Question 1

Frequently, in the short run, the quantity supplied of a good is

Accepted Answer

A) impossible, or nearly impossible, to measure. 
B) not very responsive to price changes. 
C) determined by the quantity demanded of the good. 
D) determined by psychological forces and other non-economic forces. 
A) impossible, or nearly impossible, to measure. 
B) not very responsive to price changes. 
C) determined by the quantity demanded of the good. 
D) determined by psychological forces and other non-economic forces.

Question 2

Why was OPEC unable to maintain high oil prices in the long run?

Accepted Answer

A) Demand and supply are both elastic in the long run compared to the short run. 
B) Demand and supply are both inelastic in the long run compared to the short run. 
C) Demand is elastic and supply is inelastic in the long run compared to the short run. 
D) Demand is inelastic and supply is elastic in the long run compared to the short run. 
A) Demand and supply are both elastic in the long run compared to the short run. 
B) Demand and supply are both inelastic in the long run compared to the short run. 
C) Demand is elastic and supply is inelastic in the long run compared to the short run. 
D) Demand is inelastic and supply is elastic in the long run compared to the short run.

Question 3

Table 5-5  
-Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A) 0.09. 
B) 0.58. 
C) 0.65. 
D) 1.53. 
A) 0.09. 
B) 0.58. 
C) 0.65. 
D) 1.53.

Question 4

If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

Accepted Answer

A) a 20 percent increase in the quantity demanded. 
B) an 18 percent increase in the quantity demanded. 
C) a 2 percent increase in the quantity demanded. 
D) a 1.8 percent increase in the quantity demanded. 
A) a 20 percent increase in the quantity demanded. 
B) an 18 percent increase in the quantity demanded. 
C) a 2 percent increase in the quantity demanded. 
D) a 1.8 percent increase in the quantity demanded.

Question 5

The production of methamphetamine (meth) is a social problem in the Midwest. Iowa is considering two potential programs: Operation Methbust would increase the number of sheriffs' deputies to search out and destroy methamphetamine labs. Operation Say No to Meth would increase the training required of public school teachers so that they could better educate students about the health risks of using meth. Assuming that each program were successful, which of the following statements is correct?

Accepted Answer

A) Both Operation Methbust and Say No would reduce the equilibrium quantity and increase the equilibrium price of meth. 
B) Both Operation Methbust and Say No would increase the equilibrium quantity and reduce the equilibrium price of meth. 
C) Both Operation Methbust and Say No would reduce the equilibrium quantity of meth; Operation Methbust would increase the equilibrium price, whereas Say No would reduce the equilibrium price of meth. 
D) Both Operation Methbust and Say No would reduce the equilibrium price of meth; Operation Methbust would reduce the equilibrium quantity, whereas Say No would increase the equilibrium quantity of meth. 
A) Both Operation Methbust and Say No would reduce the equilibrium quantity and increase the equilibrium price of meth. 
B) Both Operation Methbust and Say No would increase the equilibrium quantity and reduce the equilibrium price of meth. 
C) Both Operation Methbust and Say No would reduce the equilibrium quantity of meth; Operation Methbust would increase the equilibrium price, whereas Say No would reduce the equilibrium price of meth. 
D) Both Operation Methbust and Say No would reduce the equilibrium price of meth; Operation Methbust would reduce the equilibrium quantity, whereas Say No would increase the equilibrium quantity of meth.

Question 6

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

Accepted Answer

A) canoes and kayaks 
B) pizza and college textbooks 
C) Halloween candy and rain coats 
D) cats and cat food 
A) canoes and kayaks 
B) pizza and college textbooks 
C) Halloween candy and rain coats 
D) cats and cat food

Question 7

If the quantity supplied responds only slightly to changes in price, then

Accepted Answer

A) supply is said to be elastic. 
B) supply is said to be inelastic. 
C) an increase in price will not shift the supply curve very much. 
D) even a large decrease in demand will change the equilibrium price only slightly. 
A) supply is said to be elastic. 
B) supply is said to be inelastic. 
C) an increase in price will not shift the supply curve very much. 
D) even a large decrease in demand will change the equilibrium price only slightly.

Question 8

For which of the following goods is the income elasticity of demand likely highest?

