloping straight-line supply curve through the origin has an elasticity of

Correct AnswerverifiedShow Answer

If Vicky's income increases by 8% and she increases her consumption of music downloads by 4%,then her income elasticity of demand for music downloads is

Correct AnswerverifiedShow Answer

The "economic incidence" of an excise tax illustrates

Correct AnswerverifiedShow Answer

Income elasticity of demand measures the extent to which

Correct AnswerverifiedShow Answer

If the price elasticity of demand is 1.4, a 10 percent increase in the price of the good results in

Correct AnswerverifiedShow Answer

The price elasticity of demand for a product tends to be greater the

Correct AnswerverifiedShow Answer

The table below shows the demand schedule for museum admissions in a small city. TABLE 4-1 -Refer to Table 4-1. Between the prices of $8 and $10, the elasticity of demand is

Correct AnswerverifiedShow Answer

A vertical demand curve shows that the own-price elasticity of demand is

Correct AnswerverifiedShow Answer

A perfectly horizontal demand curve shows that the own-price elasticity of demand is

Correct AnswerverifiedShow Answer

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