Econ Chapter 20

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 Econ Chapter 20

  
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  • 1. 
    178.   The longer the period of time allowed for the producer of a good to adjust to a change in the price of the good, the ____________ the price elasticity of supply will be.  This statement assumes that the quantity supplied __________ be altered with time.
    • A. 

      More elastic; can

    • B. 

      More elastic; cannot

    • C. 

      More inelastic; can

    • D. 

      More inelastic; cannot


  • 2. 
         1.   Price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in
    • A. 

      Interest rates.

    • B. 

      Price

    • C. 

      Supply.

    • D. 

      Demand.


  • 3. 
         3.   If quantity demanded rises by 10 percent as price falls by 7 percent, the price elasticity of demand equals
    • A. 

      0.70.

    • B. 

      1.43.

    • C. 

      1.07.

    • D. 

      0.43.


  • 4. 
         4.   If the price elasticity of demand for a given product is 7, this means that
    • A. 

      The percentage change in quantity demanded is 7 times the percentage change in price.

    • B. 

      If quantity demanded fell by 1 percent, price would fall by 7 percent.

    • C. 

      If price was raised 7 percent, quantity demanded would fall by 7 percent.

    • D. 

      If price was raised 7 percent, quantity demanded would rise 7 percent.

    • E. 

      None of the above


  • 5. 
         5.   If the price of good X rises and the demand for good X is elastic, then the percentage __________ in quantity demanded is __________ the percentage rise in price, and total revenue __________.
    • A. 

      Fall; greater than; rises

    • B. 

      Fall; less than; falls

    • C. 

      Fall; equal to; remains constant

    • D. 

      Rise; greater than; falls

    • E. 

      Fall; greater than; falls


  • 6. 
         7.   Price falls from $1.80 to $1.70, and the quantity demanded rises from 110 units to 118 units. What is the price elasticity of demand between these two prices?
    • A. 

      1.26

    • B. 

      0.81

    • C. 

      0.68

    • D. 

      80

    • E. 

      2.04


  • 7. 
         9.   If the percentage change in quantity demanded is less than the percentage change in price, demand is
    • A. 

      Inelastic

    • B. 

      Unit elastic.

    • C. 

      Elastic.

    • D. 

      Perfectly elastic.


  • 8. 
       16.   For a certain good, when price falls from $20 to $19, quantity demanded rises from 5,000 to 5,700. The price elasticity of demand here is
    • A. 

      2.55.

    • B. 

      0.66.

    • C. 

      0.39.

    • D. 

      0.20.


  • 9. 
       26.   Cross elasticity of demand measures the responsiveness of changes in the quantity __________ of one good to changes in __________.
    • A. 

      Demanded; the price of the same good.

    • B. 

      Demanded; income.

    • C. 

      Demanded; the price of another good.

    • D. 

      Supplied; the price of the same good.

    • E. 

      None of the above


  • 10. 
    168.   If supply is inelastic, it follows that
    • A. 

      A rise in price will not change quantity supplied.

    • B. 

      A fall in price will not change quantity supplied.

    • C. 

      Consumers will pay 100 percent of any tax placed on sellers.

    • D. 

      Quantity supplied always changes more than price changes.

    • E. 

      None of the above


  • 11. 
    181.   If most drivers are _____________ in their demand for driving, then as cars become more fuel-efficient ______________ greenhouse gases will be emitted.
    • A. 

      Inelastic; more

    • B. 

      Inelastic; less

    • C. 

      Elastic; more

    • D. 

      Elastic; less

    • E. 

      B and c


  • 12. 
    134.   If the price elasticity of demand for a good is zero, then demand is
    • A. 

      Perfectly elastic.

    • B. 

      Perfectly inelastic.

    • C. 

      Unit elastic.

    • D. 

      Inelastic.

    • E. 

      None of the above


  • 13. 
         2.   The price elasticity of demand is the ratio of the
    • A. 

      Absolute change in quantity demanded to the absolute change in price.