Accepted Answer

A) natural gas 
B) doctor's visits 
C) hamburgers 
D) boats 
A) natural gas 
B) doctor's visits 
C) hamburgers 
D) boats

Question 9

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Accepted Answer

A) True 
 B)False

Question 10

Figure 5-4  
-Refer to Figure 5-4. The section of the demand curve at point B represents the

Accepted Answer

A) elastic section of the demand curve. 
B) inelastic section of the demand curve. 
C) unit elastic section of the demand curve. 
D) perfectly elastic section of the demand curve. 
A) elastic section of the demand curve. 
B) inelastic section of the demand curve. 
C) unit elastic section of the demand curve. 
D) perfectly elastic section of the demand curve.

Question 11

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

Accepted Answer

A) Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept. 
B) Elasticity provides us with a better rationale for statements such as "an increase in x will lead to a decrease in y" than we would have in the absence of the elasticity concept. 
C) Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus or a shortage. 
D) Without elasticity, it is very difficult to assess the degree of competition within a market. 
A) Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept. 
B) Elasticity provides us with a better rationale for statements such as "an increase in x will lead to a decrease in y" than we would have in the absence of the elasticity concept. 
C) Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus or a shortage. 
D) Without elasticity, it is very difficult to assess the degree of competition within a market.

Question 12

Scenario 5-3
Suppose that the supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-3. The price elasticity of supply for bread could be

Accepted Answer

A) -1. 
B) 0. 
C) 0.5. 
D) 1.5. 
A) -1. 
B) 0. 
C) 0.5. 
D) 1.5.

Question 13

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

Accepted Answer

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

Question 14

Figure 5-9  
-Refer to Figure 5-9. If the price falls from point A to point B, total revenue

Accepted Answer

A) increases, and demand is price elastic. 
B) decreases, and demand is price elastic. 
C) increases, and demand is price inelastic. 
D) decreases, and demand is price inelastic. 
A) increases, and demand is price elastic. 
B) decreases, and demand is price elastic. 
C) increases, and demand is price inelastic. 
D) decreases, and demand is price inelastic.

Question 15

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 16

Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

A) True 
 B)False

Question 17

For which of the following goods is the income elasticity of demand likely lowest?

Accepted Answer

A) subscriptions to premium movie channels through the local cable television provider 
B) hi-definition DVD players 
C) champagne 
D) housing 
A) subscriptions to premium movie channels through the local cable television provider 
B) hi-definition DVD players 
C) champagne 
D) housing

Question 18

Which of the following statements about agriculture in the U.S. is not correct?

Accepted Answer

A) From the 1950s to today, agricultural output has increased about five times. 
B) Because technological improvements increase the supply of a product for which demand is inelastic, an individual farmer would be better off not adopting the new technology. 
C) Increasing the supply of agricultural products typically benefits consumers but harms farmers. 
D) Technological improvements typically increase supply and decrease revenue for farmers. 
A) From the 1950s to today, agricultural output has increased about five times. 
B) Because technological improvements increase the supply of a product for which demand is inelastic, an individual farmer would be better off not adopting the new technology. 
C) Increasing the supply of agricultural products typically benefits consumers but harms farmers. 
D) Technological improvements typically increase supply and decrease revenue for farmers.

Question 19

Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

Accepted Answer

A) True 
 B)False

Question 20

Figure 5-2  
-Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

Accepted Answer

A) D1 
B) D2 
C) D3 
D) All of the above are equally elastic. 
A) D1 
B) D2 
C) D3 
D) All of the above are equally elastic.

Frequently, in the short run, the quantity supplied of a good is

Why was OPEC unable to maintain high oil prices in the long run?

Table 5-5 -Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

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

If the quantity supplied responds only slightly to changes in price, then

For which of the following goods is the income elasticity of demand likely highest?

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve at point B represents the

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

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

Figure 5-9 -Refer to Figure 5-9. If the price falls from point A to point B, total revenue

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

For which of the following goods is the income elasticity of demand likely lowest?

Which of the following statements about agriculture in the U.S. is not correct?

Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

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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Exam 5: Elasticity and Its Application

Frequently, in the short run, the quantity supplied of a good is

Why was OPEC unable to maintain high oil prices in the long run?

Table 5-5 -Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

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

If the quantity supplied responds only slightly to changes in price, then

For which of the following goods is the income elasticity of demand likely highest?

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve at point B represents the

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

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

Figure 5-9 -Refer to Figure 5-9. If the price falls from point A to point B, total revenue

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

For which of the following goods is the income elasticity of demand likely lowest?

Which of the following statements about agriculture in the U.S. is not correct?

Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

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