Question 1

If the income elasticity of demand for a good is negative,then the good must be an inferior good.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

Accepted Answer

A)  0.2 
B)  1 
C)  1.5 
D)  All of the above could be correct. 
A)  0.2 
B)  1 
C)  1.5 
D)  All of the above could be correct.

Question 3

Figure 5-17        
-Refer to Figure 5-17.Which of the following statements is correct?

Accepted Answer

A)  Supply curve A is perfectly elastic. 
B)  Supply curve B is perfectly inelastic. 
C)  Supply curve C is more inelastic than supply curve D. 
D)  Supply curve D is unit elastic. 
A)  Supply curve A is perfectly elastic. 
B)  Supply curve B is perfectly inelastic. 
C)  Supply curve C is more inelastic than supply curve D. 
D)  Supply curve D is unit elastic.

Question 4

Fiona's Fish Emporium increased its total monthly revenue from $1,500 to $1,800 when it raised the price of tropical fish from $5 to $9.The price elasticity of demand for Fiona's Fish Emporium is

Accepted Answer

A)  0.57. 
B)  0.70. 
C)  1.43. 
D)  2.20. 
A)  0.57. 
B)  0.70. 
C)  1.43. 
D)  2.20.

Question 5

The supply of a good will be more elastic,the

Accepted Answer

A)  more the good is considered a luxury. 
B)  broader is the definition of the market for the good. 
C)  larger the number of close substitutes for the good. 
D)  longer the time period being considered. 
A)  more the good is considered a luxury. 
B)  broader is the definition of the market for the good. 
C)  larger the number of close substitutes for the good. 
D)  longer the time period being considered.

Question 6

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

Accepted Answer

A)  lattés 
B)  filet mignon 
C)  Grey Goose® vodka 
D)  milk 
A)  lattés 
B)  filet mignon 
C)  Grey Goose® vodka 
D)  milk

Question 7

Figure 5-1  
-Refer to Figure 5-1.Between point A and point B,price elasticity of demand using the midpoint method is equal to

Accepted Answer

A)  0.71. 
B)  0.85. 
C)  1.18. 
D)  1.40. 
A)  0.71. 
B)  0.85. 
C)  1.18. 
D)  1.40.

Question 8

Figure 5-5  
-Refer to Figure 5-5.At a price of $12 per unit,sellers' total revenue equals

Accepted Answer

A)  $150. 
B)  $200. 
C)  $288. 
D)  $364. 
A)  $150. 
B)  $200. 
C)  $288. 
D)  $364.

Question 9

Figure 5-14  
-Refer to Figure 5-14.Along which of these segments of the supply curve is supply least elastic?

Accepted Answer

A)  GH 
B)  CD 
C)  AC 
D)  AB 
A)  GH 
B)  CD 
C)  AC 
D)  AB

Question 10

Moving downward and to the right along a linear demand curve,we know that total revenue

Accepted Answer

A)  first increases,then decreases. 
B)  first decreases,then increases. 
C)  always increases. 
D)  always decreases. 
A)  first increases,then decreases. 
B)  first decreases,then increases. 
C)  always increases. 
D)  always decreases.

Question 11

Figure 5-6  
-Refer to Figure 5-6.Using the midpoint method,the price elasticity of demand between point B and point C is

Accepted Answer

A)  0.5. 
B)  0.75. 
C)  1.0. 
D)  1.3. 
A)  0.5. 
B)  0.75. 
C)  1.0. 
D)  1.3.

Question 12

Table 5-2
  
-Refer to Table 5-2.Using the midpoint method,which of the three supply curves has the most elastic price elasticity of supply?

Accepted Answer

A)  Supply curve X 
B)  Supply curve Y 
C)  Supply curve Z 
D)  There is no difference in the elasticity of the three supply curves. 
A)  Supply curve X 
B)  Supply curve Y 
C)  Supply curve Z 
D)  There is no difference in the elasticity of the three supply curves.

Question 13

Frequently,in the short run,the quantity supplied of a good is

Accepted Answer

A)  impossible,or nearly impossible,to measure. 
B)  not very responsive to price changes. 
C)  determined by the quantity demanded of the good. 
D)  determined by psychological forces and other non-economic forces. 
A)  impossible,or nearly impossible,to measure. 
B)  not very responsive to price changes. 
C)  determined by the quantity demanded of the good. 
D)  determined by psychological forces and other non-economic forces.

Question 14

Studies indicate that the price elasticity of demand for cigarettes is about 0.4.A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6.According to the midpoint method,the government policy should have reduced smoking by

Accepted Answer

A)  30%. 
B)  40%. 
C)  80%. 
D)  250%. 
A)  30%. 
B)  40%. 
C)  80%. 
D)  250%.

