Question 1

A key determinant of the price elasticity of supply is the

Accepted Answer

A) number of close substitutes for the good in question. 
B) extent to which buyers alter their quantities demanded in response to changes in prices. 
C) length of the time period. 
D) extent to which buyers alter their quantities demanded in response to changes in their incomes. 
A) number of close substitutes for the good in question. 
B) extent to which buyers alter their quantities demanded in response to changes in prices. 
C) length of the time period. 
D) extent to which buyers alter their quantities demanded in response to changes in their incomes.

Question 2

The demand for a good becomes more inelastic

Accepted Answer

A) as more close substitutes for it become available. 
B) as it is increasingly viewed as a luxury good. 
C) as the market is defined more broadly. 
D) the longer the time horizon. 
A) as more close substitutes for it become available. 
B) as it is increasingly viewed as a luxury good. 
C) as the market is defined more broadly. 
D) the longer the time horizon.

Question 3

Josh mows lawns. If the demand for lawn-mowing service is elastic and Josh wants to increase his total revenue, he should

Accepted Answer

A) increase the price of his lawn-mowing service. 
B) decrease the price of his lawn-mowing service. 
C) reduce the costs of operating his lawn-mowing service. 
D) More than one of the above is correct. 
A) increase the price of his lawn-mowing service. 
B) decrease the price of his lawn-mowing service. 
C) reduce the costs of operating his lawn-mowing service. 
D) More than one of the above is correct.

Question 4

Table 5-6  
-Refer to Table 5-6. As price rises from $10 to $15, the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A) 0.40. 
B) 0.56. 
C) 1.80. 
D) 2.50. 
A) 0.40. 
B) 0.56. 
C) 1.80. 
D) 2.50.

Question 5

Suppose good X has a positive income elasticity of demand. This implies that good X could be
(i)a normal good.
(ii)a necessity.
(iii)an inferior good.
(iv)a luxury.

Accepted Answer

A) (i) only 
B) (i) and (ii) only 
C) (i), (ii), and (iv) only 
D) (iii) only 
A) (i) only 
B) (i) and (ii) only 
C) (i), (ii), and (iv) only 
D) (iii) only

Question 6

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about

Accepted Answer

A) 0.62. 
B) 0.77. 
C) 1.24. 
D) 1.63. 
A) 0.62. 
B) 0.77. 
C) 1.24. 
D) 1.63.

Question 7

Demand is said to be unit elastic if quantity demanded

Accepted Answer

A) changes by the same percent as the price. 
B) changes by a larger percent than the price. 
C) changes by a smaller percent than the price. 
D) does not respond to a change in price. 
A) changes by the same percent as the price. 
B) changes by a larger percent than the price. 
C) changes by a smaller percent than the price. 
D) does not respond to a change in price.

Question 8

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Accepted Answer

A) fall by 8 percent. 
B) fall by 50 percent. 
C) rise by 8 percent. 
D) rise by 50 percent. 
A) fall by 8 percent. 
B) fall by 50 percent. 
C) rise by 8 percent. 
D) rise by 50 percent.

Question 9

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

Accepted Answer

The answer of With regard to elasticity, as a firm...

Question 10

Which of the following statements is correct?

Accepted Answer

A) The demand for natural gas is more elastic over a short period of time than over a long period of time. 
B) The demand for smoke alarms is more elastic than the demand for Persian rugs. 
C) The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general. 
D) All of the above are correct. 
A) The demand for natural gas is more elastic over a short period of time than over a long period of time. 
B) The demand for smoke alarms is more elastic than the demand for Persian rugs. 
C) The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general. 
D) All of the above are correct.

Question 11

Table 5-12  
-Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $6 and $8?

Accepted Answer

The price

Question 12

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

Accepted Answer

The answer of Table 5-3
Consider the following demand schedule. ...

Question 13

Holding all other forces constant, if increasing the price of a good leads to a decrease 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 decrease 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 decrease in total revenue.

Question 14

Table 5-12  
-Refer to Table 5-12. Between which two quantities listed is demand most inelastic?

Accepted Answer

The answer of Table 5-12  
-Refer to Table 5-12....

Question 15

Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples illustrate the importance of

Accepted Answer

A) the availability of close substitutes in determining the price elasticity of demand. 
B) a necessity versus a luxury in determining the price elasticity of demand. 
C) the definition of a market in determining the price elasticity of demand. 
D) the time horizon in determining the price elasticity of demand. 
A) the availability of close substitutes in determining the price elasticity of demand. 
B) a necessity versus a luxury in determining the price elasticity of demand. 
C) the definition of a market in determining the price elasticity of demand. 
D) the time horizon in determining the price elasticity of demand.

Question 16

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Accepted Answer

A) True 
 B)False

Question 17

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

Accepted Answer

A) 0.6 percent increase in the quantity demanded. 
B) 1.5 percent increase in the quantity demanded. 
C) 2 percent increase in the quantity demanded. 
D) 6 percent increase in the quantity demanded. 
A) 0.6 percent increase in the quantity demanded. 
B) 1.5 percent increase in the quantity demanded. 
C) 2 percent increase in the quantity demanded. 
D) 6 percent increase in the quantity demanded.

Question 18

Which of the following statements is correct?

Accepted Answer

A) Advocates for drug-interdiction policies that reduce the supply of illegal drugs argue that the demand for illegal drugs may be more responsive in the long run than in the short run. 
B) The demand for illegal drugs is price inelastic. 
C) Drug interdiction efforts that reduce the supply of illegal drugs may increase drug-related crimes. 
D) All of the above are correct. 
A) Advocates for drug-interdiction policies that reduce the supply of illegal drugs argue that the demand for illegal drugs may be more responsive in the long run than in the short run. 
B) The demand for illegal drugs is price inelastic. 
C) Drug interdiction efforts that reduce the supply of illegal drugs may increase drug-related crimes. 
D) All of the above are correct.

Question 19

Scenario 5-2
Suppose the demand function for good X is given by:   where   is the quantity demanded of good X,   is the price of good X, and   is the price of good Y, which is related to good X.
-Refer to Scenario 5-2. Using the midpoint method, if the price of good X is $10 and the price of good Y increases from $8 to $10, the cross price elasticity of demand is about

Accepted Answer

The answer of Scenario 5-2
Suppose the demand function for good...

Question 20

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

Accepted Answer

A) increase by 4%. 
B) increase by 6.25%. 
C) decrease by 4%. 
D) decrease by 6.25%. 
A) increase by 4%. 
B) increase by 6.25%. 
C) decrease by 4%. 
D) decrease by 6.25%.

Exam 5: Elasticity and Its Application

A key determinant of the price elasticity of supply is the

The demand for a good becomes more inelastic

Josh mows lawns. If the demand for lawn-mowing service is elastic and Josh wants to increase his total revenue, he should

Table 5-6 -Refer to Table 5-6. As price rises from $10 to $15, the price elasticity of demand using the midpoint method is approximately

Suppose good X has a positive income elasticity of demand. This implies that good X could be (i)a normal good. (ii)a necessity. (iii)an inferior good. (iv)a luxury.

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about

Demand is said to be unit elastic if quantity demanded

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

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

Which of the following statements is correct?

Table 5-12 -Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $6 and $8?

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

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

Table 5-12 -Refer to Table 5-12. Between which two quantities listed is demand most inelastic?

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

Which of the following statements is correct?

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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