Question 1

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

Accepted Answer

A)  raises prices and total revenue in the drug market. 
B)  can increase drug-related crime. 
C)  shifts the demand curve for drugs to the left. 
D)  shifts the supply curve of drugs to the left. 
A)  raises prices and total revenue in the drug market. 
B)  can increase drug-related crime. 
C)  shifts the demand curve for drugs to the left. 
D)  shifts the supply curve of drugs to the left.

Question 2

If the demand for apples is elastic,then an increase in the price of apples will

Accepted Answer

A)  increase total revenue of apple sellers. 
B)  decrease total revenue of apple sellers. 
C)  not change total revenue of apple sellers. 
D)  There is not enough information to answer this question. 
A)  increase total revenue of apple sellers. 
B)  decrease total revenue of apple sellers. 
C)  not change total revenue of apple sellers. 
D)  There is not enough information to answer this question.

Question 3

For which pairs of goods is the cross-price elasticity most likely to be positive?

Accepted Answer

A)  peanut butter and jelly 
B)  bicycle frames and bicycle tires 
C)  pens and pencils 
D)  college textbooks and iPods 
A)  peanut butter and jelly 
B)  bicycle frames and bicycle tires 
C)  pens and pencils 
D)  college textbooks and iPods

Question 4

Table 5-3
The following table shows the demand schedule for a particular good.
  
-Refer to Table 5-3.Using the midpoint method,what is the price elasticity of demand when price rises from $9 to $12?

Accepted Answer

A)  0.43 
B)  0.67 
C)  1.50 
D)  2.33 
A)  0.43 
B)  0.67 
C)  1.50 
D)  2.33

Question 5

Figure 5-2  
-Refer to Figure 5-2.As price falls from Pa to Pb,we could use the three demand curves to calculate three different values of the price elasticity of demand.Which of the three demand curves would produce the smallest elasticity?

Accepted Answer

A)  D1 
B)  D2 
C)  D3 
D)  All of the above are equally elastic. 
A)  D1 
B)  D2 
C)  D3 
D)  All of the above are equally elastic.

Question 6

If the quantity supplied responds only slightly to changes in price,then

Accepted Answer

A)  supply is said to be elastic. 
B)  supply is said to be inelastic. 
C)  an increase in price will not shift the supply curve very much. 
D)  even a large decrease in demand will change the equilibrium price only slightly. 
A)  supply is said to be elastic. 
B)  supply is said to be inelastic. 
C)  an increase in price will not shift the supply curve very much. 
D)  even a large decrease in demand will change the equilibrium price only slightly.

Question 7

Your younger sister needs $50 to buy a new bike.She has opened a lemonade stand to make the money she needs.Your mother is paying for all of the ingredients.She currently is charging 25 cents per cup,but she wants to adjust her price to earn the $50 faster.If you know that the demand for lemonade is elastic,what is your advice to her?

Accepted Answer

A)  Leave the price at 25 cents and be patient. 
B)  Raise the price to increase total revenue. 
C)  Lower the price to increase total revenue. 
D)  There isn't enough information given to answer this question. 
A)  Leave the price at 25 cents and be patient. 
B)  Raise the price to increase total revenue. 
C)  Lower the price to increase total revenue. 
D)  There isn't enough information given to answer this question.

Question 8

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Accepted Answer

A) True 
 B)False

Question 9

Reta's income elasticity of demand for steak dinners is 1.50.All else equal,this means that if her income increases by 20 percent,she will buy

Accepted Answer

A)  150 percent more steak dinners. 
B)  50 percent more steak dinners. 
C)  30 percent more steak dinners. 
D)  20 percent more steak dinners. 
A)  150 percent more steak dinners. 
B)  50 percent more steak dinners. 
C)  30 percent more steak dinners. 
D)  20 percent more steak dinners.

Question 10

Figure 5-4  
-Refer to Figure 5-4.The section of the demand curve from A to B represents the

Accepted Answer

A)  elastic section of the demand curve. 
B)  inelastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  perfectly elastic section of the demand curve. 
A)  elastic section of the demand curve. 
B)  inelastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  perfectly elastic section of the demand curve.

Question 11

Supply tends to be more elastic in the short run and more inelastic in the long run.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is likely to have the most price elastic demand?

