Eco 102 H Review (Chapter 5: Elasticity And Its Application)

34 Questions | Total Attempts: 265

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Geometry Quizzes & Trivia

Choose the BEST answer. Read the explanation if there is.


Questions and Answers
  • 1. 
    Elasticity measured the magnitude of how much buyers and sellers respond to changes in market conditions.
    • A. 

      True

    • B. 

      False

  • 2. 
    The price elasticity of demand measures how willing consumers are to buy less of the good as its price decreases. 
    • A. 

      True

    • B. 

      False

  • 3. 
    Goods with close substitutes tend to have more elastic demand. 
    • A. 

      True

    • B. 

      False

  • 4. 
    Neccesities tend to have elastic demands, whereas luxuries have inelastic demands. 
    • A. 

      True

    • B. 

      False

  • 5. 
    Whether a good is a necessity depends not on the intrinsic properties of the good. 
    • A. 

      True

    • B. 

      False

  • 6. 
    Narrowly defined markets tend to have more elastic demand than broadly defined markets. 
    • A. 

      True

    • B. 

      False

  • 7. 
    Goods tend to have a more inelastic demand over longer time horizon. 
    • A. 

      True

    • B. 

      False

  • 8. 
    In Mankiw's book, a larger price elasticity implies a lesser responsiveness of quantity demanded to price. 
    • A. 

      True

    • B. 

      False

  • 9. 
    Using the midpoint method, what is the demand elasticity of a product if its price rose from $4 to $6 and its quantity decreased from 120 to 80? 
    • A. 

      0.25

    • B. 

      2.5

    • C. 

      -1

    • D. 

      1

  • 10. 
    In Mankiw's book, what elasticity represents is more important than how it is calculated. 
    • A. 

      True

    • B. 

      False

  • 11. 
    Demand is considered elastic when the elasticity is less than 1, and inelastic if the elasticity is greater than 1.
    • A. 

      True

    • B. 

      False

  • 12. 
    If the elasticity is exactly 1, the quantity moves the same amount proportionately as the price, and demand is said to have unit elasticity. 
    • A. 

      True

    • B. 

      False

  • 13. 
    The price elasticity is closely related to the demand slope. 
    • A. 

      True

    • B. 

      False

  • 14. 
    The flatter the demand curve that passes through a given point, the greater the price elasticity of the demand and vice versa. 
    • A. 

      True

    • B. 

      False

  • 15. 
    Profit is the amount paid by buyers and received by sellers of the good. 
    • A. 

      True

    • B. 

      False

  • 16. 
    How total revenue changes as one moves along the demand curve does not depend on the price elasticity of demand.
    • A. 

      True

    • B. 

      False

  • 17. 
    An increase in price in a good with an elastic demand decreases total revenue, while it increase if the good has an inelastic demand. 
    • A. 

      True

    • B. 

      False

  • 18. 
    Which is not part of the general rules for demand elasticity? 
    • A. 

      When demand is inelastic, price and total revenue moves in the same direction.

    • B. 

      When demand is elastic, price and total revenue moves in opposite directions.

    • C. 

      If demand is unit elastic, total revenue remains constant when the price changes.

    • D. 

      If demand is unit elastic, total revenue changes from one point to another in the demand curve.

  • 19. 
    Even though the slope of a linear demand curve is constant, the elasticity is not. 
    • A. 

      True

    • B. 

      False

  • 20. 
    In a linear demand curve, the demand curve is elastic at points with low price and high quantity; and the demand curve is inelastic at points with a high price and low quantity.
    • A. 

      True

    • B. 

      False

  • 21. 
    Normal goods have positive income elasticities, while inferior goods have negative income elasticties. 
    • A. 

      True

    • B. 

      False

  • 22. 
    Necessities tend to have small income elasticities. 
    • A. 

      True

    • B. 

      False

  • 23. 
    Luxuries tend to have small income elasticities. 
    • A. 

      True

    • B. 

      False

  • 24. 
    The cross-price elasticity of substitutes is negative while the cross-price elasticity of complements is positive. 
    • A. 

      True

    • B. 

      False

  • 25. 
    The law of supply states that higher prices decrease the quantity supplied. 
    • A. 

      True

    • B. 

      False