Question 1

Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit.The price elasticity of demand for this product is

Accepted Answer

A)  2.0
B)  1.0
C)  0.5
D)  4.0
E)  1.5F) None of the above
G) C) and E)

Question 2

Consumers will bear a larger burden of an excise tax if

Accepted Answer

A)  both demand and supply are relatively inelastic.
B)  the tax is collected by firms rather than remitted directly to the government by consumers.
C)  both demand and supply are relatively elastic.
D)  demand is relatively elastic and supply is relatively inelastic.
E)  demand is relatively inelastic and supply is relatively elastic.F) A) and B)
G) All of the above

Question 3

Consider an excise tax imposed on daily parking charges in the downtown of a small city.Before the imposition of the tax,equilibrium price and quantity are $15 and 100 cars parked.(P = $15,Q = 100) .The city government imposes a tax of $3 per car parked per day.Market equilbirium adjusts to P = $16 and Q = 95.After imposition of the tax,what is the daily after- tax price received by the seller per car parked?

Accepted Answer

A)  $15
B)  $1
C)  $16
D)  $3
E)  $13F) A) and E)
G) A) and B)

Question 4

The elasticity of supply for some product will tend to be larger

Accepted Answer

A)  the higher is the elasticity of demand for the product.
B)  the less time firms have to adjust to price changes.
C)  the easier it is for firms to shift from the production of this product to another.
D)  the lower is the elasticity of demand for the product.
E)  the harder it is for firms to shift from the production of this product to another.F) A) and E)
G) B) and C)

Question 5

The formula for the price elasticity of demand for a commodity can be written as which of the following?

Accepted Answer

A)  percentage change in price percentage change in quantity demanded
B)  percentage change in one price percentage change in the other price
C)  change in price change in quantity demanded
D)  percentage change in quantity demanded percentage change in price
E)  change in quantity demanded change in priceF) B) and E)
G) B) and D)

Question 6

The elasticity of supply for a given commodity is calculated as

Accepted Answer

A)  percentage change in quantity supplied percentage change in average household income
B)  percent change in product price percentage change in quantity supplied
C)  percentage change in quantity supplied of one good percentage change in average price of a different good
D)  percentage change in quantity supplied percentage change in product price
E)  percentage change in quantity supplied percentage change in input pricesF) A) and B)
G) A) and E)

Question 7

If Vicky's income increases by 8% and she increases her consumption of music downloads by 4%,then her income elasticity of demand for music downloads is

Accepted Answer

A)  0.5.
B)  2.0.
C)  - 2.0.
D)  - 0.5.
E)  4.0.F) A) and B)
G) B) and D)

Question 8

If the total expenditure on clothing decreases when the price of clothing falls,the price elasticity of demand is

Accepted Answer

A)  unity (demand is unit elastic) .
B)  exactly zero.
C)  not determinable from the information given.
D)  greater than one (demand is elastic) .
E)  less than one (demand is inelastic) .F) B) and C)
G) A) and B)

Question 9

Suppose you are advising the government on changes in the gasoline market.The current price is $1.00 per litre and the quantity demanded is 2.5 million litres per day.Short- run price elasticity of demand is constant at 0.3.If the supply of gasoline is reduced so that the price rises to $1.50 per litre,then quantity demanded is predicted to fall in the short run by

Accepted Answer

A)  50%,and total expenditure will fall.
B)  15%,and total expenditure will fall.
C)  15%,and total expenditure will rise.
D)  12%,and total expenditure will rise.
E)  13.3%,and total expenditure will rise.F) All of the above
G) B) and E)

Question 10

Suppose the supply curve for breakfast cereals is upward sloping.Suppose also that as average household income increases we observe a fall in the price of breakfast cereal.We can conclude that breakfast cereal is a(n)

Accepted Answer

A)  necessity good.
B)  inferior good.
C)  normal good.
D)  substitute good.
E)  luxury good.F) A) and B)
G) None of the above

Question 11

Suppose a market is in equilibrium at price P0,and then an excise tax of t dollars per unit of the good is imposed.At a price of (P0 + t) there will be excess for the good unless the demand curve is .

