Economics: Elasticity Explain shortly. Please do correctly and take your time. There is a written question at the bottom. There are total thirty one MC and one written. 1. What is the effect on total revenue if demand is elastic and price rises? a. Total revenue will fall b. Total revenue will rise c. Total revenue may rise or fall depending on the size of the price increase d. Elasticity is not relevant, since total revenue always rises if price increases 2. What is the term for the responsiveness of quantity demanded to a change in price? a. Elastic demand b. The elasticity coefficient c. Unitary elasticity d. Price elasticity of demand 3. What term is used to describe demand that is not very responsive to a change in price? a. Inelastic demand b. Elastic demand c. Unitary elasticity d. Price elasticity of demand e. The elasticity coefficient 4. What is unitary elasticity? a. An elasticity coefficient which is negative b. An elasticity coefficient which is equal to zero c. An elasticity coefficient which is equal to one d. A percentage change in quantity which is exactly equal to the percentage change in demand 5. If a product has many substitutes, which of the following statements is correct? a. It is likely that its income elasticity is high b. It is likely that it is an inferior product c. It is likely that its supply elasticity is high d. It is likely that its price elasticity of demand is high 6. What is true about the price elasticity of demand for products such as sugar, salt, and electricity? a. It is perfectly elastic b. It is perfectly inelastic c. It is relatively elastic d. It is relatively inelastic 7. Suppose the price of a product increased from $18 to $22, and the quantity demanded decreased from 63 to 57. What is the value of the price elasticity of demand? a. 0.43 b. 0.5 c. 1.5 d. 2.0 e. 2.3 Use the following to answer questions 8-10 Price 1 2 3 4 5 6 7 8 9 10 Price Quantity 20 18 16 14 12 10 8 6 4 2 8. At what price is the seller's total revenue maximized? a. $1 b.$10 C.$5 or $6 d. $4 or $7 e.$5 9. Which of the following statements is correct? a. Demand is inelastic between the prices $1 and $5 b. Demand is inelastic between the prices $4 and $7 c. Demand is inelastic between the prices $6 and $10 d.No comment on elasticity can be made from the above information 10. What are the elasticity coefficients for the price ranges $1 to 52 and $9 to $10, respectively? a. 0.22 and 2 b. 2 and 0.22 C.0.16 and 6.35 d. 6.35 and 0.15 11. Suppose that average incomes increased from $30000 to $34000, and the quantity demanded of a product increased from 45 to 55. What is the value of the income elasticity of demand? a. 0.625 b. 0.74 c. - 1.0 d. 1.36 e.1.6 12. Suppose that the price of Product A increased from $9 to $11, and the quantity demanded of Product B increased from 192 to 208. What can be said about the products? a. They both have elastic demands b. They both have inelastic demands c. They are complementary products d. They are substitute products 13. Demand is elastic if: A)a 10 percent drop in price causes a 20 percent rise in quantity demanded. B)a 20 percent increase in price causes a 10 percent fall in quantity demanded. С)a 15 percent increase in price causes quantity demanded to fall by the same percentage. D)a rise in price leads to an increase in total revenue. E)a decline in price leaves total revenue unaffected. 14. When demand is perfectly inelastic a.suppliers in the market are price-takers.
b.the demand curve is vertical.
c.the demand curve is horizontal.
d.total revenue in this market is always constant.
e.price is always constant. 15. Which of the following statements is true? a.If demand is inelastic, then an increase in price causes a drop in total revenue. b.When demand is elastic, a fall in price causes total revenue to be reduced. c.A unit-elastic demand curve means that total revenue is constant. d.If demand is perfectly inelastic, a rise in price causes total revenue to fall. e.A perfectly elastic demand curve means that total revenue is constant. 16. Which of the following products is most likely to have an inelastic demand?
a.a product with few close substitutes
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b.a product with many close substitutes
c.a product that makes up a large d.portion of consumers' incomes a e.luxury a complementary product 17. Which of the following products is most likely to have an elastic demand?
