Question 1

If consumers think that there are very few substitutes for a good, then

Accepted Answer

A)   supply would tend to be price elastic.
B)   none of these answers.
C)   demand would tend to be price inelastic.
D)   demand would tend to be price elastic.
E)   supply would tend to be price inelastic.F) A) and D)
G) None of the above

Question 2

Economists have observed that spending on restaurant meals declines more during economic downturns than does spending on food to be eaten at home. How might the concept of elasticities help explain this?

Accepted Answer

To explain the fact that spending on res...

Question 3

A decrease in supply will cause the smallest increase in price when

Accepted Answer

A)   both supply and demand are inelastic.
B)   demand is elastic and supply is inelastic.
C)   both supply and demand are elastic.
D)   demand is inelastic and supply is elastic.E) None of the above
F) A) and D)

Question 4

If consumers always spend 15 percent of their income on food, then the income elasticity of demand for food is

Accepted Answer

A)   1.50.
B)   1.15.
C)   15
D)   0.15.
E)   1.00.F) A) and E)
G) A) and D)

Question 5

The price elasticity of supply tends to be more inelastic as the firm's production facility reaches maximum capacity.

Accepted Answer

A) True 
 B)False

Question 6

If the price elasticity of supply equals zero, this implies that

Accepted Answer

A)   suppliers can easily change quantity supplied when price changes.
B)   the supply curve is vertical.
C)   the percentage change in price of the good supplied is zero.
D)   the percentage change in quantity supplied equals the percentage change in price.E) A) and B)
F) A) and C)

Question 7

Pharmaceutical drug have an inelastic demand, and computers have an elastic demand. Assume technological advances lead to the doubling of supply of both products.
​
a. What happens to the equilibrium price and quantity in each market?
b. Which product experiences a larger change in price?
c. Which product experiences a larger change in quantity?
d. What happens to total consumer spending on each product?
​

Accepted Answer

a. In both markets, the increase in supp...

Question 8

Suppose that at a price of €30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to €40 per month, the number of subscribers will fall to 20,000. Using the midpoint method for calculating the elasticity, what is the price elasticity of demand for cable TV in Small Town?

Accepted Answer

A)   1.4
B)   0.66
C)   0.75
D)   2.0
E)   1.0F) A) and E)
G) A) and D)

Question 9

The midpoint method is used to compute elasticity because it

Accepted Answer

A)   automatically computes a positive number instead of a negative number.
B)   results in an elasticity that is the same as the slope of the demand curve.
C)   gives the same answer regardless of the direction of change.
D)   automatically rounds quantities to the nearest whole unit.E) None of the above
F) A) and B)

Question 10

Suppose that the price elasticity of supply of lawn mowers is 1.5. If the price of lawn mowers rises 5 per cent, the quantity supplied of lawn mowers would

Accepted Answer

A)   decline 7.5 per cent.
B)   rise 7.5 per cent.
C)   rise 1.5 per cent.
D)   rise 0.3 per cent.E) None of the above
F) A) and B)

Question 11

If Euro T-Shirt Co. lowers its price from €6 to €5 and finds that students increase their quantity demanded from 400 to 600 T-shirts per month, then the demand for EuroT-shirts within this price range is

Accepted Answer

A)   price inelastic.
B)   price elastic.
C)   unit elastic.
D)   cross elastic.E) C) and D)
F) A) and B)

Question 12

If there is excess capacity in a production facility, it is likely that the firm's supply curve is

Accepted Answer

A)   price inelastic.
B)   perfectly inelastic
C)   unit price elastic.
D)   price elastic.E) B) and C)
F) All of the above

Question 13

Technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to

Accepted Answer

A)   increase total revenue to farmers as a whole because the demand for food is elastic.
B)   increase total revenue to farmers as a whole because the demand for food is inelastic.
C)   reduce total revenue to farmers as a whole because the demand for food is elastic.
D)   reduce total revenue to farmers as a whole because the demand for food is inelastic.E) A) and B)
F) C) and D)

Question 14

In general, a flatter demand curve is more likely to be

Accepted Answer

A)   price elastic.
B)   unit price elastic.
C)   income elastic
D)   price inelastic.E) C) and D)
F) B) and D)

Question 15

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 16

In general, demand curves for luxuries tend to be price elastic.

