Macroeconomics 14th Canadian Edition By Mcconnell ET AL – Test Bank

 

 

To Purchase this Complete Test Bank with Answers Click the link Below

 

https://tbzuiqe.com/product/macroeconomics-14th-canadian-edition-by-mcconnell-et-al-test-bank/

 

If face any problem or Further information contact us At tbzuiqe@gmail.com

 

 

Sample Questions

 

Economics – Canadian Edition, 15e (Ragan)

Chapter 4   Elasticity

 

4.1  Price Elasticity of Demand

 

1) The price elasticity of demand measures the responsiveness of

1.    A) quantity demanded to changes in the price.

2.    B) the price to changes in quantity demanded.

3.    C) demand to supply changes.

4.    D) supply to demand changes.

5.    E) equilibrium changes.

Answer:  A

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

2) Consider two demand curves and the same price change for both. If the resulting percentage change in quantity demanded is greater for one (D1) than the other (D2), we can conclude

1.    A) that D1is inelastic and D2is elastic.

2.    B) that D1is elastic and D2is inelastic.

3.    C) that D2is more elastic than D1.

4.    D) that D1is more elastic than D2.

5.    E) nothing about their relative elasticities.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

3) When the percentage change in quantity demanded is greater than the percentage change in price that brought it about, demand is said to be

1.    A) zero elastic.

2.    B) unelastic.

3.    C) inelastic.

4.    D) unit elastic.

5.    E) elastic.

Answer:  E

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

4) When the percentage change in quantity demanded is less than the percentage change in price that brought it about, demand is said to be

1.    A) zero elastic.

2.    B) unelastic.

3.    C) inelastic.

4.    D) unit elastic.

5.    E) elastic.

Answer:  C

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

5) The formula for the price elasticity of demand for a commodity can be written as which of the following?

A)

B)

C)

D)

E)

Answer:  C

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

6) If demand is unit elastic at all prices, then the demand curve is

1.    A) a straight line.

2.    B) a parabola.

3.    C) a rectangular hyperbola.

4.    D) upward sloping.

5.    E) perfectly horizontal.

Answer:  C

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

7) A demand curve that is the shape of a rectangular hyperbola

1.    A) is elastic over the whole curve.

2.    B) is inelastic over the whole curve.

3.    C) is unit elastic over the whole curve.

4.    D) has the same elasticity as a straight-line demand curve.

5.    E) has an elasticity of 100% over the whole curve.

Answer:  C

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

8) If household income increases by 50% and desired household expenditure on vacation travel increases by 15%, the price elasticity of demand for vacation travel is

1.    A) elastic.

2.    B) inelastic.

3.    C) unity.

4.    D) positive.

5.    E) not determinable from the information given.

Answer:  E

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

9) If the price elasticity of demand is 0.5, then a 10% increase in price results in a

1.    A) 50% reduction in quantity demanded.

2.    B) 5% increase in quantity demanded.

3.    C) 5% decrease in total revenues.

4.    D) 5% decrease in quantity demanded.

5.    E) 0.5% decrease in quantity demanded.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

 

10) Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit. The price elasticity of demand for this product is

1.    A) 0.5.

2.    B) 1.0.

3.    C) 1.5.

4.    D) 2.0.

5.    E) 4.0.

Answer:  A

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

11) Suppose the price elasticity of demand for some good is 1.4.  A 10% increase in the price of the good results in

1.    A) a 1.4% decrease in the quantity demanded.

2.    B) a 1.4% increase in the quantity demanded.

3.    C) a 14% increase in the quantity demanded.

4.    D) a 14% decrease in the quantity demanded.

5.    E) There is not enough information to answer this question.

Answer:  D

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

12) If the value of the price elasticity of demand is 0.6, demand is said to be

1.    A) elastic.

2.    B) partially elastic.

3.    C) inelastic.

4.    D) partially inelastic.

5.    E) somewhat inelastic.

Answer:  C

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

 

13) Suppose that the quantity of lemonade demanded falls from 103 000 litres per week to 97 000 litres per week as a result of a 10% increase in its price. The price elasticity of demand for lemonade is therefore

1.    A) 0.6.

2.    B) 6.0.

3.    C) 1.97.

4.    D) 1.03.

5.    E) impossible to compute unless we know the before and after prices.

Answer:  A

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

14) Suppose that the quantity demanded of skipping ropes rises from 1250 to 1750 units when the price falls from $1.25 to $0.75 per unit. The price elasticity of demand for this product is

3.    A) 1/3.

4.    B) 2/3.

5.    C) 1.

6.    D) 3/2.

7.    E) 2.

Answer:  B

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

 

The table below shows the demand schedule for museum admissions in a small city.

