ECON 102 QUESTIONS AND ANSWERS LATEST UPDATED
VERSION, GRADED A+.
Suppose prices for new homes have risen, yet sales of new homes have also risen. We can conclude
that:
A) the demand for new homes has risen.
B) the law of demand has been violated.
C) new firms have entered the construction industry.
D) construction firms must be facing higher costs.
A) the demand for new homes has risen.
If the equilibrium price of bread is $2 and the government imposes a $1.50 price ceiling on the price of
bread, then:
A) more bread will be produced.
B) there will be a shortage of bread.
C) the demand for bread will decrease.
D) producers will charge $0.50 for bread.
E) $0.50 in tax revenue will be paid for each unit of bread.
B) there will be a shortage of bread.
If Stimpson University increases tuition in order to increase its revenue, it will:
A) Not be successful if the demand curve slopes downward
B) Be successful if demand is elastic
C) Be successful if demand is inelastic
D) Be successful if the supply is elastic
E) Be successful if the supply is inelastic
C) Be successful if demand is inelastic
Governments can use price elasticity of demand to estimate how changes in excise tax rates will
affect:
A) income
B) prices
C) tax revenues
D) government spending
E) profits
C) tax revenues
If the percentage change in the quantity demanded of a good equals the percentage change in price,
price elasticity of demand is:
A) elastic
B) inelastic
, C) perfectly elastic
D) unitary elastic
D) unitary elastic
An excise tax levied on a product will impose a smaller relative burden on consumers (and a larger tax
burden on sellers) when:
A) the supply of a product is relatively inelastic
B) the supply of a product is relatively elastic
C) the demand for a product is relatively elastic
D) either A or C are true
D) either A or C are true
Which of the following statements is true?
A) If the income elasticity of demand is less than zero, the good is an inferior good.
B) Only if the demand curve is vertical will sellers raise the price by the full amount of tax.
C) Two goods are substitutes if the cross-elasticity of demand coefficient is positive.
D) A price elasticity of supply coefficient equal to 1.5 means the product exhibits an elastic supply
E) All of these.
E) All of these.
One of the reasons that price elasticities of demand are always stated as positive numbers is because:
A) the numerators and denominators of the formula are both negative.
B) the numerators and denominators of the formula are both positive.
C) price increases always lead to increases quantity demanded
D) price decreases always lead to decreases in quantity demanded
E) price elasticities are always negative, so we ignore the sign.
E) price elasticities are always negative, so we ignore the sign.
Price elasticity of demand is defined as a ratio of the:
A) percentage increase in price to a increase in quantity demanded
B) unit change in quantity demanded to the dollar change in price
C) maximum amount that consumers will pay to increase quantity
D) percentage change in quantity demanded to the percentage change in price, other things being
equal
D) percentage change in quantity demanded to the percentage change in price, other things being equal
Suppose the Good Food supermarket increases the price of a pound of bananas from $.75 to $1.25
and finds that the quantity of bananas it sells per month drops from 1,500 to 1,000. The price
elasticity of demand coefficient for bananas in the price range is:
A) 0.80
B) 3.00
C) 2.00
D) 0.50
VERSION, GRADED A+.
Suppose prices for new homes have risen, yet sales of new homes have also risen. We can conclude
that:
A) the demand for new homes has risen.
B) the law of demand has been violated.
C) new firms have entered the construction industry.
D) construction firms must be facing higher costs.
A) the demand for new homes has risen.
If the equilibrium price of bread is $2 and the government imposes a $1.50 price ceiling on the price of
bread, then:
A) more bread will be produced.
B) there will be a shortage of bread.
C) the demand for bread will decrease.
D) producers will charge $0.50 for bread.
E) $0.50 in tax revenue will be paid for each unit of bread.
B) there will be a shortage of bread.
If Stimpson University increases tuition in order to increase its revenue, it will:
A) Not be successful if the demand curve slopes downward
B) Be successful if demand is elastic
C) Be successful if demand is inelastic
D) Be successful if the supply is elastic
E) Be successful if the supply is inelastic
C) Be successful if demand is inelastic
Governments can use price elasticity of demand to estimate how changes in excise tax rates will
affect:
A) income
B) prices
C) tax revenues
D) government spending
E) profits
C) tax revenues
If the percentage change in the quantity demanded of a good equals the percentage change in price,
price elasticity of demand is:
A) elastic
B) inelastic
, C) perfectly elastic
D) unitary elastic
D) unitary elastic
An excise tax levied on a product will impose a smaller relative burden on consumers (and a larger tax
burden on sellers) when:
A) the supply of a product is relatively inelastic
B) the supply of a product is relatively elastic
C) the demand for a product is relatively elastic
D) either A or C are true
D) either A or C are true
Which of the following statements is true?
A) If the income elasticity of demand is less than zero, the good is an inferior good.
B) Only if the demand curve is vertical will sellers raise the price by the full amount of tax.
C) Two goods are substitutes if the cross-elasticity of demand coefficient is positive.
D) A price elasticity of supply coefficient equal to 1.5 means the product exhibits an elastic supply
E) All of these.
E) All of these.
One of the reasons that price elasticities of demand are always stated as positive numbers is because:
A) the numerators and denominators of the formula are both negative.
B) the numerators and denominators of the formula are both positive.
C) price increases always lead to increases quantity demanded
D) price decreases always lead to decreases in quantity demanded
E) price elasticities are always negative, so we ignore the sign.
E) price elasticities are always negative, so we ignore the sign.
Price elasticity of demand is defined as a ratio of the:
A) percentage increase in price to a increase in quantity demanded
B) unit change in quantity demanded to the dollar change in price
C) maximum amount that consumers will pay to increase quantity
D) percentage change in quantity demanded to the percentage change in price, other things being
equal
D) percentage change in quantity demanded to the percentage change in price, other things being equal
Suppose the Good Food supermarket increases the price of a pound of bananas from $.75 to $1.25
and finds that the quantity of bananas it sells per month drops from 1,500 to 1,000. The price
elasticity of demand coefficient for bananas in the price range is:
A) 0.80
B) 3.00
C) 2.00
D) 0.50
