Question 1

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

Accepted Answer

A)  laptop computers 
B)  iPod shuffles 
C)  designer jeans 
D)  college tuition for a junior or senior 
A)  laptop computers 
B)  iPod shuffles 
C)  designer jeans 
D)  college tuition for a junior or senior

Question 2

Melvin's Magnets earned $200 in total revenue last month when it sold 100 souvenir magnets.This month it earned $300 in total revenue when it sold 60 souvenir magnets.The price elasticity of demand for Marvin's Magnets is

Accepted Answer

A)  0.27. 
B)  0.58. 
C)  1.25. 
D)  1.71. 
A)  0.27. 
B)  0.58. 
C)  1.25. 
D)  1.71.

Question 3

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 elastic demand?

Accepted Answer

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

Question 4

Table 5-6
  
-Refer to Table 5-6.Which scenario describes the market for oil in the short run?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 5

The price elasticity of demand for bread

Accepted Answer

A)  is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread. 
B)  depends,in part,on the availability of close substitutes for bread. 
C)  reflects the many economic,social,and psychological forces that influence consumers' tastes for bread. 
D)  All of the above are correct. 
A)  is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread. 
B)  depends,in part,on the availability of close substitutes for bread. 
C)  reflects the many economic,social,and psychological forces that influence consumers' tastes for bread. 
D)  All of the above are correct.

Question 6

If marijuana were legalized,it is likely that there would be an increase in the demand for marijuana.If demand for marijuana is price inelastic and the supply of marijuana is perfectly elastic,this will result in

Accepted Answer

A)  higher prices and higher total revenue from marijuana sales. 
B)  higher prices but lower total revenue from marijuana sales. 
C)  the same price and higher total revenue from marijuana sales. 
D)  the same price but lower total revenue from marijuana sales. 
A)  higher prices and higher total revenue from marijuana sales. 
B)  higher prices but lower total revenue from marijuana sales. 
C)  the same price and higher total revenue from marijuana sales. 
D)  the same price but lower total revenue from marijuana sales.

Question 7

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

Accepted Answer

The price

Question 8

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Accepted Answer

A) True 
 B)False

Question 9

Normal goods have negative income elasticities of demand,while inferior goods have positive income elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 10

The price elasticity of demand measures

Accepted Answer

A)  buyers' responsiveness to a change in the price of a good. 
B)  the extent to which demand increases as additional buyers enter the market. 
C)  how much more of a good consumers will demand when incomes rise. 
D)  the movement along a supply curve when there is a change in demand. 
A)  buyers' responsiveness to a change in the price of a good. 
B)  the extent to which demand increases as additional buyers enter the market. 
C)  how much more of a good consumers will demand when incomes rise. 
D)  the movement along a supply curve when there is a change in demand.

Question 11

If demand is price inelastic,then when price rises,total revenue

Accepted Answer

A)  will fall. 
B)  will rise. 
C)  will remain unchanged. 
D)  may rise,fall,or remain unchanged.More information is need to determine the change in total revenue with certainty. 
A)  will fall. 
B)  will rise. 
C)  will remain unchanged. 
D)  may rise,fall,or remain unchanged.More information is need to determine the change in total revenue with certainty.

Question 12

Suppose the point (Q = 2,000,P = $60)is the midpoint on a certain downward-sloping,linear demand curve.Then

Accepted Answer

A)  an increase in price from $40 to $42 will increase total revenue. 
B)  a decrease in price from $61 to $59 will leave total revenue unchanged. 
C)  the maximum value of total revenue is $120,000. 
D)  All of the above are correct. 
A)  an increase in price from $40 to $42 will increase total revenue. 
B)  a decrease in price from $61 to $59 will leave total revenue unchanged. 
C)  the maximum value of total revenue is $120,000. 
D)  All of the above are correct.

Question 13

Table 5-5
The following table shows a portion of the demand schedule for a particular good at various levels of income.
  
-Refer to Table 5-5.Using the midpoint method,at a price of $16,what is the income elasticity of demand when income rises from $5,000 to $10,000?

Accepted Answer

A)  0.00 
B)  0.50 
C)  1.00 
D)  1.50 
A)  0.00 
B)  0.50 
C)  1.00 
D)  1.50

Question 14

If the price elasticity of demand for a good is 4.0,then a 10 percent increase in price results in a

Accepted Answer

A)  0.4 percent decrease in the quantity demanded. 
B)  2.5 percent decrease in the quantity demanded. 
C)  4 percent decrease in the quantity demanded. 
D)  40 percent decrease in the quantity demanded. 
A)  0.4 percent decrease in the quantity demanded. 
B)  2.5 percent decrease in the quantity demanded. 
C)  4 percent decrease in the quantity demanded. 
D)  40 percent decrease in the quantity demanded.

