Question 1

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

Accepted Answer

A)  lattés 
B)  doctor's visits 
C)  eggs 
D)  natural gas 
A)  lattés 
B)  doctor's visits 
C)  eggs 
D)  natural gas

Question 2

You are in charge of the local city-owned aquatic center.You need to increase the revenue generated by the aquatic center in order to meet expenses.The mayor advises you to increase the price of a day pass.The city manager recommends reducing the price of a day pass.You realize that

Accepted Answer

A)  the mayor thinks demand is elastic,and the city manager thinks demand is inelastic. 
B)  both the mayor and the city manager think that demand is elastic. 
C)  both the mayor and the city manager think that demand is inelastic. 
D)  the mayor thinks demand is inelastic,and the city manager thinks demand is elastic. 
A)  the mayor thinks demand is elastic,and the city manager thinks demand is inelastic. 
B)  both the mayor and the city manager think that demand is elastic. 
C)  both the mayor and the city manager think that demand is inelastic. 
D)  the mayor thinks demand is inelastic,and the city manager thinks demand is elastic.

Question 3

Holding all other forces constant,if decreasing 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 4

On a certain supply curve,one point is (quantity supplied = 200,price = $2.00)and another point is (quantity supplied = 250,price = $2.50).Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)  0.2. 
B)  0.5. 
C)  1.0. 
D)  2.5. 
A)  0.2. 
B)  0.5. 
C)  1.0. 
D)  2.5.

Question 5

Figure 5-2  
-Refer to Figure 5-2.As price falls from Pa to Pb,which demand curve represents the most elastic demand?

Accepted Answer

A)  D1 
B)  D2 
C)  D3 
D)  All of the above are equally elastic. 
A)  D1 
B)  D2 
C)  D3 
D)  All of the above are equally elastic.

Question 6

Which of the following statements about the price elasticity of demand is correct?

Accepted Answer

A)  The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. 
B)  Price elasticity of demand reflects the many economic,psychological,and social forces that shape consumer tastes. 
C)  Other things equal,if good x has close substitutes and good y does not have close substitutes,then the demand for good x will be more elastic than the demand for good y. 
D)  All of the above are correct. 
A)  The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. 
B)  Price elasticity of demand reflects the many economic,psychological,and social forces that shape consumer tastes. 
C)  Other things equal,if good x has close substitutes and good y does not have close substitutes,then the demand for good x will be more elastic than the demand for good y. 
D)  All of the above are correct.

Question 7

Figure 5-6  
-Refer to Figure 5-6.Sellers' total revenue would increase if the price

Accepted Answer

A)  increased from $6 to $8. 
B)  decreased from $18 to $16. 
C)  decreased from $16 to $15. 
D)  All of the above are correct. 
A)  increased from $6 to $8. 
B)  decreased from $18 to $16. 
C)  decreased from $16 to $15. 
D)  All of the above are correct.

Question 8

Last year,Carolyn bought 6 pairs of earrings when her income was $40,000.This year,her income is $52,000,and she purchased 7 pairs of earrings.Holding other factors constant,it follows that Carolyn's income elasticity of demand is about

Accepted Answer

A)  0.59,and Carolyn regards earrings as an inferior good. 
B)  0.59,and Carolyn regards earrings as a normal good. 
C)  1.7,and Carolyn regards earrings as an inferior good. 
D)  1.7,and Carolyn regards earrings as a normal good. 
A)  0.59,and Carolyn regards earrings as an inferior good. 
B)  0.59,and Carolyn regards earrings as a normal good. 
C)  1.7,and Carolyn regards earrings as an inferior good. 
D)  1.7,and Carolyn regards earrings as a normal good.

Question 9

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Accepted Answer

A)  -1.3 
B)  0 
C)  0.2 
D)  1.4 
A)  -1.3 
B)  0 
C)  0.2 
D)  1.4

Question 10

Figure 5-4  
-Refer to Figure 5-4.Assume the section of the demand curve from B to C corresponds to prices between $0 and $15.Then,when the price changes between $7 and $9,

Accepted Answer

A)  quantity demanded changes proportionately less than the price. 
B)  quantity demanded changes proportionately more than the price. 
C)  quantity demanded changes the same amount proportionately as price. 
D)  the price elasticity of demand equals zero. 
A)  quantity demanded changes proportionately less than the price. 
B)  quantity demanded changes proportionately more than the price. 
C)  quantity demanded changes the same amount proportionately as price. 
D)  the price elasticity of demand equals zero.

Question 11

If the cross-price elasticity of demand for two goods is -4.5,then

Accepted Answer

A)  the two goods are substitutes. 
B)  the two goods are complements. 
C)  one of the goods is normal while the other good is inferior. 
D)  one of the goods is a luxury while the other good is a necessity. 
A)  the two goods are substitutes. 
B)  the two goods are complements. 
C)  one of the goods is normal while the other good is inferior. 
D)  one of the goods is a luxury while the other good is a necessity.