Accepted Answer

A)  supply; vertical
B)  supply; horizontal
C)  demand; vertical
D)  tax; unit elastic
E)  demand; horizontalF) A) and D)
G) C) and D)

Question 12

Suppose you are advising the government on changes in the gasoline market.The current price is $1.00 per litre and the quantity demanded is 2.5 million litres per day.Long- run price elasticity of demand is constant at 0.8.If the supply of gasoline is reduced so that the price rises to $1.50 per litre,then quantity demanded is predicted to fall in the long run by

Accepted Answer

A)  15%,and total expenditure will fall.
B)  12%,and total expenditure will fall.
C)  32%,and total expenditure will rise.
D)  50%,and total expenditure will rise.
E)  15%,and total expenditure will rise.F) A) and E)
G) B) and E)

Question 13

If the total expenditure on cars increases when the price of cars rises,the price elasticity of demand for cars is

Accepted Answer

A)  exactly zero.
B)  not determinable from the information given.
C)  greater than one (demand is elastic) .
D)  equal to one (demand is unit elastic) .
E)  less than one (demand is inelastic) .F) A) and B)
G) A) and C)

Question 14

As the price for some product increases from $4.00 to $5.00 per unit,quantity demanded decreases from 400 to 300 units per month.For this segment of the demand curve,the price elasticity of demand is

Accepted Answer

A)  7.
B)  9.
C)  7/9.
D)  1.
E)  9/7.F) A) and C)
G) B) and E)

Question 15

If per capita income increases by 10% and household expenditure on fur coats increases by 15%,one can conclude that the price elasticity of demand for fur coats is

Accepted Answer

A)  unity.
B)  elastic.
C)  positive.
D)  inelastic.
E)  not determinable from the information given.F) B) and D)
G) C) and D)

Question 16

Normal goods

Accepted Answer

A)  have negative elasticity of supply.
B)  are sometimes also inferior goods.
C)  have negative income elasticity of demand.
D)  have positive income elasticity of demand.
E)  do not have elasticity of demand.F) None of the above
G) B) and E)

Question 17

If price elasticity of demand for good X is equal to 0.4,then an increase in price will cause total expenditure on good X to

Accepted Answer

A)  fall to zero.
B)  decrease.
C)  remain constant.
D)  increase.
E)  be negative.F) A) and B)
G) C) and D)

Question 18

If the income elasticity of demand for some good is 2.4,a 10% increase in income results in

Accepted Answer

A)  a 24% increase in the quantity demanded.
B)  a 240% increase in the quantity demanded.
C)  a 24% decrease in quantity demanded.
D)  a 2.4% increase in the quantity demanded.
E)  a 240% decrease in quantity demanded.F) A) and B)
G) C) and D)

Question 19

Every month Olivier buys exactly 6 take- out pizzas even though the price may fluctuate significantly.Apparently,Olivier's price elasticity of demand for take- out pizza is

Accepted Answer

A)  0.
B)  1.
C)  - 1.
D)  infinity.
E)  6.F) All of the above
G) B) and E)

Question 20

Suppose an analysis of the possible effects of increases in university tuition fees predicts that a 10% increase in tuition fees will result in a 3% decline in enrolment.What is the implied price elasticity of demand for university attendance?

Accepted Answer

A)  10
B)  7
C)  0
D)  0.3
E)  3F) B) and C)
G) A) and D)

Exam 4: Elasticity

As the price for some product increases from $4.00 to $5.00 per unit,quantity demanded decreases from 400 to 300 units per month.For this segment of the demand curve,the price elasticity of demand is

Correct Answer
verified

Suppose the supply curve for breakfast cereals is upward sloping.Suppose also that as average household income increases we observe a fall in the price of breakfast cereal.We can conclude that breakfast cereal is a(n)

Correct Answer
verified

The formula for the price elasticity of demand for a commodity can be written as which of the following?

