Question 1

Figure 5-17  
-Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point A and point B?

Accepted Answer

A) 0.4 
B) 0.6 
C) 1.67 
D) 2.16 
A) 0.4 
B) 0.6 
C) 1.67 
D) 2.16

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

If the quantity supplied responds only slightly to changes in price, then

Accepted Answer

A) supply is said to be elastic. 
B) supply is said to be inelastic. 
C) an increase in price will not shift the supply curve very much. 
D) even a large decrease in demand will change the equilibrium price only slightly. 
A) supply is said to be elastic. 
B) supply is said to be inelastic. 
C) an increase in price will not shift the supply curve very much. 
D) even a large decrease in demand will change the equilibrium price only slightly.

Question 4

Suppose demand is given by the equation:   
At what price will total revenue be maximized?

Accepted Answer

Total revenue will be maximize

Question 5

Figure 5-5  
-Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of

Accepted Answer

A) $20. 
B) $50. 
C) $70. 
D) $100. 
A) $20. 
B) $50. 
C) $70. 
D) $100.

Question 6

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

Accepted Answer

A) strawberry-banana milk shakes 
B) gasoline in the short run 
C) diamond earrings 
D) box seats at a major league baseball game 
A) strawberry-banana milk shakes 
B) gasoline in the short run 
C) diamond earrings 
D) box seats at a major league baseball game

Question 7

A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

Accepted Answer

A) True 
 B)False

Question 8

Figure 5-4  
-Refer to Figure 5-4. The section of the demand curve at point B represents the

Accepted Answer

A) elastic section of the demand curve. 
B) inelastic section of the demand curve. 
C) unit elastic section of the demand curve. 
D) perfectly elastic section of the demand curve. 
A) elastic section of the demand curve. 
B) inelastic section of the demand curve. 
C) unit elastic section of the demand curve. 
D) perfectly elastic section of the demand curve.

Question 9

When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about

Accepted Answer

A) 0.55. 
B) 1.83. 
C) 2. 
D) 10. 
A) 0.55. 
B) 1.83. 
C) 2. 
D) 10.

Question 10

Which of the following expressions can be used to compute the price elasticity of demand?

Accepted Answer

A) Price elasticity of demand =   •   . 
B) Price elasticity of demand =   •   . 
C) Price elasticity of demand =   •   . 
D) Price elasticity of demand =   •   . 
A) Price elasticity of demand =   •   . 
B) Price elasticity of demand =   •   . 
C) Price elasticity of demand =   •   . 
D) Price elasticity of demand =   •   .

Question 11

Figure 5-8  
-Refer to Figure 5-8. An increase in price from $10 to $15 would

Accepted Answer

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

Question 12

The demand for soap is more elastic than the demand for Dove soap.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements about agriculture in the U.S. is correct?

Accepted Answer

A) Technological improvements typically increase both supply and revenue for individual farmers. 
B) Technological improvements that increased supply, coupled with inelastic demand for foodstuffs, explain why the number of farmers has decreased dramatically over the last century. 
C) Because technological improvements increase the supply of a product for which demand is inelastic, an individual farmer would be better off not adopting the new technology. 
D) All of the above are correct. 
A) Technological improvements typically increase both supply and revenue for individual farmers. 
B) Technological improvements that increased supply, coupled with inelastic demand for foodstuffs, explain why the number of farmers has decreased dramatically over the last century. 
C) Because technological improvements increase the supply of a product for which demand is inelastic, an individual farmer would be better off not adopting the new technology. 
D) All of the above are correct.

Question 14

If two goods are substitutes, their cross-price elasticity will be

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) equal to the difference between the income elasticities of demand for the two goods. 
A) positive. 
B) negative. 
C) zero. 
D) equal to the difference between the income elasticities of demand for the two goods.

Question 15

If we observe that when a consumer's income rises by 10%, the quantity demanded of chocolate candy bars increases by 15%, then chocolate candy bars are are a normal good for that consumer.

Accepted Answer

A) True 
 B)False

Question 16

Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result,

Accepted Answer

A) the equilibrium quantity decreases, and the equilibrium price is unchanged. 
B) the equilibrium price increases, and the equilibrium quantity is unchanged. 
C) the equilibrium quantity and the equilibrium price both are unchanged. 
D) buyers' total expenditure on the good is unchanged. 
A) the equilibrium quantity decreases, and the equilibrium price is unchanged. 
B) the equilibrium price increases, and the equilibrium quantity is unchanged. 
C) the equilibrium quantity and the equilibrium price both are unchanged. 
D) buyers' total expenditure on the good is unchanged.

Question 17

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

Accepted Answer

A) first becomes smaller, then larger. 
B) always becomes larger. 
C) always becomes smaller. 
D) first becomes larger, then smaller. 
A) first becomes smaller, then larger. 
B) always becomes larger. 
C) always becomes smaller. 
D) first becomes larger, then smaller.

Question 18

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

Accepted Answer

A) The elasticity of supply approaches infinity. 
B) The supply curve is vertical. 
C) At a price below $4, quantity supplied is infinite. 
D) At a price above $4, quantity supplied is zero. 
A) The elasticity of supply approaches infinity. 
B) The supply curve is vertical. 
C) At a price below $4, quantity supplied is infinite. 
D) At a price above $4, quantity supplied is zero.

Question 19

If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

Accepted Answer

A) increase by 4.2%. 
B) increase by 6%. 
C) decrease by 4.2%. 
D) decrease by 6%. 
A) increase by 4.2%. 
B) increase by 6%. 
C) decrease by 4.2%. 
D) decrease by 6%.

Question 20

On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50). Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A) 0.22. 
B) 0.53. 
C) 1.00. 
D) 1.89. 
A) 0.22. 
B) 0.53. 
C) 1.00. 
D) 1.89.

Exam 5: Elasticity and Its Application

Figure 5-17 -Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point A and point B?

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

If the quantity supplied responds only slightly to changes in price, then

Suppose demand is given by the equation: At what price will total revenue be maximized?

Figure 5-5 -Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of

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

A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve at point B represents the

When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about

Which of the following expressions can be used to compute the price elasticity of demand?

Figure 5-8 -Refer to Figure 5-8. An increase in price from $10 to $15 would

The demand for soap is more elastic than the demand for Dove soap.

Which of the following statements about agriculture in the U.S. is correct?

If two goods are substitutes, their cross-price elasticity will be

If we observe that when a consumer's income rises by 10%, the quantity demanded of chocolate candy bars increases by 15%, then chocolate candy bars are are a normal good for that consumer.

Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result,

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50). Using the midpoint method, the price elasticity of supply is about

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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