Question 1

Demand is unit elastic whenever​

Accepted Answer

A)  price elasticity has an absolute value of 1.
B)  price elasticity has an absolute value greater than 1.
C)  price elasticity has an absolute value less than 1.
D)  price elasticity is negative.
E)  consumers do not respond to a change in price.

Question 2

A university administration's decision to raise tuition in order to increase revenue will be successful if:​

Accepted Answer

A)  the demand curve slopes downward.
B)  demand is elastic.
C)  demand is inelastic.
D)  supply is elastic.
E)  supply is inelastic.

Question 3

Demand is inelastic only if the price elasticity of demand has an absolute value:​

Accepted Answer

A)  of 1.
B)  greater than 1.
C)  greater than 0 but less than 1.
D)  greater than 0.
E)  greater than 5.

Question 4

If demand is unit elastic, a price reduction will:​

Accepted Answer

A)  increase revenues.
B)  reduce revenues.
C)  reduce total cost.
D)  have no effect on revenues.
E)  increase profits.

Question 5

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)  amount of time Luis spends watching TV.
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 for the TV movie.

Question 6

Necessities and luxuries are both types of normal goods.​

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

An inferior good is:​

Accepted Answer

A)  any good of low quality.
B)  one that consumers buy less of as the price rises.
C)  one that consumers buy less of as their income rises.
D)  one that has few substitutes.
E)  any good made with inexpensive inputs. C

Question 9

Elasticity is always _____.​

Accepted Answer

A)  measured in dollars
B)  measured in utils
C)  measured in units of quantity
D)  measured in pounds
E)  independent of the units of measurement for price and quantity E

Question 10

In order to prove that macaroni is an inferior good, we could test the _____ of macaroni and get a _____.​

Accepted Answer

A)  cross-price elasticity; negative number.
B)  income elasticity; number less than 1.
C)  income elasticity; positive number.
D)  price elasticity of demand; number greater than negative 1.
E)  income elasticity; negative number.

Question 11

All other things constant, if a _____ proportion of a consumer's budget is spent on a good, the demand for the good will be more _____ and a consumer will purchase a substitute instead. ​

Accepted Answer

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

Question 12

A successful advertising campaign is most likely to:​

Accepted Answer

A)  increase the price elasticity of demand by stressing upon the uniqueness of the product.
B)  reduce the price elasticity of demand by stressing upon the uniqueness of the product.
C)  reduce the price elasticity of demand by informing consumers about the availability of substitutes.
D)  have no effect on the demand curve.
E)  make the demand curve shift inward.

Question 13

A common determinant of both the price elasticity of demand and the price elasticity of supply for a product is:​

Accepted Answer

A)  the availability of close substitutes for the product.
B)  the proportion of the consumer's budget spent on the product.
C)  the length of the adjustment period considered.
D)  the additional cost of increasing production.
E)  the availability of substitutes in production for the product.

Question 14

If a firm raises the price of its product, its total revenue will:​

Accepted Answer

A)  always increase.
B)  increase only if demand is price inelastic.
C)  increase only if demand is price elastic.
D)  remain constant regardless of the price elasticity of demand.
E)  never increase.

Question 15

Substitutes are pairs of goods that have a positive cross-price elasticity of demand.​

Accepted Answer

A) True 
 B)False

Question 16

Figure 5.10 shows two upward-sloping linear supply curves that pass through the origin. The price elasticity of supply between $10 and $20 on the supply curve S is _____.​ Figure 5.10
​

Accepted Answer

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

Question 17

Demand is inelastic if:​

Accepted Answer

A)  the percentage change in price is greater than the percentage change in quantity demanded.
B)  the percentage change in price is less than the percentage change in quantity demanded.
C)  the percentage change in price is equal to the percentage change in quantity demanded.
D)  the value of price elasticity is equal to −1.
E)  the value of price elasticity is less than −1.

