Question 1

If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

Accepted Answer

A) 0.24%. 
B) 4.2%. 
C) 6%. 
D) 6.2%. 
A) 0.24%. 
B) 4.2%. 
C) 6%. 
D) 6.2%.

Question 2

For a horizontal demand curve,

Accepted Answer

A) the slope is undefined, and the price elasticity of demand is equal to 0. 
B) the slope is equal to 0, and the price elasticity of demand is undefined. 
C) both the slope and price elasticity of demand are undefined. 
D) both the slope and price elasticity of demand are equal to 0. 
A) the slope is undefined, and the price elasticity of demand is equal to 0. 
B) the slope is equal to 0, and the price elasticity of demand is undefined. 
C) both the slope and price elasticity of demand are undefined. 
D) both the slope and price elasticity of demand are equal to 0.

Question 3

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is

Accepted Answer

A) zero, and the supply curve is horizontal. 
B) zero, and the supply curve is vertical. 
C) infinity, and the supply curve is horizontal. 
D) infinity, and the supply curve is vertical. 
A) zero, and the supply curve is horizontal. 
B) zero, and the supply curve is vertical. 
C) infinity, and the supply curve is horizontal. 
D) infinity, and the supply curve is vertical.

Question 4

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Accepted Answer

A) About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars. 
B) About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars. 
C) About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars. 
D) Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run. 
A) About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars. 
B) About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars. 
C) About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars. 
D) Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.

Question 5

A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Accepted Answer

A) 0.45. 
B) 2.0. 
C) 2.2. 
D) 200. 
A) 0.45. 
B) 2.0. 
C) 2.2. 
D) 200.

Question 6

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) substitutes. 
B) complements. 
C) normal goods. 
D) inferior goods. 
A) substitutes. 
B) complements. 
C) normal goods. 
D) inferior goods.

Question 8

Figure 5-4  
-Refer to Figure 5-4. If the price increases 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 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 9

Figure 5-5  
-Refer to Figure 5-5. At a price of $50 per unit, sellers' total revenue equals

Accepted Answer

A) $500. 
B) $750. 
C) $1000. 
D) $1250. 
A) $500. 
B) $750. 
C) $1000. 
D) $1250.

Question 10

Figure 5-15  
-Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points C and D?

Accepted Answer

A) 0.21 
B) 0.29 
C) 0.73 
D) 1.36 
A) 0.21 
B) 0.29 
C) 0.73 
D) 1.36

Question 11

Holding all other forces constant, if decreasing 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 decrease never leads to an increase in total revenue. 
A) unit elastic. 
B) inelastic. 
C) elastic. 
D) None of the above is correct because a price decrease never leads to an increase in total revenue.

Question 12

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price inelastic demand?

Accepted Answer

The answer of Suppose that good X has few close...

Question 13

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

Accepted Answer

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

Question 14

Table 5-9
​  
-Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

Accepted Answer

A) along supply curve B only 
B) along supply curves B and C 
C) along all three supply curves 
D) None. Quantity supplied moves proportionately less than the price along all of the three supply curves. 
A) along supply curve B only 
B) along supply curves B and C 
C) along all three supply curves 
D) None. Quantity supplied moves proportionately less than the price along all of the three supply curves.

Question 15

Recently, in Smalltown, the price of Twinkies fell from $0.80 to $0.70. As a result, the quantity demanded of Ho-Ho's decreased from 120 to 100. What would be the appropriate elasticity to compute? Using the midpoint method, compute this elasticity. What does your answer tell you?

Accepted Answer

The appropriate elasticity to compute wo

Question 16

In general, elasticity is a measure of

Accepted Answer

A) the extent to which advances in technology are adopted by producers. 
B) the extent to which a market is competitive. 
C) how firms' profits respond to changes in market prices. 
D) how much buyers and sellers respond to changes in market conditions. 
A) the extent to which advances in technology are adopted by producers. 
B) the extent to which a market is competitive. 
C) how firms' profits respond to changes in market prices. 
D) how much buyers and sellers respond to changes in market conditions.

Question 17

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%, then ice cream is an inferior good.

Accepted Answer

A) True 
 B)False

Question 18

Between 1950 and today there was a

Accepted Answer

A) 20 percent drop in the number of farmers, but farm output increased by more than ten times. 
B) 30 percent drop in the number of farmers, but farm output more than tripled. 
C) 40 percent drop in the number of farmers, but farm output more than doubled. 
D) 70 percent drop in the number of farmers, but farm output increased by about five times. 
A) 20 percent drop in the number of farmers, but farm output increased by more than ten times. 
B) 30 percent drop in the number of farmers, but farm output more than tripled. 
C) 40 percent drop in the number of farmers, but farm output more than doubled. 
D) 70 percent drop in the number of farmers, but farm output increased by about five times.

Question 19

The price elasticity of demand for bread is

Accepted Answer

A) computed as the change in the price of bread divided by the change in the quantity demanded of bread. 
B) independent of the availability of close substitutes. 
C) influenced by whether consumers view bread as a necessity or luxury. 
D) All of the above are correct. 
A) computed as the change in the price of bread divided by the change in the quantity demanded of bread. 
B) independent of the availability of close substitutes. 
C) influenced by whether consumers view bread as a necessity or luxury. 
D) All of the above are correct.

Question 20

Table 5-9
​  
-Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?

Accepted Answer

A) supply curve A 
B) supply curve B 
C) supply curve C 
D) There is no difference in the elasticity of the three supply curves. 
A) supply curve A 
B) supply curve B 
C) supply curve C 
D) There is no difference in the elasticity of the three supply curves.

Exam 5: Elasticity and Its Application

If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

For a horizontal demand curve,

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

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

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

Figure 5-5 -Refer to Figure 5-5. At a price of $50 per unit, sellers' total revenue equals

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points C and D?

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

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price inelastic demand?

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

Table 5-9 ​ -Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

Recently, in Smalltown, the price of Twinkies fell from $0.80 to $0.70. As a result, the quantity demanded of Ho-Ho's decreased from 120 to 100. What would be the appropriate elasticity to compute? Using the midpoint method, compute this elasticity. What does your answer tell you?

In general, elasticity is a measure of

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%, then ice cream is an inferior good.

Between 1950 and today there was a

The price elasticity of demand for bread is

Table 5-9 ​ -Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?

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

Table 5-9 -Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

Table 5-9 -Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?