 

Price (per visit per person)	Quantity Demanded (thousands of person-visits per year)
$10	2
$8	4
$6	6
$4	8
$2	10

               

TABLE 4-1

 

15) Refer to Table 4-1. The elasticity of demand for museum admissions is

1.    A) greater at higher prices than at lower prices.

2.    B) elastic at all points on the demand curve.

3.    C) inelastic at all points on the demand curve.

4.    D) greater at lower prices than at higher prices.

5.    E) constant at all points on the demand curve.

Answer:  A

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Table

User2:  Qualitative

16) Refer to Table 4-1. Between the prices of $8 and $10, the elasticity of demand is

3.    A) 1/3.

4.    B) 2/3.

5.    C) 1.

6.    D) 2.

7.    E) 3.

Answer:  E

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Table

User2:  Quantitative

 

 

17) Refer to Table 4-1. Between the prices of $4 and $6 the price elasticity of demand is

1.    A) 0.50.

2.    B) 0.71.

3.    C) 1.00.

4.    D) 1.40.

5.    E) 0.40.

Answer:  B

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Table

User2:  Quantitative

 

18) Refer to Table 4-1. Between the prices of $2 and $4 the price elasticity of demand is

3.    A) 1/3.

4.    B) 2/3.

5.    C) 1.

6.    D) 2.

7.    E) 3.

Answer:  A

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

User1:  Table

User2:  Quantitative

 

19) Refer to Table 4-1. Between the prices of $8 and $6 the price elasticity of demand is

1.    A) 0.5.

2.    B) 0.71.

3.    C) 1.00.

4.    D) 1.40.

5.    E) 0.40.

Answer:  D

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

User1:  Table

User2:  Quantitative

 

20) If the price elasticity of demand for some good is 2.7, a 10% increase in the price results in

2.    A) a 2.7% decrease in the quantity demanded.

3.    B) a 2.7% increase in the quantity demanded.

4.    C) a 27% increase in the quantity demanded.

5.    D) a 27% decrease in the quantity demanded.

6.    E) There is not enough information to answer this question.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

21) As the price for some product increases from $4.00 to $5.00 per unit, quantity demanded decreases from 400 to 300 units per month. For this segment of the demand curve, the price elasticity of demand is

9.    A) 7/9.

10.  B) 1.

11.  C) 9/7.

12.  D) 7.

13.  E) 9.

Answer:  C

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

22) As the price for some product decreases from $4.00 to $3.00 per unit, quantity demanded increases from 400 to 500 units per day. For this segment of the demand curve, the price elasticity of demand is

9.    A) 7/9.

10.  B) 1.

11.  C) 9/7.

12.  D) 7.

13.  E) 9.

Answer:  A

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

23) Which of the following illustrates elastic demand?

1.    A) A 10% increase in price causes a 5% decrease in quantity demanded.

2.    B) A 10% increase in price causes a 20% decrease in quantity demanded.

3.    C) a price elasticity of 0.8

4.    D) a price elasticity of 1.0

5.    E) A 10% increase in price causes a 10% reduction in quantity demanded.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

24) If per capita income increases by 10% and household expenditure on fur coats increases by 15%, one can conclude that the price elasticity of demand for fur coats is

1.    A) elastic.

2.    B) inelastic.

3.    C) unity.

4.    D) positive.

5.    E) not determinable from the information given.

Answer:  E

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

 

                                                           FIGURE 4-1

 

25) Refer to Figure 4-1, which shows two demand curves, one linear and the other a rectangular hyperbola. In diagram 1, the price elasticity of demand

1.    A) at point A is equal to that at point C.

2.    B) at point A is less than at point C.

3.    C) at point A is greater than at point C.

4.    D) is equal at points A, B, and C.

5.    E) at point A is equal to that at point B.

Answer:  C

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Qualitative

 

