Question 1

If demand is __________ and price is _________,total revenue will ________.
A)inelastic;raised;increase
B)elastic;raised;increase
C)inelastic;lowered;increase
D)elastic;lowered;decrease

Accepted Answer

When demand is inelastic (meaning the quantity demanded is not very responsive to changes in price) and price is raised, total revenue will increase. This is because the increase in price will be offset by only a small decrease in quantity demanded, resulting in higher total revenue.

Question 2

The basic effect of a tax on a service is to _____ that service.
A)decrease the supply of
B)increase the supply of
C)decrease the demand for
D)increase the demand for

Accepted Answer

A tax on a service increases the cost of providing that service, which typically leads to a decrease in the supply of that service as providers may reduce the quantity offered at the original price.

Question 3

-In the graph above
A)D1 is more inelastic than D2.
B)D2 is more inelastic than D1.
C)D1 and D2 have the same elasticity.
D)There is no way to tell whether D1 or D2 is more elastic.

Accepted Answer

A demand curve is more inelastic if it is steeper. If D1 is steeper than D2, then D1 is more inelastic than D2.

Question 4

-How much is the tax?
A)10 cents
B)20 cents
C)30 cents
D)40 cents
E)50 cents

Accepted Answer

The answer of 
-How much is the tax?
A)10 cents
B)20 cents
C)30...

Question 5

An elasticity that would be considered only slightly inelastic would be
A)0.1.
B)0.9.
C)1.0.
D)1.1.

Accepted Answer

An elasticity of 0.9 indicates that a 1% change in price would lead to a 0.9% change in quantity demanded. This suggests that the good is somewhat responsive to changes in price, but not extremely sensitive.

Question 6

Advertisers try to
A)raise the demand for their product and make it more elastic.
B)raise the demand for their product and make it less elastic.
C)lower the demand for their product and make it more elastic.
D)lower the demand for their product and make it less elastic.

Accepted Answer

Advertisers aim to create a perceived need or desire for their product, pushing the demand curve to the right. This would make the demand more elastic because consumers have more substitutes to choose from, making them more price-sensitive. However, by creating a strong brand image or emotional connection, advertisers can differentiate their product and decrease its substitutability, making the demand less elastic. Therefore, advertisers would try to raise the demand for their product and make it less elastic.

Question 7

In general taxes on goods and services
A)are borne mainly by consumers.
B)are borne mainly by sellers.
C)are borne equally by consumers and sellers.
D)may be paid mainly or entirely by buyers or it may be paid mainly or entirely by sellers,or may be paid equally by buyers and sellers.

Accepted Answer

The incidence of taxes on goods and services depends on the relative elasticity of demand and supply. If demand is more elastic than supply, sellers bear a larger share of the tax burden. If supply is more elastic than demand, consumers bear a larger share. Therefore, the tax burden can vary significantly, being borne mainly by buyers, mainly by sellers, or shared between both.

Question 8

-A shift in the above graph from S1 to S2 may represent
A)a tax increase.
B)a tax decrease.
C)the imposition of a price ceiling.
D)the imposition of a price floor.

Accepted Answer

A tax increase would shift the supply curve to the left, from S1 to S2.

Question 9

Statement I: A perfectly elastic demand curve has the same elasticity as a perfectly inelastic demand curve.
Statement II: When elasticity is .2,a 1% decline in price will raise quantity demanded by .2%.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Accepted Answer

Statement I is false because a perfectly elastic demand curve has an elasticity of infinity, which is not the same as the elasticity of a perfectly inelastic demand curve, which has an elasticity of 0. 
Statement II is true because the elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. So if elasticity is 0.2, a 1% decline in price will raise quantity demanded by 0.2%.

Question 10

Over time,the supply of a particular good or service tends to
A)become more elastic.
B)become less elastic.
C)stay about the same.

Accepted Answer

Over time, the supply of a particular good or service tends to become more elastic because producers have more time to adjust their production processes, resources, and capacities in response to changes in market demand.

Question 11

A 4% decline in the price of laser printers causes the quantity demanded to rise by 8%.The demand for laser printers is
A)perfectly elastic.
B)elastic.
C)unit elastic.
D)inelastic.
E)perfectly inelastic.

Accepted Answer

The fact that a 4% decline in price causes a relatively large 8% increase in quantity demanded indicates that the demand for laser printers is relatively elastic, as consumers are very responsive to changes in price.

Question 12

A perfectly inelastic supply curve is
A)horizontal.
B)vertical.
C)positively sloped.
D)negatively slopeD.

Accepted Answer

A perfectly inelastic supply curve means that the quantity supplied does not change with a change in price. Therefore, the supply curve is perfectly vertical, or inelastic.

Question 13

If the supply of steel is perfectly elastic,then an increase in the demand for steel will
A)increase the price of steel but have no effect on quantity supplied.
B)increase the quantity of steel supplies but have no effect on the price.
C)have no effect on the price or the quantity supplied.
D)decrease total revenue taken in by steel producers.

