Exam 5: Elasticity and Its Application

In January the price of widgets was $1.00, and Wendy's Widgets produced 80 widgets. In February the price of widgets was $1.50, and Wendy's Widgets produced 110 widgets. In March the price of widgets was $2.00, and Wendy's Widgets produced 140 widgets. The price elasticity of supply of Wendy's Widgets was about

Figure 5-3 -Refer to Figure 5-3. Which demand curve is perfectly inelastic?

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

Necessities such as food and clothing tend to have

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, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

When demand is inelastic, the price elasticity of demand is

Figure 5-20 -Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

Suppose that quantity demand rises by 10% as a result of a 15% decrease in price. The price elasticity of demand for this good is

Which of the following statements is not valid when the market supply curve is vertical?

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is

Suppose a market has the demand function Q^d=20-0.5P. At which of the following prices will total revenue be maximized?

On a downward-sloping linear demand curve, total revenue reaches its maximum value at the

If the price elasticity of demand is equal to 0, then demand is unit elastic.

Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls.

Scenario 5-2 Suppose the demand function for good X is given by: where is the quantity demanded of good X, is the price of good X, and is the price of good Y, which is related to good X. -Refer to Scenario 5-2. Using the midpoint method, if the price of good Y is $10 and the price of good X decreases from $5 to $3, what is the price elasticity of demand for good X? Is the demand elastic, unitary elastic, or inelastic?