Deck 3: The Concept of Elasticity and Consumer and Producer Surplus

Question 1

If the price of a good decreases by 10% and the quantity demanded remains unchanged, then at that price, the good is

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Answer 1

C

Question 2

When there is an increase in the price of a good

A)the demand curve will shift to the right.
B)the demand curve will shift to the left.
C)the elasticity of demand will determine the degree to which quantity demanded rises.
D)the elasticity of demand will determine the degree to which quantity demanded falls.

Answer 2

C

Question 3

In Figure 3.1, if demand is considered perfectly elastic, then the appropriate figure is?

A)Figure 1
B)Figure 2
C)Figure 3
D)Figure 4

Answer 3

A

Question 4

If the price of a good increases by 10% and the quantity demanded decreases by 10%, then at that price, the good is

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)unit elastic.

Question 5

At point B of Figure 4 within Figure 3.1, demand is

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Question 6

The formula for elasticity of demand (in words)is

A)the change in price divided by the change in quantity.
B)the percentage change in price divided by the percentage change in quantity.
C)the change in quantity divided by the change in price.
D)the percentage change in quantity divided by the percentage change in price.

Question 7

When there is a decrease in the price of a good

A)the demand curve will shift to the right.
B)the demand curve will shift to the left.
C)the elasticity of demand will determine the degree to which quantity demanded rises.
D)the elasticity of demand will determine the degree to which quantity demanded falls.

Question 8

If the price of a good increases by 5% and the quantity demanded decreases by 10%, then at that price, the good is

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Question 9

At point A of Figure 3 within Figure 3.1, demand is

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Question 10

If the price of a good decreases by 5% and the quantity demanded increases by 5%, then at that price, the good is

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)unit elastic.

Question 11

If the price of a good decreases by 10% and the quantity demanded increases by 10%, then at that price, the good is

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)unit elastic.

Question 12

If the price of a good decreases by 5% and the quantity demanded increases by 10%, then at that price, the good is

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Question 13

If the price of a good increases by 5% and the quantity demanded remains unchanged, then at that price, the good is

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Question 14

If the price of a good decreases by 10% and the quantity demanded increases by 5%, then at that price, the good is

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Question 15

If the price of a good increases by 5% and the quantity demanded decreases by 5%, then at that price, the good is

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)unit elastic.

Question 16

In Figure 3.1, if demand is considered perfectly inelastic, then the appropriate figure is?

A)Figure 1
B)Figure 2
C)Figure 3
D)Figure 4

Question 17

If the price of a good increases by 10% and the quantity demanded decreases by 5%, then at that price, the good is

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Question 18

If the price of a good increases by 10% and the quantity demanded remains unchanged, then at that price, the good is

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Question 19

The elasticity of demand is related to the slope of the demand curve

A)and only the slope of the demand curve.
B)but also the (price, quantity)position on the demand curve.
C)but also the slope of the supply curve.
D)and whether the good is normal or inferior.

Question 20

Because the demand curve is downward sloping, the elasticity of demand is

A)positive.
B)negative (however, the negative sign is assumed and therefore ignored).
C)zero.
D)decreases from positive to negative.

Question 21

If the price of a good rises by 10% and the total amount consumers spend on the good remains the same then the good is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question 22

Which of the following is true?

A)on a linear demand curve, the higher the price the less elastic is demand
B)on a linear demand curve, elasticity is constant
C)at the same price demand is less elastic on the steeper demand curve
D)all are true

Question 23

Which of the following is true?

A)on a linear demand curve, the higher the price the less elastic is demand
B)on a linear demand curve, elasticity is not constant
C)at the same price demand is more elastic on the steeper demand curve
D)none are true

Question 24

If the price of a good falls by 10% and the percentage decrease in the total amount consumers spend on the good is 10% then the good is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question 25

If the price of a good increases by one thousandth of 1% and the quantity demanded goes to zero, then at that price, the good is

A)non-responsive.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Question 26

If the price of a good decreases by 5% and the quantity demanded remains unchanged, then at that price, the good is

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Question 27

The total revenue/expenditure rule of elasticity suggests that when price and total revenue go

A)in opposite directions, demand is elastic.
B)in same direction, demand is elastic.
C)in opposite directions, demand is inelastic.
D)to infinity, demand is perfectly inelastic.

Question 28

Which of the following is true?