26) Refer to Figure 4-1, which shows two demand curves, one linear and the other a rectangular hyperbola. The price elasticity of demand is equal to one along the entire demand curve in

1.    A) diagram 1 only.

2.    B) diagram 2 only.

3.    C) both diagrams.

4.    D) neither diagram.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Qualitative

 

27) A perfectly horizontal demand curve shows that the price elasticity of demand is

1.    A) zero.

2.    B) unity.

3.    C) less than one.

4.    D) infinite.

5.    E) not defined.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

28) A vertical demand curve shows that the price elasticity of demand is

1.    A) zero.

2.    B) unity.

3.    C) less than one.

4.    D) infinity.

5.    E) not defined.

Answer:  A

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

29) The price elasticity of demand for a product tends to be greater the

1.    A) lower its price.

2.    B) more broadly the product is defined.

3.    C) fewer close substitutes for it there are.

4.    D) more close substitutes for it there are.

5.    E) shorter the time span being considered.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

30) Which of the following statements would you expect to be true about the demand elasticities for cornflakes and food?

1.    A) Compared with food, cornflakes have a lower price elasticity of demand because it is specifically defined.

2.    B) Because cornflakes is food, but not all food is cornflakes, cornflakes would have a lower price elasticity of demand.

3.    C) Food has a higher price elasticity of demand because it is a necessity.

4.    D) Because cornflakes is food, cornflakes would have the same price elasticity of demand as food.

5.    E) Food has a lower price elasticity of demand than cornflakes because it is more broadly defined.

Answer:  E

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

31) With a downward-sloping straight-line demand curve, price elasticity of demand is

1.    A) rising continuously with price increases.

2.    B) decreasing continuously with price increases.

3.    C) increasing to the midpoint of the curve and then decreasing.

4.    D) constant everywhere on it.

5.    E) indeterminate.

Answer:  A

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Recall

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

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

1.    A) It is greater than one if the percentage increase in the commodity’s price is greater than the percentage decline in quantity demanded.

2.    B) It is very small when good substitutes are readily available for the commodity.

3.    C) It usually increases over time.

4.    D) It is a positive number because price and quantity demanded move in the same direction.

5.    E) It is higher for an entire group of related products than it is for a particular product in that group.

Answer:  C

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

33) Suppose you are shown two intersecting demand curves that are drawn on the same scale. At the point of intersection, one of the demand curves is steeper than the other. Which of the following could explain the difference in slopes?

1.    A) The steeper one has a higher income elasticity of demand.

2.    B) The steeper one is probably the demand curve for a luxury good.

3.    C) The steeper one applies for the short run whereas the flatter one applies for the long run.

4.    D) The flatter one is for a good with no close substitutes.

5.    E) It is not possible to compare the slopes of different demand curves.

Answer:  C

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

34) Suppose egg producers succeed in permanently raising the price of their product by 15%, and as a result the quantity demanded falls by 15% in the short run. In the long run we can expect the quantity demanded to fall by

1.    A) 0%.

2.    B) 15%.

3.    C) between 0 and 15%.

4.    D) more than 15%.

5.    E) 100%.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

35) Suppose that the quantity demanded of a good rises from 40 units to 60 units per month when the price falls from $1.05 to 95 cents per unit. The price elasticity of demand for this product is

1.    A) 0.5.

2.    B) 1.0.

3.    C) 1.5.

4.    D) 2.0.

5.    E) 4.0.

Answer:  E

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

36) Which of the following statements would you expect to be true about price elasticities of demand for T-shirts and clothing?

1.    A) Compared with clothing, T-shirts have a lower price elasticity of demand because they are specifically defined.

2.    B) Because T-shirts are clothing, but not all clothing is T-shirts, T-shirts would have a lower price elasticity of demand than clothing.

3.    C) Clothing has a higher price elasticity of demand because it is a necessity.

4.    D) T-shirts would have the same price elasticity of demand as clothing.

5.    E) Clothing has a lower price elasticity of demand because it is more broadly defined.

Answer:  E

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Qualitative

 

37) Which of the following illustrates elastic demand?

