Chapter 5

3. Demand is said to be ___________ when the quantity demanded is very responsive to changes in price. A. elastic B. unit elastic C. inelastic D. independent

A. elastic

15. If the supply curve for a product is horizontal, then the elasticity of supply is: A. equal to infinity. B. greater than 1 but less than infinity. C. equal to 1. D. equal to zero.

A. equal to infinity.

14. If the supply curve for a product is vertical, then the elasticity of supply is: A. equal to zero. B. equal to 1. C. greater than 1 but less than infinity. D. equal to infinity.

A. equal to zero.

11. The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise: A. increasing the price of game tickets because demand is inelastic. B. not changing the price of game tickets because demand is unit elastic. C. increasing the price of game tickets because demand is elastic. D. decreasing the price of game tickets because demand is elastic.

A. increasing the price of game tickets because demand is inelastic.

6. Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop? A. 0.15 B. 3.0 C. 0.10 D. 0.05

B. 3.0

17. Taxes on goods with __________ demand curves will tend to raise more tax revenue for the government than taxes on goods with __________ demand curves. A. elastic unit elastic B. elastic; inelastic C. inelastic; elastic D. unit elastic; inelastic

B. elastic; inelastic

8. If the demand curve is perfectly elastic, then an increase in supply will: A. decrease the price but result in no change in the quantity exchanged. B. increase the quantity exchanged but result in no change in the price. C. increase the price but result in no change in the quantity exchanged. D. increase both the price and the quantity exchanged.

B. increase the quantity exchanged but result in no change in the price.

20. The evidence on the supply curve of financial capital is controversial, but at least in the short run, the elasticity of savings with respect to the interest rate appears to be __________. A. elastic B. inelastic C. perfectly elastic D. negative

B. inelastic

4. Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price. A. independent B. inelastic C. unit elastic D. elastic

B. inelastic

7. If the demand curve for a life-saving medicine is perfectly inelastic, then 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.

B. rise and the equilibrium quantity to stay the same.

5. Demand is said to be __________ when the quantity demanded changes at the same proportion as the price. A. elastic B. unit elastic C. inelastic D. independent

B. unit elastic

9. Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve? A. 0.1 B. 0.8 C. 1.0 D. 10.0

C. 1.0

19. Youth smoking seems to be more __________ than adult smoking—that is, the quantity of youth smoking will fall by a greater percentage than the quantity of adult smoking in response to a given percentage increase in price. A. unitary elastic B. inelastic C. elastic D. cross-price elastic

C. elastic

16. The longer the time period considered, the more the elasticity of supply tends to: A. decrease B. remain constant C. increase D. converge to zero

C. increase

18. A demand or supply curve with ______________ would be horizontal in appearance. A. unitary elasticity B. zero elasticity C. infinite elasticity D. infinite cost elasticity

C. infinite elasticity

1. The price elasticity of demand measures the: A. responsiveness of quantity demanded to a change in quantity supplied. B. responsiveness of price to a change in quantity demanded. C. responsiveness of quantity demanded to a change in price. D. responsiveness of quantity demanded to a change in income.

C. responsiveness of quantity demanded to a change in price.

13. 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

D. elastic

10. A price cut will increase the total revenue a firm receives if the demand for its product is: A. unit inelastic. B. unit elastic. C. inelastic. D. elastic.

D. elastic.

12. 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

D. percentage; percentage

2. 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.

D. the percentage change in quantity demanded divided by the percentage change in price.