Question 15

If the cross-price elasticity of two goods is positive,then the two goods are

Accepted Answer

A)  substitutes. 
B)  complements. 
C)  normal goods. 
D)  inferior goods. 
A)  substitutes. 
B)  complements. 
C)  normal goods. 
D)  inferior goods.

Question 16

The cross-price elasticity of demand can tell us whether goods are

Accepted Answer

A)  normal or inferior. 
B)  elastic or inelastic. 
C)  luxuries or necessities. 
D)  complements or substitutes. 
A)  normal or inferior. 
B)  elastic or inelastic. 
C)  luxuries or necessities. 
D)  complements or substitutes.

Question 17

Suppose good X has a negative income elasticity of demand.This implies that good X is

Accepted Answer

A)  a normal good. 
B)  a necessity. 
C)  an inferior good. 
D)  a luxury. 
A)  a normal good. 
B)  a necessity. 
C)  an inferior good. 
D)  a luxury.

Question 18

If the price elasticity of demand for a good is 4,then a 12 percent decrease in price results in a

Accepted Answer

A)  0.33 percent increase in the quantity demanded. 
B)  3 percent increase in the quantity demanded. 
C)  30 percent increase in the quantity demanded. 
D)  48 percent increase in the quantity demanded. 
A)  0.33 percent increase in the quantity demanded. 
B)  3 percent increase in the quantity demanded. 
C)  30 percent increase in the quantity demanded. 
D)  48 percent increase in the quantity demanded.

Question 19

Suppose that corn farmers want to increase their total revenue.Knowing that the demand for corn is inelastic,corn farmers should

Accepted Answer

A)  plant more corn so that they would be able to sell more each year. 
B)  increase spending on fertilizer in an attempt to produce more corn on the acres they farm. 
C)  reduce the number of acres on which they plant corn. 
D)  contribute to a fund that promotes technological advances in corn production. 
A)  plant more corn so that they would be able to sell more each year. 
B)  increase spending on fertilizer in an attempt to produce more corn on the acres they farm. 
C)  reduce the number of acres on which they plant corn. 
D)  contribute to a fund that promotes technological advances in corn production.

Question 20

A key determinant of the price elasticity of supply is the time period under consideration.Which of the following statements best explains this fact?

Accepted Answer

A)  Supply curves are steeper over long periods of time than over short periods of time. 
B)  Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time. 
C)  The number of firms in a market tends to be more variable over long periods of time than over short periods of time. 
D)  Firms prefer to change their prices in the short run rather than in the long run. 
A)  Supply curves are steeper over long periods of time than over short periods of time. 
B)  Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time. 
C)  The number of firms in a market tends to be more variable over long periods of time than over short periods of time. 
D)  Firms prefer to change their prices in the short run rather than in the long run.

Exam 5: Elasticity and Its Application

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

Melvin's Magnets earned $200 in total revenue last month when it sold 100 souvenir magnets.This month it earned $300 in total revenue when it sold 60 souvenir magnets.The price elasticity of demand for Marvin's Magnets is

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 elastic demand?

Table 5-6 -Refer to Table 5-6.Which scenario describes the market for oil in the short run?

The price elasticity of demand for bread

If marijuana were legalized,it is likely that there would be an increase in the demand for marijuana.If demand for marijuana is price inelastic and the supply of marijuana is perfectly elastic,this will result in

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

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Normal goods have negative income elasticities of demand,while inferior goods have positive income elasticities of demand.

The price elasticity of demand measures

If demand is price inelastic,then when price rises,total revenue

Suppose the point (Q = 2,000,P = $60)is the midpoint on a certain downward-sloping,linear demand curve.Then

Table 5-5 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-5.Using the midpoint method,at a price of $16,what is the income elasticity of demand when income rises from $5,000 to $10,000?

If the price elasticity of demand for a good is 4.0,then a 10 percent increase in price results in a

If the cross-price elasticity of two goods is positive,then the two goods are

The cross-price elasticity of demand can tell us whether goods are

Suppose good X has a negative income elasticity of demand.This implies that good X is

If the price elasticity of demand for a good is 4,then a 12 percent decrease in price results in a

Suppose that corn farmers want to increase their total revenue.Knowing that the demand for corn is inelastic,corn farmers should

A key determinant of the price elasticity of supply is the time period under consideration.Which of the following statements best explains this fact?

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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