Question 1

Elasticity measures how responsive quantity is to changes in price.

Accepted Answer

A) True 
 B)False

Question 2

Suppose that good X has few close substitutes and that good Y has many close substitutes.Which good would you expect to have more price inelastic demand?

Accepted Answer

The answer of Suppose that good X has few close...

Question 3

Suppose that two supply curves pass through the same point.One is steep,and the other is flat.Which of the following statements is correct?

Accepted Answer

A)  The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve. 
B)  The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve. 
C)  Given two prices with which to calculate the price elasticity of supply,that elasticity would be the same for both curves. 
D)  A decrease in demand will increase total revenue if the steeper supply curve is relevant,while a decrease in demand will decrease total revenue if the flatter supply cure is relevant. 
A)  The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve. 
B)  The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve. 
C)  Given two prices with which to calculate the price elasticity of supply,that elasticity would be the same for both curves. 
D)  A decrease in demand will increase total revenue if the steeper supply curve is relevant,while a decrease in demand will decrease total revenue if the flatter supply cure is relevant.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

For a particular good,a 10 percent increase in price causes a 5 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

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

Question 6

Table 5-1
  
-Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

Accepted Answer

A)  A is root beer,and B is carbonated beverages. 
B)  A is bicycles,and B is mopeds. 
C)  A is airline tickets in the short run,and B is airline tickets in the long run. 
D)  A is gourmet coffee,and B is dentist's visits. 
A)  A is root beer,and B is carbonated beverages. 
B)  A is bicycles,and B is mopeds. 
C)  A is airline tickets in the short run,and B is airline tickets in the long run. 
D)  A is gourmet coffee,and B is dentist's visits.

Question 7

For a vertical demand curve,

Accepted Answer

A)  the slope is undefined,and the price elasticity of demand is equal to 0. 
B)  the slope is equal to 0,and the price elasticity of demand is undefined. 
C)  both the slope and price elasticity of demand are undefined. 
D)  both the slope and price elasticity of demand are equal to 0. 
A)  the slope is undefined,and the price elasticity of demand is equal to 0. 
B)  the slope is equal to 0,and the price elasticity of demand is undefined. 
C)  both the slope and price elasticity of demand are undefined. 
D)  both the slope and price elasticity of demand are equal to 0.

Question 8

Table 5-3
  
-Refer to Table 5-3.Using the midpoint method,what is the price elasticity of demand between $6 and $8?

Accepted Answer

The price

Question 9

Table 5-2
  
-Refer to Table 5-2.Using the midpoint method,if the price falls from $40 to $20,the price elasticity of demand is

Accepted Answer

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

Question 10

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

Accepted Answer

A) True 
 B)False

Question 11

If the demand for donuts is elastic,then a decrease in the price of donuts will

Accepted Answer

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

Question 12

When demand is inelastic,a decrease in price increases total revenue.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that good X is a luxury and that good Y is a necessity.Which good would you expect to have more price inelastic demand?

Accepted Answer

The answer of Suppose that good X is a luxury...

Question 14

You and your college roommate eat three packages of Ramen noodles each week.After graduation last month,both of you were hired at several times your college income.You still enjoy Ramen noodles very much and buy even more,but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more.When looking at income elasticity of demand for Ramen noodles,yours would

Accepted Answer

A)  be negative,and your roommate's would be positive. 
B)  be positive,and your roommate's would be negative. 
C)  be zero,and your roommate's would approach infinity. 
D)  approach infinity,and your roommate's would be zero. 
A)  be negative,and your roommate's would be positive. 
B)  be positive,and your roommate's would be negative. 
C)  be zero,and your roommate's would approach infinity. 
D)  approach infinity,and your roommate's would be zero.

Question 15

If the price elasticity of demand for aluminum foil is 1.45,then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Accepted Answer

A)  1.66%,and aluminum foil sellers' total revenue will increase as a result. 
B)  1.66%,and aluminum foil sellers' total revenue will decrease as a result. 
C)  3.48%,and aluminum foil sellers' total revenue will increase as a result. 
D)  3.48%,and aluminum foil sellers' total revenue will decrease as a result. 
A)  1.66%,and aluminum foil sellers' total revenue will increase as a result. 
B)  1.66%,and aluminum foil sellers' total revenue will decrease as a result. 
C)  3.48%,and aluminum foil sellers' total revenue will increase as a result. 
D)  3.48%,and aluminum foil sellers' total revenue will decrease as a result.

Question 16

At a price of $1.20,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.40,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)  0.15 
B)  0.375 
C)  2.5 
D)  2.60 
A)  0.15 
B)  0.375 
C)  2.5 
D)  2.60

Question 17

If we observe that when the price of chocolate decreases by 10%,quantity demanded increases by 25%,then the demand for chocolate is price elastic.

Accepted Answer

A) True 
 B)False

Question 18

If the price elasticity of demand is equal to 0,then demand is unit elastic.

Accepted Answer

A) True 
 B)False

Question 19

If the price elasticity of supply is 0.8,and price increased by 5%,quantity supplied would

Accepted Answer

A)  increase by 4%. 
B)  increase by 6.25%. 
C)  decrease by 4%. 
D)  decrease by 6.25%. 
A)  increase by 4%. 
B)  increase by 6.25%. 
C)  decrease by 4%. 
D)  decrease by 6.25%.

Question 20

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and,as a result,the quantity of tortilla chips demanded increases from 200 bags to 300 bags.Using the midpoint method,the price elasticity of demand for tortilla chips in the given price range is

Accepted Answer

A)  0.33. 
B)  0.45. 
C)  2.20. 
D)  3.00. 
A)  0.33. 
B)  0.45. 
C)  2.20. 
D)  3.00.

Exam 5: Elasticity and Its Application

Elasticity measures how responsive quantity is to changes in price.

Suppose that good X has few close substitutes and that good Y has many close substitutes.Which good would you expect to have more price inelastic demand?

Suppose that two supply curves pass through the same point.One is steep,and the other is flat.Which of the following statements is correct?

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

For a particular good,a 10 percent increase in price causes a 5 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Table 5-1 -Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

For a vertical demand curve,

Table 5-3 -Refer to Table 5-3.Using the midpoint method,what is the price elasticity of demand between $6 and $8?

Table 5-2 -Refer to Table 5-2.Using the midpoint method,if the price falls from $40 to $20,the price elasticity of demand is

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

If the demand for donuts is elastic,then a decrease in the price of donuts will

When demand is inelastic,a decrease in price increases total revenue.

Suppose that good X is a luxury and that good Y is a necessity.Which good would you expect to have more price inelastic demand?

If the price elasticity of demand for aluminum foil is 1.45,then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

At a price of $1.20,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.40,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is about

If we observe that when the price of chocolate decreases by 10%,quantity demanded increases by 25%,then the demand for chocolate is price elastic.

If the price elasticity of demand is equal to 0,then demand is unit elastic.

If the price elasticity of supply is 0.8,and price increased by 5%,quantity supplied would

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and,as a result,the quantity of tortilla chips demanded increases from 200 bags to 300 bags.Using the midpoint method,the price elasticity of demand for tortilla chips in the given price range is

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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