116) If a 20 percent increase in the price of a movie ticket leads to a 16 percent decrease in the
quantity of tickets demanded, which of the following is correct?
A) total expenditures by buyers increases
B) total revenue of sellers of the product decreases
C) total expenditures by buyers is constant
D) total expenditures by buyers increases and total revenue received by sellers decreases
E) None of the above answers is correct.
117) If an individual’s expenditure on a good increases when the price increases, that individual’s
demand for the good is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.
E) None of the above answers is correct because an individual’s expenditure on a good never
increases when the price increases.
118) The price elasticity of demand for an agricultural product is 0.4. This value means that,
when the quantity decreases 1 percent, the price
A) falls 4 percent.
B) rises 4 percent.
C) falls 2.5 percent.
D) rises 2.5 percent.
E) rises 0.25 percent.
119) Suppose the price elasticity of demand for addicts of a drug is 0.11 and 3.46 for casual
users. If the government legalized the drug and then implemented a tax on it so that its price rose,
expenditure by addicts would ________ and expenditure by casual users would ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) not change; decrease
120) The price elasticity of demand is a measure of the extent to which the quantity demanded of
a good changes when ________ changes and all other influences on buyers’ plans remain the
same.
A) income
B) the price of a related good
C) the price of the good
D) the demand alone
E) both the demand and the supply simultaneously
121) Suppose the price of a movie falls from $9 to $7. Using the midpoint method, what is the
percentage change in price?
A) 33 percent
B) -33 percent
C) 25 percent
D) -25 percent
E) -97 percent
122) Suppose the price of a tie rises from $45 to $55. Using the midpoint method, what is the
percentage change in price?
A) 10 percent
B) -10 percent
C) 20 percent
D) -20 percent
E) 100 percent
123) Demand is elastic if
A) consumers respond strongly to changes in the product’s price.
B) a large percentage change in price brings about a small percentage change in quantity
demanded.
C) a small percentage change in price brings about a small percentage change in quantity
demanded.
D) the quantity demanded is not responsive to price changes.
E) the demand curve is vertical.
124) During the winter of 2008-2009, the price of fuel oil increased enormously but the quantity
demanded decreased only a little. This response indicates that the demand for fuel oil was
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly elastic.
E) perfectly inelastic.
125) If substitutes for a good are readily available, the demand for that good
A) does not change substantially if the price rises.
B) does not change substantially if the price falls.
C) is inelastic.
D) is elastic.
E) Both answers A and B are correct.
126) If the price of a product increases by 5 percent and the quantity demanded decreases by 5
percent, then the elasticity of demand is
A) 0.
B) 1.
C) indeterminate.
D) 5.
E) 25.
127) The price of a bag of pretzels rises from $2 to $3 and the quantity demanded decreases from
100 to 60. What is the price elasticity of demand?
A) 1.0
B) 1.25
C) 40.0
D) 20.0
E) 0.80
128) When a firm raises the price of its product, what happens to its total revenue?
A) If demand is elastic, total revenue decreases.
B) If demand is unit elastic, total revenue increases.
C) If demand is inelastic, total revenue decreases.
D) If demand is elastic, total revenue increases.
E) If demand is unit elastic, total revenue decreases.
1) What is measured by the price elasticity of supply?
A) The price elasticity of supply measures how responsive producers are to changes in the price
of other goods.
B) The price elasticity of supply measures how responsive producers are to changes in income.
C) The price elasticity of supply measures how responsive producers are to changes in the price
of a product.
D) The price elasticity of supply is a measure of the slope of the supply curve.
E) The price elasticity of supply measures how responsive producers are to changes in the cost of
producing a product.
2) The price elasticity of supply measures the
A) percentage change in supply from a percentage change in demand.
B) extent to which the quantity supplied of a good changes when the price of a good changes,
other things remaining the same.
C) the slope of the supply curve.
D) how the equilibrium price changes in response to a change in the equilibrium quantity
supplied.
E) Both answers B and C are correct.
3) The price elasticity of supply is always a positive value because
i. there is a direct relationship between the price and the quantity supplied.
ii. as the equilibrium price increases, the equilibrium quantity also always increases.
iii. buyers are willing to pay a higher price for larger quantities.
A) i only
B) ii only
C) iii only
D) i and ii
E) ii and iii
4) The opportunity cost of producing a good rises only slightly as the quantity produced
increases. This good has
A) an inelastic demand.
B) an elastic demand.
C) an elastic supply.
D) an inelastic supply.
E) a perfectly elastic supply.