2.    A) A 5% increase in price causes a 2.5% decrease in quantity demanded.

3.    B) A 5% increase in price causes a 10% decrease in quantity demanded.

4.    C) a price elasticity of 0.8

5.    D) a price elasticity of 1.0

6.    E) A 10% increase in price causes a 10% reduction in quantity demanded.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

38) Suppose that the quantity demanded of paperback novels rises from 80 000 to 120 000 units per month when the price falls from $11 to $9 per unit. The price elasticity of demand for this product is

3.    A) 1/3.

4.    B) 1.

5.    C) 2/3.

6.    D) 3/2.

7.    E) 2.

Answer:  E

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

Demand Schedule for Ski Tickets

 

Price ($)	Quantity Demanded (no. of tickets)
120	0
110	100
100	200
90	300
80	400
70	500
60	600
50	700
40	800
30	900
20	1000
10	1100
0	1200

 

TABLE 4-2

 

39) Refer to Table 4-2. Using the data provided to plot the demand curve for ski tickets results in a ________ demand curve. Price elasticity along this demand curve is therefore ________ as price is falling.

1.    A) horizontal; constant at a value of 8

2.    B) vertical; constant at a value of 0

3.    C) rectangular hyperbola; constant at a value of 1

4.    D) downward sloping and linear; continuously increasing

5.    E) downward sloping and linear; continuously decreasing

Answer:  E

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Table

User2:  Quantitative

 

 

40) Refer to Table 4-2. Total expenditure for ski tickets reaches a maximum at a price/quantity demanded combination of

90.  A) $30/90.

91.  B) $60/600.

92.  C) $100/200.

93.  D) $20/1000.

94.  E) $80/400.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Table

User2:  Quantitative

41) Refer to Table 4-2. The price elasticity of demand over the interval of the demand curve between prices of $40 and $20 is

3.    A) 3.0.

4.    B) -3.0.

5.    C) 1.0.

6.    D) 0.33.

7.    E) 0.

Answer:  D

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Table

User2:  Quantitative

 

42) Refer to Table 4-2. Price elasticity over the interval of the demand curve between prices of $90 and $70 is

1.    A) 0.5.

2.    B) 2.0.

3.    C) -0.5.

4.    D) 4.0.

5.    E) 1.0.

Answer:  B

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Table

User2:  Quantitative

 

                                                                    FIGURE 4-2

 

43) Refer to Figure 4-2. In diagram 1, the elasticity of demand over the price range $14 to $16 is

1.    A) 0.

2.    B) less than 1.

3.    C) 1.

4.    D) greater than 1.

5.    E) infinity.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Quantitative

 

44) Refer to Figure 4-2. In diagram 1, the elasticity of demand over the price range $12 to $14 is

1.    A) 0.

2.    B) less than 1.

3.    C) 1.

4.    D) greater than 1.

5.    E) infinity.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Quantitative

 

45) Refer to Figure 4-2. In diagram 1, the elasticity of demand for prices below $10 is

1.    A) 0.

2.    B) less than 1.

3.    C) 1.

4.    D) greater than 1.

5.    E) infinity.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Quantitative

 

46) Refer to Figure 4-2. In diagram 1, the elasticity of demand at $10 is

1.    A) 0.

2.    B) less than 1.

3.    C) exactly 1.

4.    D) greater than 1.

5.    E) infinity.

Answer:  C

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Quantitative

 

47) Refer to Figure 4-2. In diagram 3, the elasticity of demand between prices $10 and $20 is

1.    A) 0.

2.    B) less than 1.

3.    C) exactly 1.

4.    D) greater than 1.

5.    E) infinity.

Answer:  C

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Quantitative

 

48) Refer to Figure 4-2. In diagram 3, the elasticity of demand between prices $5 and $10 is

1.    A) 0.

2.    B) less than 1.

3.    C) exactly 1.

4.    D) greater than 1.

5.    E) infinity.

Answer:  C

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Quantitative

 

49) Refer to Figure 4-2. In diagram 2, the price elasticity of demand is

1.    A) 0.

2.    B) less than -1.

3.    C) exactly 1.

4.    D) greater than 1.

5.    E) infinity.

Answer:  A

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Quantitative

 

50) Refer to Figure 4-2. The price elasticity of demand is continuously decreasing as the price falls in diagram(s)

1.    A) 1.

2.    B) 2.

3.    C) 1, 2, and 3.

4.    D) 2, 3, and 4.

5.    E) 1 and 2.

Answer:  A

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Qualitative

 

