Question 1

In the early 1970s, OPEC's goal was to

Accepted Answer

A) decrease the world-wide price of oil so that the quantity demanded increased, thus raising total revenues for OPEC members. 
B) increase the world-wide price of oil by reducing the quantity of oil supplied. 
C) increase the world-wide price of oil by increasing the quantity of oil supplied, thus raising total revenues for OPEC members. 
D) decrease the world-wide price of oil so that quantity demanded increased. 
A) decrease the world-wide price of oil so that the quantity demanded increased, thus raising total revenues for OPEC members. 
B) increase the world-wide price of oil by reducing the quantity of oil supplied. 
C) increase the world-wide price of oil by increasing the quantity of oil supplied, thus raising total revenues for OPEC members. 
D) decrease the world-wide price of oil so that quantity demanded increased.

Question 2

Frequently, in the short run, the quantity supplied of a good is

Accepted Answer

A) impossible, or nearly impossible, to measure. 
B) not very responsive to price changes. 
C) determined by the quantity demanded of the good. 
D) determined by psychological forces and other non-economic forces. 
A) impossible, or nearly impossible, to measure. 
B) not very responsive to price changes. 
C) determined by the quantity demanded of the good. 
D) determined by psychological forces and other non-economic forces.

Question 3

The federal government is concerned about obesity in the United States. Congress is considering two plans. One will ban the production and sale of "junk food." The other will increase nutrition-education programs and include substantial advertising campaigns to encourage healthy eating habits. The junk-food ban program

Accepted Answer

A) and the education program will reduce the quantity of junk food sold and raise the price. 
B) and the education program will reduce the quantity of junk food sold and lower the price. 
C) will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price. 
D) will reduce the quantity of junk food sold and lower the price. The education program will reduce the quantity of junk food sold and raise the price. 
A) and the education program will reduce the quantity of junk food sold and raise the price. 
B) and the education program will reduce the quantity of junk food sold and lower the price. 
C) will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price. 
D) will reduce the quantity of junk food sold and lower the price. The education program will reduce the quantity of junk food sold and raise the price.

Question 4

An increase in price causes an increase in total revenue when demand is

Accepted Answer

A) elastic. 
B) inelastic. 
C) unit elastic. 
D) All of the above are possible. 
A) elastic. 
B) inelastic. 
C) unit elastic. 
D) All of the above are possible.

Question 5

A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

Accepted Answer

A) raise the price, reduce the quantity, decrease total revenues, and decrease crime. 
B) lower the price, increase the quantity, increase total revenues, and increase crime. 
C) raise the price, increase the quantity, decrease total revenues, and increase crime. 
D) raise the price, reduce the quantity, increase total revenues, and increase crime. 
A) raise the price, reduce the quantity, decrease total revenues, and decrease crime. 
B) lower the price, increase the quantity, increase total revenues, and increase crime. 
C) raise the price, increase the quantity, decrease total revenues, and increase crime. 
D) raise the price, reduce the quantity, increase total revenues, and increase crime.

Question 6

Suppose the price elasticity of demand for a product is 1. If a supplier wants to increase revenue, what change should it make to price, if any?

Accepted Answer

No change,

Question 7

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Accepted Answer

A) True 
 B)False

Question 8

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

Accepted Answer

A) a 0.8 percent increase in the price of the good 
B) a 2.4 percent increase in the price of the good 
C) a 5 percent increase in the price of the good 
D) a 8 percent increase in the price of the good 
A) a 0.8 percent increase in the price of the good 
B) a 2.4 percent increase in the price of the good 
C) a 5 percent increase in the price of the good 
D) a 8 percent increase in the price of the good

Question 9

When a supply curve is relatively flat,

Accepted Answer

A) sellers are not very responsive to changes in price. 
B) supply is relatively inelastic. 
C) supply is relatively elastic. 
D) Both a and b are correct. 
A) sellers are not very responsive to changes in price. 
B) supply is relatively inelastic. 
C) supply is relatively elastic. 
D) Both a and b are correct.

Question 10

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

Accepted Answer

A) 0.71, and they are substitutes. 
B) -0.71, and they are complements. 
C) 1.4, and they are substitutes. 
D) -1.4, and they are complements. 
A) 0.71, and they are substitutes. 
B) -0.71, and they are complements. 
C) 1.4, and they are substitutes. 
D) -1.4, and they are complements.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Scenario 5-3
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-3. The change in equilibrium price will be

Accepted Answer

A) greater in the aged cheddar cheese market than in the bread market. 
B) greater in the bread market than in the aged cheddar cheese market. 
C) the same in the aged cheddar cheese and bread markets. 
D) Any of the above could be correct. 
A) greater in the aged cheddar cheese market than in the bread market. 
B) greater in the bread market than in the aged cheddar cheese market. 
C) the same in the aged cheddar cheese and bread markets. 
D) Any of the above could be correct.

Question 13

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

Accepted Answer

A) True 
 B)False

Question 14

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Accepted Answer

A) The interdiction has the effect of shifting the demand curve for illegal drugs to the right. 
B) The price elasticity of demand for illegal drugs is 1.3. 
C) The price elasticity of supply for illegal drugs is 0.8. 
D) As a result of the interdiction, the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent. 
A) The interdiction has the effect of shifting the demand curve for illegal drugs to the right. 
B) The price elasticity of demand for illegal drugs is 1.3. 
C) The price elasticity of supply for illegal drugs is 0.8. 
D) As a result of the interdiction, the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent.

Question 15

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

Accepted Answer

A) 0.3 
B) 1 
C) 1.8 
D) None of the above could be correct. 
A) 0.3 
B) 1 
C) 1.8 
D) None of the above could be correct.

Question 16

Figure 5-15  
-Refer to Figure 5-15. Along which of these segments of the supply curve is supply most elastic?

Accepted Answer

A) AB 
B) CD 
C) DH 
D) GH 
A) AB 
B) CD 
C) DH 
D) GH

Question 17

Figure 5-5  
-Refer to Figure 5-5. Using the midpoint method, between prices of $70 and $80, price elasticity of demand is

Accepted Answer

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

Question 18

For which of the following goods is the income elasticity of demand likely highest?

Accepted Answer

A) water 
B) diamonds 
C) hamburgers 
D) housing 
A) water 
B) diamonds 
C) hamburgers 
D) housing

Question 19

When quantity demanded responds strongly to changes in price, demand is said to be

Accepted Answer

A) fluid. 
B) elastic. 
C) dynamic. 
D) highly variable. 
A) fluid. 
B) elastic. 
C) dynamic. 
D) highly variable.

Question 20

Table 5-4
The following table shows the demand schedule for a particular good.  
-Refer to Table 5-4. Using the midpoint method, when price falls from $8 to $4, the price elasticity of demand is

Accepted Answer

A) 0.43 
B) 0.67 
C) 1 
D) 2.33 
A) 0.43 
B) 0.67 
C) 1 
D) 2.33

Exam 5: Elasticity and Its Application

In the early 1970s, OPEC's goal was to

Frequently, in the short run, the quantity supplied of a good is

An increase in price causes an increase in total revenue when demand is

A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

Suppose the price elasticity of demand for a product is 1. If a supplier wants to increase revenue, what change should it make to price, if any?

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

When a supply curve is relatively flat,

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

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

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

Figure 5-15 -Refer to Figure 5-15. Along which of these segments of the supply curve is supply most elastic?

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $70 and $80, price elasticity of demand is

For which of the following goods is the income elasticity of demand likely highest?

When quantity demanded responds strongly to changes in price, demand is said to be

Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, when price falls from $8 to $4, the price elasticity of demand is

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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