Question 1

Suppose that the price elasticity of supply of cheese is 0.80. If the price of cheese rises by 20%, the quantity supplied will increase by 16%.

Accepted Answer

A) True 
 B)False

Question 2

Suppose that in a month the price of a liter of soda increases from $1 to $1.50. At the same time, the quantity of liters of soda supplied increases from 200 to 210. The price elasticity of supply for liters of soda (calculated using the initial value formula)  is

Accepted Answer

A)   0.1.
B)   0.5.
C)   10.
D)   20.E) A) and D)
F) A) and C)

Question 3

If a product is a necessity and has no substitutes at all, demand for the product is most likely to be

Accepted Answer

A)   very inelastic.
B)   inelastic.
C)   unit elastic.
D)   elastic.E) A) and D)
F) A) and B)

Question 4

Figure 4.1
-In Figure 4.1 the demand curve along which price elasticity of demand changes as you move along it is on graph

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) B) and C)
F) A) and B)

Question 5

As we move upward along a linear demand curve, the price elasticity of the demand

Accepted Answer

A)   increases.
B)   decreases.
C)   remains the same.
D)   increases up to the midpoint and then decreases.E) C) and D)
F) B) and D)

Question 6

If the price elasticity of supply is 0.3, supply is

Accepted Answer

A)   unaffected by price changes.
B)   inelastic.
C)   unit elastic.
D)   elastic.E) A) and D)
F) A) and C)

Question 7

How do you interpret the value of income elasticity?

Accepted Answer

If income elasticity is negati...

Question 8

Which of the following products has the least elastic demand?

Accepted Answer

A)   Coca Cola in 12 oz. cans
B)   all cola drinks
C)   all carbonated beverages
D)   all beveragesE) C) and D)
F) B) and D)

Question 9

Suppose that in a month the price of a cup of coffee increases from $1 to $1.50. At the same time, the quantity of cups of coffee demanded decreases from 200 to 190. The price elasticity of demand for cups of coffee (calculated using the midpoint formula)  is approximately

Accepted Answer

A)   0.13.
B)   0.5.
C)   7.8.
D)   20.E) A) and B)
F) B) and D)

Question 10

Figure 4.1
-In Figure 4.1 the demand curve that has a zero elasticity is show in graph

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) A) and C)
F) A) and D)

Question 11

If consumers have a long time to respond to an increase in electricity prices their demand is likely to be ________ than if they are only given a short time.

Accepted Answer

A)   no different
B)   higher
C)   more elastic
D)   less elasticE) B) and C)
F) A) and D)

Question 12

Gloria works for a museum in a large city with many other museums. Her boss proposes that the museum should raise the price of admission to increase revenues. Gloria was a good student in her economics principles course. How should she advise her boss?

Accepted Answer

If there are many museums in the city de...

Question 13

Suppose that an Italian ice cream firm is facing a linear demand curve and that the current price for the Italian ice cream is set at a point where the price elasticity is 0.7. If the firm decreases the product price

Accepted Answer

A)   the demand becomes more inelastic and total revenue increases.
B)   the demand becomes more inelastic and total revenue decreases.
C)   the demand becomes less inelastic and total revenue increases.
D)   the demand becomes less inelastic and total revenue decreases.E) A) and B)
F) B) and C)

Question 14

Suppose that in a month the price of a liter of soda increases from $1 to $1.50. At the same time, the quantity of liters of soda supplied increases from 200 to 210. The price elasticity of supply for liters of soda (calculated using the initial value formula)  is

Accepted Answer

A)   negative.
B)   inelastic.
C)   unit elastic.
D)   elastic.E) B) and D)
F) B) and C)

Question 15

Firms like to know the price elasticity of demand because it determines how price changes affect

Accepted Answer

A)   the supply curve.
B)   costs.
C)   revenues.
D)   taxes.E) A) and B)
F) B) and C)

Question 16

If the quantity supplied is infinitely responsive to any change in price, the supply curve is

Accepted Answer

A)   upward sloping.
B)   downward sloping.
C)   horizontal.
D)   vertical.E) A) and D)
F) B) and C)

Question 17

The income elasticity of demand is

Accepted Answer

A)   the percentage change in quantity demanded divided by the percentage change in price.
B)   the percentage change in quantity demanded divided by the percentage change in income.
C)   the percentage change in income divided by the percentage change quantity demanded.
D)   the percentage change in price divided by the percentage change in income.E) A) and C)
F) A) and B)

Question 18

Suppose that the income elasticity of demand for good X is greater than 1. Other things being equal, which of the following statements is INCORRECT?

