Exam 5: Elasticity and Its Application

A city wants to raise revenues to build a new municipal swimming pool next year.The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues.The city manager suggests that the city lower the price of admission to raise revenues.Who is correct?

Kevin tunes pianos.If the demand for piano-tuning services is elastic,Kevin could increase his total revenue by

Figure 5-7 -Refer to Figure 5-7.For prices below $8,demand is price

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

If demand is perfectly elastic,the demand curve is horizontal,and the price elasticity of demand equals 1.

Suppose demand is given by the equation: Using the midpoint method,what is the price elasticity of demand between $7 and $8?

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

Figure 5-10 -Refer to Figure 5-10.When price falls from $50 to $40,demand is

Which of the following should be held constant when calculating an income elasticity of demand?

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

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

Figure 5-1 -Refer to Figure 5-1.Between point A and point B,the slope is equal to

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

If a 15% change in price results in a 20% change in quantity supplied,then the price elasticity of supply is about

There are fewer farmers in the United States today than 200 years ago because of

Suppose the price of natural gas,a typical fuel for heating homes,rises in January in Alaska.Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

A manufacturer produces 400 units when the market price of $10 per unit and produces 600 units when the market price is $12 per unit.Using the midpoint method,for this range of prices,the price elasticity of supply is about

Some firms eventually experience problems with their capacity to produce output as their output levels increase.For these firms,

If a 15% increase in price for a good results in a 20% decrease in quantity demanded,the price elasticity of demand is

Figure 5-10 -Refer to Figure 5-10.An increase in price from $30 to $35 would