Question 1

Suppose that corn farmers want to increase their total revenue. Knowing that the demand for corn is inelastic, corn farmers should

Accepted Answer

A) plant more corn so that they would be able to sell more each year. 
B) increase spending on fertilizer in an attempt to produce more corn on the acres they farm. 
C) reduce the number of acres on which they plant corn. 
D) contribute to a fund that promotes technological advances in corn production. 
A) plant more corn so that they would be able to sell more each year. 
B) increase spending on fertilizer in an attempt to produce more corn on the acres they farm. 
C) reduce the number of acres on which they plant corn. 
D) contribute to a fund that promotes technological advances in corn production.

Question 2

Figure 5-19        
-Refer to Figure 5-19. Which of the following statements is not correct?

Accepted Answer

A) Supply curve A is perfectly inelastic. 
B) Supply curve B is perfectly elastic. 
C) Supply curve C is unit elastic. 
D) Supply curve D is more elastic than supply curve C. 
A) Supply curve A is perfectly inelastic. 
B) Supply curve B is perfectly elastic. 
C) Supply curve C is unit elastic. 
D) Supply curve D is more elastic than supply curve C.

Question 3

Table 5-1  
-Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Accepted Answer

A) A is laundry detergent and B is Tide. 
B) A is Diet Pepsi and B is soda. 
C) A is food and B is a yacht. 
D) A is toilet paper and B is candles. 
A) A is laundry detergent and B is Tide. 
B) A is Diet Pepsi and B is soda. 
C) A is food and B is a yacht. 
D) A is toilet paper and B is candles.

Question 4

In the short run, as compared to the long run, both the price elasticity of demand and the price elasticity of supply tend to be more

Accepted Answer

The answer of In the short run, as compared to...

Question 5

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

Accepted Answer

A) milk 
B) sailboats 
C) good X in the short run compared to good X in the long run 
D) gasoline 
A) milk 
B) sailboats 
C) good X in the short run compared to good X in the long run 
D) gasoline

Question 6

The flatter the demand curve that passes through a given point, the more inelastic the demand.

Accepted Answer

A) True 
 B)False

Question 7

Figure 5-4  
-Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $8 and $16. Then, when the price changes between $9 and $10,

Accepted Answer

A) quantity demanded changes proportionately less than the price. 
B) quantity demanded changes proportionately more than the price. 
C) quantity demanded changes the same amount proportionately as price. 
D) the price elasticity of demand equals 1. 
A) quantity demanded changes proportionately less than the price. 
B) quantity demanded changes proportionately more than the price. 
C) quantity demanded changes the same amount proportionately as price. 
D) the price elasticity of demand equals 1.

Question 8

In January the price of dark chocolate candy bars was $2.00, and Willy's Chocolate Factory produced 80 pounds. In February the price of dark chocolate candy bars was $2.50, and Willy's produced 110 pounds. In March the price of dark chocolate candy bars was $3.00, and Willy's produced 140 pounds. The price elasticity of supply of Willy's dark chocolate candy bars was about

Accepted Answer

A) 0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00. 
B) 0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00. 
C) 1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00. 
D) 1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00. 
A) 0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00. 
B) 0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00. 
C) 1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00. 
D) 1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00.

Question 9

Figure 5-21  
-Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $25 and $35?

Accepted Answer

The price

Question 10

In general, demand curves for necessities tend to be price elastic.

Accepted Answer

A) True 
 B)False

Question 11

If a firm that produces honey is facing elastic demand, then the firm would decrease price to increase revenue.

Accepted Answer

A) True 
 B)False

Question 12

Table 5-2  
-Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the absolute value of the price elasticity of demand is

Accepted Answer

A) 5.3. 
B) 2.8. 
C) 0.8. 
D) 0.36. 
A) 5.3. 
B) 2.8. 
C) 0.8. 
D) 0.36.

Question 13

If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the elasticity, then demand is

Accepted Answer

A) perfectly inelastic, and the demand curve is vertical. 
B) elastic, and the demand curve is a straight, downward-sloping line. 
C) perfectly elastic, and the demand curve is horizontal. 
D) elastic, and the demand curve is something other than a straight, downward-sloping line. 
A) perfectly inelastic, and the demand curve is vertical. 
B) elastic, and the demand curve is a straight, downward-sloping line. 
C) perfectly elastic, and the demand curve is horizontal. 
D) elastic, and the demand curve is something other than a straight, downward-sloping line.

Question 14

Table 5-11  
-Refer to Table 5-11. Which scenario describes the market for oil in the long run?

Accepted Answer

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

Question 15

Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she needs. Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. If you know that the demand for lemonade is elastic, what is your advice to her?

Accepted Answer

A) Leave the price at 25 cents and be patient. 
B) Raise the price to increase total revenue. 
C) Lower the price to increase total revenue. 
D) There isn't enough information given to answer this question. 
A) Leave the price at 25 cents and be patient. 
B) Raise the price to increase total revenue. 
C) Lower the price to increase total revenue. 
D) There isn't enough information given to answer this question.

Question 16

Price elasticity of demand along a linear, downward-sloping demand curve increases as price falls.

Accepted Answer

A) True 
 B)False

Question 17

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought. Which of the following best describes the effect on corn farmers in Minnesota, where sufficient rainfall occurred?

Accepted Answer

A) Their revenue increases because price increases and demand is elastic. 
B) Their revenue increases because price increases and demand is inelastic. 
C) Their revenue decreases because price decreases and demand is inelastic. 
D) Their revenue decreases because price increases and demand is elastic. 
A) Their revenue increases because price increases and demand is elastic. 
B) Their revenue increases because price increases and demand is inelastic. 
C) Their revenue decreases because price decreases and demand is inelastic. 
D) Their revenue decreases because price increases and demand is elastic.

Question 18

Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms,

Accepted Answer

A) market power is substantial. 
B) supply is perfectly inelastic. 
C) supply is more elastic at low levels of output and less elastic at high levels of output. 
D) supply is less elastic at low levels of output and more elastic at high levels of output. 
A) market power is substantial. 
B) supply is perfectly inelastic. 
C) supply is more elastic at low levels of output and less elastic at high levels of output. 
D) supply is less elastic at low levels of output and more elastic at high levels of output.

Question 19

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements about the price elasticity of demand is correct?

Accepted Answer

A) The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. 
B) Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes. 
C) Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y. 
D) All of the above are correct. 
A) The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. 
B) Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes. 
C) Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y. 
D) All of the above are correct.

Exam 5: Elasticity and Its Application

Suppose that corn farmers want to increase their total revenue. Knowing that the demand for corn is inelastic, corn farmers should

Figure 5-19 -Refer to Figure 5-19. Which of the following statements is not correct?

Table 5-1 -Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

In the short run, as compared to the long run, both the price elasticity of demand and the price elasticity of supply tend to be more

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

The flatter the demand curve that passes through a given point, the more inelastic the demand.

Figure 5-4 -Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $8 and $16. Then, when the price changes between $9 and $10,

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $25 and $35?

In general, demand curves for necessities tend to be price elastic.

If a firm that produces honey is facing elastic demand, then the firm would decrease price to increase revenue.

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the absolute value of the price elasticity of demand is

If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the elasticity, then demand is

Table 5-11 -Refer to Table 5-11. Which scenario describes the market for oil in the long run?

Price elasticity of demand along a linear, downward-sloping demand curve increases as price falls.

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought. Which of the following best describes the effect on corn farmers in Minnesota, where sufficient rainfall occurred?

Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms,

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Which of the following statements about the price elasticity of demand is correct?

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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