Question 1

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 2

The price elasticity of supply measures how much

Accepted Answer

A) the quantity supplied responds to changes in input prices. 
B) the quantity supplied responds to changes in the price of the good. 
C) the price of the good responds to changes in supply. 
D) sellers respond to changes in technology. 
A) the quantity supplied responds to changes in input prices. 
B) the quantity supplied responds to changes in the price of the good. 
C) the price of the good responds to changes in supply. 
D) sellers respond to changes in technology.

Question 3

Holding all other forces constant, if decreasing 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 decrease never leads to an decrease 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 decrease in total revenue.

Question 4

Scenario 5-1
Suppose that when the average college student's income is $10,000 per year, the annual quantity demanded of Patty's Pizza is 50 and the annual quantity demanded of Sue's Subs is 80. Suppose that when the price of Patty's Pizza increases from $8 to $10 per pie, the quantity demanded of Sue's Subs increases from 80 to 100. Suppose also that when the average student's income increases to $12,000 per year, the annual quantity demanded of Patty's Pizza increases from 50 to 60.
-Refer to Scenario 5-1. Using the midpoint method, the cross price elasticity of demand is

Accepted Answer

A) about 0.22, and the two goods are substitutes. 
B) about -0.005, and the two goods are complements. 
C) 1, and the two goods are substitutes. 
D) 1, and the two goods are unitary elastic. 
A) about 0.22, and the two goods are substitutes. 
B) about -0.005, and the two goods are complements. 
C) 1, and the two goods are substitutes. 
D) 1, and the two goods are unitary elastic.

Question 5

A key determinant of the price elasticity of supply is

Accepted Answer

A) the ability of sellers to change the price of the good they produce. 
B) the ability of sellers to change the amount of the good they produce. 
C) how responsive buyers are to changes in sellers' prices. 
D) the slope of the demand curve. 
A) the ability of sellers to change the price of the good they produce. 
B) the ability of sellers to change the amount of the good they produce. 
C) how responsive buyers are to changes in sellers' prices. 
D) the slope of the demand curve.

Question 6

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

Accepted Answer

A) increase. 
B) stay the same. 
C) decrease. 
D) first decrease, then increase until total revenue is maximized. 
A) increase. 
B) stay the same. 
C) decrease. 
D) first decrease, then increase until total revenue is maximized.

Question 7

Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain.

Accepted Answer

If demand is inelastic, then r

Question 8

When studying how some event or policy affects a market, elasticity provides information on the

Accepted Answer

A) equity effects on the market by identifying the winners and losers. 
B) magnitude of the effect on the market. 
C) speed of adjustment of the market in response to the event or policy. 
D) number of market participants who are directly affected by the event or policy. 
A) equity effects on the market by identifying the winners and losers. 
B) magnitude of the effect on the market. 
C) speed of adjustment of the market in response to the event or policy. 
D) number of market participants who are directly affected by the event or policy.

Question 9

If the price elasticity of supply is 0.4, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

Accepted Answer

A) 0.25%. 
B) 1.2%. 
C) 2%. 
D) 12.5%. 
A) 0.25%. 
B) 1.2%. 
C) 2%. 
D) 12.5%.

Question 10

Figure 5-8  
-Refer to Figure 5-8. An increase in price from $15 to $20 would

Accepted Answer

A) increase total revenue by $500 
B) decrease total revenue by $500. 
C) increase total revenue by $1,000. 
D) decrease total revenue by $1,000. 
A) increase total revenue by $500 
B) decrease total revenue by $500. 
C) increase total revenue by $1,000. 
D) decrease total revenue by $1,000.

Question 11

Suppose demand is given by the equation:   
Using the midpoint method, what is the price elasticity of demand between $2 and $4?

Accepted Answer

The price

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

The production of methamphetamine (meth) is a social problem in the Midwest. Iowa is considering two potential programs: Operation Methbust would increase the number of sheriffs' deputies to search out and destroy methamphetamine labs. Operation Say No to Meth would increase the training required of public school teachers so that they could better educate students about the health risks of using meth. Assuming that each program were successful, which of the following statements is correct?