    • B. 

      Absolute change in price to the absolute change in quantity demanded.

    • C. 

      Percentage change in quantity demanded to the percentage change in price.

    • D. 

      Percentage change in price to the percentage change in quantity demanded.


  • 14. 
         8.   If the percentage change in quantity demanded is greater than the percentage change in price, demand is
    • A. 

      Inelastic.

    • B. 

      Unit elastic.

    • C. 

      Elastic

    • D. 

      Perfectly inelastic.


  • 15. 
       10.   If the percentage change in quantity demanded is equal to the percentage change in price, demand is
    • A. 

      Inelastic

    • B. 

      Unit elastic.

    • C. 

      Elastic

    • D. 

      Perfectly elastic.

    • E. 

      Perfectly inelastic.


  • 16. 
       11.   If quantity demanded is completely unresponsive to changes in price, demand is
    • A. 

      Inelastic

    • B. 

      Unit elastic.

    • C. 

      Elastic

    • D. 

      Perfectly elastic.

    • E. 

      Perfectly inelastic.


  • 17. 
       12.   Suppose at a price of $4 and at a price of $6, John purchases 40 units of good X. Given this information, we know that
    • A. 

      John's entire demand curve for good X is perfectly elastic.

    • B. 

      John's demand for good X is inelastic.

    • C. 

      John's demand for good X is perfectly inelastic between the prices of $4 and $6.

    • D. 

      John's demand for good X is perfectly elastic between the prices of $4 and $6.

    • E. 

      John's demand for good X is unit elastic.


  • 18. 
    If the price of good X rises and the demand for good X is inelastic, then the percentage fall in quantity demanded is __________ the percentage rise in price, and total revenue __________.
    • A. 

      Greater than; rises

    • B. 

      Less than; falls

    • C. 

      Equal to; remains constant

    • D. 

      Greater than; falls

    • E. 

      None of the above4 4 none of the above


  • 19. 
    If the price of good X falls and the demand for good X is unit elastic, then the percentage rise in quantity demanded is __________ the percentage fall in price, and total revenue __________.
    • A. 

      Greater than; rises

    • B. 

      Less than; falls

    • C. 

      Equal to; remains constant

    • D. 

      Greater than; falls

    • E. 

      Less than; rises


  • 20. 
    Which of the following would result in higher price elasticity?
    • A. 

      More substitutes for a good

    • B. 

      Shorter periods of time considered

    • C. 

      Lower costs of labor

    • D. 

      The good is more of a necessity


  • 21. 
    Which of the following would result in higher price elasticity?
    • A. 

      More substitutes for a good

    • B. 

      Shorter periods of time considered

    • C. 

      Lower costs of labor

    • D. 

      The good is more of a necessity


  • 22. 
    16.   For a certain good, when price falls from $20 to $19, quantity demanded rises from 5,000 to 5,700. The price elasticity of demand here is
    • A. 

      2.55.

    • B. 

      0.66.

    • C. 

      0.39.

    • D. 

      0.20.


  • 23. 
    For a certain good, when price rises from $90 to $95, quantity demanded falls from 90,000 to 85,000. The price elasticity of demand here is _____________, making the demand for this good ____________ in the price range between $90 and $95.
    • A. 

      0.95; inelastic

    • B. 

      1.06; elastic

    • C. 

      1.45; elastic.

    • D. 

      0.95; elastic


  • 24. 
       18.   The fewer substitutes for a good,
    • A. 

      The lower its income elasticity of demand.

    • B. 

      The higher its income elasticity of demand.

    • C. 

      The lower its price elasticity of demand.

    • D. 

      The higher its price elasticity of demand.


  • 25. 
    The price elasticity of demand is lowest for which of the following goods?
    • A. 

      Toyotas

    • B. 

      Cars

    • C. 

      Fords

    • D. 

      Chevrolets

    • E. 

      It is between a, c, and d.