Accepted Answer

A)   Good X is a normal good.
B)   The quantity demanded of good X decreases as a consumer's income declines.
C)   A consumer buys more X as income rises, but the share of income spent on good X falls.
D)   A consumer buys more X as income rises and the share of income spent on good X also rises.E) A) and B)
F) B) and D)

Question 19

Figure 4.4
-In Figure 4.4 supply elasticity is infinite in graph

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) B) and C)
F) None of the above

Question 20

Figure 4.1
-In Figure 4.1 the demand curve that is perfectly inelastic is on graph

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) A) and B)
F) A) and C)

Exam 4: Elasticity: A Measure of Responsiveness

Firms like to know the price elasticity of demand because it determines how price changes affect

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Which of the following products has the least elastic demand?

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Figure 4.1 -In Figure 4.1 the demand curve that is perfectly inelastic is on graph

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If the price elasticity of supply is 0.3, supply is

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The income elasticity of demand is

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Suppose that the price elasticity of supply of cheese is 0.80. If the price of cheese rises by 20%, the quantity supplied will increase by 16%.

Correct AnswerverifiedShow Answer

If the quantity supplied is infinitely responsive to any change in price, the supply curve is

Correct AnswerverifiedShow Answer

How do you interpret the value of income elasticity?

Correct AnswerverifiedIf income elasticity is negati...View AnswerShow Answer

Suppose that an Italian ice cream firm is facing a linear demand curve and that the current price for the Italian ice cream is set at a point where the price elasticity is 0.7. If the firm decreases the product price

Correct AnswerverifiedShow Answer

Suppose that in a month the price of a liter of soda increases from $1 to $1.50. At the same time, the quantity of liters of soda supplied increases from 200 to 210. The price elasticity of supply for liters of soda (calculated using the initial value formula) is

Correct AnswerverifiedShow Answer

Suppose that in a month the price of a liter of soda increases from $1 to $1.50. At the same time, the quantity of liters of soda supplied increases from 200 to 210. The price elasticity of supply for liters of soda (calculated using the initial value formula) is

Correct AnswerverifiedShow Answer

If a product is a necessity and has no substitutes at all, demand for the product is most likely to be

Correct AnswerverifiedShow Answer

Figure 4.4 -In Figure 4.4 supply elasticity is infinite in graph

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Figure 4.1 -In Figure 4.1 the demand curve along which price elasticity of demand changes as you move along it is on graph

Correct AnswerverifiedShow Answer

Gloria works for a museum in a large city with many other museums. Her boss proposes that the museum should raise the price of admission to increase revenues. Gloria was a good student in her economics principles course. How should she advise her boss?

Correct AnswerverifiedIf there are many museums in the city de...View AnswerShow Answer

As we move upward along a linear demand curve, the price elasticity of the demand

Correct AnswerverifiedShow Answer

Suppose that in a month the price of a cup of coffee increases from $1 to $1.50. At the same time, the quantity of cups of coffee demanded decreases from 200 to 190. The price elasticity of demand for cups of coffee (calculated using the midpoint formula) is approximately

Correct AnswerverifiedShow Answer

Suppose that the income elasticity of demand for good X is greater than 1. Other things being equal, which of the following statements is INCORRECT?

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If consumers have a long time to respond to an increase in electricity prices their demand is likely to be ________ than if they are only given a short time.

Correct AnswerverifiedShow Answer

Figure 4.1 -In Figure 4.1 the demand curve that has a zero elasticity is show in graph

Correct AnswerverifiedShow Answer

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If income elasticity is negati...
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If there are many museums in the city de...
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