Question 1

Which of the following statements is not valid when supply is perfectly elastic?

Accepted Answer

A)  The elasticity of supply approaches infinity. 
B)  The supply curve is horizontal. 
C)  Very small changes in price lead to very large changes in quantity supplied. 
D)  The time period under consideration is more likely a short period rather than a long period. 
A)  The elasticity of supply approaches infinity. 
B)  The supply curve is horizontal. 
C)  Very small changes in price lead to very large changes in quantity supplied. 
D)  The time period under consideration is more likely a short period rather than a long period.

Question 2

The price elasticity of demand for eggs

Accepted Answer

A)  is computed as the percentage change in quantity demanded of eggs divided by the percentage change in price of eggs. 
B)  will be lower if there is a new invention that is a close substitute for eggs. 
C)  will be higher if consumers consider eggs to be a necessity. 
D)  All of the above are correct. 
A)  is computed as the percentage change in quantity demanded of eggs divided by the percentage change in price of eggs. 
B)  will be lower if there is a new invention that is a close substitute for eggs. 
C)  will be higher if consumers consider eggs to be a necessity. 
D)  All of the above are correct.

Question 3

Figure 5-12  
-Refer to Figure 5-12.Total revenue when the price is P2 is represented by the area(s)

Accepted Answer

A)  B + D. 
B)  A + B. 
C)  C + D. 
D)  D. 
A)  B + D. 
B)  A + B. 
C)  C + D. 
D)  D.

Question 4

The price elasticity of supply along a typical supply curve is

Accepted Answer

A)  constant. 
B)  equal to zero. 
C)  higher at low levels of quantity supplied and lower at high levels of quantity supplied. 
D)  lower at low levels of quantity supplied and higher at high levels of quantity supplied. 
A)  constant. 
B)  equal to zero. 
C)  higher at low levels of quantity supplied and lower at high levels of quantity supplied. 
D)  lower at low levels of quantity supplied and higher at high levels of quantity supplied.

Question 5

Figure 5-10  
-Refer to Figure 5-10.An increase in price from $20 to $30 would

Accepted Answer

A)  increase total revenue by $2,000. 
B)  decrease total revenue by $2,000. 
C)  increase total revenue by $1,000. 
D)  decrease total revenue by $1,000. 
A)  increase total revenue by $2,000. 
B)  decrease total revenue by $2,000. 
C)  increase total revenue by $1,000. 
D)  decrease total revenue by $1,000.

Question 6

There are very few,if any,good substitutes for motor oil.Therefore,the

Accepted Answer

A)  demand for motor oil would tend to be inelastic. 
B)  demand for motor oil would tend to be elastic. 
C)  demand for motor oil would tend to respond strongly to changes in prices of other goods. 
D)  supply of motor oil would tend to respond strongly to changes in people's tastes for large cars relative to their tastes for small cars. 
A)  demand for motor oil would tend to be inelastic. 
B)  demand for motor oil would tend to be elastic. 
C)  demand for motor oil would tend to respond strongly to changes in prices of other goods. 
D)  supply of motor oil would tend to respond strongly to changes in people's tastes for large cars relative to their tastes for small cars.

Question 7

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.Your roommate still enjoys Ramen noodles very much and buys even more,but you plan to buy fewer Ramen noodles in favor of foods you prefer 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 8

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds.Using the midpoint method,what is the approximate value of the price elasticity of supply?

Accepted Answer

A)  0.67 
B)  0.89 
C)  1.00 
D)  1.13 
A)  0.67 
B)  0.89 
C)  1.00 
D)  1.13

Question 9

When demand is inelastic,a decrease in price will cause

Accepted Answer

A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded. 
A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded.

Question 10

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)  The demand for illegal drugs is inelastic. 
B)  Interdiction results in drug addicts having a greater need for quick cash. 
C)  Interdiction results in an increase in the amount of money needed to buy the same amount of drugs. 
D)  Government drug programs are more lenient now with drug offenders than they were in the 1980s. 
A)  The demand for illegal drugs is inelastic. 
B)  Interdiction results in drug addicts having a greater need for quick cash. 
C)  Interdiction results in an increase in the amount of money needed to buy the same amount of drugs. 
D)  Government drug programs are more lenient now with drug offenders than they were in the 1980s.

Question 11

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

Accepted Answer

A)  elastic,and total revenue will rise as price rises. 
B)  inelastic,and total revenue will rise as price rises. 
C)  elastic,and total revenue will fall as price rises. 
D)  inelastic,and total revenue will fall as price rises. 
A)  elastic,and total revenue will rise as price rises. 
B)  inelastic,and total revenue will rise as price rises. 
C)  elastic,and total revenue will fall as price rises. 
D)  inelastic,and total revenue will fall as price rises.

Question 12

At price of $1.25,a paper manufacturer is willing to supply 150 spiral notebooks per day.At a price of $1.50,the paper manufacturer is willing to supply 175 spiral notebooks per day.Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)  1.18. 
B)  1.00. 
C)  0.85. 
D)  0.25. 
A)  1.18. 
B)  1.00. 
C)  0.85. 
D)  0.25.

