316)
A perfectly elastic supply curve is
316)
A)
a horizontal straight line.
B)
a vertical straight line.
C)
a straight line coming out of the origin.
D)
a straight line that crosses the horizontal axis.
317)
When demand is inelastic
317)
A)
quantity demanded is very responsive to a change in price.
B)
producers react quickly to price changes.
C)
quantity demanded is not very responsive to a change in price.
D)
the proportional change in quantity demanded is equal to the proportional change in price.
318)
If the price of gasoline increased by 5% and consumers responded by purchasing 1% less gasoline,
the absolute value of price elasticity of demand for gasoline would equal
318)
A)
B)
C)
1.5.
D)
319)
Two items which have a positive cross price elasticity of demand are referred to as
319)
A)
B)
C)
complements.
D)
320)
Refer to the above figure. Demand will be inelastic when quantity is between
320)
A)
B)
C)
A and B.
D)
321)
When the price of a pound of apples is $1.00, 7500 pounds of apples are demanded. When the price
of a pound of apples decreases to $0.80, 10,000 pounds of apples are demanded. In this price range
the demand for apples is
321)
A)
unit elastic.
B)
perfectly elastic.
C)
elastic.
D)
inelastic.
322)
Refer to the above figure. The supply curve is
322)
A)
perfectly elastic.
B)
elastic at high prices and inelastic at low prices.
C)
unitary for all prices.
D)
perfectly inelastic.
323)
If the price of a good increases and the total revenue remains the same, the demand for the good is
323)
A)
perfectly elastic.
B)
elastic.
C)
inelastic.
D)
unit elastic.
D
324)
If the price elasticity of demand (Ep) equals one in the short run, then, other things being equal, in
the long run Ep will be
324)
A)
less than one.
B)
greater than one.
C)
one.
D)
indeterminate without more information.
B
325)
The cross price elasticity of demand between two goods is 50. We may conclude that
325)
A)
the two goods are poor substitutes for each other.
B)
the demand for one of the goods is likely to be fairly elastic and the demand for the other
good is likely to be fairly inelastic.
C)
the two goods are very complementary and probably are sold together.
D)
the demand for each of the goods is likely to be very elastic.
D
A
326)
The cross elasticity of demand is
326)
A)
the percentage change in the price of one good divided by the percentage change in the price
of another good.
B)
the change in the price of one good divided by the change of quantity demanded of another
good.
C)
the percentage change in the quantity demanded of one good divided by the percentage
change in the quantity demanded of another good.
D)
the percentage change in the demand of one good divided by the percentage change in price
of another good.
327)
When two goods are substitutes for each other, the cross price elasticity of demand
327)
A)
will be zero.
B)
will be positive.
C)
may be either positive or negative.
D)
will be negative.
328)
A perfectly inelastic demand curve is
328)
A)
an upward sloping straight line that crosses the vertical axis.
B)
a downward sloping straight line that intersects the horizontal axis at the origin.
C)
a horizontal straight line.
D)
a vertical straight line.
Price Quantity Demanded
Per Unit Per Week
$10.00 25
9.50 30
9.00 35
8.50 40
8.00 45
7.50 50
7.00 55
6.50 60
6.00 65
5.50 70
5.00 75
329)
Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7.50 to
$7?
329)
A)
B)
C)
10
D)
330)
Which of the following would NOT affect a good’s price elasticity of demand?
330)
A)
the ease of substitution between goods
B)
the proportion of one’s budget spent on an item
C)
the cost of producing the good
D)
the number of substitute goods available
331)
If the absolute price elasticity of demand for a product is less than 1, then
331)
A)
the absolute price elasticity of demand is inelastic and consumers are relatively sensitive to
price changes.
B)
the absolute price elasticity of demand is inelastic and consumers are relatively insensitive to
price changes.
C)
the absolute price elasticity of demand is elastic and consumers are relatively insensitive to
price changes.
D)
the absolute price elasticity of demand is elastic and consumers are relatively sensitive to
price changes.
332)
When two goods are complements
332)
A)
cross price elasticity of demand will be positive.
B)
the demands for both goods will be elastic.
C)
cross price elasticity of demand will be negative.
D)
cross price elasticity of demand will be 0.
333)
A perfectly elastic demand curve is
333)
A)
vertical.
B)
horizontal.
C)
a downward sloping straight line.
D)
a rectangular hyperbola.
334)
Which of the following statements regarding price elasticity of supply and the length of time for
adjustment is FALSE?
334)
A)
The longer is the time period for adjustment, the greater is the price elasticity of supply.
B)
The shorter the time period for adjustment, the greater is the price elasticity of supply.
C)
The longer is the time period for adjustment, the greater is the extent to which entry or (exit)
of firms increases or (decreases) production in an industry.
D)
The longer is the time period for adjustment, the less is the extent to which resources flow into
(or out of) an industry through expansion (or contraction) of existing firms.
335)
When demand is elastic
335)
A)
quantity demanded is very responsive to a change in price.
B)
producers react quickly to price changes.