  • 26. 
       20.   Which of the following statements is false?
    • A. 

      Ham has a higher price elasticity of demand than meat.

    • B. 

      Peaches have a higher price elasticity of demand than fruit.

    • C. 

      Soap has a higher price elasticity of demand than Ivory Soap.

    • D. 

      Carrots have a higher price elasticity of demand than vegetables.


  • 27. 
       21.   Vernon spends the following percentages of his budget on the following goods: 23 percent on good A, 11 percent on good B, 1 percent on good C, and 3 percent on good D. For which good is price elasticity of demand the highest, ceteris paribus?
    • A. 

      Good A

    • B. 

      Good B

    • C. 

      Good C

    • D. 

      Good D


  • 28. 
       22.   A good will tend to have a low price elasticity of demand if
    • A. 

      It has few substitutes.

    • B. 

      A person spends a high percentage of his or her budget on it.

    • C. 

      A person has a long period of time to adjust to price changes.

    • D. 

      The good is a luxury.


  • 29. 
       23.   The shorter the period of time consumers have to adjust to price changes, the __________ the __________ elasticity of demand.
    • A. 

      Lower; income

    • B. 

      Lower; price

    • C. 

      Higher; income

    • D. 

      Higher; price


  • 30. 
       24.   The longer the period of time consumers have to adjust to price changes, the __________ the __________ elasticity of demand.
    • A. 

      Lower, price

    • B. 

      Lower, income

    • C. 

      Higher, price

    • D. 

      Higher, income


  • 31. 
       25.   Cross elasticity of demand is the percentage change in the quantity __________ of a good divided by the percentage change in __________.
    • A. 

      Demanded; the price of the good

    • B. 

      Supplied; the price of the good

    • C. 

      Demanded; the price of another good

    • D. 

      Supplied; the price of another good

    • E. 

      Demanded; income


  • 32. 
       28.   If goods A and B have a cross elasticity of demand that is positive, this is evidence that goods A and B are __________ goods.
    • A. 

      Complementary

    • B. 

      Substitute

    • C. 

      Normal

    • D. 

      Inferior


  • 33. 
       29.   If two goods are substitute goods,
    • 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.


  • 34. 
       30.   If the price of good A decreases by 10 percent and the quantity demanded of good B increases by 10 percent, this is evidence that A and B are
    • A. 

      Substitute goods.

    • B. 

      Complement goods.

    • C. 

      Inferior goods.

    • D. 

      Normal goods.


  • 35. 
       31.   If the price of good A decreases by 10 percent and the quantity demanded of good B decreases by 10 percent, this is evidence that A and B are
    • A. 

      Substitute goods.

    • B. 

      Complement goods.

    • C. 

      Inferior goods.

    • D. 

      Normal goods.

    • E. 

      Not related.


  • 36. 
       32.   If price rises and total revenue falls,
    • A. 

      Cross elasticity is negative.

    • B. 

      Price elasticity of demand is less than 1.

    • C. 

      Income elasticity of demand is positive.

    • D. 

      B and c

    • E. 

      None of the above


  • 37. 
       33.   If the cross elasticity of demand for good A with respect to good B is +2.7, then good A is
    • A. 

      An inferior good.

    • B. 

      A normal good.

    • C. 

      A substitute for good B.

    • D. 

      A complement to good B.


  • 38. 
       35.   If Jack bought 21 CDs last year when his income was $18,000 and he buys 23 CDs this year when his income is $20,000, then his income elasticity of demand is ______________ making CDs a(n) ______________ good for Jack.
    • A. 

      +1.16; normal

    • B. 

      -1.16; inferior

    • C. 

      +0.86; normal

    • D. 

      +0.86; inferior

    • E. 

      -0.44; inferior


  • 39. 
       48.   Price elasticity of supply registers perfect inelasticity at the value of
    • A. 

      Infinity.

    • B. 

      1.

    • C. 

      0.

    • D. 

      -1.


