1. In general, elasticity is a measure of
a.
the extent to which advances in technology are adopted by producers.
b.
the extent to which a market is competitive.
c.
how firms’ profits respond to changes in market prices.
d.
how much buyers and sellers respond to changes in market conditions.
2. Elasticity is
a.
a measure of how much buyers and sellers respond to changes in market conditions.
b.
the study of how the allocation of resources affects economic well-being.
c.
the maximum amount that a buyer will pay for a good.
d.
the value of everything a seller must give up to produce a good.
3. When studying how some event or policy affects a market, elasticity provides information on the
a.
equity effects on the market by identifying the winners and losers.
b.
magnitude of the effect on the market.
c.
speed of adjustment of the market in response to the event or policy.
d.
number of market participants who are directly affected by the event or policy.
4. When studying how some event or policy affects a market, elasticity provides information on the
a.
change in the costs of production.
b.
tradeoff between equality and efficiency.
c.
effect on the budget deficit or surplus.
d.
direction and magnitude of the effect.
5. How does the concept of elasticity allow us to improve upon our understanding of supply and demand?
a.
Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence
of the elasticity concept.
b.
Elasticity provides us with a better rationale for statements such as “an increase in x will lead to a decrease in
y” than we would have in the absence of the elasticity concept.
c.
Without elasticity, we would not be able to address the direction in which price is likely to move in response
to a surplus or a shortage.
d.
Without elasticity, it is very difficult to assess the degree of competition within a market.
6. When consumers face rising gasoline prices, they typically
a.
reduce their quantity demanded more in the long run than in the short run.
b.
reduce their quantity demanded more in the short run than in the long run.
c.
do not reduce their quantity demanded in the short run or the long run.
d.
increase their quantity demanded in the short run but reduce their quantity demanded in the long run.
7. A 10 percent increase in gasoline prices reduces gasoline consumption by about
a.
6 percent after one year and 2.5 percent after five years.
b.
2.5 percent after one year and 6 percent after five years.
c.
10 percent after one year and 20 percent after five years.
d.
0 percent after one year and 1 percent after five years.
8. Which of the following statements about the consumers’ responses to rising gasoline prices is correct?
a.
About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about
90 percent arises because they switch to more fuel-efficient cars.
b.
About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about
10 percent arises because they switch to more fuel-efficient cars.
c.
About half of the long-run reduction in quantity demanded arises because people drive less and about half
arises because they switch to more fuel-efficient cars.
d.
Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or
the long run.
9. Which of the following statements about the consumers’ responses to rising gasoline prices is correct?
a.
Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or
the long run.
b.
Consumers react to a 10% increase in price with about a 10% decrease in quantity demanded in both the short
run and long run.
c.
Consumers decrease their quantity demanded more in the short run than in the long run.
d.
Consumers decrease their quantity demanded more in the long run than in the short run.