Accepted Answer

If the supply of steel is perfectly elastic, it means the quantity supplied can be increased without an increase in price. Therefore, an increase in demand for steel will only lead to an increase in the quantity supplied but not the price. This is because suppliers can easily adjust their output to meet the demand without affecting the price.

Question 14

-How much revenue will the government raise each week from the tax?
A)$8 million
B)$10 million
C)$20 million
D)$40 million
E)$80 million

Accepted Answer

The tax is 10% of $80 million, which is $8 million.

Question 15

When demand is perfectly inelastic the buyer pays _____ of a tax.
A)all
B)most
C)half
D)less than half
E)none

Accepted Answer

When demand is perfectly inelastic, it means that the quantity demanded does not change regardless of any change in price. This implies that the burden of a tax will fall entirely on the buyer, and as a result, the buyer will end up paying all of the tax. Therefore, the best answer is A, "all".

Question 16

If the price elasticity of supply for a good increases over time
A)quantity supplied becomes more sensitive to price.
B)quantity demanded is not sensitive to price.
C)quantity supplied becomes less sensitive to price.
D)quantity demanded is very sensitive to price.

Accepted Answer

An increase in the price elasticity of supply means that the percentage change in quantity supplied is more responsive to a percentage change in price. This indicates that quantity supplied becomes more sensitive to price, making choice A the correct answer.

Question 17

-The curve in the above graph:
A)can only be a perfectly inelastic demand curve.
B)can only be a perfectly inelastic supply curve.
C)may be either a perfectly inelastic demand curve or a perfectly inelastic supply curve.
D)can be neither a perfectly inelastic demand curve nor a perfectly inelastic supply curve.

Accepted Answer

The curve could be either a perfectly inelastic demand curve or a perfectly inelastic supply curve because both would be completely vertical, showing that quantity demanded or supplied would not change with a change in price. However, it could not be a perfectly elastic demand or supply curve because those would be completely horizontal, showing that quantity demanded or supplied would infinitely increase or decrease with a small change in price.

Question 18

Statement I: A perfectly inelastic demand curve and a perfectly elastic supply curve are represented the same way on a graph.
Statement II: A perfectly elastic demand curve and a perfectly elastic supply curve are represented the same way on a graph.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Accepted Answer

Statement I is false because a perfectly inelastic demand curve is represented by a vertical line, while a perfectly elastic supply curve is represented by a horizontal line. Statement II is true because both perfectly elastic demand and supply curves are represented by horizontal lines, indicating that any quantity is demanded or supplied at a specific price.

Question 19

If demand is __________ and price is _________,total revenue will ________.
A)inelastic;raised;increase
B)inelastic;lowered;decrease
C)elastic;raised;decrease
D)elastic;lowered;increase
E)All of these options are true.

Accepted Answer

All options are true because they correctly describe the relationship between elasticity, price changes, and total revenue.

Question 20

Suppose a tax were imposed on motel rooms in the San Antonio area.If demand were slightly elastic and supply were very inelastic,the tax would be borne
A)entirely by motel owners
B)mainly by motel owners
C)mainly by motel renters
D)entirely by motel renters

Accepted Answer

When demand is slightly elastic and supply is very inelastic, the burden of the tax falls mainly on the suppliers (motel owners in this case) because the suppliers are less able to pass the tax onto consumers due to their inelastic supply curve.

Quiz 18: The Price Elasticities of Demand and Supply

If demand is ______ and price is _,total revenue will ____.

The basic effect of a tax on a service is to _____ that service.

-In the graph above

-How much is the tax?

An elasticity that would be considered only slightly inelastic would be

Advertisers try to

In general taxes on goods and services

-A shift in the above graph from S1 to S2 may represent

Statement I: A perfectly elastic demand curve has the same elasticity as a perfectly inelastic demand curve. Statement II: When elasticity is .2,a 1% decline in price will raise quantity demanded by .2%.

Over time,the supply of a particular good or service tends to

A 4% decline in the price of laser printers causes the quantity demanded to rise by 8%.The demand for laser printers is

A perfectly inelastic supply curve is

If the supply of steel is perfectly elastic,then an increase in the demand for steel will

-How much revenue will the government raise each week from the tax?

When demand is perfectly inelastic the buyer pays _____ of a tax.

If the price elasticity of supply for a good increases over time

-The curve in the above graph:

Statement I: A perfectly inelastic demand curve and a perfectly elastic supply curve are represented the same way on a graph. Statement II: A perfectly elastic demand curve and a perfectly elastic supply curve are represented the same way on a graph.

If demand is ______ and price is _,total revenue will ____.

Suppose a tax were imposed on motel rooms in the San Antonio area.If demand were slightly elastic and supply were very inelastic,the tax would be borne