  • 40. 
       50.   Suppose a producer decides that if the price of her product is $9, the quantity supplied will be 1,000 units, and if the price is $11, the quantity supplied will be 1,300. The price elasticity of supply for the good is approximately
    • A. 

      +1.91.

    • B. 

      -1.30.

    • C. 

      +0.77.

    • D. 

      -0.77.

    • E. 

      +1.30.


  • 41. 
       53.   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?
    • 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.


  • 42. 
       54.   The quantity supplied of land is constant regardless of price. Suppose a tax is imposed on the rental price of land. Who will pay the greater share of such a tax?
    • A. 

      The buyers will pay the entire share.

    • B. 

      The sellers will pay the entire share.

    • C. 

      The buyers and the sellers will pay equal shares.

    • D. 

      The buyers will bear the greater share of the tax.


  • 43. 
       55.   Suppose the demand for a particular good is perfectly inelastic and the government decides to impose a tax on the production of this good. Who will pay the greater share of such a tax?
    • A. 

      The buyers will pay the entire share.

    • B. 

      The sellers will pay the entire share.

    • C. 

      The buyers and the sellers will pay equal shares.

    • D. 

      The sellers will bear the greater share of the tax.


  • 44. 

       56.   Refer to Exhibit 5-1. The demand curve D1 is
    • A. 

      Inelastic.

    • B. 

      Elastic

    • C. 

      Unit elastic.

    • D. 

      Perfectly elastic.

    • E. 

      Perfectly inelastic.


  • 45. 

       57.   Refer to Exhibit 5-l. The demand curve D2 is
    • A. 

      Inelastic

    • B. 

      Elastic.

    • C. 

      Unit elastic.

    • D. 

      Perfectly elastic.

    • E. 

      Perfectly inelastic.


  • 46. 

       58.   Refer to Exhibit 5-l. The demand curve D3 is
    • A. 

      Inelastic

    • B. 

      Elastic.

    • C. 

      Unit elastic.

    • D. 

      Perfectly elastic.

    • E. 

      Varying in elasticity along its length.


  • 47. 

       59.   Refer to Exhibit 5-2. The market for good X is initially in equilibrium at $5. The government then places a tax on the producers of good X-in effect, taxing them on each unit of good X they sell. As a result, the supply curve
    • A. 

      Shifts (down and) rightward from S2 to S1.

    • B. 

      Shifts (up and) leftward from S1 to S2.

    • C. 

      Does not shift from S1.

    • D. 

      There is not enough information to answer the question.


  • 48. 

       60.   Refer to Exhibit 5-2. 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. As a result, the equilibrium price
    • A. 

      Rises from $5.00 to $6.25.

    • B. 

      Falls from $5.00 to $4.00.

    • C. 

      Remains constant at $5.00.

    • D. 

      None of the above


  • 49. 

       61.   Refer to Exhibit 5-2. 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. As a result,
    • A. 

      Consumers end up paying $6.25 per unit, and producers end up receiving $5.00 per unit, but keeping only $4.00 per unit.

    • B. 

      Consumers end up paying $6.25 per unit, and producers end up receiving and keeping $4.00 per unit.

    • C. 

      Consumers end up paying $5.00 per unit, and producers end up receiving and keeping $5.00 per unit.

    • D. 

      Consumers end up paying $6.25 per unit, and producers end up receiving $6.25 per unit, but keeping only $4.00 per unit.

    • E. 

      None of the above


  • 50. 

       62.   Refer to Exhibit 5-2. 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 the per-unit tax equal to?
    • A. 

      $1.00

    • B. 

      $2.25

    • C. 

      $0.25

    • D. 

      $4.00

    • E. 

      $1.25


  • 51. 

       63.   Refer to Exhibit 5-2. 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. Approximately what percentage of the tax do consumers end up paying?
    • A. 

      63 percent

    • B. 

      45 percent

    • C. 

      70 percent

    • D. 

      55 percent

    • E. 

      25 percent


  • 52. 

