Question 1

Which of the following was not a reason OPEC failed to keep the price of oil high?

Accepted Answer

A) Over the long run, producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity. 
B) Consumers responded to higher prices with greater conservation. 
C) Consumers replaced old inefficient cars with newer efficient ones. 
D) The agreement OPEC members signed allowed each country to produce as much oil as each wanted. 
A) Over the long run, producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity. 
B) Consumers responded to higher prices with greater conservation. 
C) Consumers replaced old inefficient cars with newer efficient ones. 
D) The agreement OPEC members signed allowed each country to produce as much oil as each wanted.

Question 2

The price elasticity of supply measures how responsive

Accepted Answer

A) sellers are to a change in price. 
B) sellers are to a change in buyers' income. 
C) buyers are to a change in production costs. 
D) equilibrium price is to a change in supply. 
A) sellers are to a change in price. 
B) sellers are to a change in buyers' income. 
C) buyers are to a change in production costs. 
D) equilibrium price is to a change in supply.

Question 3

When consumers face rising gasoline prices, they typically

Accepted Answer

A) reduce their quantity demanded more in the long run than in the short run. 
B) reduce their quantity demanded more in the short run than in the long run. 
C) do not reduce their quantity demanded in the short run or the long run. 
D) increase their quantity demanded in the short run but reduce their quantity demanded in the long run. 
A) reduce their quantity demanded more in the long run than in the short run. 
B) reduce their quantity demanded more in the short run than in the long run. 
C) do not reduce their quantity demanded in the short run or the long run. 
D) increase their quantity demanded in the short run but reduce their quantity demanded in the long run.

Question 4

Suppose demand is given by the equation:   Using the midpoint method, what is the price elasticity of demand between $1 and $2?

Accepted Answer

The price

Question 5

Holding all other forces constant, if increasing 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 6

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is

Accepted Answer

A) inelastic and equal to 6. 
B) elastic and equal to 6. 
C) inelastic and equal to 0.17. 
D) elastic and equal to 0.17. 
A) inelastic and equal to 6. 
B) elastic and equal to 6. 
C) inelastic and equal to 0.17. 
D) elastic and equal to 0.17.

Question 7

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

Accepted Answer

A) increase total revenue of textbook sellers. 
B) decrease total revenue of textbook sellers. 
C) not change total revenue of textbook sellers. 
D) There is not enough information to answer this question. 
A) increase total revenue of textbook sellers. 
B) decrease total revenue of textbook sellers. 
C) not change total revenue of textbook sellers. 
D) There is not enough information to answer this question.

Question 8

Figure 5-15  
-Refer to Figure 5-15. 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 9

A good will have a more elastic demand, the

Accepted Answer

A) greater the availability of close substitutes. 
B) more broad the definition of the market. 
C) shorter the period of time. 
D) more it is regarded as a necessity. 
A) greater the availability of close substitutes. 
B) more broad the definition of the market. 
C) shorter the period of time. 
D) more it is regarded as a necessity.

Question 10

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

Accepted Answer

A) tablet computers 
B) leather boots 
C) lightbulbs 
D) optional textbooks 
A) tablet computers 
B) leather boots 
C) lightbulbs 
D) optional textbooks

Question 11

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 12

If the demand for textbooks is inelastic, then an increase in the price of textbooks will

Accepted Answer

A) increase total revenue of textbook sellers. 
B) decrease total revenue of textbook sellers. 
C) not change total revenue of textbook sellers. 
D) There is not enough information to answer this question. 
A) increase total revenue of textbook sellers. 
B) decrease total revenue of textbook sellers. 
C) not change total revenue of textbook sellers. 
D) There is not enough information to answer this question.

Question 13

Scenario 5-4
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-4. The equilibrium price will

Accepted Answer

A) increase in both the milk and beef markets. 
B) increase in the milk market and decrease in the beef market. 
C) decrease in the milk market and increase in the beef market. 
D) decrease in both the milk and beef markets. 
A) increase in both the milk and beef markets. 
B) increase in the milk market and decrease in the beef market. 
C) decrease in the milk market and increase in the beef market. 
D) decrease in both the milk and beef markets.

Question 14

On a downward-sloping linear demand curve, total revenue reaches its maximum value at the

Accepted Answer

A) midpoint of the demand curve. 
B) lower end of the demand curve. 
C) upper end of the demand curve. 
D) It is impossible to tell without knowing prices and quantities demanded. 
A) midpoint of the demand curve. 
B) lower end of the demand curve. 
C) upper end of the demand curve. 
D) It is impossible to tell without knowing prices and quantities demanded.

Question 15

If the price elasticity of supply is 0.4, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

Accepted Answer

A) 0.25%. 
B) 1.2%. 
C) 2%. 
D) 12.5%. 
A) 0.25%. 
B) 1.2%. 
C) 2%. 
D) 12.5%.

Question 16

Figure 5-4  
-Refer to Figure 5-4. If the price decreases in the region of the demand curve between points A and B, we can expect total revenue to

Accepted Answer

A) increase. 
B) stay the same. 
C) decrease. 
D) first decrease, then increase until total revenue is maximized. 
A) increase. 
B) stay the same. 
C) decrease. 
D) first decrease, then increase until total revenue is maximized.

Question 17

As price elasticity of supply increases, the supply curve

Accepted Answer

A) becomes flatter. 
B) becomes steeper. 
C) becomes downward sloping. 
D) shifts to the right. 
A) becomes flatter. 
B) becomes steeper. 
C) becomes downward sloping. 
D) shifts to the right.

Question 18

Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price of ginger ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statements is true?

Accepted Answer

A) The demand for ginger ale is income inelastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
B) The demand for ginger ale is income elastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
C) The demand for ginger ale is price inelastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
D) The demand for ginger ale is price elastic, so an increase in the price of ginger ale will decrease the total revenue of ginger ale producers. 
A) The demand for ginger ale is income inelastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
B) The demand for ginger ale is income elastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
C) The demand for ginger ale is price inelastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
D) The demand for ginger ale is price elastic, so an increase in the price of ginger ale will decrease the total revenue of ginger ale producers.

Question 19

Figure 5-17  
-Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point A and point B?

Accepted Answer

A) 0.4 
B) 0.6 
C) 1.67 
D) 2.16 
A) 0.4 
B) 0.6 
C) 1.67 
D) 2.16

Question 20

The demand for Godiva mint chocolates is likely quite elastic because

Accepted Answer

A) there are many close substitutes. 
B) this particular type of chocolate is viewed as a luxury by many chocolate lovers. 
C) the market is narrowly defined. 
D) All of the above are correct. 
A) there are many close substitutes. 
B) this particular type of chocolate is viewed as a luxury by many chocolate lovers. 
C) the market is narrowly defined. 
D) All of the above are correct.

Exam 5: Elasticity and Its Application

Which of the following was not a reason OPEC failed to keep the price of oil high?

The price elasticity of supply measures how responsive

When consumers face rising gasoline prices, they typically

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $1 and $2?

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

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

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

A good will have a more elastic demand, the

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

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

If the demand for textbooks is inelastic, then an increase in the price of textbooks will

Scenario 5-4 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-4. The equilibrium price will

On a downward-sloping linear demand curve, total revenue reaches its maximum value at the

If the price elasticity of supply is 0.4, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

Figure 5-4 -Refer to Figure 5-4. If the price decreases in the region of the demand curve between points A and B, we can expect total revenue to

As price elasticity of supply increases, the supply curve

Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price of ginger ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statements is true?

Figure 5-17 -Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point A and point B?

The demand for Godiva mint chocolates is likely quite elastic because

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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