Question 15

Holding all other forces constant,when the price of gasoline rises,the number of gallons of gasoline demanded would fall substantially over a ten-year period because

Accepted Answer

A)  buyers tend to be much less sensitive to a change in price when given more time to react. 
B)  buyers tend to be much more sensitive to a change in price when given more time to react. 
C)  buyers will have substantially more real income over a ten-year period. 
D)  the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline. 
A)  buyers tend to be much less sensitive to a change in price when given more time to react. 
B)  buyers tend to be much more sensitive to a change in price when given more time to react. 
C)  buyers will have substantially more real income over a ten-year period. 
D)  the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline.

Question 16

Suppose that good X is a luxury and that good Y is a necessity.Which good would you expect to have more price elastic demand?

Accepted Answer

The answer of Suppose that good X is a luxury...

Question 17

When the price of a good is $5,the quantity demanded is 100 units per month;when the price is $7,the quantity demanded is 80 units per month.Using the midpoint method,the price elasticity of demand is about

Accepted Answer

A)  0.22. 
B)  0.67. 
C)  1.33. 
D)  1.50. 
A)  0.22. 
B)  0.67. 
C)  1.33. 
D)  1.50.

Question 18

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

Accepted Answer

A)  white chocolate chip with macadamia nut cookies 
B)  Mrs.Field's chocolate chip cookies 
C)  milk chocolate chip cookies 
D)  cookies 
A)  white chocolate chip with macadamia nut cookies 
B)  Mrs.Field's chocolate chip cookies 
C)  milk chocolate chip cookies 
D)  cookies

Question 19

Figure 5-4  
-Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 1,000,P = $40)and (Q = 1,500,P = $30).Then which of the following scenarios is possible?

Accepted Answer

A)  Both of these points lie on the section of the demand curve from B to C. 
B)  The vertical intercept of the demand curve is the point (Q = 0,P = $60). 
C)  The horizontal intercept of the demand curve is the point (Q = 1,800,P = $0). 
D)  Any of these scenarios is possible. 
A)  Both of these points lie on the section of the demand curve from B to C. 
B)  The vertical intercept of the demand curve is the point (Q = 0,P = $60). 
C)  The horizontal intercept of the demand curve is the point (Q = 1,800,P = $0). 
D)  Any of these scenarios is possible.

Question 20

For a particular good,a 2 percent increase in price causes a 12 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A)  There are no close substitutes for this good. 
B)  The good is a luxury. 
C)  The market for the good is broadly defined. 
D)  The relevant time horizon is short. 
A)  There are no close substitutes for this good. 
B)  The good is a luxury. 
C)  The market for the good is broadly defined. 
D)  The relevant time horizon is short.

Exam 5: Elasticity and Its Application

If the income elasticity of demand for a good is negative,then the good must be an inferior good.

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

Figure 5-17 -Refer to Figure 5-17.Which of the following statements is correct?

Fiona's Fish Emporium increased its total monthly revenue from $1,500 to $1,800 when it raised the price of tropical fish from $5 to $9.The price elasticity of demand for Fiona's Fish Emporium is

The supply of a good will be more elastic,the

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

Figure 5-1 -Refer to Figure 5-1.Between point A and point B,price elasticity of demand using the midpoint method is equal to

Figure 5-5 -Refer to Figure 5-5.At a price of $12 per unit,sellers' total revenue equals

Figure 5-14 -Refer to Figure 5-14.Along which of these segments of the supply curve is supply least elastic?

Moving downward and to the right along a linear demand curve,we know that total revenue

Figure 5-6 -Refer to Figure 5-6.Using the midpoint method,the price elasticity of demand between point B and point C is

Table 5-2 -Refer to Table 5-2.Using the midpoint method,which of the three supply curves has the most elastic price elasticity of supply?

Frequently,in the short run,the quantity supplied of a good is

Studies indicate that the price elasticity of demand for cigarettes is about 0.4.A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6.According to the midpoint method,the government policy should have reduced smoking by

Holding all other forces constant,when the price of gasoline rises,the number of gallons of gasoline demanded would fall substantially over a ten-year period because

Suppose that good X is a luxury and that good Y is a necessity.Which good would you expect to have more price elastic demand?

When the price of a good is $5,the quantity demanded is 100 units per month;when the price is $7,the quantity demanded is 80 units per month.Using the midpoint method,the price elasticity of demand is about

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

Figure 5-4 -Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 1,000,P = $40)and (Q = 1,500,P = $30).Then which of the following scenarios is possible?

For a particular good,a 2 percent increase in price causes a 12 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

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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