Question 1

Which of the following statements is correct?

Accepted Answer

A)  The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. 
B)  The demand for grandfather clocks is more elastic than the demand for clocks in general. 
C)  The demand for cardboard is more elastic over a long period of time than over a short period of time. 
D)  All of the above are correct. 
A)  The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. 
B)  The demand for grandfather clocks is more elastic than the demand for clocks in general. 
C)  The demand for cardboard is more elastic over a long period of time than over a short period of time. 
D)  All of the above are correct.

Question 2

An advance in farm technology that results in an increased market supply is

Accepted Answer

A)  good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food. 
B)  bad for farmers because total revenue will fall but good for consumers because prices for food will fall. 
C)  good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption. 
D)  bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue. 
A)  good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food. 
B)  bad for farmers because total revenue will fall but good for consumers because prices for food will fall. 
C)  good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption. 
D)  bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue.

Question 3

Figure 5-1  
-Refer to Figure 5-1.Between point A and point B on the graph,demand is

Accepted Answer

A)  perfectly elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  elastic,but not perfectly elastic. 
A)  perfectly elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  elastic,but not perfectly elastic.

Question 4

When the price of bubble gum is $0.50,the quantity demanded is 400 packs per day.When the price falls to $0.40,the quantity demanded increases to 600.Given this information and using the midpoint method,we know that the demand for bubble gum is

Accepted Answer

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

Question 5

Suppose that when the price rises by 10% for a particular good,the quantity demanded of that good falls by 20%.The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Question 6

Demand is elastic if the price elasticity of demand is

Accepted Answer

A)  less than 1. 
B)  equal to 1. 
C)  equal to 0. 
D)  greater than 1. 
A)  less than 1. 
B)  equal to 1. 
C)  equal to 0. 
D)  greater than 1.

Question 7

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Accepted Answer

A)  The interdiction has the effect of shifting the demand curve for illegal drugs to the right. 
B)  The price elasticity of demand for illegal drugs is 1.3. 
C)  The price elasticity of supply for illegal drugs is 0.8. 
D)  As a result of the interdiction,the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent. 
A)  The interdiction has the effect of shifting the demand curve for illegal drugs to the right. 
B)  The price elasticity of demand for illegal drugs is 1.3. 
C)  The price elasticity of supply for illegal drugs is 0.8. 
D)  As a result of the interdiction,the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent.

Question 8

If the quantity demanded of a certain good responds only slightly to a change in the price of the good,then the

Accepted Answer

A)  demand for the good is said to be elastic. 
B)  demand for the good is said to be inelastic. 
C)  law of demand does not apply to the good. 
D)  demand curve for the good shifts only slightly in response to a change in price. 
A)  demand for the good is said to be elastic. 
B)  demand for the good is said to be inelastic. 
C)  law of demand does not apply to the good. 
D)  demand curve for the good shifts only slightly in response to a change in price.

Question 9

OPEC failed to maintain a high price of oil in the long run,partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 10

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

Accepted Answer

A) True 
 B)False

Question 11

For a good that is a luxury,demand

Accepted Answer

A)  tends to be inelastic. 
B)  tends to be elastic. 
C)  has unit elasticity. 
D)  cannot be represented by a demand curve in the usual way. 
A)  tends to be inelastic. 
B)  tends to be elastic. 
C)  has unit elasticity. 
D)  cannot be represented by a demand curve in the usual way.

Question 12

If the price elasticity of demand is 1.5,regardless of which two points on the demand curve are used to compute the elasticity,then demand is

Accepted Answer

A)  perfectly inelastic,and the demand curve is vertical. 
B)  elastic,and the demand curve is a straight,downward-sloping line. 
C)  perfectly elastic,and the demand curve is horizontal. 
D)  elastic,and the demand curve is something other than a straight,downward-sloping line. 
A)  perfectly inelastic,and the demand curve is vertical. 
B)  elastic,and the demand curve is a straight,downward-sloping line. 
C)  perfectly elastic,and the demand curve is horizontal. 
D)  elastic,and the demand curve is something other than a straight,downward-sloping line.

