Question 1

Supply is elastic whenever the value of the elasticity of supply is positive and greater than 1.

Accepted Answer

A) True 
 B)False  True

Question 2

At a price of $100, Beachside Canoe Rentals rented 11 canoes. When it increased its rental price to $125, 9 canoes were rented. Calculate the absolute value of the price elasticity of demand for canoe rentals using the midpoint formula.

Accepted Answer

A)  2 
B)  1.25 
C)  0.9 
D)  0.75 
A)  2 
B)  1.25 
C)  0.9 
D)  0.75 C

Question 3

Which of the following is one reason why the income of small family farms has decreased over time?

Accepted Answer

A)  Technology has increased farm productivity and market supply. 
B)  The demand for farm products is inelastic. 
C)  The demand for farm products is income inelastic. 
D)  The U.S. population has increased greatly since 1950. 
A)  Technology has increased farm productivity and market supply. 
B)  The demand for farm products is inelastic. 
C)  The demand for farm products is income inelastic. 
D)  The U.S. population has increased greatly since 1950. B

Question 4

The current price of canvas messenger bags is $36 each and sales of the bags equal 400 per week. If the price elasticity of demand is -2.5 and the price changes to $44, how many messenger bags will be sold per week? Use the midpoint formula.

Accepted Answer

Using the midpoint formula: -2.5 = (400

Question 5

Table 6-8
   The town of Bloomfield is well known for its basketball team. The price of basketball game tickets is determined by market forces. Table 6-8 above shows the demand and supply schedules for basketball games tickets.
-Refer to Table 6-8. What is the numerical value of the price elasticity of supply?

Accepted Answer

A)  1 
B)  greater than 0 but less than 1 
C)  0 
D)  greater than 1 
A)  1 
B)  greater than 0 but less than 1 
C)  0 
D)  greater than 1

Question 6

Figure 6-11  
-Refer to Figure 6-11. What is the value of the price elasticity of supply between g and h?

Accepted Answer

A)  20 percent 
B)  0.5 
C)  2 
D)  0.02 
A)  20 percent 
B)  0.5 
C)  2 
D)  0.02

Question 7

If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids, the demand for her orchids is

Accepted Answer

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

Question 8

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units. Use the midpoint formula to calculate the price elasticity of supply.

Accepted Answer

A)  1.22 
B)  1.0 
C)  0.82 
D)  0.07 
A)  1.22 
B)  1.0 
C)  0.82 
D)  0.07

Question 9

If at a price of $50, Ghani sells 20 hand-made leather cell-phone covers but at a price of $60, zero units are sold. Based on this information, the demand for his cell-phone covers is

Accepted Answer

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

Question 10

The price elasticity of supply measures

Accepted Answer

A)  the responsiveness of quantity supplied to changes in input prices. 
B)  the responsiveness of quantity supplied to changes in technology. 
C)  the responsiveness of quantity supplied to changes in price. 
D)  a supplier's ability to produce a good in the face of scarcity. 
A)  the responsiveness of quantity supplied to changes in input prices. 
B)  the responsiveness of quantity supplied to changes in technology. 
C)  the responsiveness of quantity supplied to changes in price. 
D)  a supplier's ability to produce a good in the face of scarcity.

Question 11

We should never assume that an inelastic demand curve is a perfectly inelastic demand curve because

Accepted Answer

A)  there has never been evidence of a perfectly inelastic demand curve. 
B)  an inelastic demand curve may be perfectly inelastic at some times but not others. 
C)  perfectly inelastic demand curves are rare. 
D)  an inelastic demand curve may be elastic at low prices. 
A)  there has never been evidence of a perfectly inelastic demand curve. 
B)  an inelastic demand curve may be perfectly inelastic at some times but not others. 
C)  perfectly inelastic demand curves are rare. 
D)  an inelastic demand curve may be elastic at low prices.

Question 12

Consider the following pairs of items: 
a. shampoo and conditioner
b. iPhones and earbuds
c. a laptop computer and a desktop computer
d. beef and pork
e. air-travel and weed killer
Which of the pairs listed will have a negative cross-price elasticity?

Accepted Answer

A)  a and b only 
B)  c and d only 
C)  e only 
D)  a, b, and c only 
A)  a and b only 
B)  c and d only 
C)  e only 
D)  a, b, and c only

Question 13

Table 6-2
  
-Refer to Table 6-2. Assume that an economist has estimated the price elasticity of demand values in the table above. Use the data in the table to select the correct statement.

Accepted Answer

A)  The demand for Coca-Cola is inelastic. 
B)  The elasticity for "All soft drinks" is less than the elasticity for Coca-Cola because Coca-Cola is more of a luxury than a necessity; "All soft drinks" represent goods that are more necessity than luxury. 
C)  The difference in elasticity values is explained by the fact that the more narrowly we define a market the more elastic the demand will be. 
D)  There are fewer substitutes for "All carbonated soft drinks" than there are for "All soft drinks." 
A)  The demand for Coca-Cola is inelastic. 
B)  The elasticity for "All soft drinks" is less than the elasticity for Coca-Cola because Coca-Cola is more of a luxury than a necessity; "All soft drinks" represent goods that are more necessity than luxury. 
C)  The difference in elasticity values is explained by the fact that the more narrowly we define a market the more elastic the demand will be. 
D)  There are fewer substitutes for "All carbonated soft drinks" than there are for "All soft drinks."

