Deck 4: Using Supply and Demand

Question 1

If the elasticity of demand for mothballs is 0.50, then moving along the demand for mothballs:

A)A 20% rise in the price of mothballs will lead to a 10% fall in the quantity of mothballs demanded.
B)A 10% rise in the price of mothballs will lead to a 20% fall in the quantity of mothballs demanded.
C)A 20% rise in the price of mothballs will lead to a 10% rise in the quantity of mothballs demanded.
D)A 10% rise in the price of mothballs will lead to a 20% rise in the quantity of mothballs demanded.

Answer 1

A

Question 2

When demand is elastic:

A)price elasticity of demand is greater than one.
B)consumers are relatively responsive to changes in price.
C)the percentage change in quantity demanded resulting from a price change is greater than the percentage change in price.
D)all of the above are correct.

Answer 2

D

Question 3

The price elasticity of demand coefficient for gourmet coffee is estimated to be equal to 1.6.It is expected, therefore, that a 5% increase in price would lead to:

A)a 16% decrease in the quantity of gourmet coffee demanded.
B)a 16% increase in the quantity of gourmet coffee demanded.
C)an 8% decrease in the quantity of gourmet coffee demanded.
D)an 8% increase in the quantity of gourmet coffee demanded.
E)a 1.6% decrease in the quantity of gourmet coffee demanded.

Answer 3

C

Question 4

If the demand curve is perfectly elastic, the elasticity coefficient is ____ and the curve is ____.

A)zero, vertical
B)infinity, horizontal
C)horizontal
D)infinity, vertical
E)less than 1, vertical

Question 5

For a given increase in price, a greater elasticity of demand will result in a greater

A)increase in quantity demanded.
B)increase in demand.
C)decrease in quantity demanded.
D)decrease in demand.

Question 6

Demand is said to be ____ when the quantity demanded is very responsive to changes in price.

A)independent
B)inelastic
C)unit elastic
D)elastic
E)flexible

Question 7

The Shoe Emporium reduces the price of its shoes by 50% and finds that the quantity demanded for its shoes more than doubles.The demand for shoes from The Shoe Emporium appears to be:

A)inelastic.
B)elastic.
C)unit elastic.
D)unit inelastic.
E)perfectly inelastic.

Question 8

Which of the following is false?

A)The price elasticity of demand measures the responsiveness of quantity demanded to a change in price.
B)The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.
C)If demand is elastic, it means the quantity demanded changes by a relatively larger amount than the price change.
D)If demand is inelastic, it means the quantity demanded changes by a relatively smaller amount than the price change.
E)All of the above are true.

Question 9

Fantastic Cuts Hair Salon knows that a 15% increase in the price of their haircuts will result in a 5% decrease in the number of haircuts sold.What is the elasticity of demand facing Fantastic Cuts?

A)0.05
B)0.10
C)0.15
D)0.33
E)3.0

Question 10

If the demand is perfectly elastic, what would happen to the quantity demanded if there is a tiny increase in price?

A)quantity demanded will increase proportionately
B)quantity demanded will fall to zero
C)quantity demanded will register a disproportionately high increase
D)quantity demanded will decrease proportionately
E)quantity demanded will remain the same

Question 11

Bailey's Barber Shop knows that a 5% increase in the price of their haircuts results in a 15% decrease in the number of haircuts purchased.What is the elasticity of demand facing Bailey's Barber Shop?

A)0.05
B)0.10
C)0.15
D)0.33
E)3.0

Question 12

If the elasticity of demand coefficient for a good is one-sixth (in absolute terms), we know:

A)that for every 1% increase in quantity, there will be a 6% increase in price.
B)that for every 1% increase in quantity, there will be a 6% decrease in price.
C)that for every 6% increase in quantity, there will be a 1% increase in price.
D)that for every 6% increase in quantity, there will be a 1% decrease in price.

Question 13

A steel mill raises the price of steel by 7%, which results in a 20% reduction in the quantity of steel demanded.The demand curve facing this firm is:

A)elastic.
B)inelastic.
C)unit elastic.
D)unit inelastic.

Question 14

If the demand is perfectly inelastic, what would happen to the quantity demanded if there is a tiny increase in price?

A)quantity demanded will increase proportionately
B)quantity demanded will fall to zero
C)quantity demanded will register a disproportionately high increase
D)quantity demanded will decrease proportionately
E)quantity demanded will remain the same

Question 15

Price elasticity of demand is defined as:

A)the slope of the demand curve.
B)the slope of the demand curve divided by the price.
C)the percentage change in price divided by the percentage change in quantity demanded.
D)the percentage change in quantity demanded divided by the percentage change in price.
E)the inverse of the price elasticity of supply.