5) For a product with a constant or gently increasing opportunity cost of producing additional
units, as more is produced, we expect that
A) demand is price elastic.
B) supply is price elastic.
C) demand is price inelastic.
D) supply is price inelastic.
E) demand is unit elastic.
6) It is very difficult for Gourmet Chocolatier to find inexpensive and available inputs for the
business. Because of this, we predict that Gourmet Chocolatier’s supply to be
A) inelastic.
B) perfectly elastic.
C) elastic.
D) unit elastic.
E) nonexistent.
7) The price of lumber increased by 10 percent and the quantity supplied increased by 20
percent. The supply of lumber is
A) inelastic.
B) perfectly elastic.
C) perfectly inelastic.
D) unit elastic.
E) elastic.
8) The price of beef increased by 20 percent and the quantity supplied increased by 10 percent.
The supply of beef is
A) elastic.
B) perfectly elastic.
C) perfectly inelastic.
D) inelastic.
E) unit elastic.
9) If the price of a scooter increases by 20 percent and the quantity supplied of scooters increases
by 30 percent, then supply is
A) elastic and the elasticity of supply equals 1.5.
B) inelastic and the elasticity of supply equals 1.5.
C) elastic and the elasticity of supply equals 0.66.
D) inelastic and the elasticity of supply equals 0.66.
E) either elastic or inelastic but more information about the elasticity of demand is needed to
determine which.
10) Suppose the current price of barley is $7 per bushel and at that price 100,000 bushels are
grown by a Colorado farmer. If the price of barley rises to $8 and quantity supplied increases to
130,000 bushels, then using the midpoint method, the price elasticity of supply for barley equals
A) 13.33.
B) 26.78.
C) 1.96.
D) 0.51.
E) Zero.
11) Jess owns a sandwich shop. The price of a sandwich recently increased from $5 to $7. Jess
responded by increasing the quantity of sandwiches she supplied from 70 to 90 per day. Using
the midpoint method, Jess’s price elasticity of supply is equal to
A) 1.33.
B) 0.75.
C) 3.00.
D) 4.00.
E) 1.50.
12) The price of one bedroom apartments in Cheyenne increased from $55,000 to $65,000 and
the quantity of apartment for sale increased from 25 to 30. Using the midpoint method, the price
elasticity of supply for apartments in Cheyenne is equal to
A) 0.916.
B) 0.75.
C) 1.09.
D) 2.18.
E) 0.08.
13) Suppose an increase in demand causes the price to increase from $2 to $4 and the quantity to
increase from 1,000 to 1,800. Using the midpoint method, the elasticity of supply equals
A) 0.86.
B) 1.17.
C) 2.74.
D) 0.68.
E) None of the above answers is correct.
14) Suppose a decrease in demand causes the price to decrease from $4 to $3 and the quantity to
decrease from 1,000 to 700. Using the midpoint method, the elasticity of supply equals
A) 0.81.
B) 1.24.
C) 2.83.
D) 0.18.
E) None of the above answers is correct.
15) When the price of a product increases from $35 to $45, the quantity supplied increases from
30 units to 40 units per week. Using the midpoint method, the price elasticity of supply is
A) 0.00.
B) -1.1.
C) 1.14.
D) 1.35.
E) 0.88.
16) If the price of a DVD increases from $12 to $20 and the quantity of DVDs supplied increases
from 100,000 per hour to 118,000 per hour, using the midpoint formula the elasticity of supply
equals
A) 0.33.
B) 2.94.
C) 3.08.
D) 0.23.
E) -3.08.
17) If the price of a good decreases from $9 to $6 and the quantity supplied decreases from 1,500
to 1,300, using the midpoint formula the elasticity of supply equals
A) 0.20.
B) 2.80.
C) 0.36.
D) 0.40.
E) 3.20.
18) If the price doubles and the quantity supplied also doubles, the price elasticity of supply for
the good is
A) -1.
B) 1.
C) -2.
D) 2.
E) 100 percent.
19) If the price elasticity of supply for a good is 0.75, then
A) the percentage change in the quantity supplied is less than the percentage change in price.
B) the supply is elastic.
C) an increase in the price boosts the quantity supplied by a larger percentage.
D) the supply is inelastic so the demand must also be inelastic.
E) None of the above answers is correct.
20) If the percentage change in the price of a good exceeds the percentage change in the quantity
supplied, then the supply is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.
E) perfectly inelastic.
21) If a small percentage change in the price brings a very large percentage change in the
quantity supplied, then the supply is almost perfectly ________ and the supply curve is almost
________.
A) elastic; vertical
B) elastic; horizontal
C) inelastic; horizontal
D) inelastic ; vertical
E) elastic; 45 degrees
22) If the supply curve is ________, the elasticity of supply is ________.