Question 14

Of the following, which is the best example of good with a perfectly inelastic demand?

Accepted Answer

A)  the demand for tickets in New York City when the Mets or Yankees are in the World Series 
B)  the demand for gasoline 
C)  a diabetic's demand for insulin 
D)  the demand for a college education by a student who has a full scholarship to an Ivy League school 
A)  the demand for tickets in New York City when the Mets or Yankees are in the World Series 
B)  the demand for gasoline 
C)  a diabetic's demand for insulin 
D)  the demand for a college education by a student who has a full scholarship to an Ivy League school

Question 15

Suppose the cross-price elasticity of demand between DVDs at Amazon.com and DVDs at Rakuten.com is 3.5. Based on this information, predict what happens when Amazon.com lowers its DVD prices by 10 percent.

Accepted Answer

A)  The quantity of DVDs demanded on Amazon.com will increase by 35 percent. 
B)  The quantity of DVDs demanded on Rakuten.com will increase by 35 percent. 
C)  The quantity of DVDs demanded on Amazon.com will decrease by 35 percent. 
D)  The quantity of DVDs demanded on Rakuten.com will decrease by 35 percent. 
A)  The quantity of DVDs demanded on Amazon.com will increase by 35 percent. 
B)  The quantity of DVDs demanded on Rakuten.com will increase by 35 percent. 
C)  The quantity of DVDs demanded on Amazon.com will decrease by 35 percent. 
D)  The quantity of DVDs demanded on Rakuten.com will decrease by 35 percent.

Question 16

Which of the following is not a determinant of a good's price elasticity of demand?

Accepted Answer

A)  the slope of the demand curve 
B)  the share of the good in the consumer's total budget 
C)  whether the good is a luxury or a necessity 
D)  the passage of time 
A)  the slope of the demand curve 
B)  the share of the good in the consumer's total budget 
C)  whether the good is a luxury or a necessity 
D)  the passage of time

Question 17

For each pair of items below determine which product would have the higher price elasticity of demand (in absolute value).
a. Blood pressure medicine for someone who has high blood pressure or the purchase of Clairol hair coloring product.
b. A new Ford Fusion or a tank of gas for your current car.
c. A Seiko watch or watches in general.

Accepted Answer

a. The demand for the hair product is mo

Question 18

To calculate the price elasticity of demand, we divide

Accepted Answer

A)  the percentage change in quantity demanded by the percentage change in price. 
B)  the percentage change in price by the percentage change in quantity demanded. 
C)  rise by the run. 
D)  the average price by the average quantity demanded. 
A)  the percentage change in quantity demanded by the percentage change in price. 
B)  the percentage change in price by the percentage change in quantity demanded. 
C)  rise by the run. 
D)  the average price by the average quantity demanded.

Question 19

In 2016, Philadelphia imposed a tax of 1.5 cents per ounce on sweetened beverages, and PepsiCo indicated that its sales in Philadelphia fell by 40 percent after the tax took effect. If the demand for sweetened beverages in Philadelphia is unit elastic, then the price of Pepsico's sweetened beverages in Philadelphia would have increased by ________ percent following the implementation of the tax.

Accepted Answer

A)   40 
D)  The price would not have changed if demand was unit elastic. 
A)   40 
D)  The price would not have changed if demand was unit elastic.

Question 20

If the income elasticity for canned food is 0.8, then canned food is an inferior good.

Accepted Answer

A) True 
 B)False

Exam 6: Elasticity: the Responsiveness of Demand and Supply

Supply is elastic whenever the value of the elasticity of supply is positive and greater than 1.

At a price of $100, Beachside Canoe Rentals rented 11 canoes. When it increased its rental price to $125, 9 canoes were rented. Calculate the absolute value of the price elasticity of demand for canoe rentals using the midpoint formula.

Which of the following is one reason why the income of small family farms has decreased over time?

The current price of canvas messenger bags is $36 each and sales of the bags equal 400 per week. If the price elasticity of demand is -2.5 and the price changes to $44, how many messenger bags will be sold per week? Use the midpoint formula.

Figure 6-11 -Refer to Figure 6-11. What is the value of the price elasticity of supply between g and h?

If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids, the demand for her orchids is

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units. Use the midpoint formula to calculate the price elasticity of supply.

If at a price of $50, Ghani sells 20 hand-made leather cell-phone covers but at a price of $60, zero units are sold. Based on this information, the demand for his cell-phone covers is

The price elasticity of supply measures

We should never assume that an inelastic demand curve is a perfectly inelastic demand curve because

Consider the following pairs of items: a. shampoo and conditioner b. iPhones and earbuds c. a laptop computer and a desktop computer d. beef and pork e. air-travel and weed killer Which of the pairs listed will have a negative cross-price elasticity?

Table 6-2 -Refer to Table 6-2. Assume that an economist has estimated the price elasticity of demand values in the table above. Use the data in the table to select the correct statement.

Of the following, which is the best example of good with a perfectly inelastic demand?

Suppose the cross-price elasticity of demand between DVDs at Amazon.com and DVDs at Rakuten.com is 3.5. Based on this information, predict what happens when Amazon.com lowers its DVD prices by 10 percent.

Which of the following is not a determinant of a good's price elasticity of demand?

To calculate the price elasticity of demand, we divide

If the income elasticity for canned food is 0.8, then canned food is an inferior good.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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