Question 1

The case of perfectly elastic demand is illustrated by a demand curve that is

Accepted Answer

A) vertical. 
B) horizontal. 
C) downward-sloping but relatively steep. 
D) downward-sloping but relatively flat. 
A) vertical. 
B) horizontal. 
C) downward-sloping but relatively steep. 
D) downward-sloping but relatively flat.

Question 2

Figure 5-15  
-Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points A and B?

Accepted Answer

A) 2.33 
B) 1.0 
C) 0.43 
D) 0.1 
A) 2.33 
B) 1.0 
C) 0.43 
D) 0.1

Question 3

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

Accepted Answer

A) 0.35. 
B) 0.43. 
C) 2.33. 
D) 2.89. 
A) 0.35. 
B) 0.43. 
C) 2.33. 
D) 2.89.

Question 4

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a

Accepted Answer

A) 0.5 percent decrease in the quantity demanded. 
B) 2 percent decrease in the quantity demanded. 
C) 5 percent decrease in the quantity demanded. 
D) 50 percent decrease in the quantity demanded. 
A) 0.5 percent decrease in the quantity demanded. 
B) 2 percent decrease in the quantity demanded. 
C) 5 percent decrease in the quantity demanded. 
D) 50 percent decrease in the quantity demanded.

Question 5

If we observe that when the price of ice cream rises by 10%, ice cream manufacturers increase the quantity supplied of ice cream by 20%, then the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 6

Whether a good is a luxury or necessity depends on the

Accepted Answer

A) price of the good. 
B) preferences of the buyer. 
C) intrinsic properties of the good. 
D) scarcity of the good. 
A) price of the good. 
B) preferences of the buyer. 
C) intrinsic properties of the good. 
D) scarcity of the good.

Question 7

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

Accepted Answer

A) scissors 
B) fruit 
C) music downloads 
D) toothpaste 
A) scissors 
B) fruit 
C) music downloads 
D) toothpaste

Question 8

A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Accepted Answer

A) 0.45. 
B) 2.0. 
C) 2.2. 
D) 200. 
A) 0.45. 
B) 2.0. 
C) 2.2. 
D) 200.

Question 9

Helen's Honey Hut supplies 20 jars of honey per week when the price of honey is $6 per jar and supplies 30 jars per week when the price of is $8 per jar, so the price elasticity of supply over this price range is 1.4.

Accepted Answer

A) True 
 B)False

Question 10

Table 5-10
​
​   ​
-Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most elastic price elasticity of supply?

Accepted Answer

A) Supply curve X 
B) Supply curve Y 
C) Supply curve Z 
D) There is no difference in the elasticity of the three supply curves. 
A) Supply curve X 
B) Supply curve Y 
C) Supply curve Z 
D) There is no difference in the elasticity of the three supply curves.

Question 11

When demand is perfectly inelastic, the price elasticity of demand

Accepted Answer

A) is zero, and the demand curve is vertical. 
B) is zero, and the demand curve is horizontal. 
C) approaches infinity, and the demand curve is vertical. 
D) approaches infinity, and the demand curve is horizontal. 
A) is zero, and the demand curve is vertical. 
B) is zero, and the demand curve is horizontal. 
C) approaches infinity, and the demand curve is vertical. 
D) approaches infinity, and the demand curve is horizontal.

Question 12

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Accepted Answer

A) True 
 B)False

Question 13

How did the farm population in the United States change between 1950 and today?

Accepted Answer

A) It dropped from 10 million to fewer than 3 million people. 
B) It dropped from 20 million to fewer than 5 million people. 
C) It dropped from 30 million to just over 6 million people. 
D) It increased from 10 million to almost 13 million people. 
A) It dropped from 10 million to fewer than 3 million people. 
B) It dropped from 20 million to fewer than 5 million people. 
C) It dropped from 30 million to just over 6 million people. 
D) It increased from 10 million to almost 13 million people.

