Question 1

Suppose demand is given by the equation:   
Using the midpoint method, what is the price elasticity of demand between $7 and $8?

Accepted Answer

The price

Question 2

As the price elasticity of supply approaches infinity, very small changes in price lead to

Accepted Answer

A) very large changes in quantity supplied. 
B) very small changes in quantity supplied. 
C) no change in quantity supplied. 
D) None of the above is correct. 
A) very large changes in quantity supplied. 
B) very small changes in quantity supplied. 
C) no change in quantity supplied. 
D) None of the above is correct.

Question 3

Other things equal, the demand for a good tends to be more inelastic, the

Accepted Answer

A) fewer the available substitutes. 
B) longer the time period considered. 
C) more the good is considered a luxury good. 
D) more narrowly defined is the market for the good. 
A) fewer the available substitutes. 
B) longer the time period considered. 
C) more the good is considered a luxury good. 
D) more narrowly defined is the market for the good.

Question 4

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Accepted Answer

A) a 0.2 percent increase in the price. 
B) a 2.5 percent increase in the price. 
C) a 5 percent increase in the price. 
D) a 20 percent increase in the price. 
A) a 0.2 percent increase in the price. 
B) a 2.5 percent increase in the price. 
C) a 5 percent increase in the price. 
D) a 20 percent increase in the price.

Question 5

The flatter the demand curve through a given point, the

Accepted Answer

A) greater the price elasticity of demand at that point. 
B) smaller the price elasticity of demand at that point. 
C) closer the price elasticity of demand will be to the slope of the curve. 
D) greater the absolute value of the change in total revenue when there is a movement from that point upward and to the left along the demand curve. 
A) greater the price elasticity of demand at that point. 
B) smaller the price elasticity of demand at that point. 
C) closer the price elasticity of demand will be to the slope of the curve. 
D) greater the absolute value of the change in total revenue when there is a movement from that point upward and to the left along the demand curve.

Question 6

Necessities tend to have elastic demands, whereas luxuries tend to have inelastic demands.

Accepted Answer

A) True 
 B)False

Question 7

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to

Accepted Answer

A) an inelastic demand for oil and a reduction in the amount of oil supplied. 
B) a reduction in the amount of oil supplied and a world-wide oil embargo. 
C) a world-wide oil embargo and an elastic demand for oil. 
D) a reduction in the amount of oil supplied and an elastic demand for oil. 
A) an inelastic demand for oil and a reduction in the amount of oil supplied. 
B) a reduction in the amount of oil supplied and a world-wide oil embargo. 
C) a world-wide oil embargo and an elastic demand for oil. 
D) a reduction in the amount of oil supplied and an elastic demand for oil.

Question 8

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is

Accepted Answer

A) inelastic. 
B) elastic. 
C) unit elastic. 
D) perfectly inelastic. 
A) inelastic. 
B) elastic. 
C) unit elastic. 
D) perfectly inelastic.

Question 9

If the price elasticity of supply is 0.5 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) athletic shoes 
B) running shoes 
C) Nike running shoes 
D) Nike Shox running shoes 
A) athletic shoes 
B) running shoes 
C) Nike running shoes 
D) Nike Shox running shoes

Question 11

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

Accepted Answer

A) white chocolate chip with macadamia nut cookies 
B) Mrs. Field's chocolate chip cookies 
C) milk chocolate chip cookies 
D) cookies 
A) white chocolate chip with macadamia nut cookies 
B) Mrs. Field's chocolate chip cookies 
C) milk chocolate chip cookies 
D) cookies

Question 12

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

Accepted Answer

A) True 
 B)False

Question 13

Elasticity measures how responsive quantity is to changes in price.

Accepted Answer

A) True 
 B)False

Question 14

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.  
-Refer to Table 5-7. Using the midpoint method, when income equals $5,000, what is the price elasticity of demand between $8 and $12?

Accepted Answer

A) 0.56 
B) 0.75 
C) 1.33 
D) 1.80 
A) 0.56 
B) 0.75 
C) 1.33 
D) 1.80

Question 15

If the price of calculators increases by 15% and the quantity demanded per week falls by 45% as a result, then the price elasticity of demand is 3.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is valid when the market supply curve is vertical?

Accepted Answer

A) Market quantity supplied does not change when the price changes. 
B) Supply is perfectly elastic. 
C) An increase in market demand will increase the equilibrium quantity. 
D) An increase in market demand will not increase the equilibrium price. 
A) Market quantity supplied does not change when the price changes. 
B) Supply is perfectly elastic. 
C) An increase in market demand will increase the equilibrium quantity. 
D) An increase in market demand will not increase the equilibrium price.

Question 17

Holding all other factors constant and using the midpoint method, if a tractor manufacturer increases production from 80 to 100 units when price increases by 15 percent, then supply is

Accepted Answer

A) inelastic, since the price elasticity of supply is equal to 0.68. 
B) inelastic, since the price elasticity of supply is equal to 1.48. 
C) elastic, since the price elasticity of supply is equal to 0.68. 
D) elastic, since the price elasticity of supply is equal to 1.48. 
A) inelastic, since the price elasticity of supply is equal to 0.68. 
B) inelastic, since the price elasticity of supply is equal to 1.48. 
C) elastic, since the price elasticity of supply is equal to 0.68. 
D) elastic, since the price elasticity of supply is equal to 1.48.

Question 18

If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

Accepted Answer

A) 0.24%. 
B) 4.2%. 
C) 6%. 
D) 6.2%. 
A) 0.24%. 
B) 4.2%. 
C) 6%. 
D) 6.2%.

Question 19

Drug-interdiction policies that reduce the supply of illegal drugs may

Accepted Answer

A) be more effective in the long run than in the short run. 
B) be best coupled with drug-education programs designed to reduce demand. 
C) increase drug-related crimes. 
D) All of the above are correct. 
A) be more effective in the long run than in the short run. 
B) be best coupled with drug-education programs designed to reduce demand. 
C) increase drug-related crimes. 
D) All of the above are correct.

Question 20

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 demand for meth. 
B) Both Operation Methbust and Say No would reduce the supply of meth. 
C) Operation Methbust would reduce the demand for meth; Operation Say No would reduce the supply of meth. 
D) Operation Methbust would reduce the supply of meth; Operation Say No would reduce the demand for meth. 
A) Both Operation Methbust and Say No would reduce the demand for meth. 
B) Both Operation Methbust and Say No would reduce the supply of meth. 
C) Operation Methbust would reduce the demand for meth; Operation Say No would reduce the supply of meth. 
D) Operation Methbust would reduce the supply of meth; Operation Say No would reduce the demand for meth.

Exam 5: Elasticity and Its Application

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $7 and $8?

As the price elasticity of supply approaches infinity, very small changes in price lead to

Other things equal, the demand for a good tends to be more inelastic, the

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

The flatter the demand curve through a given point, the

Necessities tend to have elastic demands, whereas luxuries tend to have inelastic demands.

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is

If the price elasticity of supply is 0.5 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

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

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

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

Elasticity measures how responsive quantity is to changes in price.

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, when income equals $5,000, what is the price elasticity of demand between $8 and $12?

If the price of calculators increases by 15% and the quantity demanded per week falls by 45% as a result, then the price elasticity of demand is 3.

Which of the following statements is valid when the market supply curve is vertical?

Holding all other factors constant and using the midpoint method, if a tractor manufacturer increases production from 80 to 100 units when price increases by 15 percent, then supply is

If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

Drug-interdiction policies that reduce the supply of illegal drugs may

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