Correct Answer
verified

If the income elasticity of demand for some good is 2.4,a 10% increase in income results in

Correct Answer
verified

Correct Answer
verified

If the total expenditure on cars increases when the price of cars rises,the price elasticity of demand for cars is

Correct Answer
verified

Consumers will bear a larger burden of an excise tax if

Correct Answer
verified

Suppose an analysis of the possible effects of increases in university tuition fees predicts that a 10% increase in tuition fees will result in a 3% decline in enrolment.What is the implied price elasticity of demand for university attendance?

Correct Answer
verified

Suppose a market is in equilibrium at price P0,and then an excise tax of t dollars per unit of the good is imposed.At a price of (P0 + t) there will be excess for the good unless the demand curve is .

Correct Answer
verified

Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit.The price elasticity of demand for this product is

Correct Answer
verified

If the total expenditure on clothing decreases when the price of clothing falls,the price elasticity of demand is

Correct Answer
verified

Every month Olivier buys exactly 6 take- out pizzas even though the price may fluctuate significantly.Apparently,Olivier's price elasticity of demand for take- out pizza is

Correct Answer
verified

If Vicky's income increases by 8% and she increases her consumption of music downloads by 4%,then her income elasticity of demand for music downloads is

Correct Answer
verified

If price elasticity of demand for good X is equal to 0.4,then an increase in price will cause total expenditure on good X to

Correct Answer
verified

Correct Answer
verified

The elasticity of supply for some product will tend to be larger

Correct Answer
verified

Normal goods

Correct Answer
verified

If per capita income increases by 10% and household expenditure on fur coats increases by 15%,one can conclude that the price elasticity of demand for fur coats is

Correct Answer
verified

The elasticity of supply for a given commodity is calculated as

Correct Answer
verified

Correct Answer
verified

Exam 4: Elasticity

As the price for some product increases from $4.00 to $5.00 per unit,quantity demanded decreases from 400 to 300 units per month.For this segment of the demand curve,the price elasticity of demand is

Correct AnswerverifiedShow Answer

Suppose the supply curve for breakfast cereals is upward sloping.Suppose also that as average household income increases we observe a fall in the price of breakfast cereal.We can conclude that breakfast cereal is a(n)

Correct AnswerverifiedShow Answer

The formula for the price elasticity of demand for a commodity can be written as which of the following?

Correct AnswerverifiedShow Answer

If the income elasticity of demand for some good is 2.4,a 10% increase in income results in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the total expenditure on cars increases when the price of cars rises,the price elasticity of demand for cars is

Correct AnswerverifiedShow Answer

Consumers will bear a larger burden of an excise tax if

Correct AnswerverifiedShow Answer

Suppose an analysis of the possible effects of increases in university tuition fees predicts that a 10% increase in tuition fees will result in a 3% decline in enrolment.What is the implied price elasticity of demand for university attendance?

Correct AnswerverifiedShow Answer

Suppose a market is in equilibrium at price P0,and then an excise tax of t dollars per unit of the good is imposed.At a price of (P0 + t) there will be excess for the good unless the demand curve is .

Correct AnswerverifiedShow Answer

Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit.The price elasticity of demand for this product is

Correct AnswerverifiedShow Answer

If the total expenditure on clothing decreases when the price of clothing falls,the price elasticity of demand is

Correct AnswerverifiedShow Answer

Every month Olivier buys exactly 6 take- out pizzas even though the price may fluctuate significantly.Apparently,Olivier's price elasticity of demand for take- out pizza is

Correct AnswerverifiedShow Answer

If Vicky's income increases by 8% and she increases her consumption of music downloads by 4%,then her income elasticity of demand for music downloads is

Correct AnswerverifiedShow Answer

If price elasticity of demand for good X is equal to 0.4,then an increase in price will cause total expenditure on good X to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The elasticity of supply for some product will tend to be larger

Correct AnswerverifiedShow Answer

Normal goods

Correct AnswerverifiedShow Answer

If per capita income increases by 10% and household expenditure on fur coats increases by 15%,one can conclude that the price elasticity of demand for fur coats is

Correct AnswerverifiedShow Answer

The elasticity of supply for a given commodity is calculated as

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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