Question 1

Reference: Ref 5-1 (Figure: Elasticity of Supply)  Refer to the figure. Which supply curve is the most elastic?

Accepted Answer

A)   S1
B)   S2
C)   S3
D)   S4E) None of the above
F) All of the above

Question 2

The demand curve for physician office visits is quite inelastic; therefore, a:

Accepted Answer

A)   large increase in price causes quantity demanded to decrease by very little.
B)   large decrease in price causes quantity demanded to decrease by a lot.
C)   small increase in price causes quantity demanded to decrease by a lot.
D)   small decrease in price causes quantity demanded to decrease by very little.E) None of the above
F) A) and B)

Question 3

Accepted Answer

a. <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> b. The demand for Good A is more ela...

Question 4

Assume that the supply curve for a good is constantly fixed at 100 units. Now suppose that the demand curve for the good increases such that the equilibrium price rises from $20 to $30. How does total revenue for the sale of this product change?

Accepted Answer

A)   Total revenue rises by $1,000.
B)   Total revenue does not change.
C)   Total revenue rises by $3,000.
D)   Total revenue rises by $10.E) A) and C)
F) C) and D)

Question 5

Nobel prize-winning economist Gary Becker suggests that a tax could be set so that it raised drug seller costs without prohibition, and in turn would:

Accepted Answer

A)   increase seller revenues.
B)   decrease seller revenues.
C)   increase government revenues.
D)   decrease government revenues.E) A) and B)
F) A) and C)

Question 6

(Figure: Price Elasticity of Demand)  Refer to the figure. Which of the four demand curves has the greatest responsiveness to price changes? Figure: Price Elasticity of Demand

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) C) and D)
F) B) and D)

Question 7

If the price elasticity of supply is 4, an increase in the price of Good X by 5 percent:

Accepted Answer

A)   causes the quantity supplied of Good X to rise 20 percent.
B)   causes the quantity supplied of Good X to fall 20 percent.
C)   causes the quantity supplied of Good X to rise 1.25 percent.
D)   causes the quantity supplied of Good X to fall 1.25 percent.E) C) and D)
F) All of the above

Question 8

If the cross-price elasticity of demand of two goods is positive, we can conclude that the two goods are:

Accepted Answer

A)   normal goods.
B)   inferior goods.
C)   substitutes.
D)   complements.E) A) and D)
F) B) and D)

Question 9

Which one of the following products would tend to have inelastic demand?

Accepted Answer

A)   luxury sedans
B)   candy
C)   crude oil
D)   Black Angus T-bone steakE) A) and B)
F) A) and C)

Question 10

The price elasticity of demand is:

Accepted Answer

A)   the responsiveness of price to changes in the quantity demanded of the product.
B)   the responsiveness of quantity demanded to changes in the price of the product.
C)   the change in the firm's total revenue when prices change.
D)   exactly the same as the slope of the demand curve.E) B) and C)
F) A) and D)

Question 11

Similar to the elasticity of demand, the elasticity of supply tends to become more elastic in the long run.

Accepted Answer

A) True 
 B)False

Question 12

The elasticity of demand for oil is about 0.5, and the elasticity of supply is about 0.3. If ANWR were drilled and the world supply of oil increased by 3 percent, what is the estimated percent change in the world price of oil?

Accepted Answer

A)   -1.25 percent
B)   -2.50 percent
C)   -3.75 percent
D)   UnknownE) B) and C)
F) A) and C)

Question 13

Assume a product has a rather elastic demand curve. If the producer of the good raises the price of the product, that producer's total revenue will always decrease.

Accepted Answer

A) True 
 B)False

Question 14

If the price of Good Y falls from $10 to $8, and the quantity demand of Good Y rises from 1,000 units to 1,200 units, the price elasticity of demand is:

Accepted Answer

A)   1.00.
B)   0.20.
C)   0.81.
D)   1.22.E) All of the above
F) A) and B)

Question 15

The fundamental determinant of the elasticity of supply is how quickly per-unit costs increase with an increase in production.

Accepted Answer

A) True 
 B)False

Question 16

Tonya consumes 10 boxes of Ramen Noodles a year when her yearly income is $40,000. After her income falls to $30,000 a year, she consumes 40 boxes of Ramen Noodles a year. Calculate her income elasticity of demand for Ramen Noodles.

Accepted Answer

A)   4.2
B)   -4.2
C)   -2.25
D)   2.25E) A) and D)
F) All of the above

Question 17

If a 3.67 percent increase in price causes a 1.97 percent decrease in quantity demanded, then total revenue must fall following an increase in price.

Accepted Answer

A) True 
 B)False

Question 18

If the price of Good Y falls from $10 to $8, and the quantity supplied of Good Y falls from 1,000 units to 600 units, the price elasticity of supply is:

Accepted Answer

A)   2.67.
B)   -2.67.
C)   2.25.
D)   -2.25.E) B) and C)
F) A) and D)

Question 19

The demand curve for computer chips is inelastic so revenues for the computer chip industry have increased with a decrease in the price of computer chips.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is TRUE? I. The War on Drugs has increased revenues in the illegal drug industry. II. The War Drugs has increased the costs of selling drugs, causing a decrease in the supply of drugs. III. The War on Drugs has caused the price of drugs to increase. IV. The quantity demanded of illicit drugs is elastic.

Accepted Answer

A)   II, III and IV only
B)   II only
C)   I, II, and III only
D)   I, II, III, and IVE) A) and B)
F) A) and C)

Exam 5: Elasticity and Its Applications

If a 3.67 percent increase in price causes a 1.97 percent decrease in quantity demanded, then total revenue must fall following an increase in price.