Accepted Answer

A)  ice cream 
B)  frozen yogurt 
C)  vanilla ice cream 
D)  Häagen-Dazs® vanilla bean ice cream 
A)  ice cream 
B)  frozen yogurt 
C)  vanilla ice cream 
D)  Häagen-Dazs® vanilla bean ice cream

Question 13

Figure 5-18  
-Refer to Figure 5-18.Which supply curve represents perfectly inelastic supply?

Accepted Answer

A)  S1 
B)  S2 
C)  S3 
D)  None of the supply curves is perfectly inelastic. 
A)  S1 
B)  S2 
C)  S3 
D)  None of the supply curves is perfectly inelastic.

Question 14

Figure 5-4  
-Refer to Figure 5-4.The section of the demand curve at point B represents the

Accepted Answer

A)  elastic section of the demand curve. 
B)  inelastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  perfectly elastic section of the demand curve. 
A)  elastic section of the demand curve. 
B)  inelastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  perfectly elastic section of the demand curve.

Question 15

Figure 5-3  
-Refer to Figure 5-3.The demand curve representing the demand for a luxury good with several close substitutes is

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 16

If the income elasticity of demand for a good is 0.56,is the good a normal or inferior good?

Accepted Answer

The good i

Question 17

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Accepted Answer

A) True 
 B)False

Question 18

When studying how some event or policy affects a market,elasticity provides information on the

Accepted Answer

A)  government expenditures associated with the policy. 
B)  costs and benefits of the effect. 
C)  allocative efficiency of the effect. 
D)  direction and magnitude of the effect. 
A)  government expenditures associated with the policy. 
B)  costs and benefits of the effect. 
C)  allocative efficiency of the effect. 
D)  direction and magnitude of the effect.

Question 19

Figure 5-13  
-Refer to Figure 5-13.Using the midpoint method,what is the price elasticity of supply between $16 and $40?

Accepted Answer

A)  0.125 
B)  0.86 
C)  1.0 
D)  2.5 
A)  0.125 
B)  0.86 
C)  1.0 
D)  2.5

Question 20

In which of the following situations will total revenue increase?

Accepted Answer

A)  Price elasticity of demand is 1.2,and the price of the good decreases. 
B)  Price elasticity of demand is 0.5,and the price of the good increases. 
C)  Price elasticity of demand is 3.0,and the price of the good decreases. 
D)  All of the above are correct. 
A)  Price elasticity of demand is 1.2,and the price of the good decreases. 
B)  Price elasticity of demand is 0.5,and the price of the good increases. 
C)  Price elasticity of demand is 3.0,and the price of the good decreases. 
D)  All of the above are correct.

Exam 5: Elasticity and Its Application

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

If the demand for apples is elastic,then an increase in the price of apples will

For which pairs of goods is the cross-price elasticity most likely to be positive?

Table 5-3 The following table shows the demand schedule for a particular good. -Refer to Table 5-3.Using the midpoint method,what is the price elasticity of demand when price rises from $9 to $12?

Figure 5-2 -Refer to Figure 5-2.As price falls from Pa to Pb,we could use the three demand curves to calculate three different values of the price elasticity of demand.Which of the three demand curves would produce the smallest elasticity?

If the quantity supplied responds only slightly to changes in price,then

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Reta's income elasticity of demand for steak dinners is 1.50.All else equal,this means that if her income increases by 20 percent,she will buy

Figure 5-4 -Refer to Figure 5-4.The section of the demand curve from A to B represents the

Supply tends to be more elastic in the short run and more inelastic in the long run.

Which of the following is likely to have the most price elastic demand?

Figure 5-18 -Refer to Figure 5-18.Which supply curve represents perfectly inelastic supply?

Figure 5-4 -Refer to Figure 5-4.The section of the demand curve at point B represents the

Figure 5-3 -Refer to Figure 5-3.The demand curve representing the demand for a luxury good with several close substitutes is

If the income elasticity of demand for a good is 0.56,is the good a normal or inferior good?

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

When studying how some event or policy affects a market,elasticity provides information on the

Figure 5-13 -Refer to Figure 5-13.Using the midpoint method,what is the price elasticity of supply between $16 and $40?

In which of the following situations will total revenue increase?

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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