Question 1

Which of the following is true of price elasticity of demand?

Accepted Answer

A)  It measures the responsiveness of quantity demanded or quantity supplied to a change in one of the determinants of demand and/or supply.
B)  It is calculated as the percentage change in the quantity demanded of a product divided by the percentage change in the price of that product.
C)  It is calculated as the percentage change in the demand for a good divided by the percentage change in income, everything else held constant.
D)  It measures the responsiveness of demand to a change in the quantity supplied.
E)  It is calculated as the percentage change in the quantity demanded for one good divided by the percentage change in the price of a related good, everything else held constant.

Question 2

Assume that due to unfavorable conditions in a prime honey-producing area, the price of honey increases by 50 percent.The quantity consumed of herbal tea declines immediately by 25 percent.Everything else held constant, the:

Accepted Answer

A)  cross-price elasticity of demand for herbal tea and honey is negative, and therefore the two goods are substitutes.
B)  cross-price elasticity of demand for herbal tea and honey is negative, and therefore the two goods are complements.
C)  cross-price elasticity of demand for herbal tea and honey is positive, and therefore the two goods are substitutes.
D)  cross-price elasticity of demand for herbal tea and honey is positive, and therefore the two goods are complements.
E)  cross-price elasticity of demand cannot be determined from the information provided.

Question 3

Tax incidence explains how taxes are shared between producers and consumers.

Accepted Answer

A) True 
 B)False

Question 4

The actual or chronological time for the short and the long run does not vary from industry to industry.

Accepted Answer

A) True 
 B)False

Question 5

There are some special types of goods for which supply cannot change irrespective of the length of time allowed for change, such as Beethoven symphonies.The price elasticity of supply for these goods is _____.

Accepted Answer

A)  infinite
B)  nonexistent
C)  negative
D)  zero
E)  unity

Question 6

When product A is a good substitute for product B, the cross-price elasticity of demand for products A and B will be _____.

Accepted Answer

A)  unity
B)  negative
C)  positive
D)  decreasing
E)  increasing

Question 7

If a product has an elastic demand, it means that consumers are relatively insensitive to a change in the price of the product.

Accepted Answer

A) True 
 B)False

Question 8

Last year, Alice bought 40 CDs when her income was $20, 000.This year, her income increased to $25, 000, and she purchased 48 CDs.We can conclude that:

Accepted Answer

A)  Alice's price elasticity of demand for CDs is equal to 1.
B)  Alice's demand for CDs is price-inelastic.
C)  Alice's demand for CDs is price-elastic.
D)  the income elasticity of demand for CDs is negative.
E)  CDs are a normal good.

Question 9

A perfectly inelastic demand curve is represented by an upward rising straight line.

Accepted Answer

A) True 
 B)False

Question 10

If the demand for cream cheese produced by a dairy is perfectly elastic, then what will be the shape of the demand curve faced by the dairy?

Accepted Answer

A)  The demand curve will be vertical
B)  The demand curve will be horizontal
C)  The demand curve will be upward sloping
D)  The demand curve will be downward sloping
E)  The demand curve will be concave

Question 11

In the opinion of many consumers, there are few, if any, substitutes for the popular search engine Google.If Google were to charge consumers for its services, it would face:

Accepted Answer

A)  a relatively inelastic demand curve.
B)  a relatively elastic demand curve.
C)  a negative income elasticity of demand.
D)  a positive cross elasticity of demand.
E)  a perfectly elastic demand curve.

Question 12

The cross-price elasticity between movie tickets and video rentals is positive.

Accepted Answer

A) True 
 B)False

Question 13

If firms have to change their production techniques in order to change the quantities they supply, they can respond less in a year to a price change than they could in a month.

Accepted Answer

A) True 
 B)False

Question 14

If the quantity demanded of product S increases as the price of product T decreases, then S and T are complements.

Accepted Answer

A) True 
 B)False

Question 15

Demand is price-elastic at the top portion of a straight-line downward-sloping demand curve.

Accepted Answer

A) True 
 B)False

Question 16

If butter has an income elasticity equal to 0.75, then butter is an inferior good.