C)
quantity demanded is not very responsive to a change in price.
D)
the proportional change in quantity demanded is equal to the proportional change in price.
336)
Suppose that the cross price elasticity of demand between good X and good Y is –1.55. This
indicates that the two goods are
336)
A)
completely unrelated in the minds of consumers.
B)
complements.
C)
substitutes.
D)
both inferior.
337)
When John earned $65,000 he purchased 10 DVDs a year. His income has just increased to $68,000
and he plans to purchase 15 DVDs this year. John‘s income elasticity of demand equals
337)
A)
B)
C)
0.11.
D)
338)
The responsiveness of quantity demanded of a good to changes in its price is the
338)
A)
cross elasticity of demand.
B)
price elasticity of demand.
C)
price elasticity of supply.
D)
income elasticity.
Month PXQXPYQYPZQZ
Jan $10 100 $20 50 $25 200
Feb 10 90 18 60 25 225
Mar 10 70 15 90 25 275
Apr 12 50 15 100 25 290
May 15 25 15 120 25 320
339)
In the above table, the cross price elasticity of demand for good Y with good X when PX rises from
$10 to $12 is
339)
A)
B)
C)
+0.58.
D)
340)
When demand is elastic,
340)
A)
changes in price and changes in total revenue move in the same direction.
B)
changes in price and changes in total revenue move in opposite directions.
C)
there is no relationship between changes in price and changes in total revenue.
D)
for any change in price, total revenue will not change.
341)
A consumer is willing and able to buy 1,000 units of a good at $10, but the consumer’s quantity
demanded falls to zero if the price rises even a fraction of a cent. The consumer’s demand curve is
341)
A)
horizontal and is perfectly elastic.
B)
vertical and is perfectly elastic.
C)
downward sloping from higher prices down to $10 and then horizontal.
D)
horizontal and is perfectly inelastic.
342)
The price elasticity of supply
342)
A)
is the slope of the supply curve.
B)
is always negative.
C)
does not vary between the long and the short run.
D)
is the percentage change in quantity supplied divided by the percentage change in price.
Pounds of Artisan Jars of
Period Income/Week Bread Sold Jam Sold
1 $250 210
2 $500 5 8
343)
Use the above table. The income elasticity of jam is
343)
A)
B)
C)
–0.33.
D)
344)
When total revenue remain unchanged when there is a change in price, demand is
344)
A)
B)
C)
elastic.
D)
Price Quantity Demanded
Per Unit Per Week
$5.5 20
$6.0 18
$6.5 16
$7.0 14
$7.5 12
$8.0 10
345)
According to the above table, what is the absolute price elasticity of demand when price rises from
$5.50 to $6?
345)
A)
B)
C)
4.00
D)
346)
When two goods are unrelated
346)
A)
the demands for both goods will be inelastic.
B)
cross price elasticity of demand will be positive.
C)
cross price elasticity of demand will be negative.
D)
cross price elasticity of demand will be 0.
347)
If goods are completely unrelated, their cross price elasticity will
347)
A)
be less than one.
B)
be greater than one.
C)
be equal to zero.
D)
be negative.
348)
If the price of a cola increased by 12% and consumers responded by purchasing 20% less cola, the
absolute value of price elasticity of demand for cola would be
348)
A)
B)
C)
0.20.
D)
349)
When Mary earned $3,200 per month, she bought 2 concert tickets each month. Now her monthly
income is $5,600, and the number of concert tickets she purchases has risen to 3 per month. Mary’s
income elasticity of demand for concert tickets equals ________ and the tickets are a(n) ________
good for Mary.
349)
A)
–1.36; normal
B)
+0.73; normal
C)
–0.21; inferior
D)
+0.21; complementary
350)
Suppose the price of X increases by 10 percent while the quantity demanded of Y does not change.
We would conclude that
350)
A)
the two goods are complements, but the cross elasticity of demand is not large.
B)
the two goods are perfect substitutes.
C)
the two goods are not related.
D)
the two goods are substitutes, but the cross elasticity of demand is not large.
351)
When two goods are substitutes
351)
A)
cross price elasticity of demand will be positive.
B)
the demands for both goods will be inelastic.
C)
cross price elasticity of demand will be negative.
D)
cross price elasticity of demand will be 0.
352)
Which of the following statements is correct?
352)
A)
Price elasticity of supply is constant along the supply curve.
B)
Price elasticity of supply is always a negative number.
C)
Supply is more elastic in the long run than in short run.
D)
Supply is more elastic in the short run than in long run.
353)
For most goods and services the income elasticity of demand is
353)
A)
B)
C)
inverse.
D)
354)
When quantity supplied is not very responsive to a change in price, supply is
354)
A)
inelastic.
B)
unit–elastic.
C)
income sensitive.
D)
elastic.
355)
If the price of good A increases from $15 to $20 per unit and quantity demanded falls from 150 to
100 units, then by using the method of average values, we can calculate the absolute price elasticity
of demand to be
355)
A)
B)
C)
2.4.
