Question 1

Figure 5-21  
-Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $5 and $15?

Accepted Answer

The price

Question 2

The smaller the price elasticity of demand, the

Accepted Answer

A) steeper the demand curve will be through a given point. 
B) flatter the demand curve will be through a given point. 
C) more strongly buyers respond to a change in price between any two prices P1 and P2. 
D) smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2. 
A) steeper the demand curve will be through a given point. 
B) flatter the demand curve will be through a given point. 
C) more strongly buyers respond to a change in price between any two prices P1 and P2. 
D) smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2.

Question 3

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

Accepted Answer

A) 30%. 
B) 40%. 
C) 80%. 
D) 250%. 
A) 30%. 
B) 40%. 
C) 80%. 
D) 250%.

Question 4

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

Accepted Answer

A) lattés 
B) filet mignon 
C) Grey Goose® vodka 
D) milk 
A) lattés 
B) filet mignon 
C) Grey Goose® vodka 
D) milk

Question 5

How does total revenue change as one moves downward and to the right along a linear demand curve?

Accepted Answer

A) It always increases. 
B) It always decreases. 
C) It first increases, then decreases. 
D) It is unaffected by a movement along the demand curve. 
A) It always increases. 
B) It always decreases. 
C) It first increases, then decreases. 
D) It is unaffected by a movement along the demand curve.

Question 6

A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

Accepted Answer

A) infinity. 
B) zero. 
C) one. 
D) negative one. 
A) infinity. 
B) zero. 
C) one. 
D) negative one.

Question 7

Figure 5-1  
-Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

Accepted Answer

A) 0.33. 
B) 0.67. 
C) 1.5 
D) 2.67. 
A) 0.33. 
B) 0.67. 
C) 1.5 
D) 2.67.

Question 8

Suppose that gasoline prices increase dramatically this month. Lola commutes 100 miles to work each weekday. Over the next few months, Lola drives less on the weekends to try to save money. Within the year, she sells her home and purchases one only 10 miles from her place of employment. These examples illustrate the importance of

Accepted Answer

A) the availability of 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 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 9

Which of the following statements is correct?

Accepted Answer

A) The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. 
B) The demand for grandfather clocks is more elastic than the demand for clocks in general. 
C) The demand for cardboard is more elastic over a long period of time than over a short period of time. 
D) All of the above are correct. 
A) The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. 
B) The demand for grandfather clocks is more elastic than the demand for clocks in general. 
C) The demand for cardboard is more elastic over a long period of time than over a short period of time. 
D) All of the above are correct.

Question 10

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 11

Scenario 5-6
Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000.
-Refer to Scenario 5-6. Using the midpoint method, what is the cross price elasticity of demand for landline and mobile service?

Accepted Answer

The answer of Scenario 5-6
Consider the markets for mobile and...

Question 12

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 13

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by

Accepted Answer

A) 30%. 
B) 40%. 
C) 60%. 
D) 74%. 
A) 30%. 
B) 40%. 
C) 60%. 
D) 74%.

Question 14

Normal goods have negative income elasticities of demand, while inferior goods have positive income elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 15

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

Accepted Answer

A) the equilibrium quantity decreases, and the equilibrium price is unchanged. 
B) the equilibrium price increases, and the equilibrium quantity is unchanged. 
C) the equilibrium quantity and the equilibrium price both are unchanged. 
D) buyers' total expenditure on the good is unchanged. 
A) the equilibrium quantity decreases, and the equilibrium price is unchanged. 
B) the equilibrium price increases, and the equilibrium quantity is unchanged. 
C) the equilibrium quantity and the equilibrium price both are unchanged. 
D) buyers' total expenditure on the good is unchanged.

Question 16

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 17

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A) The direct impact is on buyers, not sellers. 
B) Successful drug interdiction policies reduce the demand for illegal drugs. 
C) Drug addicts will have an even greater need for quick cash to support their habits. 
D) In the short run, both equilibrium quantities and prices will fall in the markets for illegal drugs. 
A) The direct impact is on buyers, not sellers. 
B) Successful drug interdiction policies reduce the demand for illegal drugs. 
C) Drug addicts will have an even greater need for quick cash to support their habits. 
D) In the short run, both equilibrium quantities and prices will fall in the markets for illegal drugs.

Question 18

A tax accounting firm produces 500 tax returns units when the market price is $150 per return and produces 700 tax returns when the market price is $170 per tax return. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Accepted Answer

A) 2.67. 
B) 0.67. 
C) 0.4. 
D) 0.125. 
A) 2.67. 
B) 0.67. 
C) 0.4. 
D) 0.125.

Question 19

If the price elasticity of supply for a good is equal to infinity, then the

Accepted Answer

A) supply curve is vertical. 
B) supply curve is horizontal. 
C) supply curve also has a slope equal to infinity. 
D) quantity supplied is constant regardless of the price. 
A) supply curve is vertical. 
B) supply curve is horizontal. 
C) supply curve also has a slope equal to infinity. 
D) quantity supplied is constant regardless of the price.

Question 20

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a

Accepted Answer

A) 0.4 percent increase in the quantity demanded. 
B) 2.5 percent increase in the quantity demanded. 
C) 3.6 percent increase in the quantity demanded. 
D) 6 percent increase in the quantity demanded. 
A) 0.4 percent increase in the quantity demanded. 
B) 2.5 percent increase in the quantity demanded. 
C) 3.6 percent increase in the quantity demanded. 
D) 6 percent increase in the quantity demanded.

Exam 5: Elasticity and Its Application

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $5 and $15?

The smaller the price elasticity of demand, the

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

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

How does total revenue change as one moves downward and to the right along a linear demand curve?

A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

Which of the following statements is correct?

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

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

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by

Normal goods have negative income elasticities of demand, while inferior goods have positive income elasticities of demand.

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

A tax accounting firm produces 500 tax returns units when the market price is $150 per return and produces 700 tax returns when the market price is $170 per tax return. Using the midpoint method, for this range of prices, the price elasticity of supply is about

If the price elasticity of supply for a good is equal to infinity, then the

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a

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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