A)on a linear demand curve, the higher the price the less elastic is demand
B)on a linear demand curve, elasticity is constant
C)at the same price demand is more elastic on the steeper demand curve
D)none are true

Question 29

If the price of a good falls by 10% and the percentage decrease in the total amount consumers spend on the good is 5% then the good is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question 30

Which of the following is true?

A)on a linear demand curve, the higher the price the more elastic is demand
B)on a linear demand curve, elasticity is constant
C)at the same price demand is more elastic on the steeper demand curve
D)none are true

Question 31

If the price of a good rises by 10% and the percentage decrease in the total amount consumers spend on the good is 15% then the good is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question 32

If the price of a good falls by 10% and the percentage increase in the total amount consumers spend on the good is 15% then the good is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question 33

If the price of a good falls by 10% and the percentage decrease in the total amount consumers spend on the good is 15% then the good is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question 34

If the price of a good rises by 10% and the percentage increase in the total amount consumers spend on the good is 10% then the good is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question 35

If the price of a good rises by 10% and the percentage decrease in the total amount consumers spend on the good is 5% then the good is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question 36

If the price of a good falls by 10% and the percentage increase in the total amount consumers spend on the good is 5% then the good is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question 37

If the price of a good rises by 10% and the percentage increase in the total amount consumers spend on the good is 15% then the good is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question 38

If the price of a good falls by 10% and the percentage increase in the total amount consumers spend on the good is 10% then the good is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question 39

If the price of a good rises by 10% and the percentage increase in the total amount consumers spend on the good is 5% then the good is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question 40

If the price of a good rises by 10% and the percentage decrease in the total amount consumers spend on the good is 10% then the good is

A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Question 41

Suppose you observe that minor changes in supply seem to cause dramatic changes in price with only slight changes in the amount sold, you would conclude that

A)demand is unit elastic.
B)demand is inelastic.
C)demand is elastic.
D)demand is perfectly inelastic.

Question 42

If the price falls and the total amount consumers spend on the good rises, then demand must be

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Question 43

For a given increase in supply, the condition of demand that will result in no change in quantity is when demand is

A)elastic.
B)inelastic.
C)perfectly elastic.
D)perfectly inelastic.

Question 44

For a given decrease in supply, the condition of demand that will result in no change in quantity is when demand is

A)elastic.
B)inelastic.
C)perfectly elastic.
D)perfectly inelastic.

Question 45

An increase in demand will increase prices most when supply is

A)elastic.
B)unit elastic.
C)inelastic (but not perfectly inelastic).
D)perfectly inelastic.

Question 46

If the price rises and the total amount consumers spend on the good falls, then demand must be

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Question 47

For a given increase in supply, the condition of demand that will result in no change in price is when demand is

A)elastic.
B)inelastic.
C)perfectly elastic.
D)perfectly inelastic.

Question 48

For a given decrease in supply, the condition of demand that will result in the most significant change in price is when demand is

A)elastic.
B)inelastic.
C)perfectly elastic.
D)perfectly inelastic.

Question 49

For a given increase in supply, the condition of demand that will result in the most significant change in price is when demand is

A)elastic.
B)inelastic.
C)perfectly elastic.
D)perfectly inelastic.

Question 50

Suppose a firm can not figure out whether the demand for the good it sells is elastic or inelastic but discovers that every time it raises its price, its total revenue declines. Their

A)demand is unit elastic.
B)demand is inelastic.
C)demand is elastic.
D)demand is perfectly inelastic.

Question 51

An increase in demand will increase prices least when supply is

A)elastic.
B)unit elastic.
C)inelastic (but not perfectly inelastic).
D)perfectly inelastic.

Question 52

If the price rises and the total amount consumers spend on the good rises, then demand must be

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Question 53

If the price rises and the total amount consumers spend on the good falls to zero, then demand must be

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.

Question 54

If the price of a good falls by 10% and the total amount consumers spend on the good remains the same then the good is

A)Elastic
B)Inelastic
C)Unit elastic
D)Perfectly inelastic

Question 55

For a given increase in supply, the condition of demand that will result in the most significant change in quantity is when demand is

A)elastic.
B)inelastic.
C)perfectly elastic.
D)perfectly inelastic.

Question 56

If the price rises and the total amount consumers spend on the good remains unchanged, then demand must be

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)unit elastic

Question 57

For a given decrease in supply, the condition of demand that will result in no change in price is when demand is

A)elastic.
B)inelastic.
C)perfectly elastic.
D)perfectly inelastic.

