Question 1

If the price of corn goes up by $1 a bushel and the quantity supplied rises by 100 bushels, the price elasticity of supply has to be 100.

Accepted Answer

A) True 
 B)False

Question 2

Richard Voith estimated the price elasticity of demand for round-trip rail fare to be 0.62. If fares rose by 30 percent, one would expect the quantity of round-trip tickets purchased to:

Accepted Answer

A)   rise by 18.6 percent.
B)   fall by 18.6 percent.
C)   rise by 48.4 percent.
D)   fall by 48.4 percent.E) A) and C)
F) C) and D)

Question 3

If milk and cookies are complements and the price of cookies rises, we would expect to see:

Accepted Answer

A)   an increase in the demand for milk.
B)   a decrease in the demand for milk.
C)   an increase in the quantity demanded for milk but no change in demand.
D)   a decrease in the quantity demanded for milk but no change in demand.E) None of the above
F) C) and D)

Question 4

If consumers won't pay more than $1.50 for a pack of gum and at $1.50 they will buy an almost infinite amount, price elasticity of demand at $1.50 is:

Accepted Answer

A)   inelastic.
B)   elastic.
C)   perfectly elastic.
D)   perfectly inelastic.E) A) and B)
F) A) and C)

Question 5

If milk and cookies are complements and the price of cookies falls, we would expect to see:

Accepted Answer

A)   an increase in the demand for milk.
B)   a decrease in the demand for milk.
C)   an increase in the quantity demanded for milk but no change in demand.
D)   a decrease in the quantity demanded for milk but no change in demand.E) A) and C)
F) B) and C)

Question 6

Repeated hurricanes in Florida have caused some retirees to choose to retire to Arizona instead. Based on this information, retirement housing in Florida and that in Arizona are what kinds of goods?

Accepted Answer

A)   Florida housing has become an inferior good, and Arizona housing had been a luxury good.
B)   Florida housing has become a luxury good, and Arizona housing had been an inferior good.
C)   Florida housing and Arizona housing are substitutes.
D)   Florida housing and Arizona housing are complementary goods.E) A) and B)
F) A) and C)

Question 7

If the percentage increase in the quantity supplied is greater than the percentage increase in the price, the supply:

Accepted Answer

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

Question 8

It has been estimated that the price elasticity for cigarettes is 0.164. Assuming there are currently no taxes on cigarettes, to reduce cigarette purchases by 5 percent, the government would need to tax cigarettes enough to:

Accepted Answer

A)   raise the price by 0.82 percent.
B)   lower the price by 0.82 percent.
C)   raise the price by 30.5 percent.
D)   lower the price by 30.5 percent.E) A) and B)
F) A) and C)

Question 9

Refer to the graph shown. Which supply curve is perfectly inelastic?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) B) and D)
F) C) and D)

Question 10

Elasticity of demand for bus services is 0.23 for the peak hours and 0.42 for off-peak hours. The same percentage increase in price would:

Accepted Answer

A)   lower revenues for both, but more for peak hours.
B)   raise revenues for both, but more for peak hours.
C)   raise revenue for peak hours but lower revenue for off-peak hours.
D)   lower revenue for peak hours but raise revenue for off-peak hours.E) A) and B)
F) All of the above

Question 11

If supply is highly elastic and demand shifts to the right:

Accepted Answer

A)   price will rise significantly; quantity hardly changes at all.
B)   price will hardly change at all; quantity will rise significantly.
C)   price will rise significantly as will quantity.
D)   price and quantity will hardly change at all.E) None of the above
F) A) and D)

Question 12

Refer to the graph shown. Calculate the approximate average elasticity of demand as the price falls from $18 to $0:

Accepted Answer

A)   3.
B)   1.
C)   2/3.
D)   3/2.E) C) and D)
F) A) and D)

Question 13

Most likely, the elasticity of demand for transportation is greater than the elasticity of demand for cars.