Question 13

Figure 5-13  
-Refer to Figure 5-13.Over which range is the supply curve in this figure the least elastic?

Accepted Answer

A)  $16 to $40 
B)  $40 to $100 
C)  $100 to $220 
D)  $220 to $430 
A)  $16 to $40 
B)  $40 to $100 
C)  $100 to $220 
D)  $220 to $430

Question 14

When the Shaffers had a monthly income of $4,000,they usually ate out 8 times a month.Now that the couple makes $4,500 a month,they eat out 10 times a month.Compute the couple's income elasticity of demand using the midpoint method.Explain your answer.Is a restaurant meal a normal or inferior good to the couple?

Accepted Answer

The income elasticity of deman

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Suppose that when the price of good X falls from $10 to $8,the quantity demanded of good Y rises from 20 units to 25 units.Using the midpoint method,the cross-price elasticity of demand is

Accepted Answer

A)  -1.0,and X and Y are complements. 
B)  -1.0,and X and Y are substitutes. 
C)  1.0,and X and Y are complements. 
D)  1.0,and X and Y are substitutes. 
A)  -1.0,and X and Y are complements. 
B)  -1.0,and X and Y are substitutes. 
C)  1.0,and X and Y are complements. 
D)  1.0,and X and Y are substitutes.

Question 17

Demand is inelastic if the price elasticity of demand is

Accepted Answer

A)  less than 1. 
B)  equal to 1. 
C)  greater than 1. 
D)  equal to 0. 
A)  less than 1. 
B)  equal to 1. 
C)  greater than 1. 
D)  equal to 0.

Question 18

If a change in the price of a good results in no change in total revenue,then

Accepted Answer

A)  the demand for the good must be elastic. 
B)  the demand for the good must be inelastic. 
C)  the demand for the good must be unit elastic. 
D)  buyers must not respond very much to a change in price. 
A)  the demand for the good must be elastic. 
B)  the demand for the good must be inelastic. 
C)  the demand for the good must be unit elastic. 
D)  buyers must not respond very much to a change in price.

Question 19

The price elasticity of demand for a good measures the willingness of

Accepted Answer

A)  consumers to buy less of the good as price rises. 
B)  consumers to avoid monopolistic markets in favor of competitive markets. 
C)  firms to produce more of a good as price rises. 
D)  firms to respond to the tastes of consumers. 
A)  consumers to buy less of the good as price rises. 
B)  consumers to avoid monopolistic markets in favor of competitive markets. 
C)  firms to produce more of a good as price rises. 
D)  firms to respond to the tastes of consumers.

Question 20

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

Which of the following statements is correct?

An advance in farm technology that results in an increased market supply is

Figure 5-1 -Refer to Figure 5-1.Between point A and point B on the graph,demand is

When the price of bubble gum is $0.50,the quantity demanded is 400 packs per day.When the price falls to $0.40,the quantity demanded increases to 600.Given this information and using the midpoint method,we know that the demand for bubble gum is

Suppose that when the price rises by 10% for a particular good,the quantity demanded of that good falls by 20%.The price elasticity of demand for this good is equal to 2.0.

Demand is elastic if the price elasticity of demand is

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

If the quantity demanded of a certain good responds only slightly to a change in the price of the good,then the

OPEC failed to maintain a high price of oil in the long run,partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

For a good that is a luxury,demand

If the price elasticity of demand is 1.5,regardless of which two points on the demand curve are used to compute the elasticity,then demand is

Figure 5-13 -Refer to Figure 5-13.Over which range is the supply curve in this figure the least elastic?

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

Suppose that when the price of good X falls from $10 to $8,the quantity demanded of good Y rises from 20 units to 25 units.Using the midpoint method,the cross-price elasticity of demand is

Demand is inelastic if the price elasticity of demand is

If a change in the price of a good results in no change in total revenue,then

The price elasticity of demand for a good measures the willingness of

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

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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