Question 12

Suppose that when the price of good X falls from $6 to $4,the quantity demanded of good Y rises from 30 units to 40 units.Using the midpoint method,the cross-price elasticity of demand is

Accepted Answer

A)  -0.71,and X and Y are complements. 
B)  -1.40,and X and Y are complements. 
C)  -0.71,and X and Y are substitutes. 
D)  -1.40,and X and Y are substitutes. 
A)  -0.71,and X and Y are complements. 
B)  -1.40,and X and Y are complements. 
C)  -0.71,and X and Y are substitutes. 
D)  -1.40,and X and Y are substitutes.

Question 13

Figure 5-3  
-Refer to Figure 5-3.Mark says he would buy one Mt.Dew per day regardless of the price.If this is true,then Mark's demand for Mt.Dew is represented by demand curve

Accepted Answer

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

Question 14

A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

Accepted Answer

A) True 
 B)False

Question 15

Total revenue will be at its largest value on a linear demand curve at the

Accepted Answer

A)  top of the curve,where prices are highest. 
B)  midpoint of the curve. 
C)  low end of the curve,where quantity demanded is highest. 
D)  None of the above is correct. 
A)  top of the curve,where prices are highest. 
B)  midpoint of the curve. 
C)  low end of the curve,where quantity demanded is highest. 
D)  None of the above is correct.

Question 16

Suppose the price elasticity of supply for candles is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for candles causes the price of candles to increase by 36%,then the quantity supplied of candles will increase by about

Accepted Answer

A)  0.8% in the short run and 3.3% in the long run. 
B)  1.2% in the short run and 0.3% in the long run. 
C)  10.8% in the short run and 43.2% in the long run. 
D)  120% in the short run and 30% in the long run. 
A)  0.8% in the short run and 3.3% in the long run. 
B)  1.2% in the short run and 0.3% in the long run. 
C)  10.8% in the short run and 43.2% in the long run. 
D)  120% in the short run and 30% in the long run.

Question 17

A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

Accepted Answer

A)  raise the price,reduce the quantity,decrease total revenues,and decrease crime. 
B)  lower the price,increase the quantity,increase total revenues,and increase crime. 
C)  raise the price,increase the quantity,decrease total revenues,and increase crime. 
D)  raise the price,reduce the quantity,increase total revenues,and increase crime. 
A)  raise the price,reduce the quantity,decrease total revenues,and decrease crime. 
B)  lower the price,increase the quantity,increase total revenues,and increase crime. 
C)  raise the price,increase the quantity,decrease total revenues,and increase crime. 
D)  raise the price,reduce the quantity,increase total revenues,and increase crime.

Question 18

The supply of oil is likely to be

Accepted Answer

A)  inelastic in both the short run and long run. 
B)  elastic in both the short run and long run. 
C)  elastic in the short run and inelastic in the long run. 
D)  inelastic in the short run and elastic in the long run. 
A)  inelastic in both the short run and long run. 
B)  elastic in both the short run and long run. 
C)  elastic in the short run and inelastic in the long run. 
D)  inelastic in the short run and elastic in the long run.

Question 19

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 0.75.Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Accepted Answer

A)  a 7.5 increase in the price of the good 
B)  a 13.33 percent increase in the price of the good 
C)  an increase in the price of the good from $7.50 to $10 
D)  an increase in the price of the good from $10 to $17.50 
A)  a 7.5 increase in the price of the good 
B)  a 13.33 percent increase in the price of the good 
C)  an increase in the price of the good from $7.50 to $10 
D)  an increase in the price of the good from $10 to $17.50

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

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

You are in charge of the local city-owned aquatic center.You need to increase the revenue generated by the aquatic center in order to meet expenses.The mayor advises you to increase the price of a day pass.The city manager recommends reducing the price of a day pass.You realize that

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

On a certain supply curve,one point is (quantity supplied = 200,price = $2.00)and another point is (quantity supplied = 250,price = $2.50).Using the midpoint method,the price elasticity of supply is about

Figure 5-2 -Refer to Figure 5-2.As price falls from Pa to Pb,which demand curve represents the most elastic demand?

Which of the following statements about the price elasticity of demand is correct?

Figure 5-6 -Refer to Figure 5-6.Sellers' total revenue would increase if the price

Last year,Carolyn bought 6 pairs of earrings when her income was $40,000.This year,her income is $52,000,and she purchased 7 pairs of earrings.Holding other factors constant,it follows that Carolyn's income elasticity of demand is about

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Figure 5-4 -Refer to Figure 5-4.Assume the section of the demand curve from B to C corresponds to prices between $0 and $15.Then,when the price changes between $7 and $9,

If the cross-price elasticity of demand for two goods is -4.5,then

Suppose that when the price of good X falls from $6 to $4,the quantity demanded of good Y rises from 30 units to 40 units.Using the midpoint method,the cross-price elasticity of demand is

Figure 5-3 -Refer to Figure 5-3.Mark says he would buy one Mt.Dew per day regardless of the price.If this is true,then Mark's demand for Mt.Dew is represented by demand curve

A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

Total revenue will be at its largest value on a linear demand curve at the

Suppose the price elasticity of supply for candles is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for candles causes the price of candles to increase by 36%,then the quantity supplied of candles will increase by about

A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

The supply of oil is likely to be

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 0.75.Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

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

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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