Question 1

A per-unit tax is placed on the production of good Y.Someone who believes that the producers of the good will end up paying the full tax may be assuming that the good's demand curve is

Accepted Answer

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

Question 2

If the seller of good X raises the price of good X,it follows that the total revenue of good X will __________,if demand is __________.

Accepted Answer

A)   rise; inelastic
B)   rise; elastic
C)   fall; unit elastic
D)   fall; elastic
E)   a and dF) None of the above
G) B) and C)

Question 3

Exhibit 20-3
 
-Refer to Exhibit 20-3.When price decreases from $3.50 to $2.50,the price elasticity of supply is

Accepted Answer

A)   0.
B)   1.0.
C)   5.0.
D)   0.1.
E)   0.5.F) All of the above
G) A) and C)

Question 4

If two goods are substitute goods,

Accepted Answer

A)   an increase in the price of one will cause a decrease in the demand for the other.
B)   an increase in the price of one will cause an increase in the demand for the other.
C)   the price elasticity of demand for both goods will be greater than 1.
D)   the price elasticity of demand for both goods will be less than 1.E) B) and C)
F) A) and D)

Question 5

When price = $33,quantity demanded = 460.When price = $31,quantity demanded = 500.The price elasticity of demand is _______________,making this an _____________ good in the price range between $31 and $33.

Accepted Answer

A)   1.33; inelastic
B)   1.33; elastic
C)   0.75; elastic
D)   0.75; inelastic
E)   6.2; elasticF) None of the above
G) A) and B)

Question 6

The percentage change in the quantity demanded of good X is 20 percent and the percentage change in the price of good Y is 10 percent.It follows that the __________ elasticity of demand is __________ and that the two goods are __________.

Accepted Answer

A)   income; 0.50; substitutes
B)   cross; 2.00; complements
C)   cross; 0.50; substitutes
D)   cross; 2.00; substitutes
E)   price; 2.00; substitutesF) A) and D)
G) A) and C)

Question 7

Which of the following is a determinant of price elasticity of demand for good Z?

Accepted Answer

A)   the number of substitutes for good Z
B)   the percentage of one's budget spent on good Z
C)   the amount of time that has passed since the price of good Z has changed
D)   b and c
E)   all of the aboveF) C) and D)
G) A) and D)

Question 8

When a good is perfectly inelastic in demand,or perfectly elastic in supply,the buyers will pay the full tax that is placed on the sellers.

Accepted Answer

A) True 
 B)False

Question 9

The demand curve for good X is generally highly inelastic at and around the current price.If we assume that the supply curve is neither perfectly elastic nor perfectly inelastic,then who will pay the greater share of a tax placed on the production of good X?

Accepted Answer

A)   The buyers will pay the greater share.
B)   The sellers will pay the greater share.
C)   The buyers and the sellers will pay equal shares.
D)   There is not enough information to answer the question.E) B) and D)
F) B) and C)

Question 10

If the demand for cocaine is inelastic and people commit crimes to buy drugs,then a drug bust can increase the amount of drug-related crime.

Accepted Answer

A) True 
 B)False

Question 11

For a certain good,when the good's price falls from $12 to $10,its quantity demanded rises from 10 to 12 units.The price elasticity of demand here is

Accepted Answer

A)   2.55.
B)   0.66.
C)   0.39.
D)   0.20.
E)   1.00F) All of the above
G) C) and E)

Question 12

Good Z is income unit elastic.This means that the percentage change in income is

Accepted Answer

A)   equal to the percentage change in the quantity demanded of good Z.
B)   greater than the percentage change in the demand for good Z.
C)   less than the percentage change in the quantity demanded of good Z.
D)   equal to the percentage change in the price of good Z.
E)   greater than the percentage change in the price of good Z.F) B) and D)
G) B) and E)

Question 13

Explain how and why price elasticity of demand changes as a product is defined more narrowly or more broadly. Cite an example to help support your answer.

Accepted Answer

When a good is defined more broadly dema...

Question 14

Exhibit 20-6
 1 be the supply curve of a producer.If S2 is the supply curve of the same producer after the government imposes a per-unit tax,the share of the tax paid by the producer as compared to the share of the tax paid by consumers will be A)  greater if D1 is the demand curve facing the producer. B)  greater if D2 is the demand curve facing the producer. C)  the same regardless of which demand curve the firm faces. D)  Any of the above, depending on the type of good the tax is imposed on." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 20-6.Let S1 be the supply curve of a producer.If S2 is the supply curve of the same producer after the government imposes a per-unit tax,the share of the tax paid by the producer as compared to the share of the tax paid by consumers will be

Accepted Answer

A)   greater if D1 is the demand curve facing the producer.
B)   greater if D2 is the demand curve facing the producer.
C)   the same regardless of which demand curve the firm faces.
D)   Any of the above, depending on the type of good the tax is imposed on.E) B) and C)
F) C) and D)

Question 15

If the demand for a good is unit elastic,then

Accepted Answer

A)   the percentage change in quantity demanded is greater than the percentage change in price.
B)   the percentage change in quantity demanded is less than the percentage change in price.
C)   the percentage change in quantity demanded is equal to the percentage change in price.
D)   quantity demanded is extremely responsive to changes in price.
E)   quantity demanded is not responsive to changes in price.F) B) and E)
G) A) and B)

Question 16

From the sellers' perspective,it is most desirable for a product to be perfectly elastic in demand.

Accepted Answer

A) True 
 B)False

Question 17

Exhibit 20-2
 1 to S2.What is an expression for the tax revenue raised? A)  $2.25 x Q2 B)  $1.25 x Q2 C)  $1.00 x Q2 D)  ($1.00 x Q2)  + [$1.25 x (Q1 - Q2) ] E)  $2.25 x (Q1 - Q2) " class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 20-2.The market for good X is initially in equilibrium at $5.The government then places a per-unit tax on good X as shown by the shift of S1 to S2.What is an expression for the tax revenue raised?