       64.   Refer to Exhibit 5-2. 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. Approximately what percentage of the tax do producers end up paying?
    • A. 

      45 percent

    • B. 

      70 percent

    • C. 

      63 percent

    • D. 

      25 percent


  • 53. 

       65.   Refer to Exhibit 5-2. 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?
    • 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)


  • 54. 
       70.   When the price of diamond rings rises by 40 percent, the quantity demanded falls by 10 percent. The price elasticity of demand for diamond rings is ____________, making diamond rings an _______________ good (in this example).
    • A. 

      0.25; inelastic

    • B. 

      4.0; elastic

    • C. 

      1.0; unit elastic

    • D. 

      0.4; inelastic


  • 55. 
       71.   When the price of cigarettes decreases by 6 percent, the quantity demanded increases by 2 percent. The price elasticity of demand for cigarettes is __________, making cigarettes an ____________ product.
    • A. 

      0.1; inelastic

    • B. 

      0.2; inelastic

    • C. 

      0.33; inelastic

    • D. 

      3.0; elastic

    • E. 

      2.5; elastic


  • 56. 
       72.   If the demand for a good is elastic, then
    • 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.


  • 57. 
       74.   If the demand for a good is perfectly inelastic, then
    • 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.


  • 58. 
       75.   If the demand for a good is inelastic and the price of the good decreases,
    • A. 

      Total revenue increases.

    • B. 

      Total revenue decreases.

    • C. 

      Total revenue is not affected.

    • D. 

      The direction of the change in total revenue cannot be determined from the information given.


  • 59. 
       76.   If the demand for a good is unit elastic and the price of the good increases,
    • A. 

      Total revenue increases.

    • B. 

      Total revenue decreases.

    • C. 

      Total revenue is not affected.

    • D. 

      The direction of the change in total revenue cannot be determined from the information given.


  • 60. 
      Price of Good A Quantity Demanded of Good A Quantity Supplied of Good A $5.50 5 55 $4.50 15 45 $3.50 25 35 $2.50 35 25 $1.50 45 15 $0.50 55 5    77.   Refer to Exhibit 5-3. When price decreases from $5.50 to $4.50, the price elasticity of demand is
    • A. 

      0.2.

    • B. 

      0.5.

    • C. 

      1.0.

    • D. 

      2.0.

    • E. 

      5.0.


  • 61. 
      Price of Good A Quantity Demanded of Good A Quantity Supplied of Good A $5.50 5 55 $4.50 15 45 $3.50 25 35 $2.50 35 25 $1.50 45 15 $0.50 55 5    78.   Refer to Exhibit 5-3. When price decreases from $4.50 to $3.50, the price elasticity of demand is
    • A. 

      0.4375.

    • B. 

      0.50.

    • C. 

      1.0.

    • D. 

      2.00.

    • E. 

      2.86.


  • 62. 
      Price of Good A Quantity Demanded of Good A Quantity Supplied of Good A $5.50 5 55 $4.50 15 45 $3.50 25 35 $2.50 35 25 $1.50 45 15 $0.50 55 5 79.   Refer to Exhibit 5-3. If price decreases from $5.50 to $4.50, total revenue along the demand curve
    • A. 

      Increases to $67.50.

    • B. 

      Increases to $87.50.

    • C. 

      Remains at $87.50.

    • D. 

      Decreases to $67.50.

    • E. 

      Decreases to $27.50.


  • 63. 
      Price of Good A Quantity Demanded of Good A Quantity Supplied of Good A $5.50 5 55 $4.50 15 45 $3.50 25 35 $2.50 35 25 $1.50 45 15 $0.50 55 5    80.   Refer to Exhibit 5-3. If price increases from $2.50 to $3.50, total revenue along the demand curve
    • A. 

      Increases to $67.50.

    • B. 

      Increases to $87.50.

    • C. 

      Remains at $87.50.

    • D. 

      Decreases to $67.50.


