Question 1

If a 10 percent increase in the price of gasoline results in a 2 percent decrease in the quantity demanded of gasoline,then the elasticity of demand for gasoline is:

Accepted Answer

A)  equal to 0.2 and demand is inelastic.
B)  equal to 0.2 and demand is elastic.
C)  equal to 0.02 and demand is elastic.
D)  equal to 0.5 and demand is inelastic.
E)  equal to 0.5 and the demand is elastic.

Question 2

If price elasticity of supply is large and demand is price-inelastic,then the firm can earn positive profits byincreasing the price.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Which of the following is explained by the price elasticity of demand?

Accepted Answer

A)  The effect of price changes on supply.
B)  The effect of quantity changes on supply.
C)  The effect of quantity changes on price.
D)  The effect of price changes on quantity demanded.
E)  The effect of price changes on quantity supplied.

Question 5

If a 50 percent increase in the price of pizza results in a 25 percent decrease in the quantity demanded of pizza,then the elasticity of demand for pizza:

Accepted Answer

A)  is equal to 0.5 and demand is inelastic.
B)  is equal to 0.5 and demand is elastic.
C)  is equal to 2 and is elastic.
D)  is equal to 2 and is inelastic.
E)  cannot be determined from the information provided.

Question 6

If a 15 percent reduction in the price of electricity per kilowatt hour has no impact on the total electricity consumption,we can infer that in the short run,the demand for electricity is _____.

Accepted Answer

A)  perfectly inelastic
B)  perfectly elastic
C)  unitary elastic
D)  relatively inelastic
E)  relatively elastic

Question 7

Ceteris paribus,if a 20 percent increase in the price of shoes leads to a 10 percent increase in the quantity supplied of shoes,then the price elasticity of supply is equal to _____.

Accepted Answer

A)  2
B)  20
C)  10
D)  0.5
E)  0.2

Question 8

Price elasticity of demand measures the responsiveness of quantity demanded in a market to a change in price.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Arc elasticity is calculated as _____.

Accepted Answer

A)   
B)   
C)   
D)   
E)

Question 11

If supply is price-inelastic and demand is price-elastic,then the firm can earn positive profits by increasing the price.

Accepted Answer

A) True 
 B)False

Question 12

If the demand for liquor is elastic,and the government increases liquor tax,then _____.

Accepted Answer

A)  most of the tax will be paid by the consumer
B)  most of the tax will be paid by the producer
C)  all of the tax will be paid by the consumer
D)  all of the tax will be paid by the producer
E)  the tax will be paid by the retailer

Question 13

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 14

If the price elasticity of demand is equal to 4,a 1 percent increase in price will cause the quantity demanded to _____ by _____ percent.

Accepted Answer

A)  increase; 0.25
B)  decrease; 0.25
C)  increase; 4
D)  decrease; 25
E)  decrease; 4

Question 15

Supply tends to be more elastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 16

If a 10 percent increase in the price of tomatoes leads to a 20 percent decrease in quantity demanded,then the price elasticity of demand for tomatoes,  ,equals 2.

Accepted Answer

A) True 
 B)False

Question 17

If a 1 percent change in the price of a good causes a 1 percent change in the quantity demanded of that good,then demand is said t be:

Accepted Answer

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

Question 18

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 19

The income elasticity of demand _____.

Accepted Answer

A)  must be negative because of the law of diminishing marginal utility
B)  could be positive or negative or zero,depending on the nature of the good
C)  must be positive because consumers tend to buy more at higher incomes
D)  is usually zero because "you can only have so much"
E)  can never be zero

Question 20

If a consumer is spending a small portion of his or her income on a good,then the demand for the good is likely to be inelastic.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity: Demand and Supply

If a 10 percent increase in the price of tomatoes leads to a 20 percent decrease in quantity demanded,then the price elasticity of demand for tomatoes, ,equals 2.

Correct AnswerverifiedShow Answer

If a 10 percent increase in the price of gasoline results in a 2 percent decrease in the quantity demanded of gasoline,then the elasticity of demand for gasoline is:

Correct AnswerverifiedShow Answer

If the demand for liquor is elastic,and the government increases liquor tax,then _____.

Correct AnswerverifiedShow Answer

If a consumer is spending a small portion of his or her income on a good,then the demand for the good is likely to be inelastic.

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

Price elasticity of demand measures the responsiveness of quantity demanded in a market to a change in price.

Correct AnswerverifiedShow Answer

Ceteris paribus,if a 20 percent increase in the price of shoes leads to a 10 percent increase in the quantity supplied of shoes,then the price elasticity of supply is equal to _____.

Correct AnswerverifiedShow Answer

Which of the following is explained by the 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

If a 1 percent change in the price of a good causes a 1 percent change in the quantity demanded of that good,then demand is said t be:

Correct AnswerverifiedShow Answer

Supply tends to be more elastic in the long run than in the short run.

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 the price elasticity of demand is equal to 4,a 1 percent increase in price will cause the quantity demanded to _____ by _____ percent.

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

If supply is price-inelastic and demand is price-elastic,then the firm can earn positive profits by increasing the price.

Correct AnswerverifiedShow Answer

If a 15 percent reduction in the price of electricity per kilowatt hour has no impact on the total electricity consumption,we can infer that in the short run,the demand for electricity is _____.

Correct AnswerverifiedShow Answer

If price elasticity of supply is large and demand is price-inelastic,then the firm can earn positive profits byincreasing the price.

Correct AnswerverifiedShow Answer

If a 50 percent increase in the price of pizza results in a 25 percent decrease in the quantity demanded of pizza,then the elasticity of demand for pizza:

Correct AnswerverifiedShow Answer

Arc elasticity is calculated as _____.

Correct AnswerverifiedShow Answer

The income elasticity of demand _____.

Correct AnswerverifiedShow Answer

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If the price elasticity of demand is equal to 4,a 1 percent increase in price will cause the quantity demanded to _ by _ percent.

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