51) Refer to Figure 4-2. The price elasticity of demand is continuously increasing as the price falls in diagram(s)

1.    A) 1.

2.    B) 2.

3.    C) 1, 2, and 3.

4.    D) 2, 3, and 4.

5.    E) none of the above

Answer:  E

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Qualitative

 

52) Refer to Figure 4-2. The price elasticity of demand is constant as price changes in diagram(s)

1.    A) 1.

2.    B) 2.

3.    C) 1, 2, and 3.

4.    D) 2, 3, and 4.

5.    E) none of the above

Answer:  D

Diff: 1

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Qualitative

 

53) Refer to Figure 4-2. Demand is inelastic

1.    A) over the entire demand curve in diagram 1.

2.    B) over the entire demand curve in diagram 3.

3.    C) over section (a) of the demand curve in diagram 1.

4.    D) over section (b) of the demand curve in diagram 1.

5.    E) at the midpoint between sections (a) and (b) of the demand curve in diagram 1.

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Qualitative

 

54) Refer to Figure 4-2. There is good reason to suppose that, of the four goods whose demand curves are shown in diagrams 1-4 of the figure, the good that has the fewest close substitutes is shown in

1.    A) diagram 1.

2.    B) diagram 2.

3.    C) diagram 3.

4.    D) diagram 4.

5.    E) There is not enough information to determine this.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User1:  Graph

User2:  Qualitative

 

55) Refer to Figure 4-2. There is good reason to suppose that, of the four goods whose demand curves are shown in diagrams 1-4 of the figure, the good that has the fewest close substitutes is shown in

1.    A) diagram 1

2.    B) diagram 2

3.    C) diagram 3

4.    D) diagram 4

5.    E) There is not enough information to determine this.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

User1:  Graph

User2:  Quantitative

 

56) Suppose you are advising the government on changes in the gasoline market. The current price is $1.00 per litre and the quantity demanded is 2.5 million litres per day. Short-run price elasticity of demand is constant at 0.3. If the supply of gasoline is reduced so that the price rises to $1.50 per litre, then quantity demanded is predicted to fall in the short run by

1.    A) 15%, and total expenditure will rise.

2.    B) 15%, and total expenditure will fall.

3.    C) 50%, and total expenditure will fall.

4.    D) 12%, and total expenditure will rise.

5.    E) 13.3%, and total expenditure will rise.

Answer:  D

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

57) Suppose you are advising the government on changes in the gasoline market. The current price is $1.00 per litre and the quantity demanded is 2.5 million litres per day. Long-run price elasticity of demand is constant at 0.8. If the supply of gasoline is reduced so that the price rises to $1.50 per litre, then quantity demanded is predicted to fall in the long run by

1.    A) 12%, and total expenditure will fall.

2.    B) 32%, and total expenditure will rise.

3.    C) 15%, and total expenditure will rise.

4.    D) 15%, and total expenditure will fall.

5.    E) 50%, and total expenditure will rise.

Answer:  B

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

58) Suppose you are advising the government on changes in the gasoline market. The current price is $1.00 per litre and the long-run price elasticity of demand is constant at 0.8. If a tax on gasoline causes the price to rise to $1.50 per litre, then quantity demanded is predicted to fall in the long run by

1.    A) 12% and total expenditure will fall.

2.    B) 24% and total expenditure will fall.

3.    C) 32% and total expenditure will fall.

4.    D) 24% and total expenditure will rise.

5.    E) 50% and total expenditure will rise.

Answer:  C

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

User2:  Quantitative

 

59) Suppose a fast-food chain determines that the price elasticity of demand for its hamburgers is 1.7, and the price of the hamburger is currently $4.00. What will be the effect on quantity demanded and total expenditure on this chain’s hamburgers if the price is increased to $6.00?

1.    A) Quantity demanded will fall by 68% and total expenditure will decrease.

2.    B) Quantity demanded will fall by 11.76% and total expenditure will decrease.

3.    C) Quantity demanded will fall by 17% and total expenditure will increase.

4.    D) Quantity demanded will fall by 1.7% and total expenditure will increase.

5.    E) Quantity demanded will fall by 34% and total expenditure will decrease.

Answer:  A

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

60) Suppose a fast-food chain determines that the price elasticity of demand for its hamburgers is 0.75, and the price of the hamburger is currently $4.00. What will be the effect on quantity demanded and total expenditure on this chain’s hamburgers if the price is increased to $6.00?

