Question 1

Figure 5-5  
-Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

Accepted Answer

A) $20 and $40. 
B) $40 and $50. 
C) $40 and $60. 
D) $50 and $70. 
A) $20 and $40. 
B) $40 and $50. 
C) $40 and $60. 
D) $50 and $70.

Question 2

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A) 0.63, and supply is elastic. 
B) 0.63, and supply is inelastic. 
C) 1.60, and supply is elastic. 
D) 1.60, and supply is inelastic. 
A) 0.63, and supply is elastic. 
B) 0.63, and supply is inelastic. 
C) 1.60, and supply is elastic. 
D) 1.60, and supply is inelastic.

Question 3

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

Accepted Answer

A) True 
 B)False

Question 4

Figure 5-12  
-Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Accepted Answer

A) 0.4. 
B) 1. 
C) 2. 
D) 2.5. 
A) 0.4. 
B) 1. 
C) 2. 
D) 2.5.

Question 5

Last month, sellers of good Y took in $100 in total revenue on sales of 50 units of good Y. This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y. At the same time, the price of good X stayed the same, but sales of good X increased from 20 units to 40 units. We can conclude that goods X and Y are

Accepted Answer

A) substitutes, and have a cross-price elasticity of 0.60. 
B) complements, and have a cross-price elasticity of -0.60. 
C) substitutes, and have a cross-price elasticity of 1.67. 
D) complements, and have a cross-price elasticity of -1.67. 
A) substitutes, and have a cross-price elasticity of 0.60. 
B) complements, and have a cross-price elasticity of -0.60. 
C) substitutes, and have a cross-price elasticity of 1.67. 
D) complements, and have a cross-price elasticity of -1.67.

Question 6

Suppose good X has a negative income elasticity of demand. This implies that good X is

Accepted Answer

A) a normal good. 
B) a necessity. 
C) an inferior good. 
D) a luxury. 
A) a normal good. 
B) a necessity. 
C) an inferior good. 
D) a luxury.

Question 7

Figure 5-7  
-Refer to Figure 5-7. For prices above $5, demand is price

Accepted Answer

A) elastic, and raising price will increase total revenue. 
B) inelastic, and raising price will increase total revenue. 
C) elastic, and lowering price will increase total revenue. 
D) inelastic, and lowering price will increase total revenue. 
A) elastic, and raising price will increase total revenue. 
B) inelastic, and raising price will increase total revenue. 
C) elastic, and lowering price will increase total revenue. 
D) inelastic, and lowering price will increase total revenue.

Question 8

If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) tablet computers 
B) leather boots 
C) lightbulbs 
D) optional textbooks 
A) tablet computers 
B) leather boots 
C) lightbulbs 
D) optional textbooks

Question 10

Suppose that when the price rises by 20% for a particular good, the quantity demanded of that good falls by 10%. The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Question 11

What is the price elasticity of demand at any point on a perfectly elastic demand curve?

Accepted Answer

The price

Question 12

Income elasticity of demand measures how

Accepted Answer

A) the quantity demanded changes as consumer income changes. 
B) consumer purchasing power is affected by a change in the price of a good. 
C) the price of a good is affected when there is a change in consumer income. 
D) many units of a good a consumer can buy given a certain income level. 
A) the quantity demanded changes as consumer income changes. 
B) consumer purchasing power is affected by a change in the price of a good. 
C) the price of a good is affected when there is a change in consumer income. 
D) many units of a good a consumer can buy given a certain income level.

Question 13

A key determinant of the price elasticity of supply is the

Accepted Answer

A) time horizon. 
B) income of consumers. 
C) price elasticity of demand. 
D) importance of the good in a consumer's budget. 
A) time horizon. 
B) income of consumers. 
C) price elasticity of demand. 
D) importance of the good in a consumer's budget.

Question 14

Figure 5-13  
-Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

Accepted Answer

A) 0.71. 
B) 0.85. 
C) 1.18. 
D) 1.40. 
A) 0.71. 
B) 0.85. 
C) 1.18. 
D) 1.40.

Question 15

Figure 5-17  
-Refer to Figure 5-17. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

Accepted Answer

A) increase. 
B) decrease. 
C) remain unchanged. 
D) The effect on total revenue cannot be determined from the given information. 
A) increase. 
B) decrease. 
C) remain unchanged. 
D) The effect on total revenue cannot be determined from the given information.

Question 16

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

Accepted Answer

A) increase the total revenue of wheat farmers. 
B) decrease the total revenue of wheat farmers. 
C) decrease the demand for wheat. 
D) decrease the supply of wheat. 
A) increase the total revenue of wheat farmers. 
B) decrease the total revenue of wheat farmers. 
C) decrease the demand for wheat. 
D) decrease the supply of wheat.

Question 17

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Accepted Answer

A) About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars. 
B) About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars. 
C) About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars. 
D) Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run. 
A) About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars. 
B) About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars. 
C) About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars. 
D) Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.

Question 18

In which of these instances is demand said to be perfectly inelastic?

Accepted Answer

A) An increase in price of 2% causes a decrease in quantity demanded of 2%. 
B) A decrease in price of 2% causes an increase in quantity demanded of 0%. 
C) A decrease in price of 2% causes a decrease in total revenue of 0%. 
D) An increase in price of 2% causes a decrease in quantity demanded of 1/2%. 
A) An increase in price of 2% causes a decrease in quantity demanded of 2%. 
B) A decrease in price of 2% causes an increase in quantity demanded of 0%. 
C) A decrease in price of 2% causes a decrease in total revenue of 0%. 
D) An increase in price of 2% causes a decrease in quantity demanded of 1/2%.

Question 19

Table 5-3
Consider the following demand schedule.  
-Refer to Table 5-3. Using the midpoint method, between which two prices is price elasticity of demand most inelastic?

Accepted Answer

The answer of Table 5-3
Consider the following demand schedule. ...

Question 20

The price elasticity of demand measures

Accepted Answer

A) buyers' responsiveness to a change in the price of a good. 
B) the extent to which demand increases as additional buyers enter the market. 
C) how much more of a good consumers will demand when incomes rise. 
D) the movement along a supply curve when there is a change in demand. 
A) buyers' responsiveness to a change in the price of a good. 
B) the extent to which demand increases as additional buyers enter the market. 
C) how much more of a good consumers will demand when incomes rise. 
D) the movement along a supply curve when there is a change in demand.

Exam 5: Elasticity and Its Application

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Suppose good X has a negative income elasticity of demand. This implies that good X is

Figure 5-7 -Refer to Figure 5-7. For prices above $5, demand is price

If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

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

Suppose that when the price rises by 20% for a particular good, the quantity demanded of that good falls by 10%. The price elasticity of demand for this good is equal to 2.0.

What is the price elasticity of demand at any point on a perfectly elastic demand curve?

Income elasticity of demand measures how

A key determinant of the price elasticity of supply is the

Figure 5-13 -Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

Figure 5-17 -Refer to Figure 5-17. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

In which of these instances is demand said to be perfectly inelastic?

Table 5-3 Consider the following demand schedule. -Refer to Table 5-3. Using the midpoint method, between which two prices is price elasticity of demand most inelastic?

The price elasticity of demand measures

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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