Question 1

If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the elasticity, then demand is

Accepted Answer

A) perfectly inelastic, and the demand curve is vertical. 
B) elastic, and the demand curve is a straight, downward-sloping line. 
C) perfectly elastic, and the demand curve is horizontal. 
D) elastic, and the demand curve is something other than a straight, downward-sloping line. 
A) perfectly inelastic, and the demand curve is vertical. 
B) elastic, and the demand curve is a straight, downward-sloping line. 
C) perfectly elastic, and the demand curve is horizontal. 
D) elastic, and the demand curve is something other than a straight, downward-sloping line.

Question 2

At price of $1.20, a local pencil manufacturer is willing to supply 150 boxes per day. At a price of $1.40, the manufacturer is willing to supply 170 boxes per day. Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A) 2.0. 
B) 1.23. 
C) 1.00. 
D) 0.81. 
A) 2.0. 
B) 1.23. 
C) 1.00. 
D) 0.81.

Question 3

In the short run, as compared to the long run, both the price elasticity of demand and the price elasticity of supply tend to be more

Accepted Answer

The answer of In the short run, as compared to...

Question 4

The price elasticity of supply along a typical supply curve is

Accepted Answer

A) constant. 
B) equal to zero. 
C) higher at low levels of quantity supplied and lower at high levels of quantity supplied. 
D) lower at low levels of quantity supplied and higher at high levels of quantity supplied. 
A) constant. 
B) equal to zero. 
C) higher at low levels of quantity supplied and lower at high levels of quantity supplied. 
D) lower at low levels of quantity supplied and higher at high levels of quantity supplied.

Question 5

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

Accepted Answer

A) increase the total revenue of wheat farmers. 
B) decrease the total revenue of wheat farmers. 
C) decrease the demand for wheat. 
D) decrease the supply of wheat. 
A) increase the total revenue of wheat farmers. 
B) decrease the total revenue of wheat farmers. 
C) decrease the demand for wheat. 
D) decrease the supply of wheat.

Question 6

When demand is inelastic, an increase in price will cause

Accepted Answer

A) an increase in total revenue. 
B) a decrease in total revenue. 
C) no change in total revenue but an increase in quantity demanded. 
D) no change in total revenue but a decrease in quantity demanded. 
A) an increase in total revenue. 
B) a decrease in total revenue. 
C) no change in total revenue but an increase in quantity demanded. 
D) no change in total revenue but a decrease in quantity demanded.

Question 7

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 change in equilibrium quantity will be

Accepted Answer

A) greater in the milk market than in the beef market. 
B) greater in the beef market than in the milk market. 
C) the same in the milk and beef markets. 
D) Any of the above could be correct. 
A) greater in the milk market than in the beef market. 
B) greater in the beef market than in the milk market. 
C) the same in the milk and beef markets. 
D) Any of the above could be correct.

Question 8

Figure 5-16  
-Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $6 and $8?

Accepted Answer

A) 0.86 
B) 1.00 
C) 1.17 
D) 1.25 
A) 0.86 
B) 1.00 
C) 1.17 
D) 1.25

Question 9

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 10

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

Accepted Answer

A) -1.2, and X and Y are complements. 
B) -0.1, and X and Y are complements. 
C) 0.1, and X and Y are substitutes. 
D) 1.2, and X and Y are substitutes. 
A) -1.2, and X and Y are complements. 
B) -0.1, and X and Y are complements. 
C) 0.1, and X and Y are substitutes. 
D) 1.2, and X and Y are substitutes.

Question 11

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

Accepted Answer

A) laptop computers 
B) tablets 
C) Microsoft® Surface tablets 
D) cell phones 
A) laptop computers 
B) tablets 
C) Microsoft® Surface tablets 
D) cell phones

Question 12

Figure 5-4  
-Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $6 and $12. Then, when the price increases from $8 to $10,

Accepted Answer

A) the percent decrease in the quantity demanded exceeds the percent increase in the price. 
B) the percent increase in the price exceeds the percent decrease in the quantity demanded. 
C) sellers' total revenue increases as a result. 
D) it is possible that the quantity demanded fell from 550 to 500 as a result. 
A) the percent decrease in the quantity demanded exceeds the percent increase in the price. 
B) the percent increase in the price exceeds the percent decrease in the quantity demanded. 
C) sellers' total revenue increases as a result. 
D) it is possible that the quantity demanded fell from 550 to 500 as a result.

