Question 1

In the case of a price floor,

Accepted Answer

A)   there will be a shortage.
B)   there is no need for government to buy any excess.
C)   government must require producers to increase production to meet demand.
D)   there is a redistribution of income from consumers to producers.
E)   supply decreases.F) None of the above
G) C) and D)

Question 2

Give four instances that cause price elasticity to vary. Explain.

Accepted Answer

Substitutability. The easier it is to fi...

Question 3

Suppose demand is a straight line as follows: Qd = 100 - 2P. Calculate the price elasticity of demand between the prices of $41 and $43.

Accepted Answer

100 - 2(41) = 18 = Q...

Question 4

A price floor that is effective results in a surplus.

Accepted Answer

A) True 
 B)False

Question 5

Supply may be elastic, unit elastic, or inelastic.

Accepted Answer

A) True 
 B)False

Question 6

A perfectly inelastic demand curve has a price elasticity

Accepted Answer

A)   equal to zero.
B)   that varies.
C)   equal to 1.
D)   less than 1.
E)   of infinity.F) A) and E)
G) None of the above

Question 7

One of the results of a price ceiling is a decline in the quality of the good sold.

Accepted Answer

A) True 
 B)False

Question 8

If a price ceiling is imposed on a good, then a shortage for that good will occur.

Accepted Answer

A) True 
 B)False

Question 9

The elasticity of demand is lower for European vehicles than for U.S. vehicles. Why do auto dealers offer substantially fewer discounts for European vehicles than for U.S. vehicles?

Accepted Answer

When the elasticity of demand is higher,...

Question 10

The price elasticity of demand is expressed as the

Accepted Answer

A)   percentage change in the quantity demanded divided by the percentage change in income.
B)   percentage change in the price divided by the percentage change in the quantity demanded.
C)   percentage change in the quantity demanded divided by the percentage change in the price.
D)   percentage change in supply divided by the percentage change in demand.
E)   absolute change in the quantity demanded divided by the absolute change in the price.F) B) and D)
G) A) and D)

Question 11

Does a price floor result in a shortage or a surplus? Why?

Accepted Answer

A price floor results in a sur...

Question 12

Explain why economists care about the price elasticity of demand. What does it tell us?

Accepted Answer

The price elasticity of demand tells us ...

Question 13

For demand to be elastic,

Accepted Answer

A)   the percentage change in quantity demanded must be greater than the associated percentage change in price.
B)   demand must change with a change in price.
C)   the percentage change in quantity demanded must be less than the associated percentage change in price.
D)   the percentage change in quantity demanded must be equal to the associated percentage change in price.
E)   quantity demanded must change with a change in price.F) C) and D)
G) B) and E)

Question 14

If demand is perfectly inelastic, then the

Accepted Answer

A)   quantity demanded does not change when price changes.
B)   demand curve is nonexistent.
C)   elasticity of demand is -1.
D)   elasticity of demand is 1.
E)   demand curve is a horizontal line.F) A) and D)
G) C) and D)

Question 15

A horizontal demand curve is

Accepted Answer

A)   unit elastic.
B)   relatively inelastic.
C)   relatively elastic.
D)   perfectly inelastic.
E)   perfectly elastic.F) C) and E)
G) A) and B)

Question 16

Along a downward-sloping, straight-line demand curve, total revenue is greatest where demand is

Accepted Answer

A)   inelastic.
B)   perfectly inelastic.
C)   perfectly elastic.
D)   elastic.
E)   unit elastic.F) All of the above
G) C) and D)

Question 17

The price elasticity of demand measures how much price changes given a change in demand.

Accepted Answer

A) True 
 B)False

Question 18

Assume that a firm makes available 50 more units of a good at a price of $2 than it made available when the price was $1. What is the price elasticity of supply?

Accepted Answer

A)   It cannot be determined from the information given.
B)   .02
C)   25
D)   50
E)   .04F) A) and D)
G) None of the above

Question 19

Consider two demand curves with different slopes. It is possible to predict ranges on each demand curve where the price elasticities of demand will be different.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements about the price elasticity of demand is true?

Accepted Answer

A)   Slope and elasticity measure the same things.
B)   Price elasticity of demand varies depending on how price and quantity are measured.
C)   It is important to know whether the price elasticity of demand is a positive or negative number.
D)   The slope of a demand curve does not tell us the price elasticity of demand.
E)   Price elasticity is the same everywhere along a demand curve of any shape.F) None of the above
G) A) and C)

Exam 4: Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

Give four instances that cause price elasticity to vary. Explain.

Correct AnswerverifiedSubstitutability. The easier it is to fi...View AnswerShow Answer

Explain why economists care about the price elasticity of demand. What does it tell us?

Correct AnswerverifiedThe price elasticity of demand tells us ...View AnswerShow Answer

Along a downward-sloping, straight-line demand curve, total revenue is greatest where demand is

Correct AnswerverifiedShow Answer

A horizontal demand curve is

Correct AnswerverifiedShow Answer

Does a price floor result in a shortage or a surplus? Why?

Correct AnswerverifiedA price floor results in a sur...View AnswerShow Answer

A perfectly inelastic demand curve has a price elasticity

Correct AnswerverifiedShow Answer

Suppose demand is a straight line as follows: Qd = 100 - 2P. Calculate the price elasticity of demand between the prices of $41 and $43.

Correct Answerverified100 - 2(41) = 18 = Q...View AnswerShow Answer

If demand is perfectly inelastic, then the

Correct AnswerverifiedShow Answer

For demand to be elastic,

Correct AnswerverifiedShow Answer

Supply may be elastic, unit elastic, or inelastic.

Correct AnswerverifiedShow Answer

Consider two demand curves with different slopes. It is possible to predict ranges on each demand curve where the price elasticities of demand will be different.

Correct AnswerverifiedShow Answer

The price elasticity of demand measures how much price changes given a change in demand.

Correct AnswerverifiedShow Answer

The price elasticity of demand is expressed as the

Correct AnswerverifiedShow Answer

If a price ceiling is imposed on a good, then a shortage for that good will occur.

Correct AnswerverifiedShow Answer

Assume that a firm makes available 50 more units of a good at a price of $2 than it made available when the price was $1. What is the price elasticity of supply?

Correct AnswerverifiedShow Answer

In the case of a price floor,

Correct AnswerverifiedShow Answer

Which of the following statements about the price elasticity of demand is true?

Correct AnswerverifiedShow Answer

A price floor that is effective results in a surplus.

Correct AnswerverifiedShow Answer

One of the results of a price ceiling is a decline in the quality of the good sold.

Correct AnswerverifiedShow Answer

The elasticity of demand is lower for European vehicles than for U.S. vehicles. Why do auto dealers offer substantially fewer discounts for European vehicles than for U.S. vehicles?

Correct AnswerverifiedWhen the elasticity of demand is higher,...View AnswerShow Answer

Correct Answer
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Substitutability. The easier it is to fi...
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Correct Answer
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The price elasticity of demand tells us ...
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Correct Answer
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Correct Answer
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Correct Answer
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A price floor results in a sur...
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Correct Answer
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Suppose demand is a straight line as follows: Q_d = 100 - 2P. Calculate the price elasticity of demand between the prices of $41 and $43.

Correct Answer
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100 - 2(41) = 18 = Q...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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When the elasticity of demand is higher,...
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