Question 1

Price elasticity of demand is generally

Accepted Answer

A)  greater in the long run than in the short run.
B)  greater in the short run than in the long run.
C)  the same in both the short run and the long run.
D)  greater for "necessities" than it is for "luxuries."

Question 2

A negative income elasticity of demand coefficient indicates that

Accepted Answer

A)  the product is an inferior good.
B)  the product follows the law of demand.
C)  the product is a complementary good.
D)  the product is a substitute good.

Question 3

Suppose the price elasticity of supply for crude oil is 0.6. How much would price have to rise to increase production by 12 percent?

Accepted Answer

A)  20 percent
B)  7.2 percent
C)  12 percent
D)  15 percent

Question 4

Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?

Accepted Answer

A)  dinner at a nice restaurant (+1.8) 
B)  chicken purchased at the grocery store for preparation at home (+0.25) 
C)  second-hand clothing (-0.6) 
D)  plasma screen and LCD TVs (+4.2)

Question 5

Refer to the above graph. Which of the following statements is correct?

Accepted Answer

A)  Demand is perfectly elastic.
B)  Demand is perfectly inelastic.
C)  Supply is perfectly elastic.
D)  Supply is perfectly inelastic.

Question 6

Airlines charge business travelers more than leisure travelers because there is a more

Accepted Answer

A)  elastic supply of business travel.
B)  inelastic supply of business travel.
C)  elastic demand for business travel.
D)  inelastic demand for business travel.

Question 7

Answer the question on the basis of the following demand schedule.  The price elasticity of demand is relatively inelastic

Accepted Answer

A)  in the $6-$4 price range.
B)  over the entire $6-$1 price range.
C)  in the $3-$1 price range.
D)  in the $6-$5 price range only.

Question 8

The concept of price elasticity of demand measures

Accepted Answer

A)  the slope of the demand curve.
B)  the number of buyers in a market.
C)  the extent to which the demand curve shifts as the result of a price decline.
D)  the sensitivity of consumer purchases to price changes.

Question 9

The price elasticity of demand is a measure of the

Accepted Answer

A)  effect of changes in demand on the price.
B)  relationship between price and profitability.
C)  responsiveness of buyers of a good to changes in its price.
D)  sensitivity of a good's price to changes in demand.

Question 10

Which of the following is not characteristic of the demand for a commodity that is elastic?

Accepted Answer

A)  The relative change in quantity demanded is greater than the relative change in price.
B)  Buyers are relatively sensitive to price changes.
C)  Total revenue increases if price is increased.
D)  The elasticity coefficient is greater than one.

Question 11

The demand for a necessity whose cost is a small portion of one's total income is

Accepted Answer

A)  perfectly price inelastic.
B)  perfectly price elastic.
C)  relatively price inelastic.
D)  relatively price elastic.

Question 12

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range

Accepted Answer

A)  has declined.
B)  is of unit elasticity.
C)  is inelastic.
D)  is elastic.

Question 13

The supply curve of a one-of-a-kind original painting is

Accepted Answer

A)  relatively elastic.
B)  relatively inelastic.
C)  perfectly inelastic.
D)  perfectly elastic.

Question 14

A linear demand curve has a constant elasticity over the full range of the curve.

Accepted Answer

A) True 
 B)False

Question 15

If the government imposes an excise tax on a good, it will collect the most tax revenues from it if the demand for the good is

Accepted Answer

A)  elastic.
B)  inelastic.
C)  unit elastic.
D)  perfectly elastic.

Question 16

Refer to the diagram. The decline in price from P₁ to P₂ will

Accepted Answer

A)  increase total revenue by D.
B)  increase total revenue by B + D.
C)  decrease total revenue by A.
D)  increase total revenue by D − A.

Question 17

A perfectly inelastic demand schedule

Accepted Answer

A)  rises upward and to the right but has a constant slope.
B)  can be represented by a line parallel to the vertical axis.
C)  cannot be shown on a two-dimensional graph.
D)  can be represented by a line parallel to the horizontal axis.

Question 18

Refer to the graph above. Which demand curve is relatively most elastic between P₁ and P₂?

Accepted Answer

A)  D₁
B)  D₂
C)  D₃
D)  D₄

Question 19

A state government wants to increase the taxes on cigarettes to increase tax revenue. Because cigarettes are addictive, we would expect its demand to be

Accepted Answer

A)  elastic. Thus, the government's cigarette-tax revenues would rise with a tax increase.
B)  elastic. Thus, the government's cigarette-tax revenues would fall with a tax increase.
C)  inelastic. Thus, the government's cigarette-tax revenues would fall with a tax increase.
D)  inelastic. Thus, the government's cigarette-tax revenues would rise with a tax increase.

Question 20

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.

Exam 6: Elasticity

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range

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If the government imposes an excise tax on a good, it will collect the most tax revenues from it if the demand for the good is

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Refer to the graph above. Which demand curve is relatively most elastic between P₁ and P₂?

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The price elasticity of demand is a measure of the

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Which of the following is not characteristic of the demand for a commodity that is elastic?

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The demand for a necessity whose cost is a small portion of one's total income is

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Refer to the diagram. The decline in price from P₁ to P₂ will

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Suppose the price elasticity of supply for crude oil is 0.6. How much would price have to rise to increase production by 12 percent?

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Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?

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A state government wants to increase the taxes on cigarettes to increase tax revenue. Because cigarettes are addictive, we would expect its demand to be

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Price elasticity of demand is generally

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A perfectly inelastic demand schedule

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Refer to the above graph. Which of the following statements is correct?

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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

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Answer the question on the basis of the following demand schedule. The price elasticity of demand is relatively inelastic

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The supply curve of a one-of-a-kind original painting is

Correct AnswerverifiedShow Answer

A negative income elasticity of demand coefficient indicates that

Correct AnswerverifiedShow Answer

A linear demand curve has a constant elasticity over the full range of the curve.

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Airlines charge business travelers more than leisure travelers because there is a more

Correct AnswerverifiedShow Answer

The concept of price elasticity of demand measures

Correct AnswerverifiedShow Answer

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