Question 1

When a supply curve is relatively flat,

Accepted Answer

A)  sellers are not very responsive to changes in price. 
B)  supply is relatively inelastic. 
C)  supply is relatively elastic. 
D)  Both a and b are correct. 
A)  sellers are not very responsive to changes in price. 
B)  supply is relatively inelastic. 
C)  supply is relatively elastic. 
D)  Both a and b are correct. C

Question 2

Figure 5-9  
-Refer to Figure 5-9.Suppose this demand curve is a straight,downward-sloping line all the way from the horizontal intercept to the vertical intercept.We choose two prices,P1 and P2,and the corresponding quantities demanded,Q1 and Q2,for the purpose of calculating the price elasticity of demand.Also suppose P2 > P1.In which of the following cases could we possibly find that (i)demand is elastic and (ii)an increase in price from P1 to P2 causes an increase in total revenue?

Accepted Answer

A)  0 1 2 1 2 1 > $15. 
D)  None of the above is correct. 
A)  0 1 2 1 2 1 > $15. 
D)  None of the above is correct. D

Question 3

The price elasticity of demand measures how much

Accepted Answer

A)  quantity demanded responds to a change in price. 
B)  quantity demanded responds to a change in income. 
C)  price responds to a change in demand. 
D)  demand responds to a change in supply. 
A)  quantity demanded responds to a change in price. 
B)  quantity demanded responds to a change in income. 
C)  price responds to a change in demand. 
D)  demand responds to a change in supply. A

Question 4

Which of the following is not possible?

Accepted Answer

A)  Demand is elastic,and a decrease in price causes an increase in revenue. 
B)  Demand is unit elastic,and a decrease in price causes an increase in revenue. 
C)  Demand is inelastic,and an increase in price causes an increase in revenue. 
D)  Demand is perfectly inelastic,and an increase in price causes an increase in revenue. 
A)  Demand is elastic,and a decrease in price causes an increase in revenue. 
B)  Demand is unit elastic,and a decrease in price causes an increase in revenue. 
C)  Demand is inelastic,and an increase in price causes an increase in revenue. 
D)  Demand is perfectly inelastic,and an increase in price causes an increase in revenue.

Question 5

Knowing that the demand for wheat is inelastic,if all farmers voluntarily did not plant wheat on 10 percent of their land,then

Accepted Answer

A)  consumers of wheat would buy more wheat. 
B)  wheat farmers would suffer a reduction in their total revenue. 
C)  wheat farmers would experience an increase in their total revenue. 
D)  the demand for wheat would decrease. 
A)  consumers of wheat would buy more wheat. 
B)  wheat farmers would suffer a reduction in their total revenue. 
C)  wheat farmers would experience an increase in their total revenue. 
D)  the demand for wheat would decrease.

Question 6

An increase in price causes an increase in total revenue when demand is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  All of the above are possible. 
A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  All of the above are possible.

Question 7

Which of the following statements is correct?

Accepted Answer

A)  The demand for natural gas is more elastic over a short period of time than over a long period of time. 
B)  The demand for smoke alarms is more elastic than the demand for Persian rugs. 
C)  The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general. 
D)  All of the above are correct. 
A)  The demand for natural gas is more elastic over a short period of time than over a long period of time. 
B)  The demand for smoke alarms is more elastic than the demand for Persian rugs. 
C)  The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general. 
D)  All of the above are correct.

Question 8

Figure 5-8  
-Refer to Figure 5-8.For prices below $5,demand is price

Accepted Answer

A)  elastic,and raising price will increase total revenue. 
B)  inelastic,and raising price will increase total revenue. 
C)  elastic,and lowering price will increase total revenue. 
D)  inelastic,and lowering price will increase total revenue. 
A)  elastic,and raising price will increase total revenue. 
B)  inelastic,and raising price will increase total revenue. 
C)  elastic,and lowering price will increase total revenue. 
D)  inelastic,and lowering price will increase total revenue.

Question 9

For a particular good,a 3 percent increase in price causes a 10 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A)  The relevant time horizon is short. 
B)  The good is a necessity. 
C)  The market for the good is broadly defined. 
D)  There are many close substitutes for this good. 
A)  The relevant time horizon is short. 
B)  The good is a necessity. 
C)  The market for the good is broadly defined. 
D)  There are many close substitutes for this good.

Question 10

When demand is inelastic,the price elasticity of demand is

Accepted Answer

A)  less than 1,and price and total revenue will move in the same direction. 
B)  less than 1,and price and total revenue will move in opposite directions. 
C)  greater than 1,and price and total revenue will move in the same direction. 
D)  greater than 1,and price and total revenue will move in opposite directions. 
A)  less than 1,and price and total revenue will move in the same direction. 
B)  less than 1,and price and total revenue will move in opposite directions. 
C)  greater than 1,and price and total revenue will move in the same direction. 
D)  greater than 1,and price and total revenue will move in opposite directions.

Question 11

A perfectly elastic demand implies that

Accepted Answer

A)  buyers will not respond to any change in price. 
B)  any rise in price above that represented by the demand curve will result in a quantity demanded of zero. 
C)  quantity demanded and price change by the same percent as we move along the demand curve. 
D)  price will rise by an infinite amount when there is a change in quantity demanded. 
A)  buyers will not respond to any change in price. 
B)  any rise in price above that represented by the demand curve will result in a quantity demanded of zero. 
C)  quantity demanded and price change by the same percent as we move along the demand curve. 
D)  price will rise by an infinite amount when there is a change in quantity demanded.

