Question 1

The current supply of Rembrandt paintings:

Accepted Answer

A)  ​is perfectly elastic.
B)  ​is elastic.
C)  ​is unit elastic.
D)  ​is perfectly inelastic.E) None of the above
F) B) and C)

Question 2

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Accepted Answer

A)  ​buyers of the good will incur most of the burden of the tax.
B)  ​sellers of the good will incur most of the burden of the tax.
C)  ​buyers and sellers will each incur 50 percent of the burden of the tax.
D)  ​the equilibrium quantity will increase.E) A) and C)
F) None of the above A

Question 3

When a 9% increase in price leads to a 6% increase in quantity supplied, supply is relatively inelastic.

Accepted Answer

A) True 
 B)False  True

Question 4

The quantity of gasoline demanded will respond more to a change in price over three weeks than over three years.

Accepted Answer

A) True 
 B)False

Question 5

A straight line demand curve has a different elasticity of demand at different points along the curve.

Accepted Answer

A) True 
 B)False

Question 6

Say that a consumer's income elasticity of demand over the relevant range is equal to 2. When she has a monthly income of $2,000, she spends $600 on food. If her monthly income rose to $4,000, how much would she spend on food?

Accepted Answer

A)  ​$900.
B)  ​$1200.
C)  ​$1800.
D)  ​$2400.E) A) and B)
F) None of the above

Question 7

A decrease in demand will increase total revenue:

Accepted Answer

A)  ​Always.
B)  ​Only if supply is relatively inelastic.
C)  ​Only if supply is relatively elastic.
D)  ​Never.E) None of the above
F) All of the above

Question 8

A tax is imposed on orange juice. Consumers will bear the full burden of this tax if the:

Accepted Answer

A)  ​price elasticity of demand for orange juice equals 1.0.
B)  ​demand for orange juice is perfectly elastic.
C)  ​demand for orange juice is unit elastic.
D)  ​demand curve for orange juice is perfectly inelastic.E) A) and C)
F) All of the above

Question 9

​Exhibit 6-3
​ 
-Refer to Exhibit 6-3. The graph that best illustrates a relatively inelastic (but not perfectly inelastic)  range along a demand curve is:

Accepted Answer

A)  ​Graph A.
B)  ​Graph B.
C)  ​Graph C.
D)  ​Graph D.E) B) and C)
F) All of the above

Question 10

The government proposes a tax on flowers in order to boost its revenue. Consumers will bear all of this tax if the:

Accepted Answer

A)  ​demand for flowers is perfectly inelastic.
B)  ​supply of flowers is perfectly inelastic.
C)  ​demand for flowers is perfectly elastic.
D)  ​demand for flowers is unit elastic.E) C) and D)
F) B) and D)

Question 11

Total revenue for a seller represents the amount that:

Accepted Answer

A)  ​sellers receive for a good or service which is computed as P ÷ Q.
B)  ​sellers receive for a good or service which is computed as P  Q.
C)  ​one buyer spends on a good or service which is computed as P  Q.
D)  ​one buyer spends on a good or service which is computed as P ÷ Q.E) A) and B)
F) A) and C)

Question 12

If Pizza Hut decreases its price for a large pizza by 25% and this leads to a 75% increase in sales, we can conclude that demand is relatively elastic with regard to price over that range.

Accepted Answer

A) True 
 B)False

Question 13

A perfectly elastic demand curve is vertical.

Accepted Answer

A) True 
 B)False  False

Question 14

If the price elasticity coefficient equals 4.2, then demand is relatively inelastic with regard to price.

Accepted Answer

A) True 
 B)False

Question 15

If the measured elasticity of supply coefficient equals 0.6, then supply is:

Accepted Answer

A)  ​perfectly elastic.
B)  ​elastic.
C)  ​unit elastic.
D)  ​inelastic.E) None of the above
F) B) and C)

Question 16

Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

Accepted Answer

A) True 
 B)False

Question 17

A steel mill raises the price of steel by 20%, which results in a 7% reduction in the quantity of steel demanded. The demand curve facing this firm is:

Accepted Answer

A)  ​elastic.
B)  ​inelastic.
C)  ​unit elastic.
D)  ​unit inelastic.E) A) and C)
F) None of the above

Question 18

Demand is said to be ____ when the quantity demanded is very responsive to changes in price.

