Exam 5: Elasticity and Its Application

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

If the cross-price elasticity of two goods is negative, then the two goods are

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is

If two goods are substitutes, their cross-price elasticity will be

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

The price elasticity of demand measures how much

Figure 5-6 -Refer to Figure 5-6. For prices above $8, demand is price

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should

With regard to elasticity, as a firm nears its production capacity, supply becomes more

Table 5-3 Consider the following demand schedule. -Refer to Table 5-3. Using the midpoint method, demand is unit elastic when price changes from

On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50). Using the midpoint method, the price elasticity of supply is about

Suppose a market has the demand function Q^d=20-0.5P. At which of the following prices will total revenue be maximized?

Farm programs that pay farmers not to plant crops on all their land

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

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Scenario 5-5 Suppose the government is concerned about firms in the United States importing illegal caviar. As a result, the government increases border patrols to catch illegal shipments. U.S. Customs agents perform DNA testing on the caviar to determine if it comes from endangered species of fish. If so, the government destroys the caviar. -Refer to Scenario 5-5. What would we expect to observe in the caviar market?

Suppose the price of gas increases by 20%. Will demand be more elastic if consumers have 3 weeks or 3 years to adjust to this price change?

The demand for grape-flavored Hubba Bubba bubble gum is likely

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is