FAU ECO 2023 Exam 2 Study Guide
What is the correct expression for the price elasticity of demand? Correct Answer: Percentage change in
quantity demanded/percentage change in price
Substitutes have a Correct Answer: positive cross elasticity of demand
What type of supply curve is perfectly inelastic? Correct Answer: Market period supply curve
Less deadweight loss results from the imposition of a tax when: Correct Answer: demand is inelastic and
supply is inelastic
In general, the smaller the percent of household income spent on a product: Correct Answer: The lower
the elasticity of demand.
A firm will maximize total revenue if it sells its product at a price that corresponds to: Correct Answer:
The midpoint of the demand curve
What type of supply curve always cross through the origin? Correct Answer: Unitary elastic supply
curves
Groups being taxed ___________ bear the burden of the tax. Correct Answer: May not be the ones who
What will happen to the quantity demanded of a unitary elastic product when its price increases by 5%?
Correct Answer: Quantity demanded will decrease by 5%
Complements are defined as having: Correct Answer: A negative cross price elasticity of demand.
Which of the following is an example of unitary elastic supply? Correct Answer: a product that has a
price elasticity of supply that equals 1
_____ refers to who bears the economic burden of a tax. Correct Answer: The incidence of taxation
What will happen to the quantity demanded of a perfectly inelastic product when the price increases by
10%? Correct Answer: It will not change.
For which of the following industries is supply most elastic in the long run? Correct Answer: Coffee
shops
Which of the following values of Ed represents the largest price elasticity of demand? Correct Answer: 7
What happens to price elasticity on a linear demand curve when the price increases above the unitary
elasticity point? Correct Answer: It becomes more elastic.
, Short-run supply curves are _____ long-run supply curves. Correct Answer: more inelastic than
If the price elasticity of demand for facial tissue is 0.4, then the price elasticity for facial tissue is
considered: Correct Answer: inelastic
When the price of product A rises, the quantity of product B that is purchased increases. Products A and
B are: Correct Answer: substitutes
What type of supply curves always cross through the origin? Correct Answer: unitary elastic supply
curves
The midpoint method of computing elasticity: Correct Answer: gets rid of the natural bias that occurs
when using the base method.
After Lindsay received a 30% raise at work, she bought 15% less canned cream corn. For Lindsay, which
type of good is canned creamed corn? Correct Answer: Inferior good
Inelastic supply curves always cross: Correct Answer: the quantity axis.
Assume that the price elasticity of demand for T-shirts is unitary elastic. If a surf shop increases the price
of its T-shirts, what will happen to the total revenue from T-shirt sales? Correct Answer: Total revenue
will stay the same.
When the increase in price for a new video game is 10%, the increase in quantity supplied of that new
video game is 10%. What is the price elasticity of supply for that video game? Correct Answer: 1
Assume that a firm is selling its product at the price that corresponds to the midpoint of its demand
curve. If the firm increases the price of its product, what will happen to total revenue? Correct Answer:
It will decrease
When the increase in price for a new video game is 30%, the increase in quantity supplied of a new
video game is 90%. What is the price elasticity of supply for that video game? Correct Answer: 3
If the price of apples causes quantity demanded to fall on the elastic portion of the (linear) demand
curve, what will a decrease in price do to total revenue? Correct Answer: Total revenue will rise
An analyst states that the demand for Pepsi is more elastic than the demand for cola. This represents
which of the determinants of elasticity? Correct Answer: number of substitutes
If a store sells a good that has a unitary elastic demand, what would be the net result on their total
revenue from an increase in price? Correct Answer: There would be no change in total revenue.
What is the correct expression for the price elasticity of demand? Correct Answer: Percentage change in
quantity demanded/percentage change in price
Substitutes have a Correct Answer: positive cross elasticity of demand
What type of supply curve is perfectly inelastic? Correct Answer: Market period supply curve
Less deadweight loss results from the imposition of a tax when: Correct Answer: demand is inelastic and
supply is inelastic
In general, the smaller the percent of household income spent on a product: Correct Answer: The lower
the elasticity of demand.
A firm will maximize total revenue if it sells its product at a price that corresponds to: Correct Answer:
The midpoint of the demand curve
What type of supply curve always cross through the origin? Correct Answer: Unitary elastic supply
curves
Groups being taxed ___________ bear the burden of the tax. Correct Answer: May not be the ones who
What will happen to the quantity demanded of a unitary elastic product when its price increases by 5%?
Correct Answer: Quantity demanded will decrease by 5%
Complements are defined as having: Correct Answer: A negative cross price elasticity of demand.
Which of the following is an example of unitary elastic supply? Correct Answer: a product that has a
price elasticity of supply that equals 1
_____ refers to who bears the economic burden of a tax. Correct Answer: The incidence of taxation
What will happen to the quantity demanded of a perfectly inelastic product when the price increases by
10%? Correct Answer: It will not change.
For which of the following industries is supply most elastic in the long run? Correct Answer: Coffee
shops
Which of the following values of Ed represents the largest price elasticity of demand? Correct Answer: 7
What happens to price elasticity on a linear demand curve when the price increases above the unitary
elasticity point? Correct Answer: It becomes more elastic.
, Short-run supply curves are _____ long-run supply curves. Correct Answer: more inelastic than
If the price elasticity of demand for facial tissue is 0.4, then the price elasticity for facial tissue is
considered: Correct Answer: inelastic
When the price of product A rises, the quantity of product B that is purchased increases. Products A and
B are: Correct Answer: substitutes
What type of supply curves always cross through the origin? Correct Answer: unitary elastic supply
curves
The midpoint method of computing elasticity: Correct Answer: gets rid of the natural bias that occurs
when using the base method.
After Lindsay received a 30% raise at work, she bought 15% less canned cream corn. For Lindsay, which
type of good is canned creamed corn? Correct Answer: Inferior good
Inelastic supply curves always cross: Correct Answer: the quantity axis.
Assume that the price elasticity of demand for T-shirts is unitary elastic. If a surf shop increases the price
of its T-shirts, what will happen to the total revenue from T-shirt sales? Correct Answer: Total revenue
will stay the same.
When the increase in price for a new video game is 10%, the increase in quantity supplied of that new
video game is 10%. What is the price elasticity of supply for that video game? Correct Answer: 1
Assume that a firm is selling its product at the price that corresponds to the midpoint of its demand
curve. If the firm increases the price of its product, what will happen to total revenue? Correct Answer:
It will decrease
When the increase in price for a new video game is 30%, the increase in quantity supplied of a new
video game is 90%. What is the price elasticity of supply for that video game? Correct Answer: 3
If the price of apples causes quantity demanded to fall on the elastic portion of the (linear) demand
curve, what will a decrease in price do to total revenue? Correct Answer: Total revenue will rise
An analyst states that the demand for Pepsi is more elastic than the demand for cola. This represents
which of the determinants of elasticity? Correct Answer: number of substitutes
If a store sells a good that has a unitary elastic demand, what would be the net result on their total
revenue from an increase in price? Correct Answer: There would be no change in total revenue.
