Question 1

The price elasticity of demand changes as we move along a

Accepted Answer

A)  horizontal demand curve. 
B)  vertical demand curve. 
C)  linear,downward-sloping demand curve. 
D)  All of the above are correct. 
A)  horizontal demand curve. 
B)  vertical demand curve. 
C)  linear,downward-sloping demand curve. 
D)  All of the above are correct.

Question 2

In January the price of widgets was $1.00,and Wendy's Widgets produced 80 widgets.In February the price of widgets was $1.50,and Wendy's Widgets produced 110 widgets.In March the price of widgets was $2.00,and Wendy's Widgets produced 140 widgets.The price elasticity of supply of Wendy's Widgets was about

Accepted Answer

A)  0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00. 
B)  1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00. 
C)  0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00. 
D)  1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00. 
A)  0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00. 
B)  1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00. 
C)  0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00. 
D)  1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.

Question 3

If the price elasticity of demand for a good is 1.5,then a 3 percent decrease in price results in a

Accepted Answer

A)  0.5 percent increase in the quantity demanded. 
B)  2 percent increase in the quantity demanded. 
C)  4.5 percent increase in the quantity demanded. 
D)  5 percent increase in the quantity demanded. 
A)  0.5 percent increase in the quantity demanded. 
B)  2 percent increase in the quantity demanded. 
C)  4.5 percent increase in the quantity demanded. 
D)  5 percent increase in the quantity demanded.

Question 4

Figure 5-5  
-Refer to Figure 5-5.At a price of $30 per unit,sellers' total revenue equals

Accepted Answer

A)  $150. 
B)  $200. 
C)  $288. 
D)  $450. 
A)  $150. 
B)  $200. 
C)  $288. 
D)  $450.

Question 5

As price elasticity of supply increases,the supply curve

Accepted Answer

A)  becomes flatter. 
B)  becomes steeper. 
C)  becomes downward sloping. 
D)  shifts to the right. 
A)  becomes flatter. 
B)  becomes steeper. 
C)  becomes downward sloping. 
D)  shifts to the right.

Question 6

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

Accepted Answer

A)  water 
B)  sapphire pendant necklaces 
C)  filet mignon steaks 
D)  fresh fruit 
A)  water 
B)  sapphire pendant necklaces 
C)  filet mignon steaks 
D)  fresh fruit

Question 7

Adam and Barb go to the store to purchase some lottery tickets.Without looking at the price,Adam says "I'll take 10 lottery tickets," and Barb says "I'll take $10 worth of lottery tickets." What is each person's price elasticity of demand for lottery tickets?

Accepted Answer

Since Adam wants 10 tickets regardless o

Question 8

If the price of gasoline rises,when is the price elasticity of demand likely to be the highest?

Accepted Answer

A)  immediately after the price increases 
B)  one month after the price increase 
C)  three months after the price increase 
D)  one year after the price increase 
A)  immediately after the price increases 
B)  one month after the price increase 
C)  three months after the price increase 
D)  one year after the price increase

Question 9

Elasticity of demand is closely related to the slope of the demand curve.The more responsive buyers are to a change in price,the

Accepted Answer

A)  steeper the demand curve will be. 
B)  flatter the demand curve will be. 
C)  further to the right the demand curve will sit. 
D)  closer to the vertical axis the demand curve will sit. 
A)  steeper the demand curve will be. 
B)  flatter the demand curve will be. 
C)  further to the right the demand curve will sit. 
D)  closer to the vertical axis the demand curve will sit.

Question 10

When the price of used cds is $4,Daphne buys five per month.When the price is $3,she buys nine per month.Daphne's demand for used cds is

Accepted Answer

A)  elastic,and her demand curve would be relatively flat. 
B)  elastic,and her demand curve would be relatively steep. 
C)  inelastic,and her demand curve would be relatively flat. 
D)  inelastic,and her demand curve would be relatively steep. 
A)  elastic,and her demand curve would be relatively flat. 
B)  elastic,and her demand curve would be relatively steep. 
C)  inelastic,and her demand curve would be relatively flat. 
D)  inelastic,and her demand curve would be relatively steep.

Question 11

Figure 5-2  
-Refer to Figure 5-2.Using the midpoint method,what is the price elasticity of supply between $5 and $6?

Accepted Answer

A)  0.60 
B)  0.64 
C)  1.57 
D)  1.67 
A)  0.60 
B)  0.64 
C)  1.57 
D)  1.67

Question 12

If the price elasticity of supply is zero,then

Accepted Answer

A)  supply is more elastic than it is in any other case. 
B)  the supply curve is horizontal. 
C)  the quantity supplied is the same,regardless of price. 
D)  a change in demand will cause a relatively small change in the equilibrium price. 
A)  supply is more elastic than it is in any other case. 
B)  the supply curve is horizontal. 
C)  the quantity supplied is the same,regardless of price. 
D)  a change in demand will cause a relatively small change in the equilibrium price.

