Question 1

Discuss the pros and cons of legalizing drugs such as heroin or cocaine from an economic perspective using the concept of elasticity.

Accepted Answer

Proponents of legalization contend that ...

Question 2

The following data table relates to the supply schedule of a product.  Over which of the following price ranges is the price-elasticity of supply less than 1?

Accepted Answer

A)  $5 to $10
B)  $25 to $30
C)  It is less than one over all price ranges.
D)  $20 to $25E) B) and C)
F) None of the above

Question 3

Which of the following statements is inconsistent with an elastic demand curve?

Accepted Answer

A)  The price-elasticity coefficient is greater than 1.
B)  Total revenue increases when price increases.
C)  Buyers are relatively sensitive to price changes.
D)  The relative change in quantity exceeds the relative change in price.E) A) and B)
F) A) and C)

Question 4

Which of the following is not characteristic of a product with relatively inelastic demand?

Accepted Answer

A)  The good is regarded by consumers as a necessity.
B)  There are a large number of good substitutes for the good.
C)  Buyers spend a small percentage of their total income on the product.
D)  Consumers have had only a short time period to adjust to changes in price.E) All of the above
F) A) and B)

Question 5

In the immediate market period for a highly perishable crop like tomatoes, the individual farmer's supply curve tends to be

Accepted Answer

A)  perfectly inelastic.
B)  perfectly elastic.
C)  quite flat.
D)  downward-sloping.E) B) and C)
F) A) and D)

Question 6

If the government tightens up on drug dealers and raises the costs of dealing illegal drugs, then the drug addicts' dollar expenditures to feed their addiction will tend to

Accepted Answer

A)  increase because their demand is price-elastic.
B)  decrease because their demand is price-Inelastic.
C)  decrease because their demand is price-elastic.
D)  increase because their demand is price-Inelastic.E) A) and D)
F) B) and D)

Question 7

A 4 percent reduction in the price of a product has zero effect on the dollar amount of consumer expenditure on the product. The price elasticity of demand is

Accepted Answer

A)  zero.
B)  greater than zero.
C)  greater than zero but less than 1.
D)  equal to 1.E) A) and C)
F) None of the above

Question 8

If a firm's demand for labor is elastic, a union-negotiated wage increase will

Accepted Answer

A)  necessarily be inflationary.
B)  cause the firm's total payroll to increase.
C)  cause the firm's total payroll to decline.
D)  cause a shortage of labor.E) A) and D)
F) C) and D)

Question 9

For which product is the income elasticity of demand most likely to be negative?

Accepted Answer

A)  computer software
B)  used clothing
C)  apps for iPhones
D)  breadE) A) and B)
F) None of the above

Question 10

Demand is said to be inelastic when

Accepted Answer

A)  an increase in price results in a reduction in total revenue.
B)  a reduction in price results in an increase in total revenue.
C)  a reduction in price results in a decrease in total revenue.
D)  the elasticity coefficient exceeds one.E) A) and B)
F) A) and C)

Question 11

Which of these pairs of concepts can be positively, as well as negatively, related?

Accepted Answer

A)  the income of consumers and the demand for a product
B)  the price of a product and the quantity of that product demanded
C)  the price of a product and the demand for a complementary product
D)  the cost of resources required to make a product and its supplyE) All of the above
F) B) and D)

Question 12

The basic formula for the price elasticity of demand coefficient is

Accepted Answer

A)  absolute decline in quantity demanded/absolute increase in price.
B)  percentage change in quantity demanded/percentage change in price.
C)  absolute decline in price/absolute increase in quantity demanded.
D)  percentage change in price/percentage change in quantity demanded.E) B) and C)
F) A) and B)

Question 13

Explain the differences between the immediate market period, the short run, and the long run as they relate to price elasticity of supply.

Accepted Answer

The immediate market period is a length ...

Question 14

In which price range of the accompanying demand schedule is demand elastic?