1.    A) Quantity demanded will fall by 30%, and total expenditure will increase.

2.    B) Quantity demanded will fall by 40%, and total expenditure will increase.

3.    C) Quantity demanded will fall by 75%, and total expenditure will increase.

4.    D) Quantity demanded will fall by 0.3%, and total expenditure will decrease.

5.    E) Quantity demanded will fall by 0.4%, and total expenditure will decrease.

Answer:  A

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

User2:  Quantitative

 

61) Rania is selling boxes of cookies door to door in her neighbourhood. At a price of $10 per box she sold 40 boxes per day. When the price was reduced to $4 per box she sold 100 boxes per day.  Assuming that the demand conditions were unchanged, what is the price elasticity of demand for Rania’s cookies?

1.    A) -1.7

2.    B) 0

3.    C) 0.85

4.    D) 1

5.    E) 1.17

Answer:  D

Diff: 3

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

62) Every month Olivier buys exactly 6 take-out pizzas even though the price may fluctuate significantly. Apparently, Olivier’s price elasticity of demand for take-out pizza is

1.    A) -1.

2.    B) 0.

3.    C) 1.

4.    D) 6.

5.    E) infinity.

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

63) Suppose the price of take-out pizza has been stable for many months at exactly $12.50 per pizza – and Olivier buys 6 pizzas per month at this price. When the price rises to $12.55 per pizza, Olivier’s quantity demanded drops to zero. Apparently, Olivier’s price elasticity of demand for take-out pizza is

1.    A) -1.

2.    B) 0.

3.    C) 100

4.    D) 6.

5.    E) higher than 10 000.

Answer:  E

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

User2:  Quantitative

 

64) Suppose an analysis of the possible effects of increases in university tuition fees predicts that a 10% increase in tuition fees will result in a 3% decline in enrolment. What is the implied price elasticity of demand for university attendance?

1.    A) 0

2.    B) 0.3

3.    C) 3

4.    D) 7

5.    E) 10

Answer:  B

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

Learning Obj.:  4-1 Explain what price elasticity of demand is and how it is measured.

User2:  Quantitative

 

65) Elasticity of demand for prescription drugs is estimated to be much lower than elasticity of demand for one particular brand of over-the-counter cough medicine.  One reason for this is

1.    A) there are many substitutes for prescription drugs in the short run.

2.    B) there are many substitutes for prescription drugs in the long run.

3.    C) there are no substitutes for one brand of cough medicine in the short run.

4.    D) there are no substitutes for one brand of cough medicine in the long run.

5.    E) there are few substitutes for the broad category of prescription drugs while there are many substitutes for one brand of cough medicine.

Answer:  E

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

User2:  Qualitative

 

66) Which of the following situations could explain why product X has a relatively high price elasticity of demand in the short run?

1.    A) the price of product X is too low

2.    B) the price of product X is too high

3.    C) the prices of substitute products are constant

4.    D) there are many substitutes for product X and consumers have an ability to switch quickly to those substitutes

5.    E) there are few substitutes for product X in the short run

Answer:  D

Diff: 2

Topic:  4.1a. price elasticity of demand

Skill:  Applied

User2:  Qualitative

 

67) Suppose an analysis of the possible effects of increases in university tuition fees predicts that a 10% increase in tuition fees will result in a 3% decline in enrolment. Given the information this provides about price elasticity of demand, what is the predicted effect on total expenditure on tuition fees?