Question 13

To determine whether a good is considered normal or inferior,one could examine the value of the

Accepted Answer

A)  income elasticity of demand for that good. 
B)  price elasticity of demand for that good. 
C)  price elasticity of supply for that good. 
D)  cross-price elasticity of demand for that good. 
A)  income elasticity of demand for that good. 
B)  price elasticity of demand for that good. 
C)  price elasticity of supply for that good. 
D)  cross-price elasticity of demand for that good.

Question 14

Which of the following expressions represents a cross-price elasticity of demand?

Accepted Answer

A)  percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread 
B)  percentage change in quantity demanded of bread divided by percentage change in price of butter 
C)  percentage change in price of bread divided by percentage change in quantity demanded of bread 
D)  percentage change in quantity demanded of bread divided by percentage change in income 
A)  percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread 
B)  percentage change in quantity demanded of bread divided by percentage change in price of butter 
C)  percentage change in price of bread divided by percentage change in quantity demanded of bread 
D)  percentage change in quantity demanded of bread divided by percentage change in income

Question 15

A good will have a more elastic demand,the

Accepted Answer

A)  greater the availability of close substitutes. 
B)  more broad the definition of the market. 
C)  shorter the period of time. 
D)  more it is regarded as a necessity. 
A)  greater the availability of close substitutes. 
B)  more broad the definition of the market. 
C)  shorter the period of time. 
D)  more it is regarded as a necessity.

Question 16

Holding all other forces constant,if increasing the price of a good leads to an increase in total revenue,then the demand for the good must be

Accepted Answer

A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price increase always leads to an increase in total revenue. 
A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price increase always leads to an increase in total revenue.

Question 17

The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price.If the owner is only interested in increasing revenue,she should

Accepted Answer

A)  lower the price of the cinnamon rolls. 
B)  leave the price of the cinnamon rolls unchanged. 
C)  raise the price of the cinnamon rolls. 
D)  reduce costs. 
A)  lower the price of the cinnamon rolls. 
B)  leave the price of the cinnamon rolls unchanged. 
C)  raise the price of the cinnamon rolls. 
D)  reduce costs.

Question 18

Table 5-3
The following table shows the demand schedule for a particular good.
  
-Refer to Table 5-3.Using the midpoint method,when price rises from $6 to $9,the price elasticity of demand is

Accepted Answer

A)  0.43 
B)  0.67 
C)  1.00 
D)  1.5 
A)  0.43 
B)  0.67 
C)  1.00 
D)  1.5

Question 19

The price elasticity of supply measures how responsive

Accepted Answer

A)  sellers are to a change in price. 
B)  sellers are to a change in buyers' income. 
C)  buyers are to a change in production costs. 
D)  equilibrium price is to a change in supply. 
A)  sellers are to a change in price. 
B)  sellers are to a change in buyers' income. 
C)  buyers are to a change in production costs. 
D)  equilibrium price is to a change in supply.

Question 20

Suppose you are in charge of setting prices at a local sandwich shop.The business needs to increase its total revenue,and your job is on the line.If the demand for sandwiches is elastic,you

Accepted Answer

A)  should increase the price of sandwiches. 
B)  should decrease the price of sandwiches. 
C)  should not change the price of sandwiches. 
D)  could not determine what to do with price until you determine whether supply is elastic or inelastic. 
A)  should increase the price of sandwiches. 
B)  should decrease the price of sandwiches. 
C)  should not change the price of sandwiches. 
D)  could not determine what to do with price until you determine whether supply is elastic or inelastic.

Exam 5: Elasticity and Its Application

The price elasticity of demand changes as we move along a

If the price elasticity of demand for a good is 1.5,then a 3 percent decrease in price results in a

Figure 5-5 -Refer to Figure 5-5.At a price of $30 per unit,sellers' total revenue equals

As price elasticity of supply increases,the supply curve

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

Adam and Barb go to the store to purchase some lottery tickets.Without looking at the price,Adam says "I'll take 10 lottery tickets," and Barb says "I'll take $10 worth of lottery tickets." What is each person's price elasticity of demand for lottery tickets?

If the price of gasoline rises,when is the price elasticity of demand likely to be the highest?

Elasticity of demand is closely related to the slope of the demand curve.The more responsive buyers are to a change in price,the

When the price of used cds is $4,Daphne buys five per month.When the price is $3,she buys nine per month.Daphne's demand for used cds is

Figure 5-2 -Refer to Figure 5-2.Using the midpoint method,what is the price elasticity of supply between $5 and $6?

If the price elasticity of supply is zero,then

To determine whether a good is considered normal or inferior,one could examine the value of the

Which of the following expressions represents a cross-price elasticity of demand?

A good will have a more elastic demand,the

Holding all other forces constant,if increasing the price of a good leads to an increase in total revenue,then the demand for the good must be

The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price.If the owner is only interested in increasing revenue,she should

Table 5-3 The following table shows the demand schedule for a particular good. -Refer to Table 5-3.Using the midpoint method,when price rises from $6 to $9,the price elasticity of demand is

The price elasticity of supply measures how responsive

Suppose you are in charge of setting prices at a local sandwich shop.The business needs to increase its total revenue,and your job is on the line.If the demand for sandwiches is elastic,you

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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