  • 64. 
      Price of Good A Quantity Demanded of Good A Quantity Supplied of Good A $5.50 5 55 $4.50 15 45 $3.50 25 35 $2.50 35 25 $1.50 45 15 $0.50 55 5 82.   Refer to Exhibit 5-3. When price decreases from $5.50 to $4.50, the price elasticity of supply is
    • A. 

      0.

    • B. 

      0.1.

    • C. 

      0.5.

    • D. 

      1.0.

    • E. 

      5.0.


  • 65. 
      Price of Good A Quantity Demanded of Good A Quantity Supplied of Good A $5.50 5 55 $4.50 15 45 $3.50 25 35 $2.50 35 25 $1.50 45 15 $0.50 55 5 84.   Refer to Exhibit 5-3. When price decreases from $1.50 to $0.50, the price elasticity of supply is
    • A. 

      1.0.

    • B. 

      5.0.

    • C. 

      0.1.

    • D. 

      0.5.


  • 66. 
       85.   Cross elasticity of demand measures the responsiveness of
    • A. 

      Demand for one good to changes in the demand for another good.

    • B. 

      Demand for one good to changes in the price of another good.

    • C. 

      Quantity demanded of one good to changes in the quantity demanded of another good.

    • D. 

      Quantity demanded of one good to changes in the price of another good.

    • E. 

      B and d


  • 67. 
       90.   If elasticity of demand is 0.5, it follows that a _______ percent decrease in price causes a _______ percent increase in quantity demanded.
    • A. 

      50; 1

    • B. 

      0.5; 1

    • C. 

      0.5; 0.5

    • D. 

      100; 500

    • E. 

      2; 1


  • 68. 
       95.   If a 7 percent increase in the price of a commodity results in a 12 percent increase in the quantity supplied, supply is said to be
    • A. 

      Perfectly elastic.

    • B. 

      Elastic.

    • C. 

      Unit elastic.

    • D. 

      Inelastic

    • E. 

      Perfectly inelastic.


  • 69. 
    100.   If a small increase in the price of a good reduces quantity demanded to zero, demand is ________________ and the price elasticity of demand is
    • A. 

      Perfectly inelastic; equal to zero.

    • B. 

      Perfectly elastic; equal to infinity.

    • C. 

      Unit elastic; equal to one.

    • D. 

      Perfectly elastic; equal to zero.


  • 70. 
    105.   Refer to Exhibit 5-4. As a consequence of the depicted change in supply of X, the demand curve for Y shifted from D1 to D2. What is true of the cross elasticity of demand for Y?
    • A. 

      Ec > 0

    • B. 

      Ec < 0

    • C. 

      Ec = 0

    • D. 

      It cannot be determined from the information provided.


  • 71. 

    108.   Refer to Exhibit 5-5. Assume that the seller of X increases the price from $1.50 to $2.00, and this results in an increase in total revenue. Which of the graphs represents the demand curve for X?
    • A. 

      (1)

    • B. 

      (2)

    • C. 

      (3)

    • D. 

      All of the above


  • 72. 

    109.   Refer to Exhibit 5-5. For graph (3), if the seller of X raises the price from $1.50 to $2.00, the total revenue the seller receives will
    • A. 

      Decrease by $30.

    • B. 

      Increase by $30.

    • C. 

      Decrease by $5.

    • D. 

      Not change.


  • 73. 

    110.   Refer to Exhibit 5-5. Which of the graphs represents a greater percentage change in quantity demanded than the percentage change in price?
    • A. 

      (1)

    • B. 

      (2)

    • C. 

      (3)

    • D. 

      (2) and (3)


  • 74. 

    111.   Refer to Exhibit 5-5. For graph (1), what is the price elasticity of demand going between $2.00 and $1.50?
    • A. 

      0.02

    • B. 

      0.43

    • C. 

      2.33

    • D. 

      42.8


  • 75. 

    112.   Refer to Exhibit 5-5. For graph (3), what is the price elasticity of demand going between $2.00 and $1.50?
    • A. 