Accepted Answer

A)  $4-$3
B)  $3-$2
C)  $2-$1
D)  below $1E) None of the above
F) All of the above

Question 15

A union argues that a price cut will boost the revenues of the firm, while management argues that the opposite is true. This suggests that the price elasticity of demand is

Accepted Answer

A)  unit-elastic from the union's perspective and unit-inelastic from management's perspective.
B)  perfectly inelastic from the union's perspective and perfectly elastic from management's perspective.
C)  elastic from the union's perspective, inelastic from management's perspective.
D)  inelastic from the union's perspective, elastic from management's perspective.E) B) and D)
F) None of the above

Question 16

An increase in demand will increase equilibrium price to a greater extent

Accepted Answer

A)  if the product is a normal good.
B)  if the product is an inferior good.
C)  the less elastic the supply curve.
D)  the more elastic the supply curve.E) B) and C)
F) A) and D)

Question 17

Refer to the diagram. In the P₁P₂ price range, demand is

Accepted Answer

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

Question 18

Suppose that as the price of Y falls from$2.00 to $1.90, the quantity of Y demanded increases from110 to 118. Then the absolute value of the price elasticity (using the midpoint formula) is approximately

Accepted Answer

A)  4.
B)  2.09.
C)  1.37.
D)  3.94.E) All of the above
F) A) and D)

Question 19

Suppose the total-revenue curve is derived from a particular linear demand curve. That demand curve must be

Accepted Answer

A)  inelastic for price declines that increase quantity demanded from 2 units to 3 units.
B)  elastic for price declines that increase quantity demanded from 5 units to 6 units.
C)  unit elastic for price increases that reduce quantity demanded from 5 units to 4 units.
D)  inelastic for price increases that reduce quantity demanded from 4 units to 3 units.E) None of the above
F) All of the above

Question 20

Supply curves for antiques tend to be highly inelastic.

Accepted Answer

A) True 
 B)False

Exam 6: Elasticity

Discuss the pros and cons of legalizing drugs such as heroin or cocaine from an economic perspective using the concept of elasticity.

Correct AnswerverifiedProponents of legalization contend that ...View AnswerShow Answer

A 4 percent reduction in the price of a product has zero effect on the dollar amount of consumer expenditure on the product. The price elasticity of demand is

Correct AnswerverifiedShow Answer

In the immediate market period for a highly perishable crop like tomatoes, the individual farmer's supply curve tends to be

Correct AnswerverifiedShow Answer

An increase in demand will increase equilibrium price to a greater extent

Correct AnswerverifiedShow Answer

Suppose the total-revenue curve is derived from a particular linear demand curve. That demand curve must be

Correct AnswerverifiedShow Answer

In which price range of the accompanying demand schedule is demand elastic?

Correct AnswerverifiedShow Answer

The basic formula for the price elasticity of demand coefficient is

Correct AnswerverifiedShow Answer

Refer to the diagram. In the P₁P₂ price range, demand is

Correct AnswerverifiedShow Answer

A union argues that a price cut will boost the revenues of the firm, while management argues that the opposite is true. This suggests that the price elasticity of demand is

Correct AnswerverifiedShow Answer

Which of the following statements is inconsistent with an elastic demand curve?

Correct AnswerverifiedShow Answer

Which of these pairs of concepts can be positively, as well as negatively, related?

Correct AnswerverifiedShow Answer

If a firm's demand for labor is elastic, a union-negotiated wage increase will

Correct AnswerverifiedShow Answer

Suppose that as the price of Y falls from$2.00 to $1.90, the quantity of Y demanded increases from110 to 118. Then the absolute value of the price elasticity (using the midpoint formula) is approximately

Correct AnswerverifiedShow Answer

Supply curves for antiques tend to be highly inelastic.

Correct AnswerverifiedShow Answer

The following data table relates to the supply schedule of a product. Over which of the following price ranges is the price-elasticity of supply less than 1?

Correct AnswerverifiedShow Answer

Demand is said to be inelastic when

Correct AnswerverifiedShow Answer

Which of the following is not characteristic of a product with relatively inelastic demand?

Correct AnswerverifiedShow Answer

If the government tightens up on drug dealers and raises the costs of dealing illegal drugs, then the drug addicts' dollar expenditures to feed their addiction will tend to

Correct AnswerverifiedShow Answer

Explain the differences between the immediate market period, the short run, and the long run as they relate to price elasticity of supply.

Correct AnswerverifiedThe immediate market period is a length ...View AnswerShow Answer

For which product is the income elasticity of demand most likely to be negative?

Correct AnswerverifiedShow Answer

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Proponents of legalization contend that ...
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The immediate market period is a length ...
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