Question 16

A steel mill raises the price of steel by 20%, which results in a 7% reduction in the quantity of steel demanded.The demand curve facing this firm is:

A)elastic.
B)inelastic.
C)unit elastic.
D)unit inelastic.

Question 17

If the elasticity of demand coefficient for a good is 6 (in absolute terms), we know:

A)that for every 1% increase in quantity, there will be a 6% increase in price.
B)that for every 1% increase in quantity, there will be a 6% decrease in price.
C)that for every 6% increase in quantity, there will be a 1% increase in price.
D)that for every 6% increase in quantity, there will be a 1% decrease in price.

Question 18

A movie theatre raises its admission prices by 10%, which results in a 10% reduction in the quantity of tickets demanded.The demand curve facing this firm is:

A)elastic.
B)inelastic.
C)unit elastic.
D)unit inelastic.

Question 19

If the price elasticity of demand was 4.0 (in absolute terms), a 10% off sale would lead to:

A)a 40% increase in purchases by customers.
B)a 40% decrease in purchases by customers.
C)a 2.5% increase in purchases by customers.
D)a 2.5% decrease in purchases by customers.
E)none of the above

Question 20

Demand is said to be ____ when the quantity demanded changes the same proportion as the price.

A)independent
B)inelastic
C)unit elastic
D)elastic
E)flexible

Question 21

Which of the following is not a major determinant of the price elasticity of demand?

A)availability of close substitutes
B)proportion of income spent on the good
C)quantity of goods available
D)amount of time that has elapsed since the price change

Question 22

What type of demand curve is depicted by the graph below?

A)perfectly elastic
B)relatively elastic
C)unit elastic
D)relatively inelastic
E)perfectly inelastic

Question 23

Which of the following is associated with inelastic demand?

A)a limited amount of time for consumers to respond to a price change
B)availability of many close substitutes
C)large percentage of income spent on the good in question
D)all of the above

Question 24

If the demand curve is perfectly elastic, then an increase in supply will:

A)increase both the price and the quantity exchanged.
B)increase the price but result in no change in the quantity exchanged.
C)increase the quantity exchanged but result in no change in the price.
D)decrease the price but result in no change in the quantity exchanged.
E)do none of the above.

Question 25

What type of demand curve is depicted by the graph below?

A)perfectly elastic
B)relatively elastic
C)unit elastic
D)relatively inelastic
E)perfectly inelastic

Question 26

Which of the following is most likely to feature inelastic demand with regard to price?

A)a Rooms To Go chair
B)an inflatable chair with the logo of the local football team
C)an old recliner
D)an authentic Queen Anne chair

Question 27

Which of the following would most likely feature elastic demand?

A)heart surgery
B)a required textbook
C)fresh green beans
D)all of the above
E)none of the above

Question 28

If the demand curve for a product is horizontal, then the elasticity of demand is:

A)equal to zero.
B)equal to one.
C)greater than one, but less than infinity.
D)equal to infinity.

Question 29

What type of demand curve is depicted by the graph below?

A)perfectly inelastic
B)perfectly elastic
C)unit elastic
D)relatively inelastic

Question 30

If makers of snake antivenom implement significant price increases, it is unlikely to significantly affect the use of antivenom for treating poisonous snakebites.The demand for antivenom among users is:

A)elastic.
B)inelastic.
C)unit elastic.
D)unit inelastic.

Question 31

If the demand curve is perfectly inelastic, then an increase in supply will:

A)increase both the price and the quantity exchanged.
B)increase the price but result in no change in the quantity exchanged.
C)increase the quantity exchanged but result in no change in the price.
D)decrease the price but result in no change in the quantity exchanged.
E)do none of the above.

Question 32

If the demand curve for a product is vertical, then the elasticity of demand is:

A)equal to zero.
B)equal to one.
C)greater than one, but less than infinity.
D)equal to infinity.

Question 33

Which of the following is associated with elastic demand?

A)availability of many close substitutes
B)a greater amount of time for consumers to respond to a price change
C)a large percentage of income spent on the good in question
D)all of the above

Question 34

If demand is unit elastic:

A)revenue and prices rise and fall together.
B)revenue rises as price falls.
C)revenue falls as price rises.
D)revenue remains constant as price rises or falls.

Question 35

If the demand curve for a life-saving medicine is perfectly inelastic, a reduction in supply will cause the equilibrium price to:

A)rise and the equilibrium quantity to fall.
B)rise and the equilibrium quantity to stay the same.
C)rise and the equilibrium quantity to rise.
D)stay the same and the equilibrium quantity to fall.
E)fall and the equilibrium quantity to stay the same.