Correct Answer
verified

Reference: Ref 5-1 (Figure: Elasticity of Supply) Refer to the figure. Which supply curve is the most elastic?

Correct Answer
verified

If the price of Good Y falls from $10 to $8, and the quantity supplied of Good Y falls from 1,000 units to 600 units, the price elasticity of supply is:

Correct Answer
verified

Nobel prize-winning economist Gary Becker suggests that a tax could be set so that it raised drug seller costs without prohibition, and in turn would:

Correct Answer
verified

If the cross-price elasticity of demand of two goods is positive, we can conclude that the two goods are:

Correct Answer
verified

Correct Answer
verified

The fundamental determinant of the elasticity of supply is how quickly per-unit costs increase with an increase in production.

Correct Answer
verified

Which one of the following products would tend to have inelastic demand?

Correct Answer
verified

Assume that the supply curve for a good is constantly fixed at 100 units. Now suppose that the demand curve for the good increases such that the equilibrium price rises from $20 to $30. How does total revenue for the sale of this product change?

Correct Answer
verified

The demand curve for physician office visits is quite inelastic; therefore, a:

Correct Answer
verified

Tonya consumes 10 boxes of Ramen Noodles a year when her yearly income is $40,000. After her income falls to $30,000 a year, she consumes 40 boxes of Ramen Noodles a year. Calculate her income elasticity of demand for Ramen Noodles.

Correct Answer
verified

The elasticity of demand for oil is about 0.5, and the elasticity of supply is about 0.3. If ANWR were drilled and the world supply of oil increased by 3 percent, what is the estimated percent change in the world price of oil?

Correct Answer
verified

If the price elasticity of supply is 4, an increase in the price of Good X by 5 percent:

Correct Answer
verified

The demand curve for computer chips is inelastic so revenues for the computer chip industry have increased with a decrease in the price of computer chips.

Correct Answer
verified

If the price of Good Y falls from $10 to $8, and the quantity demand of Good Y rises from 1,000 units to 1,200 units, the price elasticity of demand is:

Correct Answer
verified

(Figure: Price Elasticity of Demand) Refer to the figure. Which of the four demand curves has the greatest responsiveness to price changes? Figure: Price Elasticity of Demand

Correct Answer
verified

Correct Answer
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a. b. The demand for Good A is more ela...
View Answer

Similar to the elasticity of demand, the elasticity of supply tends to become more elastic in the long run.

Correct Answer
verified

Assume a product has a rather elastic demand curve. If the producer of the good raises the price of the product, that producer's total revenue will always decrease.

Correct Answer
verified

The price elasticity of demand is:

Correct Answer
verified

Exam 5: Elasticity and Its Applications

If a 3.67 percent increase in price causes a 1.97 percent decrease in quantity demanded, then total revenue must fall following an increase in price.

Correct AnswerverifiedShow Answer

Reference: Ref 5-1 (Figure: Elasticity of Supply) Refer to the figure. Which supply curve is the most elastic?

Correct AnswerverifiedShow Answer

If the price of Good Y falls from $10 to $8, and the quantity supplied of Good Y falls from 1,000 units to 600 units, the price elasticity of supply is:

Correct AnswerverifiedShow Answer

Nobel prize-winning economist Gary Becker suggests that a tax could be set so that it raised drug seller costs without prohibition, and in turn would:

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand of two goods is positive, we can conclude that the two goods are:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The fundamental determinant of the elasticity of supply is how quickly per-unit costs increase with an increase in production.

Correct AnswerverifiedShow Answer

Which one of the following products would tend to have inelastic demand?

Correct AnswerverifiedShow Answer

Assume that the supply curve for a good is constantly fixed at 100 units. Now suppose that the demand curve for the good increases such that the equilibrium price rises from $20 to $30. How does total revenue for the sale of this product change?

Correct AnswerverifiedShow Answer

The demand curve for physician office visits is quite inelastic; therefore, a:

Correct AnswerverifiedShow Answer

Tonya consumes 10 boxes of Ramen Noodles a year when her yearly income is $40,000. After her income falls to $30,000 a year, she consumes 40 boxes of Ramen Noodles a year. Calculate her income elasticity of demand for Ramen Noodles.

Correct AnswerverifiedShow Answer

The elasticity of demand for oil is about 0.5, and the elasticity of supply is about 0.3. If ANWR were drilled and the world supply of oil increased by 3 percent, what is the estimated percent change in the world price of oil?

Correct AnswerverifiedShow Answer

If the price elasticity of supply is 4, an increase in the price of Good X by 5 percent:

Correct AnswerverifiedShow Answer

The demand curve for computer chips is inelastic so revenues for the computer chip industry have increased with a decrease in the price of computer chips.

Correct AnswerverifiedShow Answer

If the price of Good Y falls from $10 to $8, and the quantity demand of Good Y rises from 1,000 units to 1,200 units, the price elasticity of demand is:

Correct AnswerverifiedShow Answer

(Figure: Price Elasticity of Demand) Refer to the figure. Which of the four demand curves has the greatest responsiveness to price changes? Figure: Price Elasticity of Demand

Correct AnswerverifiedShow Answer

Correct Answerverifieda. b. The demand for Good A is more ela...View AnswerShow Answer

Similar to the elasticity of demand, the elasticity of supply tends to become more elastic in the long run.

Correct AnswerverifiedShow Answer

Assume a product has a rather elastic demand curve. If the producer of the good raises the price of the product, that producer's total revenue will always decrease.

Correct AnswerverifiedShow Answer

The price elasticity of demand is:

Correct AnswerverifiedShow Answer

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a. b. The demand for Good A is more ela...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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