D)
356)
Janice earns an income of $2,000 a week and goes out to lunch 4 times a week. If her income
increased to $2,100 she would go out to lunch 5 times a week. Compute Janice’s income elasticity of
demand.
356)
A)
B)
C)
–0.22
D)
357)
The price elasticity of demand measures
357)
A)
changes in demand.
B)
how responsive consumers are to a change in price.
C)
how responsive producers are to a change in demand.
D)
how responsive consumers are to a change in income.
358)
If the supply curve is vertical, then supply is
358)
A)
unit elastic.
B)
perfectly elastic.
C)
relatively elastic.
D)
perfectly inelastic.
359)
A perfectly horizontal demand curve has
359)
A)
some positive finite elasticity.
B)
negative elasticity.
C)
zero elasticity.
D)
perfect elasticity.
360)
If the price of apples went up by 25 percent, which of the following values of the cross price
elasticity for cars would be most reasonable to anticipate?
360)
A)
B)
C)
–1.0
D)
361)
If there is no response in quantity demanded to a change in price, demand is
361)
A)
perfectly inelastic.
B)
elastic.
C)
perfectly elastic.
D)
unit–elastic.
362)
The government raises gasoline taxes as part of the price of gasoline and receives more tax
revenues. However, after five years, the government discovers that revenues from the gasoline tax
have declined. This situation would be most likely to occur if
362)
A)
the long–run elasticity of demand was greater than the long–run elasticity of supply.
B)
the demand for gasoline was inelastic in the short run, but elastic in the long run.
C)
the long–run elasticity of supply was much greater than the long–run elasticity of demand.
D)
the demand for gasoline was perfectly inelastic in both the short run and the long run.
363)
In the long run, the supply curve
363)
A)
exhibits no change in elasticity at all.
B)
is less elastic than it is in the short run.
C)
is more elastic than it is in the short run.
D)
exhibits no systematic sequence of changes in elasticity.
364)
When quantity supplied is very responsive to a change in price, supply is
364)
A)
unit–elastic.
B)
inelastic.
C)
income sensitive.
D)
elastic.
365)
Income elasticity relates to
365)
A)
a movement up a demand curve.
B)
a horizontal shift in a demand curve.
C)
a movement down a demand curve.
D)
the percentage change in quantity demanded divided by the percentage change in the price.
366)
When total revenue and price are directly related, demand is
366)
A)
B)
C)
elastic.
D)
367)
If the price elasticity of supply is equal to 1, we would say the supply of the item is
367)
A)
inelastic.
B)
elastic.
C)
perfectly elastic.
D)
unit elastic.
368)
We expect the price elasticity of supply to be
368)
A)
zero.
B)
between –1 and +1.
C)
negative.
D)
positive.
369)
A situation in which there is a reduction in quantity supplied to zero when there is the slightest
decrease in price is
369)
A)
perfectly elastic demand.
B)
perfectly inelastic demand.
C)
perfectly inelastic supply.
D)
perfectly elastic supply.
370)
Which of the following goods is likely to have the highest income elasticity?
370)
A)
tomato soup
B)
can of tuna
C)
a designer blouse
D)
hamburger
371)
The absolute price elasticity of demand for a product for which annual expenditures make up a
very small share of a typical consumer’s budget is probably
371)
A)
B)
C)
less than 1.
D)
372)
Use the above figure. Which graph depicts substitute goods?
372)
A)
B)
C)
C
D)
373)
The income elasticity of demand
373)
A)
is negative only.
B)
must lie between –1 and +1.
C)
is positive only.
D)
can be positive, negative, or zero.
374)
A perfectly inelastic demand curve exhibits
374)
A)
a change in quantity demanded that is proportional to the change in price.
B)
a change in quantity demanded that is always twenty percent of the change in price.
C)
zero quantity demanded when there is a slight change in price.
D)
zero responsiveness to changes in price.
375)
While the slope of the perfectly inelastic supply curve ________, the slope of the perfectly elastic
supply curve ________.
375)
A)
is zero, is zero
B)
approaches infinity, approaches infinity
C)
is zero, approaches infinity
D)
approaches infinity, is zero
376)
Which of the following is NOT a determinant of the price elasticity of demand?
376)
A)
the number of producers of the good
B)
the time consumers have to adjust to a price change
C)
expenditures on the item as a percentage of a consumer’s total budget
D)
the number of substitutes available to buyers
A
377)
Which of the following is FALSE regarding inelastic demand?
377)
A)
If a firm lowers price, total revenues will fall.
B)
Price elasticity of demand is greater than 1 (Ep> 1).
C)
If a firm raises price, total revenues will go up.
D)
Price elasticity of demand is less than 1 (Ep< 1).
B
378)
An inferior good has an income elasticity of demand that is
378)
A)
negative.
B)
positive but less than 1.
C)
zero.
D)
positive.
A
379)
For which of the following purchases would the absolute price elasticity of demand be greatest?
379)
A)
B)
C)
utilities
D)
A
C