Question 1

As price decreases along a linear demand curve, price elasticity of demand decreases.

Accepted Answer

A) True 
 B)False

Question 2

For which of the following is demand likely to be the most price inelastic?

Accepted Answer

A)   furniture
B)   automobiles
C)   hotel rooms
D)   airline travel
E)   candy bars

Question 3

The ability of increasing quantity supplied in response to a higher price is identical across industries.

Accepted Answer

A) True 
 B)False

Question 4

Elasticity is always

Accepted Answer

A)   measured in dollars
B)   measured in dollars per unit of quantity
C)   measured in units of quantity
D)   measured in units of quantity per dollar
E)   independent of the units of measurement

Question 5

Along a linear demand curve,

Accepted Answer

A)   both the slope and price elasticity are constant
B)   the price elasticity is constant, but the slope varies
C)   total revenues are constant
D)   the slope is constant, but the price elasticity varies
E)   total revenues are negative

Question 6

NARRBEGIN: Exhibit 5-26
Exhibit 5-25
 
-Refer to exhibit 5-25. Between points C and D price elasticity of demand is:

Accepted Answer

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

Question 7

If the demand for a good is elastic, then total revenue

Accepted Answer

A)   increases as price increases
B)   remains constant as quantity demanded increases
C)   increases as price decreases
D)   decreases as quantity demanded increases
E)   decreases as price decreases

Question 8

Suppose that you allow yourself $50 per month to spend on compact disks. You spend exactly this much every month regardless of the price of compact disks. Therefore, your demand for CDs

Accepted Answer

A)   is elastic
B)   is inelastic
C)   is unit elastic
D)   cannot be characterized unless we know the price of a disk
E)   cannot be characterized unless we know the price and quantity of compact disks purchased

Question 9

A government-imposed price floor above the market price of milk would increase consumers' expenditures on milk only if

Accepted Answer

A)   demand is elastic
B)   supply is inelastic
C)   demand falls
D)   demand is inelastic
E)   supply is unit elastic

Question 10

Luxury goods are

Accepted Answer

A)   price inelastic
B)   income inelastic
C)   income elastic
D)   goods with negative income elasticity
E)   goods with positive price elasticity

Question 11

If a good is inferior, then the income elasticity of demand for that good is

Accepted Answer

A)   positive and greater than 1
B)   negative
C)   positive and less than 1
D)   0
E)   perfectly elastic

Question 12

Necessities and luxuries are both types of normal goods.

Accepted Answer

A) True 
 B)False

Question 13

The cross-price elasticity of demand between rifles and bullets is likely to be

Accepted Answer

A)   negative because the goods are complements
B)   positive because the goods are complements
C)   negative because the goods are substitutes
D)   positive because the goods are substitutes
E)   0 because the goods are not substitutes

Question 14

Today's supply curve of dorm rooms on campus is likely to be

Accepted Answer

A)   downward sloping
B)   relatively flat
C)   vertical
D)   horizontal
E)   price elastic

Question 15

If a firm facing a perfectly elastic demand curve raises its price,

Accepted Answer

A)   it will still sell exactly the same amount of output as it did at the lower price
B)   it will lose some, but not all, of its sales
C)   its sales will decrease to zero
D)   its sales will increase
E)   it is impossible to predict what will happen to its sales

Question 16

NARRBEGIN: Exhibit 5-13
Exhibit 5-13
 
-Which of the following is true of the demand curve in Exhibit 5-13?

Accepted Answer

A)   Its slope is 0, and the value of elasticity is negative infinity.
B)   Its slope is infinite, and the value of elasticity is 0.
C)   Both its slope and the value of elasticity are 0.
D)   Both its slope and the value of elasticity are negative infinity.
E)   Its slope is 0, and demand is unit elastic.

Question 17

If the price elasticity of supply in the kiwi fruit industry equals 1, supply is

Accepted Answer

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

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 always respond to a one-dollar change in price by decreasing their quantity demanded by one unit

Question 20

NARRBEGIN: Exhibit 5-26
Exhibit 5-25
 
-Refer to exhibit 5-25. As you move from B to C on the demand curve, total revenue __________ and therefore the price elasticity must be ____________ between B and C.

Accepted Answer

A)   stays the same; unitary
B)   decreases; inelastic
C)   increases; elastic
D)   decreases; elastic
E)   increases, inelastic

Exam 5: Elasticity of Demand and Supply

If the price elasticity of supply in the kiwi fruit industry equals 1, supply is

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The ability of increasing quantity supplied in response to a higher price is identical across industries.

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NARRBEGIN: Exhibit 5-26 Exhibit 5-25 -Refer to exhibit 5-25. Between points C and D price elasticity of demand is:

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Necessities and luxuries are both types of normal goods.

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Luxury goods are

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Today's supply curve of dorm rooms on campus is likely to be

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The cross-price elasticity of demand between rifles and bullets is likely to be

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NARRBEGIN: Exhibit 5-13 Exhibit 5-13 -Which of the following is true of the demand curve in Exhibit 5-13?

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As price decreases along a linear demand curve, price elasticity of demand decreases.

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Elasticity is always

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

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Along a linear demand curve,

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If the demand for a good is elastic, then total revenue

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A government-imposed price floor above the market price of milk would increase consumers' expenditures on milk only if

Correct AnswerverifiedShow Answer

NARRBEGIN: Exhibit 5-26 Exhibit 5-25 -Refer to exhibit 5-25. As you move from B to C on the demand curve, total revenue __________ and therefore the price elasticity must be ____________ between B and C.

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If a good is inferior, then the income elasticity of demand for that good is

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Suppose that you allow yourself $50 per month to spend on compact disks. You spend exactly this much every month regardless of the price of compact disks. Therefore, your demand for CDs

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Demand is unit elastic whenever

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For which of the following is demand likely to be the most price inelastic?

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If a firm facing a perfectly elastic demand curve raises its price,

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NARRBEGIN: Exhibit 5-26 Exhibit 5-25 -Refer to exhibit 5-25. As you move from B to C on the demand curve, total revenue and therefore the price elasticity must be __ between B and C.

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