Question 13

Last month,sellers of good Y took in $100 in total revenue on sales of 50 units of good Y.This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y.At the same time,the price of good X stayed the same,but sales of good X increased from 20 units to 40 units.We can conclude that goods X and Y are

Accepted Answer

A)  substitutes,and have a cross-price elasticity of 0.60. 
B)  complements,and have a cross-price elasticity of 0.60. 
C)  substitutes,and have a cross-price elasticity of 1.67. 
D)  complements,and have a cross-price elasticity of 1.67. 
A)  substitutes,and have a cross-price elasticity of 0.60. 
B)  complements,and have a cross-price elasticity of 0.60. 
C)  substitutes,and have a cross-price elasticity of 1.67. 
D)  complements,and have a cross-price elasticity of 1.67.

Question 14

If a 30 percent change in price causes a 15 percent change in quantity supplied,then the price elasticity of supply is about

Accepted Answer

A)  0.5,and supply is elastic. 
B)  0.5,and supply is inelastic. 
C)  2,and supply is inelastic. 
D)  2,and supply is elastic. 
A)  0.5,and supply is elastic. 
B)  0.5,and supply is inelastic. 
C)  2,and supply is inelastic. 
D)  2,and supply is elastic.

Question 15

At price of $1.20,a local pencil manufacturer is willing to supply 150 boxes per day.At a price of $1.40,the manufacturer is willing to supply 170 boxes per day.Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)  2.0. 
B)  1.23. 
C)  1.00. 
D)  0.81. 
A)  2.0. 
B)  1.23. 
C)  1.00. 
D)  0.81.

Question 16

Danita rescues dogs from her local animal shelter.When Danita's income rises by 7 percent,her quantity demanded of dog biscuits increases by 12 percent.For Danita,the income elasticity of demand for dog biscuits is

Accepted Answer

A)  negative,and dog biscuits are a normal good. 
B)  negative,and dog biscuits are an inferior good. 
C)  positive,and dog biscuits are an inferior good. 
D)  positive,and dog biscuits are a normal good. 
A)  negative,and dog biscuits are a normal good. 
B)  negative,and dog biscuits are an inferior good. 
C)  positive,and dog biscuits are an inferior good. 
D)  positive,and dog biscuits are a normal good.

Question 17

Figure 5-15  
-Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between $4 and $6?

Accepted Answer

A)  0.75 
B)  1.00 
C)  1.20 
D)  1.25 
A)  0.75 
B)  1.00 
C)  1.20 
D)  1.25

Question 18

Table 5-1
  
-Refer to Table 5-1.As price rises from $10 to $15,the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A)  0.40. 
B)  0.56. 
C)  1.80. 
D)  2.50. 
A)  0.40. 
B)  0.56. 
C)  1.80. 
D)  2.50.

Question 19

Table 5-4
  
-Refer to Table 5-4.As price rises from $10 to $12,the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A)  0.08. 
B)  0.18. 
C)  0.42. 
D)  0.58. 
A)  0.08. 
B)  0.18. 
C)  0.42. 
D)  0.58.

Question 20

Figure 5-5  
-Refer to Figure 5-5.The maximum value of total revenue corresponds to a price of

Accepted Answer

A)  $18. 
B)  $30. 
C)  $42. 
D)  $48. 
A)  $18. 
B)  $30. 
C)  $42. 
D)  $48.

Exam 5: Elasticity and Its Application

Which of the following statements is not valid when supply is perfectly elastic?

The price elasticity of demand for eggs

Figure 5-12 -Refer to Figure 5-12.Total revenue when the price is P2 is represented by the area(s)

The price elasticity of supply along a typical supply curve is

Figure 5-10 -Refer to Figure 5-10.An increase in price from $20 to $30 would

There are very few,if any,good substitutes for motor oil.Therefore,the

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds.Using the midpoint method,what is the approximate value of the price elasticity of supply?

When demand is inelastic,a decrease in price will cause

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

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

At price of $1.25,a paper manufacturer is willing to supply 150 spiral notebooks per day.At a price of $1.50,the paper manufacturer is willing to supply 175 spiral notebooks per day.Using the midpoint method,the price elasticity of supply is about

If a 30 percent change in price causes a 15 percent change in quantity supplied,then the price elasticity of supply is about

At price of $1.20,a local pencil manufacturer is willing to supply 150 boxes per day.At a price of $1.40,the manufacturer is willing to supply 170 boxes per day.Using the midpoint method,the price elasticity of supply is about

Danita rescues dogs from her local animal shelter.When Danita's income rises by 7 percent,her quantity demanded of dog biscuits increases by 12 percent.For Danita,the income elasticity of demand for dog biscuits is

Figure 5-15 -Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between $4 and $6?

Table 5-1 -Refer to Table 5-1.As price rises from $10 to $15,the price elasticity of demand using the midpoint method is approximately

Table 5-4 -Refer to Table 5-4.As price rises from $10 to $12,the price elasticity of demand using the midpoint method is approximately

Figure 5-5 -Refer to Figure 5-5.The maximum value of total revenue corresponds to a price of

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

Filters

Figure 5-12 -Refer to Figure 5-12.Total revenue when the price is P₂ is represented by the area(s)