A) vertical; infinite
B) vertical; 0
C) horizontal; 1
D) horizontal; 0
E) a straight, upward sloping line through the origin; 0
23) The figure above shows the supply curve for a good with a
A) perfectly elastic supply.
B) perfectly inelastic supply.
C) elastic supply.
D) inelastic supply.
E) unit elastic supply.
24) If the price elasticity of supply for a good is 10, then supply is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.
E) perfectly inelastic.
25) If wheat can be produced at a constant opportunity cost, then the supply of wheat is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.
E) perfectly elastic.
26) If the quantity supplied and the price change by the same percentage, then supply is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.
E) perfectly inelastic.
27) When the percentage change in the quantity supplied equals the percentage change in price,
the supply is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.
E) perfectly inelastic.
28) When the percentage change in the quantity supplied is less than the percentage change in
price, the supply is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly unit elastic.
E) perfectly elastic.
29) The fact that there is a very limited amount of land in Hong Kong means the supply of new
apartments in Hong Kong is
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly elastic.
E) limited by the demand.
30) Because the price elasticity of supply for jumbo jets is 0.35, the supply of jumbo jets is
A) elastic.
B) unit elastic.
C) inelastic.
D) perfectly elastic.
E) perfectly inelastic.
31) If a 20 percent increase in the price of a good does not change the quantity supplied, the
A) supply is perfectly inelastic.
B) supply is unit elastic.
C) supply is perfectly elastic.
D) supply is elastic.
E) None of the above answers is correct.
32) The figure above shows the supply curve for a good with a
A) perfectly elastic supply.
B) perfectly inelastic supply.
C) elastic supply.
D) inelastic supply.
E) unit elastic supply.
33) Which of the following explains why supply is more elastic as more time passes?
A) It is difficult or impossible to increase the quantity produced in a short period of time.
B) Consumers have more time to search for substitutes.
C) Sellers try to take advantage of a high price in the short term.
D) The supply curve becomes generally steeper as more time passes.
E) There is no explanation for this phenomenon.
34) Suppose a good can be produced using commonly available resources. The elasticity of
supply is
A) negative.
B) greater than zero but less than 1.
C) greater than 1.
D) zero.
E) More information is needed to make a determination about the size of the elasticity of supply.
35) One reason why the price elasticity of supply for DVD players is greater than one is that
A) the cost of producing DVD players is small.
B) the storage of DVD players is not possible.
C) DVD players can be easily stored.
D) the demand for DVD players is fairly large.
E) DVD players require relatively advanced technology for their production.
36) The price elasticity of supply is a measure of the extent to which the quantity supplied of a
good changes when the
A) cost of producing the product increases.
B) quantity of the good demanded increases.
C) supply increases.
D) price changes.
E) number of firms supplying the good changes.
37) When the percentage change in the quantity supplied is twice the percentage change in price,
then supply is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.
E) perfectly elastic.
38) When the price of a textbook is $95, the quantity of textbooks supplied is 90 million a year
and when the price rises to $105, the quantity of textbooks supplied is 110 million a year. The
supply of textbooks is
A) elastic
B) perfectly elastic
C) inelastic
D) perfectly inelastic
E) unit elastic.
39) Supply is unit elastic when the
A) supply curve is upward sloping.
B) price elasticity of supply is positive.
C) percentage change in the quantity supplied equals the percentage change in price.
D) supply curve is horizontal.
E) supply curve is vertical.
40) The supply of beachfront property on St. Simon’s Island is
A) elastic.
B) unit elastic.
C) negative.
D) inelastic.
E) perfectly elastic.
41) Goods that can be produced at a constant or very gently rising opportunity cost have
A) an elastic demand.
B) an inelastic demand.
C) an inelastic supply.
D) an elastic supply.
E) a unit elastic demand.
42) For a product with a rapidly increasing opportunity cost of producing additional units,
A) demand is price elastic.
B) supply is price elastic.
C) demand is price inelastic.
D) supply is price inelastic.
E) the demand curve is vertical.
43) When supply is perfectly inelastic, the supply curve is
A) upward sloping but not a straight line.
B) vertical.
C) downward sloping.
D) horizontal.
E) a straight line with a 45 degree slope that goes through the origin.
44) The greater the amount of time that passes after a price change, the
A) less elastic supply becomes.
B) more elastic supply becomes.
C) more negative supply becomes.
D) steeper the supply curve becomes.
E) None of the above answers is correct.