Question 14

In the long run, the quantity supplied of most goods

Accepted Answer

A) will increase in almost all cases, regardless of what happens to price. 
B) cannot respond at all to a change in price. 
C) can respond to a change in price, but the change is almost always inconsequential. 
D) can respond substantially to a change in price. 
A) will increase in almost all cases, regardless of what happens to price. 
B) cannot respond at all to a change in price. 
C) can respond to a change in price, but the change is almost always inconsequential. 
D) can respond substantially to a change in price.

Question 15

Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8. You should

Accepted Answer

A) increase the price of ice cream. 
B) decrease the price of ice cream. 
C) decrease the cost of operating the ice cream shop. 
D) increase the price of bottled water also sold at the ice cream shop because its price elasticity of demand is 1.2. 
A) increase the price of ice cream. 
B) decrease the price of ice cream. 
C) decrease the cost of operating the ice cream shop. 
D) increase the price of bottled water also sold at the ice cream shop because its price elasticity of demand is 1.2.

Question 16

If a 6% decrease in price for a good results in a 2% increase in quantity demanded, the price elasticity of demand is

Accepted Answer

A) 0.02. 
B) 0.33. 
C) 3. 
D) 4. 
A) 0.02. 
B) 0.33. 
C) 3. 
D) 4.

Question 17

The income elasticity of demand for caviar tends to be

Accepted Answer

A) high because caviar is relatively expensive. 
B) low because caviar is packaged in small containers. 
C) high because buyers generally feel that they can do without it. 
D) low because it is almost always in short supply. 
A) high because caviar is relatively expensive. 
B) low because caviar is packaged in small containers. 
C) high because buyers generally feel that they can do without it. 
D) low because it is almost always in short supply.

Question 18

Table 5-5  
-Refer to Table 5-5. As price rises from $5 to $6, the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A) 0.07. 
B) 0.18. 
C) 0.41. 
D) 2.45. 
A) 0.07. 
B) 0.18. 
C) 0.41. 
D) 2.45.

Question 19

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the

Accepted Answer

A) steeper the demand curve will be. 
B) flatter the demand curve will be. 
C) further to the right the demand curve will sit. 
D) closer to the vertical axis the demand curve will sit. 
A) steeper the demand curve will be. 
B) flatter the demand curve will be. 
C) further to the right the demand curve will sit. 
D) closer to the vertical axis the demand curve will sit.

Question 20

Which of the following statements about agriculture in the U.S. is not correct?

Accepted Answer

A) From the 1950s to today, agricultural output has increased about five times. 
B) 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. 
C) Increasing the supply of agricultural products typically benefits consumers but harms farmers. 
D) Technological improvements typically increase supply and decrease revenue for farmers. 
A) From the 1950s to today, agricultural output has increased about five times. 
B) 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. 
C) Increasing the supply of agricultural products typically benefits consumers but harms farmers. 
D) Technological improvements typically increase supply and decrease revenue for farmers.

Exam 5: Elasticity and Its Application

The case of perfectly elastic demand is illustrated by a demand curve that is

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points A and B?

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a

If we observe that when the price of ice cream rises by 10%, ice cream manufacturers increase the quantity supplied of ice cream by 20%, then the price elasticity of supply is 2.

Whether a good is a luxury or necessity depends on the

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

A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Helen's Honey Hut supplies 20 jars of honey per week when the price of honey is $6 per jar and supplies 30 jars per week when the price of is $8 per jar, so the price elasticity of supply over this price range is 1.4.

Table 5-10 ​ ​ ​ -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most elastic price elasticity of supply?

When demand is perfectly inelastic, the price elasticity of demand

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

How did the farm population in the United States change between 1950 and today?

In the long run, the quantity supplied of most goods

Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8. You should

If a 6% decrease in price for a good results in a 2% increase in quantity demanded, the price elasticity of demand is

The income elasticity of demand for caviar tends to be

Table 5-5 -Refer to Table 5-5. As price rises from $5 to $6, the price elasticity of demand using the midpoint method is approximately

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the

Which of the following statements about agriculture in the U.S. is not correct?

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

Table 5-10 -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most elastic price elasticity of supply?