Accepted Answer

A) Both Operation Methbust and Say No would reduce the equilibrium quantity and increase the equilibrium price of meth. 
B) Both Operation Methbust and Say No would increase the equilibrium quantity and reduce the equilibrium price of meth. 
C) Both Operation Methbust and Say No would reduce the equilibrium quantity of meth; Operation Methbust would increase the equilibrium price, whereas Say No would reduce the equilibrium price of meth. 
D) Both Operation Methbust and Say No would reduce the equilibrium price of meth; Operation Methbust would reduce the equilibrium quantity, whereas Say No would increase the equilibrium quantity of meth. 
A) Both Operation Methbust and Say No would reduce the equilibrium quantity and increase the equilibrium price of meth. 
B) Both Operation Methbust and Say No would increase the equilibrium quantity and reduce the equilibrium price of meth. 
C) Both Operation Methbust and Say No would reduce the equilibrium quantity of meth; Operation Methbust would increase the equilibrium price, whereas Say No would reduce the equilibrium price of meth. 
D) Both Operation Methbust and Say No would reduce the equilibrium price of meth; Operation Methbust would reduce the equilibrium quantity, whereas Say No would increase the equilibrium quantity of meth.

Question 14

If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is

Accepted Answer

A) 0.75. 
B) 1.25. 
C) 1.33. 
D) 1.60. 
A) 0.75. 
B) 1.25. 
C) 1.33. 
D) 1.60.

Question 15

If the demand for bananas is elastic, then an increase in the price of bananas will

Accepted Answer

A) increase total revenue of banana sellers. 
B) decrease total revenue of banana sellers. 
C) not change total revenue of banana sellers. 
D) There is not enough information to answer this question. 
A) increase total revenue of banana sellers. 
B) decrease total revenue of banana sellers. 
C) not change total revenue of banana sellers. 
D) There is not enough information to answer this question.

Question 16

Table 5-10
​
​   ​
-Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most inelastic price elasticity of supply?

Accepted Answer

A) Supply curve X 
B) Supply curve Y 
C) Supply curve Z 
D) There is no difference in the elasticities of the three supply curves. 
A) Supply curve X 
B) Supply curve Y 
C) Supply curve Z 
D) There is no difference in the elasticities of the three supply curves.

Question 17

Figure 5-3  
-Refer to Figure 5-3. Which demand curve is unit elastic?

Accepted Answer

A) A 
B) B 
C) D 
D) None of the above. 
A) A 
B) B 
C) D 
D) None of the above.

Question 18

Figure 5-3  
-Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve

Accepted Answer

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

Question 19

Moving downward and to the right along a linear demand curve, we know that total revenue

Accepted Answer

A) first increases, then decreases. 
B) first decreases, then increases. 
C) always increases. 
D) always decreases. 
A) first increases, then decreases. 
B) first decreases, then increases. 
C) always increases. 
D) always decreases.

Question 20

If marijuana were legalized, it is likely that there would be an increase in the supply of marijuana. Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana. These advocates believe that the

Accepted Answer

A) supply for marijuana is elastic. 
B) demand for marijuana is elastic. 
C) supply for marijuana is inelastic. 
D) demand for marijuana is inelastic. 
A) supply for marijuana is elastic. 
B) demand for marijuana is elastic. 
C) supply for marijuana is inelastic. 
D) demand for marijuana is inelastic.

Exam 5: Elasticity and Its Application

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

The price elasticity of supply measures how much

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

A key determinant of the price elasticity of supply is

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

Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain.

When studying how some event or policy affects a market, elasticity provides information on the

If the price elasticity of supply is 0.4, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

Figure 5-8 -Refer to Figure 5-8. An increase in price from $15 to $20 would

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $2 and $4?

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?

If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is

If the demand for bananas is elastic, then an increase in the price of bananas will

Table 5-10 ​ ​ ​ -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most inelastic price elasticity of supply?

Figure 5-3 -Refer to Figure 5-3. Which demand curve is unit elastic?

Figure 5-3 -Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve

Moving downward and to the right along a linear demand curve, we know that total revenue

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

Filters

Table 5-10 -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most inelastic price elasticity of supply?