Accepted Answer

A)   $2.25 x Q2
B)   $1.25 x Q2
C)   $1.00 x Q2
D)   ($1.00 x Q2)  + [$1.25 x (Q1 - Q2) ]
E)   $2.25 x (Q1 - Q2) F) All of the above
G) A) and B)

Question 18

If for good Z income elasticity is greater than 1,then demand for good Z is income __________,and good Z is a(n) __________ good.

Accepted Answer

A)   inelastic; normal
B)   inelastic; inferior
C)   elastic; normal
D)   elastic; inferior
E)   unit elastic; normalF) C) and D)
G) A) and C)

Question 19

When companies hire celebrities to advertise their products,they are attempting to make the demand for their product more ____________. If this strategy is successful,the firm can raise both ____________ and ________________.

Accepted Answer

A)   elastic; price; total revenue
B)   elastic; quantity; total cost
C)   inelastic; quantity; total revenue
D)   inelastic; price; total revenueE) A) and D)
F) A) and C)

Question 20

Price falls from $3 to $2,and the quantity demanded rises from 360 units to 400 units.What is the price elasticity of demand between these two prices?

Accepted Answer

A)   0.26
B)   10.51
C)   0.68
D)   3.80
E)   2.04F) None of the above
G) B) and C)

Exam 20: Elasticity

If the seller of good X raises the price of good X,it follows that the total revenue of good X will __________,if demand is __________.

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If two goods are substitute goods,

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When price = $33,quantity demanded = 460.When price = $31,quantity demanded = 500.The price elasticity of demand is _______________,making this an _____________ good in the price range between $31 and $33.

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If for good Z income elasticity is greater than 1,then demand for good Z is income __________,and good Z is a(n) __________ good.

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Good Z is income unit elastic.This means that the percentage change in income is

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If the demand for cocaine is inelastic and people commit crimes to buy drugs,then a drug bust can increase the amount of drug-related crime.

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Price falls from $3 to $2,and the quantity demanded rises from 360 units to 400 units.What is the price elasticity of demand between these two prices?

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Exhibit 20-2 -Refer to Exhibit 20-2.The market for good X is initially in equilibrium at $5.The government then places a per-unit tax on good X as shown by the shift of S1 to S2.What is an expression for the tax revenue raised?

Correct AnswerverifiedShow Answer

From the sellers' perspective,it is most desirable for a product to be perfectly elastic in demand.

Correct AnswerverifiedShow Answer

A per-unit tax is placed on the production of good Y.Someone who believes that the producers of the good will end up paying the full tax may be assuming that the good's demand curve is

Correct AnswerverifiedShow Answer

For a certain good,when the good's price falls from $12 to $10,its quantity demanded rises from 10 to 12 units.The price elasticity of demand here is

Correct AnswerverifiedShow Answer

Explain how and why price elasticity of demand changes as a product is defined more narrowly or more broadly. Cite an example to help support your answer.

Correct AnswerverifiedWhen a good is defined more broadly dema...View AnswerShow Answer

If the demand for a good is unit elastic,then

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The percentage change in the quantity demanded of good X is 20 percent and the percentage change in the price of good Y is 10 percent.It follows that the __________ elasticity of demand is __________ and that the two goods are __________.

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The demand curve for good X is generally highly inelastic at and around the current price.If we assume that the supply curve is neither perfectly elastic nor perfectly inelastic,then who will pay the greater share of a tax placed on the production of good X?

Correct AnswerverifiedShow Answer

When a good is perfectly inelastic in demand,or perfectly elastic in supply,the buyers will pay the full tax that is placed on the sellers.

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Exhibit 20-6 -Refer to Exhibit 20-6.Let S1 be the supply curve of a producer.If S2 is the supply curve of the same producer after the government imposes a per-unit tax,the share of the tax paid by the producer as compared to the share of the tax paid by consumers will be

Correct AnswerverifiedShow Answer

Which of the following is a determinant of price elasticity of demand for good Z?

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When companies hire celebrities to advertise their products,they are attempting to make the demand for their product more ____________. If this strategy is successful,the firm can raise both ____________ and ________________.

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Exhibit 20-3 -Refer to Exhibit 20-3.When price decreases from $3.50 to $2.50,the price elasticity of supply is

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If the seller of good X raises the price of good X,it follows that the total revenue of good X will ,if demand is .

Correct Answer
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When price = $33,quantity demanded = 460.When price = $31,quantity demanded = 500.The price elasticity of demand is ___,making this an _ good in the price range between $31 and $33.

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If for good Z income elasticity is greater than 1,then demand for good Z is income ,and good Z is a(n) good.

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Exhibit 20-2 -Refer to Exhibit 20-2.The market for good X is initially in equilibrium at $5.The government then places a per-unit tax on good X as shown by the shift of S₁ to S₂.What is an expression for the tax revenue raised?

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When a good is defined more broadly dema...
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The percentage change in the quantity demanded of good X is 20 percent and the percentage change in the price of good Y is 10 percent.It follows that the elasticity of demand is and that the two goods are __.

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Exhibit 20-6 -Refer to Exhibit 20-6.Let S₁ be the supply curve of a producer.If S₂ is the supply curve of the same producer after the government imposes a per-unit tax,the share of the tax paid by the producer as compared to the share of the tax paid by consumers will be

Correct Answer
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When companies hire celebrities to advertise their products,they are attempting to make the demand for their product more . If this strategy is successful,the firm can raise both and ____.

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Correct Answer
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