Question 36

Which of the following is associated with relatively elastic demand?

A)Few substitutes; large portion of income; short time span
B)Many substitutes; large portion of income; long time span
C)Few substitutes; small portion of income; short time span
D)Many substitutes; small portion of income; long time span

Question 37

Put the following products in order from the least to the most elastic demand: Domino's pizza, pizza, and pizza from Domino's on the corner of Main Street and 8th Avenue.

A)Domino's pizza; pizza; pizza from Domino's on the corner of Main Street and 8th Avenue
B)pizza; pizza from Domino's on the corner of Main Street and 8th Avenue; Domino's pizza
C)pizza; Domino's pizza; pizza from Domino's on the corner of Main Street and 8th Avenue
D)pizza from Domino's on the corner of Main Street and 8th Avenue; Domino's pizza; pizza
E)pizza from Domino's on the corner of Main Street and 8th Avenue; pizza; Domino's pizza

Question 38

The longer the time period considered, the price elasticity of demand tends to:

A)decrease.
B)remain constant.
C)increase.
D)converge to zero.

Question 39

If a small change in price will lead to an infinite change in the quantity demanded, then the demand curve is:

A)horizontal.
B)vertical.
C)inclined.
D)non-linear

Question 40

The long-run demand curve for wheat is likely to be:

A)more elastic than the short-run demand curve for wheat.
B)more inelastic the short-run demand curve for wheat.
C)the same as the short-run demand curve for wheat.
D)more inelastic than the short-run supply of wheat.

Question 41

If 400 apple pies are sold at $4 per pie, but 500 apple pies are sold at $3 per pie, we know from the total revenue rule:

A)that the demand for pies is elastic over that price range.
B)that the demand for pies is inelastic over that price range.
C)that the demand for pies is unit elastic over that price range.
D)nothing about the elasticity of demand.

Question 42

When demand is relatively inelastic, a 5% increase in price will:

A)increase total revenue by more than 5%.
B)increase total revenue by less than 5%.
C)decrease total revenue by more than 5%.
D)decrease total revenue by more than 5%.
E)decrease total revenue, but it is unknown whether it will be by more or less than 10%.

Question 43

Total revenue represents the amount that:

A)sellers receive for a good or service which is computed as P÷Q.
B)sellers receive for a good or service which is computed as PxQ.
C)one buyer spends on a good or service which is computed as PxQ.
D)one buyer spends on a good or service which is computed as P÷Q.
E)one buyer spends on a good or service which is computed as Q÷P.

Question 44

If the elasticity of demand for bangles is equal to 1, moving along the demand curve for bangles, an increase in price will:

A)not affect the quantity purchased.
B)increase the quantity demanded and increase total revenue.
C)increase the quantity demanded and decrease total revenue.
D)increase the quantity demanded and leave total revenue unchanged.

Question 45

A jeweler cut prices in his store by 20% and the dollar value of his sales fell by 20%.This is indicative of:

A)elastic demand.
B)inelastic demand.
C)unit elastic demand.
D)a vertical demand curve.
E)none of the above.

Question 46

The price elasticity of demand for tickets to local hockey matches is estimated to be equal to 0.89.In order to boost ticket revenues, an economist would advise:

A)decreasing the price of hockey match tickets because demand is elastic.
B)increasing the price of hockey match tickets because demand is elastic.
C)not changing the price of hockey match tickets because demand is unit elastic.
D)decreasing the price of hockey match tickets because demand in inelastic.
E)increasing the price of hockey match tickets because demand is inelastic.

Question 47

The elasticity in the vicinity of five different points along a demand curve varies as follows: $\begin{array}{lcccc}\text { Point } & \text { A } & \text { B } & \text { C } & \text { D }&\text {E} \\\text { Elasticity } & 1.25 & 0.3 & 1.0 & 0.2&2.1\end{array}$
At which of these points would a price increase be accompanied by an increase in total revenue?

A)B and D
B)A and E
C)A, C, and E
D)A and D

Question 48

If most passenger trains operate far below full capacity and demand is ____, reducing travel fares would be likely to increase total revenue.

A)inelastic
B)unit elastic
C)unit inelastic
D)elastic
E)perfectly inelastic

Question 49

A 25% decrease in the price of breakfast cereal leads to a 20% increase in the quantity of cereal demanded.As a result:

A)total revenue will decrease.
B)total revenue will increase.
C)total revenue will remain constant.
D)the elasticity of demand will increase.

