Question 1

Figure 5-18  
-Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $4 and $5?

Accepted Answer

A) 0.50 
B) 0.56 
C) 1.80 
D) 2.00 
A) 0.50 
B) 0.56 
C) 1.80 
D) 2.00

Question 2

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

Accepted Answer

A) 0.71, and they are substitutes. 
B) -0.71, and they are complements. 
C) 1.4, and they are substitutes. 
D) -1.4, and they are complements. 
A) 0.71, and they are substitutes. 
B) -0.71, and they are complements. 
C) 1.4, and they are substitutes. 
D) -1.4, and they are complements.

Question 3

In general, demand curves for luxuries tend to be price elastic.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

Accepted Answer

A) The elasticity of supply approaches infinity. 
B) The supply curve is vertical. 
C) At a price below $4, quantity supplied is infinite. 
D) At a price above $4, quantity supplied is zero. 
A) The elasticity of supply approaches infinity. 
B) The supply curve is vertical. 
C) At a price below $4, quantity supplied is infinite. 
D) At a price above $4, quantity supplied is zero.

Question 5

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

Accepted Answer

A) fountain ink pens 
B) milk 
C) disposable diapers 
D) shampoo 
A) fountain ink pens 
B) milk 
C) disposable diapers 
D) shampoo

Question 6

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

Accepted Answer

A) increase by 4%. 
B) increase by 6.25%. 
C) decrease by 4%. 
D) decrease by 6.25%. 
A) increase by 4%. 
B) increase by 6.25%. 
C) decrease by 4%. 
D) decrease by 6.25%.

Question 7

A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each. At a price of $20.00, the t-shirt maker would be willing to supply 100 t-shirts. Using the midpoint method, the price elasticity of supply for t-shirts is about

Accepted Answer

A) 0.37, and supply is elastic. 
B) 0.37, and supply is inelastic. 
C) 2.71, and supply is elastic. 
D) 2.71, and supply is inelastic. 
A) 0.37, and supply is elastic. 
B) 0.37, and supply is inelastic. 
C) 2.71, and supply is elastic. 
D) 2.71, and supply is inelastic.

Question 8

Table 5-9
​  
-Refer to Table 5-9. Which of the three supply curves represents the least elastic supply?

Accepted Answer

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

Question 9

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought. Which of the following best describes the effect on corn farmers in Minnesota, where sufficient rainfall occurred?

Accepted Answer

A) Their revenue increases because price increases and demand is elastic. 
B) Their revenue increases because price increases and demand is inelastic. 
C) Their revenue decreases because price decreases and demand is inelastic. 
D) Their revenue decreases because price increases and demand is elastic. 
A) Their revenue increases because price increases and demand is elastic. 
B) Their revenue increases because price increases and demand is inelastic. 
C) Their revenue decreases because price decreases and demand is inelastic. 
D) Their revenue decreases because price increases and demand is elastic.

Question 10

Figure 5-11  
-Refer to Figure 5-11. Suppose this demand curve is a straight, downward-sloping line all the way from the horizontal intercept to the vertical intercept. We choose two prices, P1 and P2, and the corresponding quantities demanded, Q1 and Q2, for the purpose of calculating the price elasticity of demand. Also suppose P2 > P1. In which of the following cases could we possibly find that (i) demand is elastic and (ii) a decrease in price from P1 to P2 causes an decrease in total revenue?

Accepted Answer

A) 0 1 2 1 2 1 > $20. 
D) None of the above is correct. 
A) 0 1 2 1 2 1 > $20. 
D) None of the above is correct.

Question 11

For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A) There are many substitutes for this good. 
B) The good is a necessity. 
C) The market for the good is narrowly defined. 
D) The relevant time horizon is long. 
A) There are many substitutes for this good. 
B) The good is a necessity. 
C) The market for the good is narrowly defined. 
D) The relevant time horizon is long.

Question 12

Figure 5-15  
-Refer to Figure 5-15. Along which of these segments of the supply curve is supply most elastic?

Accepted Answer

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

Question 13

If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

Accepted Answer

A) increase by 4.2%. 
B) increase by 6%. 
C) decrease by 4.2%. 
D) decrease by 6%. 
A) increase by 4.2%. 
B) increase by 6%. 
C) decrease by 4.2%. 
D) decrease by 6%.

Question 14

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

Accepted Answer

A) raises prices and total revenue in the drug market. 
B) can increase drug-related crime. 
C) shifts the demand curve for drugs to the left. 
D) shifts the supply curve of drugs to the left. 
A) raises prices and total revenue in the drug market. 
B) can increase drug-related crime. 
C) shifts the demand curve for drugs to the left. 
D) shifts the supply curve of drugs to the left.

Question 15

Table 5-10
​
​   ​
-Refer to Table 5-10. 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 16

In the long run, the quantity supplied of most goods

Accepted Answer

A) will increase in almost all cases, regardless of what happens to price. 
B) cannot respond at all to a change in price. 
C) can respond to a change in price, but the change is almost always inconsequential. 
D) can respond substantially to a change in price. 
A) will increase in almost all cases, regardless of what happens to price. 
B) cannot respond at all to a change in price. 
C) can respond to a change in price, but the change is almost always inconsequential. 
D) can respond substantially to a change in price.

Question 17

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

Accepted Answer

A) $20. 
B) $50. 
C) $70. 
D) $100. 
A) $20. 
B) $50. 
C) $70. 
D) $100.

Question 18

A perfectly elastic demand implies that

Accepted Answer

A) buyers will not respond to any change in price. 
B) any rise in price above that represented by the demand curve will result in a quantity demanded of zero. 
C) quantity demanded and price change by the same percent as we move along the demand curve. 
D) price will rise by an infinite amount when there is a change in quantity demanded. 
A) buyers will not respond to any change in price. 
B) any rise in price above that represented by the demand curve will result in a quantity demanded of zero. 
C) quantity demanded and price change by the same percent as we move along the demand curve. 
D) price will rise by an infinite amount when there is a change in quantity demanded.

Question 19

-Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the absolute value of the price elasticity of demand is

Accepted Answer

A) 5.3. 
B) 2.8. 
C) 0.8. 
D) 0.36. 
A) 5.3. 
B) 2.8. 
C) 0.8. 
D) 0.36.

Question 20

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.

Exam 5: Elasticity and Its Application

Figure 5-18 -Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $4 and $5?

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

In general, demand curves for luxuries tend to be price elastic.

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

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

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each. At a price of $20.00, the t-shirt maker would be willing to supply 100 t-shirts. Using the midpoint method, the price elasticity of supply for t-shirts is about

Table 5-9 ​ -Refer to Table 5-9. Which of the three supply curves represents the least elastic supply?

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought. Which of the following best describes the effect on corn farmers in Minnesota, where sufficient rainfall occurred?

For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Figure 5-15 -Refer to Figure 5-15. Along which of these segments of the supply curve is supply most elastic?

If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

Table 5-10 ​ ​ ​ -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most elastic price elasticity of supply?

In the long run, the quantity supplied of most goods

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

A perfectly elastic demand implies that

-Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the absolute value of the price elasticity of demand is

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

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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters

Table 5-9 -Refer to Table 5-9. Which of the three supply curves represents the least elastic supply?

Table 5-10 -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most elastic price elasticity of supply?