Question 1

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 2

Figure 5-12  
-Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Accepted Answer

A) 0.4. 
B) 1. 
C) 2. 
D) 2.5. 
A) 0.4. 
B) 1. 
C) 2. 
D) 2.5.

Question 3

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A) 0.63, and supply is elastic. 
B) 0.63, and supply is inelastic. 
C) 1.60, and supply is elastic. 
D) 1.60, and supply is inelastic. 
A) 0.63, and supply is elastic. 
B) 0.63, and supply is inelastic. 
C) 1.60, and supply is elastic. 
D) 1.60, and supply is inelastic.

Question 4

Price elasticity of demand along a linear, downward-sloping demand curve increases as price falls.

Accepted Answer

A) True 
 B)False

Question 5

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 6

Figure 5-3  
-Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve

Accepted Answer

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

Question 7

For which pairs of goods is the cross-price elasticity most likely to be negative?

Accepted Answer

A) peanut butter and jelly 
B) celery and coffee 
C) pens and pencils 
D) iPods and iPads 
A) peanut butter and jelly 
B) celery and coffee 
C) pens and pencils 
D) iPods and iPads

Question 8

There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be

Accepted Answer

A) elastic. 
B) unit elastic. 
C) inelastic. 
D) highly responsive to changes in income as well as changes in prices. 
A) elastic. 
B) unit elastic. 
C) inelastic. 
D) highly responsive to changes in income as well as changes in prices.

Question 9

If the price elasticity of supply for a good is equal to infinity, then the

Accepted Answer

A) supply curve is vertical. 
B) supply curve is horizontal. 
C) supply curve also has a slope equal to infinity. 
D) quantity supplied is constant regardless of the price. 
A) supply curve is vertical. 
B) supply curve is horizontal. 
C) supply curve also has a slope equal to infinity. 
D) quantity supplied is constant regardless of the price.

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

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about

Accepted Answer

A) 0.67%. 
B) 0.83%. 
C) 1.20%. 
D) 2.70%. 
A) 0.67%. 
B) 0.83%. 
C) 1.20%. 
D) 2.70%.

Question 12

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) 0.3 
B) 1 
C) 1.8 
D) None of the above could be correct. 
A) 0.3 
B) 1 
C) 1.8 
D) None of the above could be correct.

Question 13

Figure 5-3  
-Refer to Figure 5-3. Which demand curve is perfectly elastic?

Accepted Answer

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

Question 14

Figure 5-8  
-Refer to Figure 5-8. When the price is $15, total revenue is

Accepted Answer

A) $1,500. 
B) $2,500. 
C) $3,500. 
D) $4,500. 
A) $1,500. 
B) $2,500. 
C) $3,500. 
D) $4,500.

Question 15

Which of the following expressions is valid for the price elasticity of demand?

Accepted Answer

A) Price elasticity of demand =  
) 
B) Price elasticity of demand =  
) 
C) Price elasticity of demand =  
) 
D) Price elasticity of demand =  
) 
A) Price elasticity of demand =  
) 
B) Price elasticity of demand =  
) 
C) Price elasticity of demand =  
) 
D) Price elasticity of demand =  
)

Question 16

If demand is price inelastic, then

Accepted Answer

A) buyers do not respond much to a change in price. 
B) buyers respond substantially to a change in price, but the response is very slow. 
C) buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes. 
D) the demand curve is very flat. 
A) buyers do not respond much to a change in price. 
B) buyers respond substantially to a change in price, but the response is very slow. 
C) buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes. 
D) the demand curve is very flat.

Question 17

A decrease in supply will cause the smallest increase in price when

Accepted Answer

A) both supply and demand are inelastic. 
B) demand is elastic and supply is inelastic. 
C) both supply and demand are elastic. 
D) demand is inelastic and supply is elastic. 
A) both supply and demand are inelastic. 
B) demand is elastic and supply is inelastic. 
C) both supply and demand are elastic. 
D) demand is inelastic and supply is elastic.

Question 18

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

Accepted Answer

A) a 0.8 percent increase in the price of the good 
B) a 2.4 percent increase in the price of the good 
C) a 5 percent increase in the price of the good 
D) a 8 percent increase in the price of the good 
A) a 0.8 percent increase in the price of the good 
B) a 2.4 percent increase in the price of the good 
C) a 5 percent increase in the price of the good 
D) a 8 percent increase in the price of the good

Question 19

Holding all other forces constant, if increasing the price of a good leads to a decrease 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 decrease 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 decrease in total revenue.

Question 20

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

Accepted Answer

A) the equilibrium quantity decreases, and the equilibrium price is unchanged. 
B) the equilibrium price increases, and the equilibrium quantity is unchanged. 
C) the equilibrium quantity and the equilibrium price both are unchanged. 
D) buyers' total expenditure on the good is unchanged. 
A) the equilibrium quantity decreases, and the equilibrium price is unchanged. 
B) the equilibrium price increases, and the equilibrium quantity is unchanged. 
C) the equilibrium quantity and the equilibrium price both are unchanged. 
D) buyers' total expenditure on the good is unchanged.

Exam 5: Elasticity and Its Application

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

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

Price elasticity of demand along a linear, downward-sloping demand curve increases as price falls.

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Figure 5-3 -Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve

For which pairs of goods is the cross-price elasticity most likely to be negative?

There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be

If the price elasticity of supply for a good is equal to infinity, then the

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

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about

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

Figure 5-3 -Refer to Figure 5-3. Which demand curve is perfectly elastic?

Figure 5-8 -Refer to Figure 5-8. When the price is $15, total revenue is

Which of the following expressions is valid for the price elasticity of demand?

If demand is price inelastic, then

A decrease in supply will cause the smallest increase in price when

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

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

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

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

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