Question 50

If an increase in price causes total expenditure on a product to decrease, then the price elasticity of demand is:

A)inelastic.
B)elastic.
C)unit elastic.
D)zero.

Question 51

A price cut will increase the total revenue a firm receives if the demand for its product is:

A)elastic.
B)inelastic.
C)unit elastic.
D)unit inelastic.

Question 52

A price cut will decrease the total revenue a firm receives if the demand for its product is:

A)elastic.
B)inelastic.
C)unit elastic.
D)unit inelastic.

Question 53

If the short run elasticity of demand for a good was greater than 1, an increase in the price of the good would tend to:

A)increase total revenue in both the short run and the long run.
B)increase total revenue in the short run but not the long run.
C)decrease total revenue in the short run and the long run, but by more in the short run.
D)decrease total revenue in the short run and the long run, but by more in the long run.

Question 54

A "war on drugs" is waged, and, as a result, a larger quantity of drugs flowing into the United States is seized and more drug traffickers are arrested.If demand for drugs is inelastic, one would expect the total expenditure on drugs to:

A)decrease.
B)increase.
C)stay constant.
D)There is not enough information available to make a determination.

Question 55

A decrease in demand will:

A)reduce total revenue.
B)increase total revenue.
C)increase total revenue only if demand is inelastic.
D)increase total revenue only if demand is elastic.

Question 56

The elasticity in the vicinity of five different points along a demand curve varies as follows: $\begin{array}{lcccc}\text { Point } & \text { A } & \text { B } & \text { C } & \text { D }&\text {E} \\\text { Elasticity } & 1.25 & 0.3 & 1.0 & 0.2&2.1\end{array}$ In the vicinity of which of these points would a price decrease be accompanied by an increase in total revenue?

A)B and D
B)A and E
C)A and D
D)B, C, and D

Question 57

If a university charged a lower price for tuition during summer school than during the regular session, in search of added total revenue,

A)administrators likely believe that demand is more elastic during summer school than during the regular session.
B)administrators likely believe that demand is less elastic during summer school than during the regular session.
C)it indicates nothing about likely differences in the elasticity of demand during summer school than during the regular session.
D)administrators likely believe that demand is both lower and less elastic during summer school than during the regular session.

Question 58

If 400 apple pies are sold at $4 per pie, but 600 apple pies are sold at $3 per pie, we know from the total revenue rule:

A)that the demand for pies is elastic over that price range.
B)that the demand for pies is inelastic over that price range.
C)that the demand for pies is unit elastic over that price range.
D)nothing about the elasticity of demand.

Question 59

A 10% decrease in the price of energy bars leads to a 20% increase in the quantity of energy bars demanded.It appears that:

A)demand is inelastic and total revenue will decrease.
B)demand is inelastic and total revenue will increase.
C)demand is unit elastic and total revenue will remain constant.
D)demand is elastic and total revenue will decrease.
E)demand is elastic and total revenue will increase.

Question 60

When the price of ulcer medication increased by $20 per 100 tablets, a drug company's revenue increased by $10 million.Its elasticity of demand coefficient (in absolute terms) must be:

A)zero.
B)greater than one.
C)less than one.
D)infinitely large.
E)indeterminate.

Question 61

Ceteris paribus, if an 8% increase in price leads to a 6% increase in the quantity supplied, then:

A)supply is elastic.
B)supply is unit elastic.
C)supply is inelastic.
D)the supply curve is perfectly vertical.
E)the supply curve is perfectly horizontal.

Question 62

If the elasticity of supply coefficient for a good is 6, we know:

A)that for every 1% increase in quantity, there will be a 6% increase in price.
B)that for every 1% increase in quantity, there will be a 6% decrease in price.
C)that for every 6% increase in quantity, there will be a 1% increase in price.
D)that for every 6% increase in quantity, there will be a 1% decrease in price.

Question 63

If the elasticity of supply of bangles is equal to 1, moving along the supply curve for bangles, an increase in price will:

A)not affect the quantity purchased.
B)increase the quantity supplied and increase total revenue.
C)increase the quantity supplied and decrease total revenue.
D)increase the quantity supplied and leave total revenue unchanged.

Question 64

The elasticity of supply coefficient for bicycles is estimated to be equal to 1.5.It is expected, therefore, that a 4% increase in price would lead to:

A)a 4% decrease in the quantity of bicycles supplied.
B)a 4% increase in the quantity of bicycles supplied.
C)a 6% decrease in the quantity of bicycles supplied.
D)a 6% increase in the quantity of bicycles supplied.
E)a 1.5% decrease in the quantity of bicycles supplied.