1.    A) total expenditure will decrease

2.    B) total expenditure will decrease by 7%

3.    C) total expenditure will decrease by 3%

4.    D) total expenditure will increase

5.    E) total expenditure will remain constant

Answer:  D

Diff: 3

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User2:  Quantitative

 

                                                                    FIGURE 4-2

 

68) Refer to Figure 4-2. As price decreases, total expenditure increases, reaches a maximum, and then decreases for the demand curve in diagram(s)

1.    A) 1.

2.    B) 2.

3.    C) 3.

4.    D) 4.

5.    E) 1 and 3.

Answer:  A

Diff: 2

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User1:  Graph

User2:  Qualitative

 

69) Refer to Figure 4-2. As price decreases, total expenditure remains constant in diagram(s)

1.    A) 1.

2.    B) 2.

3.    C) 3.

4.    D) 4.

5.    E) 2 and 4.

Answer:  C

Diff: 2

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User1:  Graph

User2:  Qualitative

 

70) A demand curve for which any price-quantity combination yields the same total expenditure reveals a price elasticity of demand equal to

1.    A) infinity.

2.    B) zero.

3.    C) one.

4.    D) some value greater than one but less than infinity.

5.    E) not enough information to know.

Answer:  C

Diff: 2

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User2:  Qualitative

 

71) If price elasticity of demand for good X is equal to 0.4, then an increase in price will cause total expenditure on good X to

1.    A) increase.

2.    B) remain constant.

3.    C) decrease.

4.    D) fall to zero.

5.    E) be negative.

Answer:  A

Diff: 2

Topic:  4.1b. elasticity and total expenditure

Skill:  Recall

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User2:  Qualitative

 

72) When a product’s price has an inverse relationship with total expenditure, then demand has a price elasticity of

1.    A) zero.

2.    B) less than one.

3.    C) greater than one.

4.    D) one.

5.    E) inverse proportions.

Answer:  C

Diff: 2

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User2:  Quantitative

 

73) If total expenditure on a product rises and falls directly with a product’s price, then demand for this product has an elasticity of

1.    A) zero.

2.    B) less than one.

3.    C) greater than one.

4.    D) one.

5.    E) direct proportions.

Answer:  B

Diff: 2

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User2:  Qualitative

 

74) If the total expenditure on photocopiers increases when the price of photocopiers rises, the price elasticity of demand is

1.    A) greater than one (demand is elastic).

2.    B) less than one (demand is inelastic).

3.    C) equal to one (demand is unit elastic).

4.    D) exactly zero.

5.    E) not determinable from the information given.

Answer:  B

Diff: 2

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User2:  Qualitative

 

75) If the total expenditure on perfume increases when the price of perfume falls, the price elasticity of demand is

1.    A) greater than one (demand is elastic).

2.    B) less than one (demand is inelastic).

3.    C) unity (demand is unit elastic).

4.    D) exactly zero.

5.    E) not determinable from the information given.

Answer:  A

Diff: 2

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User2:  Qualitative

 

76) If the total expenditure on cars increases when the price of cars rises, the price elasticity of demand for cars is

1.    A) greater than one (demand is elastic).

2.    B) less than one (demand is inelastic).

3.    C) equal to one (demand is unit elastic).

4.    D) exactly zero.

5.    E) not determinable from the information given.

Answer:  B

Diff: 2

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User2:  Quantitative

 

77) Suppose the current level of output of some good is 100 units. If market demand is inelastic at that quantity, total expenditure on this product would be higher if output was

1.    A) maximized.

2.    B) kept constant.

3.    C) greater than 100 units.

4.    D) less than 100 units.

5.    E) minimized.

Answer:  D

Diff: 3

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User2:  Quantitative

 

78) The president of a major nickel-producing company says that an increase in the price of nickel would have no effect on the total amount spent on nickel. If this is true, the price elasticity of demand for nickel is

1.    A) more than one.

2.    B) exactly one.

3.    C) less than zero.

4.    D) infinitely elastic.

5.    E) not calculable from the information given.

Answer:  B

Diff: 2

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User2:  Quantitative

 

79) Suppose Statistics Canada reports that total income earned by Canadian barley farmers has declined as a result of a partial crop failure that has driven up the Canadian price of barley. We can conclude that the price elasticity of demand for barley in Canada is

1.    A) greater than one.

2.    B) exactly one.

3.    C) less than zero.

4.    D) less than one.

5.    E) exactly zero.

Answer:  A

Diff: 3

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User2:  Quantitative

 

80) If the total expenditure on clothing decreases when the price of clothing falls, the price elasticity of demand is

1.    A) greater than one (demand is elastic).

2.    B) less than one (demand is inelastic).

3.    C) unity (demand is unit elastic).

4.    D) exactly zero.

5.    E) not determinable from the information given.

Answer:  B

Diff: 2

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User2:  Qualitative

 