Question 58

If the price falls and the total amount consumers spend on the good remains unchanged, then demand must be

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)unit elastic.

Question 59

If the price falls and the total amount consumers spend on the good falls, then demand must be

A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic

Question 60

For a given decrease in supply, the condition of demand that will result in the most significant change in quantity is when demand is

A)elastic.
B)inelastic.
C)perfectly elastic.
D)perfectly inelastic.

Question 61

A good like water has few substitutes and takes up little of our income to purchase, as a result its demand is likely to be

A)elastic.
B)perfectly elastic.
C)inelastic.
D)unit elastic.

Question 62

Name brand apparel have many substitutes and can get very expensive, as a result their demand is likely to be

A)elastic.
B)perfectly elastic.
C)inelastic.
D)unit elastic.

Question 63

A decrease in supply will increase prices most when demand is

A)elastic.
B)unit elastic.
C)inelastic (but not perfectly inelastic).
D)perfectly inelastic.

Question 64

Suppose a new law makes illegal the sale of a good that had been legal. This will

A)increase consumer surplus.
B)increase producer surplus.
C)decrease producer surplus.
D)eliminate deadweight loss.

Question 65

A decrease in demand will decrease prices least when supply is

A)elastic.
B)unit elastic.
C)inelastic (but not perfectly inelastic).
D)perfectly inelastic.

Question 66

An increase in supply will always

A)increase producer surplus.
B)decrease consumer surplus.
C)decrease producer surplus.
D)increase consumer surplus.

Question 67

An increase in demand will always

A)increase producer surplus.
B)increase producer surplus and increase consumer surplus.
C)decrease consumer surplus and increase consumer surplus.
D)increase consumer surplus.

Question 68

Because there are many brands of similarly tasting light beers, the elasticity of demand for any one of them is likely to be

A)zero.
B)higher than that of light beer itself.
C)less than that of light beer itself.
D)infinity.

Question 69

A decrease in demand will always

A)increase producer surplus.
B)decrease producer surplus and decrease consumer surplus.
C)decrease consumer surplus and increase consumer surplus.
D)increase consumer surplus.

Question 70

The elasticity of demand for gasoline is likely to be

A)small, but grow as time goes by.
B)small and shrink as time goes by.
C)large and grow as time goes by.
D)large and shrink as time goes by.

Question 71

An increase in supply will decrease prices least when demand is

A)elastic.
B)unit elastic.
C)inelastic (but not perfectly inelastic).
D)perfectly inelastic.

Question 72

When looking at the impact of a change in trade policy economists use consumer and producer surplus to look at the winners and losers. Free trade economists insist that

A)no one loses.
B)everyone loses.
C)there are winners and losers but that the gain to the winners is greater than the loss to the losers.
D)there are winners and losers but that the loss to the losers is greater than the gain to the winners.

Question 73

A decrease in demand will decrease prices most when supply is

A)elastic.
B)unit elastic.
C)inelastic (but not perfectly inelastic).
D)perfectly inelastic.

Question 74

An increase in supply will decrease prices most when demand is

A)elastic.
B)unit elastic.
C)inelastic (but not perfectly inelastic).
D)perfectly inelastic.

Question 75

A decrease in supply will increase prices least when demand is

A)elastic.
B)unit elastic.
C)inelastic (but not perfectly inelastic).
D)perfectly inelastic.

Question 76

Because most people spend a very small fraction of the income on tap water, it is likely to be

A)elastic.
B)inelastic.
C)perfectly elastic.
D)perfectly inelastic.

Question 77

Suppose a new law makes illegal the sale of a good that had been legal. This will

A)decrease consumer surplus.
B)increase consumer surplus.
C)increase producer surplus.
D)eliminate deadweight loss.

Question 78

If supply and demand are both straight lines, then at equilibrium consumer and producer surplus are both

A)equal.
B)shown as trapezoids.
C)shown as squares.
D)shown as triangles.

Question 79

The fact that the demand for eggs is inelastic is not surprising because

A)there are many substitutes for eggs as breakfast food.
B)the demand for food is inelastic.
C)the supply of eggs is inelastic.
D)they are so inexpensive.

Question 80

A decrease in supply will always

A)increase producer surplus.
B)decrease consumer surplus.
C)decrease producer surplus.
D)increase consumer surplus.