Accepted Answer

A) True 
 B)False

Question 17

Scenario 19.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px.Assume that P = $8, I = 200, and Px = $10.
Given the above equation, the quantity of noodles demanded at a price of $8 is _____.

Accepted Answer

A)  8
B)  10
C)  12
D)  4
E)  20

Question 18

An inferior good or service is any good or service for which an increase in income causes a decrease in demand.

Accepted Answer

A) True 
 B)False

Question 19

An economic survey observed that, a 20 percent cut in the price of a certain line of women's clothing, almost doubled the quantity demanded of the clothing.This led economists to conclude that the demand for this line of clothing is _____.

Accepted Answer

A)  very elastic
B)  very inelastic
C)  vertical
D)  horizontal
E)  inferior

Question 20

Assume that the demand curve for a certain good is a vertical line.This vertical demand curve illustrates the idea that:

Accepted Answer

A)  consumers are unwilling to pay more than a certain price for the good.
B)  the good is a complement to another good.
C)  consumers are unwilling to pay less than a certain price for the good.
D)  there are many substitutes for this good.
E)  people will not change the quantity of the good when the price of the good is changed.

Exam 33: Elasticity: Demand and Supply

The actual or chronological time for the short and the long run does not vary from industry to industry.

Correct AnswerverifiedShow Answer

The cross-price elasticity between movie tickets and video rentals is positive.

Correct AnswerverifiedShow Answer

An economic survey observed that, a 20 percent cut in the price of a certain line of women's clothing, almost doubled the quantity demanded of the clothing.This led economists to conclude that the demand for this line of clothing is _____.

Correct AnswerverifiedShow Answer

If the quantity demanded of product S increases as the price of product T decreases, then S and T are complements.

Correct AnswerverifiedShow Answer

If firms have to change their production techniques in order to change the quantities they supply, they can respond less in a year to a price change than they could in a month.

Correct AnswerverifiedShow Answer

A perfectly inelastic demand curve is represented by an upward rising straight line.

Correct AnswerverifiedShow Answer

If the demand for cream cheese produced by a dairy is perfectly elastic, then what will be the shape of the demand curve faced by the dairy?

Correct AnswerverifiedShow Answer

There are some special types of goods for which supply cannot change irrespective of the length of time allowed for change, such as Beethoven symphonies.The price elasticity of supply for these goods is _____.

Correct AnswerverifiedShow Answer

Demand is price-elastic at the top portion of a straight-line downward-sloping demand curve.

Correct AnswerverifiedShow Answer

If butter has an income elasticity equal to 0.75, then butter is an inferior good.

Correct AnswerverifiedShow Answer

Assume that due to unfavorable conditions in a prime honey-producing area, the price of honey increases by 50 percent.The quantity consumed of herbal tea declines immediately by 25 percent.Everything else held constant, the:

Correct AnswerverifiedShow Answer

Last year, Alice bought 40 CDs when her income was $20, 000.This year, her income increased to $25, 000, and she purchased 48 CDs.We can conclude that:

Correct AnswerverifiedShow Answer

Tax incidence explains how taxes are shared between producers and consumers.

Correct AnswerverifiedShow Answer

In the opinion of many consumers, there are few, if any, substitutes for the popular search engine Google.If Google were to charge consumers for its services, it would face:

Correct AnswerverifiedShow Answer

An inferior good or service is any good or service for which an increase in income causes a decrease in demand.

Correct AnswerverifiedShow Answer

Scenario 19.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2Px.Assume that P = $8, I = 200, and Px = $10. Given the above equation, the quantity of noodles demanded at a price of $8 is _____.

Correct AnswerverifiedShow Answer

When product A is a good substitute for product B, the cross-price elasticity of demand for products A and B will be _____.

Correct AnswerverifiedShow Answer

Which of the following is true of price elasticity of demand?

Correct AnswerverifiedShow Answer

If a product has an elastic demand, it means that consumers are relatively insensitive to a change in the price of the product.

Correct AnswerverifiedShow Answer

Assume that the demand curve for a certain good is a vertical line.This vertical demand curve illustrates the idea that:

Correct AnswerverifiedShow Answer

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Scenario 19.1 The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P_x.Assume that P = $8, I = 200, and P_x= $10. Given the above equation, the quantity of noodles demanded at a price of $8 is _____.

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