      1.0

    • B. 

      0

    • C. 

      50.0

    • D. 

      0.02


  • 76. 

    113.   Refer to Exhibit 5-6. Let S1 be the supply curve of a firm. If S2 represents the supply curve of the same firm after the government imposes a per-unit tax, the tax is
    • A. 

      $1 per unit.

    • B. 

      $2 per unit.

    • C. 

      $3 per unit.

    • D. 

      -$1 per unit, i.e., a subsidy of $1.


  • 77. 

    114.   Refer to Exhibit 5-6. 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 tax revenue generated will be
    • A. 

      Greater if D1 is the demand curve facing the firm.

    • B. 

      Greater if D2 is the demand curve facing the firm.

    • 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.


  • 78. 

    115.   Refer to Exhibit 5-6. 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
    • 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.


  • 79. 

    116.   Refer to Exhibit 5-6. Suppose the three equilibrium quantities are 700, 800, and 900, and the two other equilibrium prices are $2.20 and $2.75. What is the tax revenue collected from the tax that shifted S1 to S2 when D1 is the relevant demand curve?
    • A. 

      $440

    • B. 

      $600

    • C. 

      $800

    • D. 

      $900


  • 80. 

    117.   Refer to Exhibit 5-6. Suppose the three equilibrium quantities are 700, 800, and 900, and the two other equilibrium prices are $2.20 and $2.75. What is the change in total revenue when a per-unit tax shifts S1 to S2, given that D2 is the relevant demand curve?
    • A. 

      $260

    • B. 

      -$260

    • C. 

      $900

    • D. 

      $700

    • E. 

      -$200


  • 81. 

    118.   Refer to Exhibit 5-7. Which of the graphs shows a perfectly elastic demand curve?
    • A. 

      (1)

    • B. 

      (2)

    • C. 

      (3) and (4)

    • D. 

      None of the above


  • 82. 

    119.   Refer to Exhibit 5-7. Which of the graphs shows a perfectly inelastic demand curve?
    • A. 

      (1)

    • B. 

      (2)

    • C. 

      (3) and (4)

    • D. 

      None of the above


  • 83. 

    120.   Refer to Exhibit 5-7. If the government is contemplating imposing a per-unit tax and it wants the tax to have as small a negative effect on consumers as possible, it should choose a good for which the market is depicted on graph
    • A. 

      (1).

    • B. 

      (2).

    • C. 

      (3).

    • D. 

      (4).


  • 84. 

    121.   Refer to Exhibit 5-7. If the government wants to impose a per-unit tax in order to raise revenues, which of the depicted markets should it choose in order to maximize tax revenues?
    • A. 

      (1)

    • B. 

      (2)

    • C. 

      (3)

    • D. 

      (4)


  • 85. 

    122.   Refer to Exhibit 5-7. As a producer, if you had a choice, which of the depicted markets would you operate in?
    • A. 

      (1)

    • B. 

      (2)

    • C. 

      (3)

    • D. 

      (4)


  • 86. 
    125.   As the price of good X rises from $10 to $12 the result is a decrease in the quantity demanded of good X from 120 units to 100 units. The price elasticity of demand for good X is _____________ and total revenue __________ as the price of good X rises from $10 to $12.
    • A. 

      1.89; falls

    • B. 

      0.92; rises

    • C. 

      2.00; falls

    • D. 

      1.00; remains unchanged


  • 87. 
    130.   Which of the following defines elastic demand?
    • A. 

      Percentage change in price greater than percentage change in quantity demanded

    • B. 

      Percentage change in income greater than percentage change in price

    • C. 

      Percentage change in quantity demanded greater than percentage change in price

    • D. 

      Percentage change in quantity supplied greater than percentage change in price

    • E. 

      None of the above


  • 88. 
    135.   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 __________.
    • A. 

      Rise; inelastic.

    • B. 

      Rise; elastic.