Question 12

Figure 5-11  
-Refer to Figure 5-11.Using the midpoint method,the price elasticity of demand between point A and point B is about

Accepted Answer

A)  0.33. 
B)  0.5. 
C)  2.0. 
D)  3.0. 
A)  0.33. 
B)  0.5. 
C)  2.0. 
D)  3.0.

Question 13

A 10 percent increase in gasoline prices reduces gasoline consumption by about

Accepted Answer

A)  6 percent after one year and 2.5 percent after five years. 
B)  2.5 percent after one year and 6 percent after five years. 
C)  10 percent after one year and 20 percent after five years. 
D)  0 percent after one year and 1 percent after five years. 
A)  6 percent after one year and 2.5 percent after five years. 
B)  2.5 percent after one year and 6 percent after five years. 
C)  10 percent after one year and 20 percent after five years. 
D)  0 percent after one year and 1 percent after five years.

Question 14

When demand is elastic,a decrease in price will cause

Accepted Answer

A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded. 
A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded.

Question 15

Suppose demand is given by the equation:   At what point along this demand curve will total revenue be maximized?

Accepted Answer

Total revenue is con

Question 16

When demand is perfectly inelastic,the price elasticity of demand

Accepted Answer

A)  is zero,and the demand curve is vertical. 
B)  is zero,and the demand curve is horizontal. 
C)  approaches infinity,and the demand curve is vertical. 
D)  approaches infinity,and the demand curve is horizontal. 
A)  is zero,and the demand curve is vertical. 
B)  is zero,and the demand curve is horizontal. 
C)  approaches infinity,and the demand curve is vertical. 
D)  approaches infinity,and the demand curve is horizontal.

Question 17

When we move upward and to the left along a linear,downward-sloping demand curve,price elasticity of demand

Accepted Answer

A)  first becomes smaller,then larger. 
B)  always becomes larger. 
C)  always becomes smaller. 
D)  first becomes larger,then smaller. 
A)  first becomes smaller,then larger. 
B)  always becomes larger. 
C)  always becomes smaller. 
D)  first becomes larger,then smaller.

Question 18

For which of the following goods is the income elasticity of demand likely highest?

Accepted Answer

A)  water 
B)  diamonds 
C)  hamburgers 
D)  housing 
A)  water 
B)  diamonds 
C)  hamburgers 
D)  housing

Question 19

Necessities such as food and clothing tend to have

Accepted Answer

A)  high price elasticities of demand and high income elasticities of demand. 
B)  high price elasticities of demand and low income elasticities of demand. 
C)  low price elasticities of demand and high income elasticities of demand. 
D)  low price elasticities of demand and low income elasticities of demand. 
A)  high price elasticities of demand and high income elasticities of demand. 
B)  high price elasticities of demand and low income elasticities of demand. 
C)  low price elasticities of demand and high income elasticities of demand. 
D)  low price elasticities of demand and low income elasticities of demand.

Question 20

Suppose that 50 ice cream cones are demanded at a particular price.If the price of ice cream cones rises from that price by 4 percent,the number of ice cream cones demanded falls to 46.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Accepted Answer

A)  demand for ice cream cones in this price range is elastic. 
B)  demand for ice cream cones in this price range is inelastic. 
C)  demand for ice cream cones in this price range is unit elastic. 
D)  price elasticity of demand for ice cream cones in this price range is 0. 
A)  demand for ice cream cones in this price range is elastic. 
B)  demand for ice cream cones in this price range is inelastic. 
C)  demand for ice cream cones in this price range is unit elastic. 
D)  price elasticity of demand for ice cream cones in this price range is 0.

Exam 5: Elasticity and Its Application

When a supply curve is relatively flat,

The price elasticity of demand measures how much

Which of the following is not possible?

Knowing that the demand for wheat is inelastic,if all farmers voluntarily did not plant wheat on 10 percent of their land,then

An increase in price causes an increase in total revenue when demand is

Which of the following statements is correct?

Figure 5-8 -Refer to Figure 5-8.For prices below $5,demand is price

For a particular good,a 3 percent increase in price causes a 10 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

When demand is inelastic,the price elasticity of demand is

A perfectly elastic demand implies that

Figure 5-11 -Refer to Figure 5-11.Using the midpoint method,the price elasticity of demand between point A and point B is about

A 10 percent increase in gasoline prices reduces gasoline consumption by about

When demand is elastic,a decrease in price will cause

Suppose demand is given by the equation: At what point along this demand curve will total revenue be maximized?

When demand is perfectly inelastic,the price elasticity of demand

When we move upward and to the left along a linear,downward-sloping demand curve,price elasticity of demand

For which of the following goods is the income elasticity of demand likely highest?

Necessities such as food and clothing tend to have

Suppose that 50 ice cream cones are demanded at a particular price.If the price of ice cream cones rises from that price by 4 percent,the number of ice cream cones demanded falls to 46.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Supply,demand,and Government Policies

Consumers,producers,and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Market for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving,investment,and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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