Accepted Answer

A) True 
 B)False

Question 17

If demand is linear (a straight line) , then price elasticity of demand is

Accepted Answer

A)   elastic in the upper portion and inelastic in the lower portion.
B)   inelastic in the upper portion and elastic in the lower portion.
C)   inelastic throughout.
D)   constant along the demand curve.
E)   elastic throughout.F) B) and C)
G) B) and E)

Question 18

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Exam 4: Elasticity and Its Applications

If Euro T-Shirt Co. lowers its price from €6 to €5 and finds that students increase their quantity demanded from 400 to 600 T-shirts per month, then the demand for EuroT-shirts within this price range is

Correct Answer
verified

Suppose that the price elasticity of supply of lawn mowers is 1.5. If the price of lawn mowers rises 5 per cent, the quantity supplied of lawn mowers would

Correct Answer
verified

If there is excess capacity in a production facility, it is likely that the firm's supply curve is

Correct Answer
verified

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Correct Answer
verified

The price elasticity of supply tends to be more inelastic as the firm's production facility reaches maximum capacity.

Correct Answer
verified

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Correct Answer
verified

Economists have observed that spending on restaurant meals declines more during economic downturns than does spending on food to be eaten at home. How might the concept of elasticities help explain this?

Correct Answer
verified
To explain the fact that spending on res...
View Answer

Technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to

Correct Answer
verified

In general, demand curves for luxuries tend to be price elastic.

Correct Answer
verified

If demand is linear (a straight line) , then price elasticity of demand is

Correct Answer
verified

If the price elasticity of supply equals zero, this implies that

Correct Answer
verified

Correct Answer
verified
a. In both markets, the increase in supp...
View Answer

If consumers always spend 15 percent of their income on food, then the income elasticity of demand for food is

Correct Answer
verified

Correct Answer
verified

If consumers think that there are very few substitutes for a good, then

Correct Answer
verified

In general, a flatter demand curve is more likely to be

Correct Answer
verified

A decrease in supply will cause the smallest increase in price when

Correct Answer
verified

The midpoint method is used to compute elasticity because it

Correct Answer
verified

Exam 4: Elasticity and Its Applications

If Euro T-Shirt Co. lowers its price from €6 to €5 and finds that students increase their quantity demanded from 400 to 600 T-shirts per month, then the demand for EuroT-shirts within this price range is

Correct AnswerverifiedShow Answer

Suppose that the price elasticity of supply of lawn mowers is 1.5. If the price of lawn mowers rises 5 per cent, the quantity supplied of lawn mowers would

Correct AnswerverifiedShow Answer

If there is excess capacity in a production facility, it is likely that the firm's supply curve is

Correct AnswerverifiedShow Answer

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Correct AnswerverifiedShow Answer

The price elasticity of supply tends to be more inelastic as the firm's production facility reaches maximum capacity.

Correct AnswerverifiedShow Answer

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Correct AnswerverifiedShow Answer

Economists have observed that spending on restaurant meals declines more during economic downturns than does spending on food to be eaten at home. How might the concept of elasticities help explain this?

Correct AnswerverifiedTo explain the fact that spending on res...View AnswerShow Answer

Technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to

Correct AnswerverifiedShow Answer

In general, demand curves for luxuries tend to be price elastic.

Correct AnswerverifiedShow Answer

If demand is linear (a straight line) , then price elasticity of demand is

Correct AnswerverifiedShow Answer

If the price elasticity of supply equals zero, this implies that

Correct AnswerverifiedShow Answer

Correct Answerverifieda. In both markets, the increase in supp...View AnswerShow Answer

If consumers always spend 15 percent of their income on food, then the income elasticity of demand for food is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If consumers think that there are very few substitutes for a good, then

Correct AnswerverifiedShow Answer

In general, a flatter demand curve is more likely to be

Correct AnswerverifiedShow Answer

A decrease in supply will cause the smallest increase in price when

Correct AnswerverifiedShow Answer

The midpoint method is used to compute elasticity because it

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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To explain the fact that spending on res...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified
a. In both markets, the increase in supp...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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