a.a pack of chewing gum a type of b.medical vaccine a home c.entertainment system
d.drinking water e.none of the above 18.The value of the price elasticity of demand is: a.equal to 1 when demand is unit-elastic. b.greater than 1 when demand is inelastic. c.never negative. d.between 0 and 1 when demand is elastic. e.equal to 0 when demand is perfectly elastic. 19. A rise in a good's price from $5 to $7 causes quantity demanded for that good to decline from 5000 to 3000 units. This means the value of the price elasticity of demand is: a.(-)1. b.(-)0.67. c.(-)1.5. d.(-)0.4. e.none of the above 20. When a demand curve is linear, the curve: a.tends to be inelastic at high prices and elastic at low prices. b.is unit-elastic at all prices. c.tends to be elastic at high prices and inelastic at low prices. d.tends to be perfectly inelastic at high prices and perfectly elastic at low prices. e.tends to be perfectly elastic at high prices and perfectly inelastic at low prices. 21. A rise in average consumer income from $15 000 to $25 000 causes quantity demanded for a particular good to fall from 10 000 to 6000 units. This means the value of the good's income elasticity is:
a.3.0
b.2.0 c.2.0 d.3.0 e.1.0 22.When a product is normal, the value of its income elasticity:
А)equals one.
B)is positive
C)is negative
D)is always above one.
E)is always between zero and -1. 23.When two products are complements, the cross price elasticity of each:
a.equals one.
b.is positive C.is negative
d.is always above one.
e.is always between zero and -1. 24.If a market has a perfectly elastic supply curve, then:
a. the supply curve is horizontal.
b.an increase in demand raises equilibrium price, but keeps equilibrium quantity unchanged. C.both equilibrium price and equilibrium quantity remain unchanged if demand increases. d.the supply curve is upward-sloping. e.the supply curve is downward-sloping. 25 In the immediate run:
A)the demand curve is horizontal.
B)supply is either elastic or inelastic.
C)supply is perfectly inelastic.
D)demand is perfectly inelastic.
E)supply is perfectly elastic. 26.In an increasing-cost industry:
A)the long-run supply curve is vertical.
B)new units of the product can be produced in the long run only at gradually higher prices. C)changes in the quantity of output have no effect on resource prices.
D)price is always constant.
Е)quantity supplied is always constant. 27.An increase in the price of an item from $400 to $800 leads to a rise in the item's quantity supplied from 200,000 to 300,000 units. The value of the price elasticity of supply is therefore:
A)2.0
B)1.67
c)0.5
d)1.0
e)0.6 28. Which of the following is not a likely result of a government agricultural price support program? A)Consumers are harmed, because they must pay a higher price than without the program. B)Farmers are helped, since they are able to produce more output and receive a higher price than without the program. C)A government agency must purchase the surplus in the market. D)Society as a whole benefits from the program because more of the good is produced. E)Taxpayers are hurt, due to the tax revenues that must be spent on the program. 29. A price ceiling: A)creates a shortage. B)is effective only when the ceiling price is below the equilibrium price. C)is illustrated by the case of rent controls. D)is harmful to producers in the affected market. E)all of the above 30. When an excise tax is imposed in a market in which demand is elastic, then: A)the bulk of the tax is more likely to be paid by consumers. B)the after-tax price as seen by consumers is lower than the price received by businesses in the market. C)the supply curve for producers shifts vertically downward. D)the demand curve for consumers shifts vertically upward. E)the bulk of the tax is more likely to be paid by producers 31. When an excise tax is imposed in a market in which supply is elastic, then: A)the bulk of the tax is more likely to be paid by consumers. B)the after-tax price as seen by consumers is lower than the price received by businesses in the market. C)the supply curve for producers shifts vertically downward. D)the demand curve for consumers shifts vertically upward. E)the bulk of the tax is more likely to be paid by producers Written An excise tax of $6 per cigarette pack is imposed. a) Draw the new supply curve b) What's the new price to consumers for a pack of cigarettes? c) What is the total tax payment made by producers? d) Shade the producers' tax payment area in on the graph

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