Accepted Answer

A) True 
 B)False

Question 14

If Portuguese wines are an inferior good, higher incomes will cause:

Accepted Answer

A)   an increase in the demand for Portuguese wines.
B)   a decrease in the demand for Portuguese wines.
C)   an increase in the quantity demanded for Portuguese wines.
D)   a decrease in the quantity demanded for Portuguese wines.E) B) and C)
F) A) and D)

Question 15

In which case will the price change be the greatest (assuming the shifts described are the same size) ?

Accepted Answer

A)   Demand is inelastic, and supply shifts to the left.
B)   Supply is perfectly elastic, and demand shifts to the left.
C)   Demand is elastic, and supply shifts to the left.
D)   Supply is elastic, and demand shifts to the left.E) B) and C)
F) None of the above

Question 16

Suppose average attendance to Six Flags is 500,000 when prices are $40 a ticket and 450,000 when prices are $50 a ticket. Other things being equal, the data imply that the elasticity of demand for Six Flags is:

Accepted Answer

A)   elastic, so the increase in price caused total revenue to rise.
B)   elastic, so the increase in price caused total revenue to fall.
C)   inelastic, so the increase in price caused total revenue to rise.
D)   inelastic, so the increase in price caused total revenue to fall.E) A) and D)
F) All of the above

Question 17

A perfectly elastic supply curve would:

Accepted Answer

A)   intersect the two axes at the origin.
B)   intersect the horizontal axis.
C)   be horizontal.
D)   be vertical.E) None of the above
F) B) and D)

Question 18

The cross-price elasticity of demand is the percentage change in price divided by the percentage change in the price of another good.

Accepted Answer

A) True 
 B)False

Question 19

Along a straight-line demand curve, total revenue is the highest when elasticity of demand is:

Accepted Answer

A)   zero.
B)   1.
C)   infinity.
D)   between zero and 1.E) A) and B)
F) A) and C)

Question 20

Refer to the following table to answer the question. A local government is looking to reduce "undesirable" behavior on the part of its citizens: drinking alcoholic beverages and smoking. Assuming people cannot shop for alcoholic beverages out of town, a 10 percent tax on all alcoholic beverages would have the largest proportionate effect on the sale of:   Good  Elasticity  Cigarettes 3 Liquor .5 Wine .4 Beer .1\begin{array}{|c|c|}\hline 	ext { Good } & 	ext { Elasticity } \\hline 	ext { Cigarettes } & 3 \\hline 	ext { Liquor } & .5 \\hline 	ext { Wine } & .4 \\hline 	ext { Beer } & .1 \\hline\end{array} Good  Cigarettes  Liquor  Wine  Beer ​ Elasticity 3.5.4.1​​

Accepted Answer

A)   cigarettes.
B)   liquor.
C)   beer.
D)   wine. E) None of the above
F) A) and C)

Exam 6: Describing Supply and Demand: Elasticities

The cross-price elasticity of demand is the percentage change in price divided by the percentage change in the price of another good.

Correct Answer
verified

If the price of corn goes up by $1 a bushel and the quantity supplied rises by 100 bushels, the price elasticity of supply has to be 100.

Correct Answer
verified

It has been estimated that the price elasticity for cigarettes is 0.164. Assuming there are currently no taxes on cigarettes, to reduce cigarette purchases by 5 percent, the government would need to tax cigarettes enough to:

Correct Answer
verified

If consumers won't pay more than $1.50 for a pack of gum and at $1.50 they will buy an almost infinite amount, price elasticity of demand at $1.50 is:

Correct Answer
verified

In which case will the price change be the greatest (assuming the shifts described are the same size) ?

Correct Answer
verified

Refer to the graph shown. Which supply curve is perfectly inelastic?