Question 18

The larger the proportion of a consumer's budget that is spent on a product, the more the consumer will demand a substitute.​

Accepted Answer

A) True 
 B)False

Question 19

If the demand curve shifts, but the supply curve does not, and the price remains the same, supply must be perfectly inelastic.​

Accepted Answer

A) True 
 B)False

Question 20

A 5 percent increase in income leads to a 10 percent increase in the quantity demanded for a service. This service is a(n)  _____ good, and the demand is _____.​

Accepted Answer

A)  normal; elastic
B)  normal; inelastic
C)  normal; unit elastic
D)  inferior; elastic
E)  inferior; inelastic A

Exam 5: Elasticity of Demand and Supply

Demand is unit elastic whenever​

Correct AnswerverifiedShow Answer

A university administration's decision to raise tuition in order to increase revenue will be successful if:​

Correct AnswerverifiedShow Answer

Demand is inelastic only if the price elasticity of demand has an absolute value:​

Correct AnswerverifiedShow Answer

If demand is unit elastic, a price reduction will:​

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

Necessities and luxuries are both types of normal goods.​

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An inferior good is:​

Correct AnswerverifiedC

Elasticity is always _____.​

Correct AnswerverifiedE

In order to prove that macaroni is an inferior good, we could test the _____ of macaroni and get a _____.​

Correct AnswerverifiedShow Answer

All other things constant, if a _____ proportion of a consumer's budget is spent on a good, the demand for the good will be more _____ and a consumer will purchase a substitute instead. ​

Correct AnswerverifiedShow Answer

A successful advertising campaign is most likely to:​

Correct AnswerverifiedShow Answer

A common determinant of both the price elasticity of demand and the price elasticity of supply for a product is:​

Correct AnswerverifiedShow Answer

If a firm raises the price of its product, its total revenue will:​

Correct AnswerverifiedShow Answer

Substitutes are pairs of goods that have a positive cross-price elasticity of demand.​

Correct AnswerverifiedShow Answer

Figure 5.10 shows two upward-sloping linear supply curves that pass through the origin. The price elasticity of supply between $10 and $20 on the supply curve S is _____.​ Figure 5.10 ​

Correct AnswerverifiedShow Answer

Demand is inelastic if:​

Correct AnswerverifiedShow Answer

The larger the proportion of a consumer's budget that is spent on a product, the more the consumer will demand a substitute.​

Correct AnswerverifiedShow Answer

If the demand curve shifts, but the supply curve does not, and the price remains the same, supply must be perfectly inelastic.​

Correct AnswerverifiedShow Answer

A 5 percent increase in income leads to a 10 percent increase in the quantity demanded for a service. This service is a(n) _____ good, and the demand is _____.​

Correct AnswerverifiedA

Demand is unit elastic whenever

Correct Answer
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A university administration's decision to raise tuition in order to increase revenue will be successful if:

Correct Answer
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Demand is inelastic only if the price elasticity of demand has an absolute value:

Correct Answer
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If demand is unit elastic, a price reduction will:

Correct Answer
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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 Answer
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Necessities and luxuries are both types of normal goods.

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

Correct Answer
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An inferior good is:

Correct Answer
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C

Elasticity is always _____.

Correct Answer
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E

In order to prove that macaroni is an inferior good, we could test the _ of macaroni and get a _.

Correct Answer
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All other things constant, if a _ proportion of a consumer's budget is spent on a good, the demand for the good will be more _ and a consumer will purchase a substitute instead.

Correct Answer
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A successful advertising campaign is most likely to:

Correct Answer
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A common determinant of both the price elasticity of demand and the price elasticity of supply for a product is:

Correct Answer
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If a firm raises the price of its product, its total revenue will:

Correct Answer
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Substitutes are pairs of goods that have a positive cross-price elasticity of demand.

Correct Answer
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Figure 5.10 shows two upward-sloping linear supply curves that pass through the origin. The price elasticity of supply between $10 and $20 on the supply curve S is _____. Figure 5.10

Correct Answer
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Demand is inelastic if:

Correct Answer
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The larger the proportion of a consumer's budget that is spent on a product, the more the consumer will demand a substitute.

Correct Answer
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If the demand curve shifts, but the supply curve does not, and the price remains the same, supply must be perfectly inelastic.

Correct Answer
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A 5 percent increase in income leads to a 10 percent increase in the quantity demanded for a service. This service is a(n) _ good, and the demand is _.

Correct Answer
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A