Question 13

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

Accepted Answer

A) True 
 B)False

Question 14

If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

Accepted Answer

A) True 
 B)False

Question 15

When studying how some event or policy affects a market, elasticity provides information on the

Accepted Answer

A) change in the costs of production. 
B) tradeoff between equality and efficiency. 
C) effect on the budget deficit or surplus. 
D) direction and magnitude of the effect. 
A) change in the costs of production. 
B) tradeoff between equality and efficiency. 
C) effect on the budget deficit or surplus. 
D) direction and magnitude of the effect.

Question 16

Scenario 5-1
Suppose that when the average college student's income is $10,000 per year, the annual quantity demanded of Patty's Pizza is 50 and the annual quantity demanded of Sue's Subs is 80. Suppose that when the price of Patty's Pizza increases from $8 to $10 per pie, the quantity demanded of Sue's Subs increases from 80 to 100. Suppose also that when the average student's income increases to $12,000 per year, the annual quantity demanded of Patty's Pizza increases from 50 to 60.
-Refer to Scenario 5-1. What can you deduce about the type of good Patty's Pizza is and about the relationship between Patty's Pizza and Sue's Subs?

Accepted Answer

A) Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are substitutes. 
B) Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are complements. 
C) Patty's Pizza is an inferior good and Patty's Pizza and Sue's Subs are substitutes. 
D) Patty's Pizza is an inferior good and Patty's Pizza and Sue's Subs are complements. 
A) Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are substitutes. 
B) Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are complements. 
C) Patty's Pizza is an inferior good and Patty's Pizza and Sue's Subs are substitutes. 
D) Patty's Pizza is an inferior good and Patty's Pizza and Sue's Subs are complements.

Question 17

Table 5-3
Consider the following demand schedule.  
-Refer to Table 5-3. Using the midpoint method, in which range is demand most elastic?

Accepted Answer

A) $0 to $3 
B) $3 to $6 
C) $9 to 12 
D) $12 to $15 
A) $0 to $3 
B) $3 to $6 
C) $9 to 12 
D) $12 to $15

Question 18

The price elasticity of demand for bread

Accepted Answer

A) is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread. 
B) depends, in part, on the availability of close substitutes for bread. 
C) reflects the many economic, social, and psychological forces that influence consumers' tastes for bread. 
D) All of the above are correct. 
A) is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread. 
B) depends, in part, on the availability of close substitutes for bread. 
C) reflects the many economic, social, and psychological forces that influence consumers' tastes for bread. 
D) All of the above are correct.

Question 19

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

Accepted Answer

A) inelastic. 
B) elastic. 
C) unit elastic. 
D) quite sensitive to changes in income. 
A) inelastic. 
B) elastic. 
C) unit elastic. 
D) quite sensitive to changes in income.

Question 20

Good news for farming can be bad news for farmers because the

Accepted Answer

A) supply curve for an individual farmer is usually perfectly elastic. 
B) supply curve for an individual farmer is usually perfectly inelastic. 
C) demand for basic foodstuffs is usually inelastic, meaning that factors that shift supply to the right decrease total revenues to sellers. 
D) demand for basic foodstuffs is usually elastic, meaning that factors that shift supply to the right increase total revenues to sellers. 
A) supply curve for an individual farmer is usually perfectly elastic. 
B) supply curve for an individual farmer is usually perfectly inelastic. 
C) demand for basic foodstuffs is usually inelastic, meaning that factors that shift supply to the right decrease total revenues to sellers. 
D) demand for basic foodstuffs is usually elastic, meaning that factors that shift supply to the right increase total revenues to sellers.

Exam 5: Elasticity and Its Application

If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the elasticity, then demand is

At price of $1.20, a local pencil manufacturer is willing to supply 150 boxes per day. At a price of $1.40, the manufacturer is willing to supply 170 boxes per day. Using the midpoint method, the price elasticity of supply is about

In the short run, as compared to the long run, both the price elasticity of demand and the price elasticity of supply tend to be more

The price elasticity of supply along a typical supply curve is

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

When demand is inelastic, an increase in price will cause

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 change in equilibrium quantity will be

Figure 5-16 -Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $6 and $8?

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

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

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

Figure 5-4 -Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $6 and $12. Then, when the price increases from $8 to $10,

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

When studying how some event or policy affects a market, elasticity provides information on the

Table 5-3 Consider the following demand schedule. -Refer to Table 5-3. Using the midpoint method, in which range is demand most elastic?

The price elasticity of demand for bread

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

Good news for farming can be bad news for farmers because the

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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