    • C. 

      Fall; unit elastic.

    • D. 

      Fall; elastic.

    • E. 

      A and d


  • 89. 
    140.   Which of the following statements is true?
    • A. 

      Lower prices always lower total revenue.

    • B. 

      Higher prices always raise total revenue.

    • C. 

      Higher prices always lower total revenue.

    • D. 

      Lower prices always raise total revenue.

    • E. 

      None of the above


  • 90. 
    145.   If the demand for good X is inelastic in the short run, then it will be __________ in the long run (as more time passes).
    • A. 

      Inelastic

    • B. 

      Elastic

    • C. 

      Unit elastic

    • D. 

      Perfectly inelastic

    • E. 

      There is not enough information to answer the question.


  • 91. 
    150.   Income elasticity of demand for an inferior good is
    • A. 

      Less than 0.

    • B. 

      Greater than 1.

    • C. 

      Equal to 1.

    • D. 

      None of the above


  • 92. 
    155.   For a normal good, __________ falls as income __________; for an inferior good, __________ rises as income __________.
    • A. 

      Demand; falls; demand; falls

    • B. 

      Demand; rises; demand; rises

    • C. 

      Supply; falls; demand; falls

    • D. 

      Supply; rises; supply; falls


  • 93. 
    160.   Price elasticity of supply, and price elasticity of demand, are likely to be __________ in the __________ than in the __________.
    • A. 

      Higher; short run; long run

    • B. 

      Lower; long run; short run

    • C. 

      Higher; long run; short run

    • D. 

      Lower; past; future

    • E. 

      Higher; past; future


  • 94. 
    164.   Which of the following statements represents a correct and sequentially accurate economic explanation?
    • A. 

      A tax is placed on the production of good X, the supply curve of good X shifts to the left, equilibrium price rises, equilibrium quantity falls, and buyers pay 100 percent of the tax.

    • B. 

      A tax is placed on the production of good X, the supply curve of good X shifts to the left, equilibrium price rises, equilibrium quantity stays constant, and buyers pay 100 percent of the tax.

    • C. 

      A tax is placed on the production of good X, the supply curve of good X shifts to the left, equilibrium price does not change, equilibrium quantity rises, and sellers pay 50 percent of the tax.

    • D. 

      A tax is placed on the production of good X, the supply curve of good X shifts to the right, equilibrium price falls, equilibrium quantity falls, and sellers pay 100 percent of the tax.


  • 95. 
    165.   Which of the following statements is false?
    • A. 

      Income elasticity of demand measures the responsiveness of quantity demanded to changes in income.

    • B. 

      Price elasticity of demand measures the responsiveness of quantity demanded to changes in price.

    • C. 

      Price elasticity of demand and the slope of a demand curve are the same thing.

    • D. 

      The more substitutes for a good, the higher the price elasticity of demand, ceteris paribus.


  • 96. 
    166.   If demand is __________, price and total revenue are __________ related; if demand is __________, price and total revenue are directly related.
    • A. 

      Elastic; inversely; inelastic

    • B. 

      Inelastic; inversely; elastic

    • C. 

      Unit elastic; not; elastic

    • D. 

      Inelastic; inversely; unit elastic

    • E. 

      None of the above


  • 97. 
    167.   If income elasticity of demand is 2.12, it means that quantity demanded will __________ by 2.12 percent for every __________ percent __________ in income.
    • A. 

      Rise; 2.12; fall

    • B. 

      Rise; 1.0; rise

    • C. 

      Fall; 1.0; rise

    • D. 

      Fall; 2.12; fall

    • E. 

      None of the above


  • 98. 
    168.   If supply is inelastic, it follows that
    • A. 

      A rise in price will not change quantity supplied.

    • B. 

      A fall in price will not change quantity supplied.

    • C. 

      Consumers will pay 100 percent of any tax placed on sellers.

    • D. 

      Quantity supplied always changes more than price changes.

    • E. 

      None of the above


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