Question 1

If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about

Accepted Answer

A) 0.2%. 
B) 0.5%. 
C) 2.0%. 
D) 4.5%. 
A) 0.2%. 
B) 0.5%. 
C) 2.0%. 
D) 4.5%.

Question 2

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

Accepted Answer

A) supply decreases, demand is unaffected, and price increases. 
B) demand decreases, supply is unaffected, and price decreases. 
C) demand and supply both decrease, leaving price essentially unchanged. 
D) supply decreases, demand increases, and price increases substantially. 
A) supply decreases, demand is unaffected, and price increases. 
B) demand decreases, supply is unaffected, and price decreases. 
C) demand and supply both decrease, leaving price essentially unchanged. 
D) supply decreases, demand increases, and price increases substantially.

Question 3

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 4

Figure 5-5  
-Refer to Figure 5-5. At a price of $70 per unit, sellers' total revenue equals

Accepted Answer

A) $700. 
B) $1050. 
C) $1250. 
D) $1400. 
A) $700. 
B) $1050. 
C) $1250. 
D) $1400.

Question 5

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

Accepted Answer

A) True 
 B)False

Question 6

The price elasticity of demand measures the

Accepted Answer

A) magnitude of the response in quantity demanded to a change in price. 
B) direction of the shift in the demand curve in response to a market event. 
C) size of the shortage created by the increase in demand. 
D) responsiveness of quantity demanded to a change in income. 
A) magnitude of the response in quantity demanded to a change in price. 
B) direction of the shift in the demand curve in response to a market event. 
C) size of the shortage created by the increase in demand. 
D) responsiveness of quantity demanded to a change in income.

Question 7

In the case of perfectly inelastic demand,

Accepted Answer

A) the change in quantity demanded equals the change in price. 
B) the percentage change in quantity demanded equals the percentage change in price. 
C) infinitely-large changes in quantity demanded result from very small changes in the price. 
D) quantity demanded stays the same whenever price changes. 
A) the change in quantity demanded equals the change in price. 
B) the percentage change in quantity demanded equals the percentage change in price. 
C) infinitely-large changes in quantity demanded result from very small changes in the price. 
D) quantity demanded stays the same whenever price changes.

Question 8

If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

Accepted Answer

A) True 
 B)False

Question 9

The demand for Rice Krispies is more elastic than the demand for cereal in general.

Accepted Answer

A) True 
 B)False

Question 10

Figure 5-12  
-Refer to Figure 5-12. If the price decreased from $36 to $12, total revenue would

Accepted Answer

A) increase by $4,800, and demand is elastic between points X and Z. 
B) increase by $7,200, and demand is elastic between points X and Z. 
C) decrease by $4,800, and demand is inelastic between points X and Z. 
D) decrease by $7,200, and demand is inelastic between points X and Z. 
A) increase by $4,800, and demand is elastic between points X and Z. 
B) increase by $7,200, and demand is elastic between points X and Z. 
C) decrease by $4,800, and demand is inelastic between points X and Z. 
D) decrease by $7,200, and demand is inelastic between points X and Z.

Question 11

When consumers face rising gasoline prices, they typically

Accepted Answer

A) reduce their quantity demanded more in the long run than in the short run. 
B) reduce their quantity demanded more in the short run than in the long run. 
C) do not reduce their quantity demanded in the short run or the long run. 
D) increase their quantity demanded in the short run but reduce their quantity demanded in the long run. 
A) reduce their quantity demanded more in the long run than in the short run. 
B) reduce their quantity demanded more in the short run than in the long run. 
C) do not reduce their quantity demanded in the short run or the long run. 
D) increase their quantity demanded in the short run but reduce their quantity demanded in the long run.

Question 12

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

Accepted Answer

A) positive, so Joan considers hamburger to be an inferior good. 
B) positive, so Joan considers hamburger to be a normal good and a necessity. 
C) negative, so Joan considers hamburger to be an inferior good. 
D) negative, so Joan considers hamburger to be a normal good but not a necessity. 
A) positive, so Joan considers hamburger to be an inferior good. 
B) positive, so Joan considers hamburger to be a normal good and a necessity. 
C) negative, so Joan considers hamburger to be an inferior good. 
D) negative, so Joan considers hamburger to be a normal good but not a necessity.

Question 13

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is

Accepted Answer

A) 0. 
B) 1. 
C) 6. 
D) 36. 
A) 0. 
B) 1. 
C) 6. 
D) 36.

Question 14

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is

Accepted Answer

A) elastic, and the price elasticity of supply is 1.74. 
B) elastic, and the price elasticity of supply is 0.57. 
C) inelastic, and the price elasticity of supply is 1.74. 
D) inelastic, and the price elasticity of supply is 0.57. 
A) elastic, and the price elasticity of supply is 1.74. 
B) elastic, and the price elasticity of supply is 0.57. 
C) inelastic, and the price elasticity of supply is 1.74. 
D) inelastic, and the price elasticity of supply is 0.57.

Question 15

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

Accepted Answer

A) inelastic. 
B) unit elastic. 
C) elastic. 
D) highly responsive to changes in income. 
A) inelastic. 
B) unit elastic. 
C) elastic. 
D) highly responsive to changes in income.

Question 16

If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is

Accepted Answer

A) 0.50. 
B) 1. 
C) 1.5. 
D) 2. 
A) 0.50. 
B) 1. 
C) 1.5. 
D) 2.

Question 17

Figure 5-3  
-Refer to Figure 5-3. The demand curve representing the demand for a luxury good with several close substitutes is

Accepted Answer

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

Question 18

When a supply curve is relatively flat, the

Accepted Answer

A) sellers are not at all responsive to a change in price. 
B) equilibrium price changes substantially when the demand for the good changes. 
C) supply is relatively elastic. 
D) supply is relatively inelastic. 
A) sellers are not at all responsive to a change in price. 
B) equilibrium price changes substantially when the demand for the good changes. 
C) supply is relatively elastic. 
D) supply is relatively inelastic.

Question 19

Goods with many close substitutes tend to have

Accepted Answer

A) more elastic demands. 
B) less elastic demands. 
C) price elasticities of demand that are unit elastic. 
D) income elasticities of demand that are negative. 
A) more elastic demands. 
B) less elastic demands. 
C) price elasticities of demand that are unit elastic. 
D) income elasticities of demand that are negative.

Question 20

Figure 5-5  
-Refer to Figure 5-5. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

Accepted Answer

A) 0.33. 
B) 0.4. 
C) 1.33. 
D) 3. 
A) 0.33. 
B) 0.4. 
C) 1.33. 
D) 3.

Exam 5: Elasticity and Its Application

If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

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

Figure 5-5 -Refer to Figure 5-5. At a price of $70 per unit, sellers' total revenue equals

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

The price elasticity of demand measures the

In the case of perfectly inelastic demand,

If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

The demand for Rice Krispies is more elastic than the demand for cereal in general.

Figure 5-12 -Refer to Figure 5-12. If the price decreased from $36 to $12, total revenue would

When consumers face rising gasoline prices, they typically

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is

Figure 5-3 -Refer to Figure 5-3. The demand curve representing the demand for a luxury good with several close substitutes is

When a supply curve is relatively flat, the

Goods with many close substitutes tend to have

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

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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