81) If household expenditures on electricity remain constant when the price of electricity increases, the price elasticity for electricity is

1.    A) greater than one (demand is elastic).

2.    B) less than one (demand is inelastic).

3.    C) one (demand is unit elastic).

4.    D) exactly zero.

5.    E) not determinable from the information given.

Answer:  C

Diff: 2

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User2:  Qualitative

 

82) If the total revenue of producers rises for an initial cut in the price of their product but falls for further reductions in price, the price elasticity of demand for the product

1.    A) declines as price falls.

2.    B) is zero.

3.    C) is unity.

4.    D) rises as price falls.

5.    E) rises and then falls.

Answer:  A

Diff: 2

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

Learning Obj.:  4-2 Explain the relationship between total expenditure and price elasticity of demand.

User2:  Qualitative

 

83) What does the following statement imply about price elasticity of demand? “Cherry producers in British Columbia experienced a healthy increase in revenues this year, despite a reduced harvest due to poor weather conditions.”

1.    A) elastic demand for B.C. cherries

2.    B) elasticity of demand equal to one for B.C. cherries

3.    C) inelastic demand for B.C. cherries

4.    D) elasticity of demand equal to zero for B.C. cherries

5.    E) infinite elasticity of demand for B.C. cherries

Answer:  C

Diff: 3

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

User2:  Quantitative

 

84) What does the following statement imply about price elasticity of demand? “Airlines experiencing higher traffic with reduced fares, but are struggling with fall in revenue.”

1.    A) demand for airline travel is price inelastic

2.    B) elasticity of demand for airline travel is equal to one

3.    C) elasticity of demand for airline travel is constant

4.    D) elasticity of demand for airline travel is equal to zero

5.    E) demand for airline travel is price elastic

Answer:  E

Diff: 3

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

User2:  Quantitative

 

85) What does the following statement imply about price elasticity of demand?  “An unexpected spike in world oil prices leads to dramatic increase in revenue for the world’s oil producers.”

1.    A) short-run demand for oil is inelastic

2.    B) short-run demand for oil is elastic

3.    C) elasticity of demand for oil is equal to one

4.    D) elasticity of demand for oil is constant

5.    E) elasticity of demand for oil is equal to zero

Answer:  A

Diff: 3

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

User2:  Quantitative

 

86) What does the following statement imply about price elasticity of demand?  “Consumers unfazed by 400 percent increase in price of table salt — grocers see no change in sales!”

1.    A) elasticity of demand for salt is equal to one

2.    B) demand for salt is elastic

3.    C) salt is too narrowly defined to determine price elasticity of demand

4.    D) demand for salt is almost perfectly inelastic in the relevant price range

5.    E) salt is too broadly defined to determine price elasticity of demand

Answer:  D

Diff: 2

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

User2:  Qualitative

 

 

87) What does the following statement imply about price elasticity of demand?  “Government tries to reduce cigarette consumption with an extra 50 cent tax per pack. Policy raises government revenue but fails to curb smoking.”

1.    A) demand for cigarettes is elastic

2.    B) demand for cigarettes is inelastic

3.    C) elasticity of demand for cigarettes is equal to one

4.    D) elasticity of demand for cigarettes is close to infinity

5.    E) elasticity of demand for cigarettes equals 0.5

Answer:  B

Diff: 3

Topic:  4.1b. elasticity and total expenditure

Skill:  Applied

User2:  Quantitative

4.2  Price Elasticity of Supply

 

1) The elasticity of supply for a given commodity is calculated as

A)

B)

C)

D)

E)

Answer:  A

Diff: 1

Topic:  4.2a. price elasticity of supply

Skill:  Recall

Learning Obj.:  4-3 Explain what price elasticity of supply is and how it is measured.

User2:  Qualitative

 

2) A value of zero for the elasticity of supply of some product implies that

1.    A) the supply curve is horizontal.

2.    B) supply is highly responsive to price.

3.    C) the supply curve is vertical.

4.    D) the product will not be supplied at any price.

5.    E) there is no supply.

Answer:  C

Diff: 1

Topic:  4.2a. price elasticity of supply

Skill:  Recall

Learning Obj.:  4-3 Explain what price elasticity of supply is and how it is measured.

User2:  Qualitative