Question 1

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Accepted Answer

A) True 
 B)False

Question 2

Suppose demand is perfectly inelastic,and the supply of the good in question decreases.As a result,

Accepted Answer

A)  the equilibrium quantity decreases,and the equilibrium price is unchanged. 
B)  the equilibrium price increases,and the equilibrium quantity is unchanged. 
C)  the equilibrium quantity and the equilibrium price both are unchanged. 
D)  buyers' total expenditure on the good is unchanged. 
A)  the equilibrium quantity decreases,and the equilibrium price is unchanged. 
B)  the equilibrium price increases,and the equilibrium quantity is unchanged. 
C)  the equilibrium quantity and the equilibrium price both are unchanged. 
D)  buyers' total expenditure on the good is unchanged.

Question 3

Total revenue

Accepted Answer

A)  always increases as price increases. 
B)  increases as price increases,as long as demand is elastic. 
C)  decreases as price increases,as long as demand is inelastic. 
D)  remains unchanged as price increases when demand is unit elastic. 
A)  always increases as price increases. 
B)  increases as price increases,as long as demand is elastic. 
C)  decreases as price increases,as long as demand is inelastic. 
D)  remains unchanged as price increases when demand is unit elastic.

Question 4

What is the price elasticity of demand at any point on a perfectly inelastic demand curve?

Accepted Answer

The price

Question 5

A decrease in supply will cause the largest increase in price when

Accepted Answer

A)  both supply and demand are inelastic. 
B)  both supply and demand are elastic. 
C)  demand is elastic and supply is inelastic. 
D)  demand is inelastic and supply is elastic. 
A)  both supply and demand are inelastic. 
B)  both supply and demand are elastic. 
C)  demand is elastic and supply is inelastic. 
D)  demand is inelastic and supply is elastic.

Question 6

Figure 5-5  
-Refer to Figure 5-5.Using the midpoint method,between prices of $12 and $18,price elasticity of demand is

Accepted Answer

A)  0.33. 
B)  0.67. 
C)  1.33. 
D)  1.89. 
A)  0.33. 
B)  0.67. 
C)  1.33. 
D)  1.89.

Question 7

If the price elasticity of supply for wheat is less than 1,then the supply of wheat is

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  unit elastic. 
D)  quite sensitive to changes in income. 
A)  inelastic. 
B)  elastic. 
C)  unit elastic. 
D)  quite sensitive to changes in income.

Question 8

Figure 5-9  
-Refer to Figure 5-9.A decrease in price from $15 to $10 leads to a

Accepted Answer

A)  decrease in total revenue of $10,so the price elasticity of demand is greater than 1 in this price range. 
B)  decrease in total revenue of $10,so the price elasticity of demand is less than 1 in this price range. 
C)  decrease in total revenue of $20,so the price elasticity of demand is less than 1 in this price range. 
D)  decrease in total revenue of $20,so demand is elastic in this price range. 
A)  decrease in total revenue of $10,so the price elasticity of demand is greater than 1 in this price range. 
B)  decrease in total revenue of $10,so the price elasticity of demand is less than 1 in this price range. 
C)  decrease in total revenue of $20,so the price elasticity of demand is less than 1 in this price range. 
D)  decrease in total revenue of $20,so demand is elastic in this price range.

Question 9

Drug interdiction,which reduces the supply of drugs,will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

A) True 
 B)False

Question 10

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that 500 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 10 percent,the number of candy bars demanded falls to 480.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Accepted Answer

A)  demand for candy bars in this price range is unit elastic. 
B)  price increase will decrease the total revenue of candy bar sellers. 
C)  price elasticity of demand for candy bars in this price range is about 0.41. 
D)  price elasticity of demand for candy bars in this price range is about 0.24. 
A)  demand for candy bars in this price range is unit elastic. 
B)  price increase will decrease the total revenue of candy bar sellers. 
C)  price elasticity of demand for candy bars in this price range is about 0.41. 
D)  price elasticity of demand for candy bars in this price range is about 0.24.

Question 12

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12,the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 13

Figure 5-14  
-Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points C and D?

Accepted Answer

A)  0.21 
B)  0.29 
C)  0.73 
D)  1.36 
A)  0.21 
B)  0.29 
C)  0.73 
D)  1.36

Question 14

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Accepted Answer

A) True 
 B)False

Question 15

If sellers do not adjust their quantities supplied at all in response to a change in price,

Accepted Answer

A)  advances in technology must be prevalent. 
B)  the time period under consideration must be very long. 
C)  supply is perfectly elastic. 
D)  supply is perfectly inelastic. 
A)  advances in technology must be prevalent. 
B)  the time period under consideration must be very long. 
C)  supply is perfectly elastic. 
D)  supply is perfectly inelastic.

Question 16

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 17

If a supply curve is horizontal,then supply is said to be perfectly elastic,and the price elasticity of supply approaches infinity.

Accepted Answer

A) True 
 B)False

Question 18

Figure 5-5  
-Refer to Figure 5-5.Using the midpoint method,demand is unit elastic between prices of

Accepted Answer

A)  $18 and $24. 
B)  $24 and $30. 
C)  $24 and $36. 
D)  $30 and $36. 
A)  $18 and $24. 
B)  $24 and $30. 
C)  $24 and $36. 
D)  $30 and $36.

Question 19

Figure 5-4  
-Refer to Figure 5-4.Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00.Then,between prices of $4.99 and $5.01,the price elasticity of demand is

Accepted Answer

A)  less than 1 but greater than zero. 
B)  equal to 1. 
C)  greater than 1. 
D)  equal to zero. 
A)  less than 1 but greater than zero. 
B)  equal to 1. 
C)  greater than 1. 
D)  equal to zero.

Question 20

The midpoint method for calculating elasticities is convenient in that it allows us to

Accepted Answer

A)  ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price. 
B)  calculate the same value for the elasticity,regardless of whether the price increases or decreases. 
C)  assume that sellers' total revenue stays constant when the price changes. 
D)  restrict all elasticity values to between 0 and 1. 
A)  ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price. 
B)  calculate the same value for the elasticity,regardless of whether the price increases or decreases. 
C)  assume that sellers' total revenue stays constant when the price changes. 
D)  restrict all elasticity values to between 0 and 1.

Exam 5: Elasticity and Its Application

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Suppose demand is perfectly inelastic,and the supply of the good in question decreases.As a result,

Total revenue

What is the price elasticity of demand at any point on a perfectly inelastic demand curve?

A decrease in supply will cause the largest increase in price when

Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,between prices of $12 and $18,price elasticity of demand is

If the price elasticity of supply for wheat is less than 1,then the supply of wheat is

Figure 5-9 -Refer to Figure 5-9.A decrease in price from $15 to $10 leads to a

Drug interdiction,which reduces the supply of drugs,will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Suppose that 500 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 10 percent,the number of candy bars demanded falls to 480.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12,the price elasticity of supply is 2.

Figure 5-14 -Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points C and D?

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

If sellers do not adjust their quantities supplied at all in response to a change in price,

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

If a supply curve is horizontal,then supply is said to be perfectly elastic,and the price elasticity of supply approaches infinity.

Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,demand is unit elastic between prices of

Figure 5-4 -Refer to Figure 5-4.Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00.Then,between prices of $4.99 and $5.01,the price elasticity of demand is

The midpoint method for calculating elasticities is convenient in that it allows us to

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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