Correct Answer
verified

Along a straight-line demand curve, total revenue is the highest when elasticity of demand is:

Correct Answer
verified

Elasticity of demand for bus services is 0.23 for the peak hours and 0.42 for off-peak hours. The same percentage increase in price would:

Correct Answer
verified

Refer to the graph shown. Calculate the approximate average elasticity of demand as the price falls from $18 to $0:

Correct Answer
verified

Correct Answer
verified

If the percentage increase in the quantity supplied is greater than the percentage increase in the price, the supply:

Correct Answer
verified

Suppose average attendance to Six Flags is 500,000 when prices are $40 a ticket and 450,000 when prices are $50 a ticket. Other things being equal, the data imply that the elasticity of demand for Six Flags is:

Correct Answer
verified

A perfectly elastic supply curve would:

Correct Answer
verified

If milk and cookies are complements and the price of cookies falls, we would expect to see:

Correct Answer
verified

Most likely, the elasticity of demand for transportation is greater than the elasticity of demand for cars.

Correct Answer
verified

If Portuguese wines are an inferior good, higher incomes will cause:

Correct Answer
verified

If supply is highly elastic and demand shifts to the right:

Correct Answer
verified

If milk and cookies are complements and the price of cookies rises, we would expect to see:

Correct Answer
verified

Repeated hurricanes in Florida have caused some retirees to choose to retire to Arizona instead. Based on this information, retirement housing in Florida and that in Arizona are what kinds of goods?

Correct Answer
verified

Richard Voith estimated the price elasticity of demand for round-trip rail fare to be 0.62. If fares rose by 30 percent, one would expect the quantity of round-trip tickets purchased to:

Correct Answer
verified

Exam 6: Describing Supply and Demand: Elasticities

The cross-price elasticity of demand is the percentage change in price divided by the percentage change in the price of another good.

Correct AnswerverifiedShow Answer

If the price of corn goes up by $1 a bushel and the quantity supplied rises by 100 bushels, the price elasticity of supply has to be 100.

Correct AnswerverifiedShow Answer

It has been estimated that the price elasticity for cigarettes is 0.164. Assuming there are currently no taxes on cigarettes, to reduce cigarette purchases by 5 percent, the government would need to tax cigarettes enough to:

Correct AnswerverifiedShow Answer

If consumers won't pay more than $1.50 for a pack of gum and at $1.50 they will buy an almost infinite amount, price elasticity of demand at $1.50 is:

Correct AnswerverifiedShow Answer

In which case will the price change be the greatest (assuming the shifts described are the same size) ?

Correct AnswerverifiedShow Answer

Refer to the graph shown. Which supply curve is perfectly inelastic?

Correct AnswerverifiedShow Answer

Along a straight-line demand curve, total revenue is the highest when elasticity of demand is:

Correct AnswerverifiedShow Answer

Elasticity of demand for bus services is 0.23 for the peak hours and 0.42 for off-peak hours. The same percentage increase in price would:

Correct AnswerverifiedShow Answer

Refer to the graph shown. Calculate the approximate average elasticity of demand as the price falls from $18 to $0:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the percentage increase in the quantity supplied is greater than the percentage increase in the price, the supply:

Correct AnswerverifiedShow Answer

Suppose average attendance to Six Flags is 500,000 when prices are $40 a ticket and 450,000 when prices are $50 a ticket. Other things being equal, the data imply that the elasticity of demand for Six Flags is:

Correct AnswerverifiedShow Answer

A perfectly elastic supply curve would:

Correct AnswerverifiedShow Answer

If milk and cookies are complements and the price of cookies falls, we would expect to see:

Correct AnswerverifiedShow Answer

Most likely, the elasticity of demand for transportation is greater than the elasticity of demand for cars.

Correct AnswerverifiedShow Answer

If Portuguese wines are an inferior good, higher incomes will cause:

Correct AnswerverifiedShow Answer

If supply is highly elastic and demand shifts to the right:

Correct AnswerverifiedShow Answer

If milk and cookies are complements and the price of cookies rises, we would expect to see:

Correct AnswerverifiedShow Answer

Repeated hurricanes in Florida have caused some retirees to choose to retire to Arizona instead. Based on this information, retirement housing in Florida and that in Arizona are what kinds of goods?

Correct AnswerverifiedShow Answer

Richard Voith estimated the price elasticity of demand for round-trip rail fare to be 0.62. If fares rose by 30 percent, one would expect the quantity of round-trip tickets purchased to:

Correct AnswerverifiedShow Answer

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