Question 65

The following schedule represents a portion of Tim's demand for video rentals each month. $\begin{array}{cc}\text { Price } & \text { Quantity Demanded } \\&\text { per Month }\\\$4&8\\\$3&9\\\$2&10\end{array}$

Along this portion of Tim's demand curve for video rentals, price elasticity of demand is:

A)equal to zero.
B)less than one.
C)equal to one.
D)greater than one.
E)infinite.

Question 66

The elasticity of supply coefficient for lobster is estimated to be equal to 0.6.It is expected, therefore, that a 10% decrease in price would lead to:

A)a 6% decrease in the quantity of lobsters supplied.
B)a 6% increase in the quantity of lobsters supplied.
C)a 10% decrease in the quantity of lobsters supplied.
D)a 10% increase in the quantity of lobsters supplied.
E)a 0.6% increase in the quantity of lobsters supplied.

Question 67

If the elasticity of supply of a good was 2, how much would the price have to increase to lead to an increase in output of 6 percent?

A)3 percent.
B)4 percent.
C)8 percent.
D)12 percent.

Question 68

Which of the following is false?

A)The price elasticity of supply measures the sensitivity of the quantity supplied to the changes in the price of the good.
B)The price elasticity of supply is defined at the percentage change in the quantity supplied divided by the percentage change in price.
C)Goods with a supply elasticity that is greater than 1 are called relatively elastic in supply.
D)When supply is inelastic, a 1 percent change in the price of a good will induce a more than 1 percent change in the quantity supplied.
E)Time is usually critical in supply elasticities, because it is more costly for producers to bring forth and release resources in a shorter period of time.

Question 69

If the measured elasticity of supply coefficient equals 0.6, then supply is:

A)perfectly elastic.
B)elastic.
C)unit elastic.
D)inelastic.
E)perfectly inelastic.

Question 70

Ceteris paribus, if a 4% increase in price leads to a 6% increase in the quantity supplied, then:

A)supply is elastic.
B)supply is unit elastic.
C)supply is inelastic.
D)the supply curve is perfectly vertical.
E)the supply curve is perfectly horizontal.

Question 71

Supply is said to be ____ when the quantity supplied is not very responsive to changes in price.

A)independent
B)inelastic
C)unit elastic
D)elastic
E)flexible

Question 72

For a given increase in price, the greater is the elasticity of supply, the greater is the resulting

A)decrease in quantity supplied.
B)decrease in supply.
C)increase in quantity supplied.
D)increase in supply.

Question 73

Assume the price of widgets increases by 22 percent and the quantity supplied increases by 27 percent as a result.The elasticity of supply coefficient is:

A)greater than 1, implying that widgets are normal goods.
B)less than 1, implying that widgets are inferior goods.
C)greater than 1, implying that supply is elastic.
D)greater than 1, implying that supply is inelastic.

Question 74

Along a supply curve, a decrease in price will increase total revenue:

A)only if supply is elastic.
B)only if supply is inelastic.
C)only if supply is unit elastic.
D)under no circumstances.
E)in none of the above situations.

Question 75

Supply is said to be ____ when the quantity supplied is very responsive to changes in price.

A)independent
B)inelastic
C)unit elastic
D)elastic
E)flexible

Question 76

The following schedule represents a portion of Kate's demand for sub sandwiches. $\begin{array}{cc}\text { Price } & \text { Quantity Demanded } \\&\text { per Month }\\\$6&3\\\$5&5\\\$4&8\end{array}$
Along this portion of Kate's demand curve for sub sandwiches, price elasticity of demand is:

A)equal to zero.
B)less than one.
C)equal to one.
D)greater than one.
E)infinite.

Question 77

The elasticity of supply is defined as the ____ change in quantity supplied divided by the ____ change in price.

A)total; percentage
B)percentage; marginal
C)marginal; percentage
D)percentage; percentage
E)total; total

Question 78

Evaluate the following statements: (I) The slope of the demand curve is always equal to the elasticity of demand.
(II) Moving down alone a downward-sloping straight-line demand curve, the elasticity of demand fallf.

A)(I) and (II) are both true.
B)(I) is true and (II) is false.
C)(I) is false and (II) is true.
D)(I) and (II) are both false.

Question 79

If the measured elasticity of supply coefficient equals 1.3, then supply is:

A)perfectly elastic.
B)elastic.
C)unit elastic.
D)inelastic.
E)perfectly inelastic.

Question 80

If the supply curve for a product is vertical, then the elasticity of supply is:

A)equal to zero.
B)equal to one.
C)greater than one but less than infinity.
D)equal to infinity.