Accepted Answer

A)  ​independent
B)  ​inelastic
C)  ​unit elastic
D)  ​elasticE) B) and C)
F) None of the above

Question 19

If the elasticity of demand for mothballs is 0.50, then moving along the demand for mothballs:

Accepted Answer

A)  ​A 20% rise in the price of mothballs will lead to a 10% fall in the quantity of mothballs demanded.
B)  ​A 10% rise in the price of mothballs will lead to a 20% fall in the quantity of mothballs demanded.
C)  ​A 20% rise in the price of mothballs will lead to a 10% rise in the quantity of mothballs demanded.
D)  ​A 10% rise in the price of mothballs will lead to a 20% rise in the quantity of mothballs demanded.E) None of the above
F) B) and C)

Question 20

If the government increases its efforts to reduce illegal drugs which of the following would explain the possible unintended consequences-an increase in drug-related crimes.

Accepted Answer

A)  ​More people will commit crimes as a result of the increased drug use.
B)  ​Tough drug enforcement policies reduce the demand for illegal drugs.
C)  ​Drug addicts will have an even greater need for quick cash to support their habits.
D)  ​In the short run, both equilibrium quantities and prices will fall in the markets for illegal drugs.E) B) and C)
F) None of the above

Exam 6: Elasticities

The current supply of Rembrandt paintings:

Correct AnswerverifiedShow Answer

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Correct AnswerverifiedA

When a 9% increase in price leads to a 6% increase in quantity supplied, supply is relatively inelastic.

Correct AnswerverifiedTrue

The quantity of gasoline demanded will respond more to a change in price over three weeks than over three years.

Correct AnswerverifiedShow Answer

A straight line demand curve has a different elasticity of demand at different points along the curve.

Correct AnswerverifiedShow Answer

Say that a consumer's income elasticity of demand over the relevant range is equal to 2. When she has a monthly income of $2,000, she spends $600 on food. If her monthly income rose to $4,000, how much would she spend on food?

Correct AnswerverifiedShow Answer

A decrease in demand will increase total revenue:

Correct AnswerverifiedShow Answer

A tax is imposed on orange juice. Consumers will bear the full burden of this tax if the:

Correct AnswerverifiedShow Answer

​Exhibit 6-3 ​ -Refer to Exhibit 6-3. The graph that best illustrates a relatively inelastic (but not perfectly inelastic) range along a demand curve is:

Correct AnswerverifiedShow Answer

The government proposes a tax on flowers in order to boost its revenue. Consumers will bear all of this tax if the:

Correct AnswerverifiedShow Answer

Total revenue for a seller represents the amount that:

Correct AnswerverifiedShow Answer

If Pizza Hut decreases its price for a large pizza by 25% and this leads to a 75% increase in sales, we can conclude that demand is relatively elastic with regard to price over that range.

Correct AnswerverifiedShow Answer

A perfectly elastic demand curve is vertical.

Correct AnswerverifiedFalse

If the price elasticity coefficient equals 4.2, then demand is relatively inelastic with regard to price.

Correct AnswerverifiedShow Answer

If the measured elasticity of supply coefficient equals 0.6, then supply is:

Correct AnswerverifiedShow Answer

Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

Correct AnswerverifiedShow Answer

A steel mill raises the price of steel by 20%, which results in a 7% reduction in the quantity of steel demanded. The demand curve facing this firm is:

Correct AnswerverifiedShow Answer

Demand is said to be ____ when the quantity demanded is very responsive to changes in price.

Correct AnswerverifiedShow Answer

If the elasticity of demand for mothballs is 0.50, then moving along the demand for mothballs:

Correct AnswerverifiedShow Answer

If the government increases its efforts to reduce illegal drugs which of the following would explain the possible unintended consequences-an increase in drug-related crimes.

Correct AnswerverifiedShow Answer

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Exhibit 6-3 -Refer to Exhibit 6-3. The graph that best illustrates a relatively inelastic (but not perfectly inelastic) range along a demand curve is:

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False

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