Question 1

If the price elasticity of demand for a good is 1, then a 3 percent decrease in price results in a

Accepted Answer

A) 0.1 percent increase in the quantity demanded. 
B) 1 percent increase in the quantity demanded. 
C) 3 percent increase in the quantity demanded. 
D) 4 percent increase in the quantity demanded. 
A) 0.1 percent increase in the quantity demanded. 
B) 1 percent increase in the quantity demanded. 
C) 3 percent increase in the quantity demanded. 
D) 4 percent increase in the quantity demanded.

Question 2

If the cross-price elasticity of demand for two goods is -4.5, then

Accepted Answer

A) the two goods are substitutes. 
B) the two goods are complements. 
C) one of the goods is normal while the other good is inferior. 
D) one of the goods is a luxury while the other good is a necessity. 
A) the two goods are substitutes. 
B) the two goods are complements. 
C) one of the goods is normal while the other good is inferior. 
D) one of the goods is a luxury while the other good is a necessity.

Question 3

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Accepted Answer

A) The quantity of the good demanded decreases from 250 to 150. 
B) The quantity of the good demanded decreases from 200 to 100. 
C) The quantity of the good demanded decreases by 0.05 percent. 
D) The quantity of the good demanded decreases by 0.2 percent. 
A) The quantity of the good demanded decreases from 250 to 150. 
B) The quantity of the good demanded decreases from 200 to 100. 
C) The quantity of the good demanded decreases by 0.05 percent. 
D) The quantity of the good demanded decreases by 0.2 percent.

Question 4

Elasticity is

Accepted Answer

A) a measure of how much buyers and sellers respond to changes in market conditions. 
B) the study of how the allocation of resources affects economic well-being. 
C) the maximum amount that a buyer will pay for a good. 
D) the value of everything a seller must give up to produce a good. 
A) a measure of how much buyers and sellers respond to changes in market conditions. 
B) the study of how the allocation of resources affects economic well-being. 
C) the maximum amount that a buyer will pay for a good. 
D) the value of everything a seller must give up to produce a good.

Question 5

Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

Accepted Answer

The price elasticity

Question 6

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is

Accepted Answer

A) ignoring the law of demand. 
B) assuming that the demand for university education is elastic. 
C) assuming that the demand for university education is inelastic. 
D) assuming that the supply of university education is elastic. 
A) ignoring the law of demand. 
B) assuming that the demand for university education is elastic. 
C) assuming that the demand for university education is inelastic. 
D) assuming that the supply of university education is elastic.

Question 7

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the

Accepted Answer

A) demand for the good is said to be elastic. 
B) demand for the good is said to be inelastic. 
C) law of demand does not apply to the good. 
D) demand curve for the good shifts only slightly in response to a change in price. 
A) demand for the good is said to be elastic. 
B) demand for the good is said to be inelastic. 
C) law of demand does not apply to the good. 
D) demand curve for the good shifts only slightly in response to a change in price.

Question 8

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

Accepted Answer

A) tennis lessons 
B) allergy medication 
C) clothing 
D) cell phone contracts 
A) tennis lessons 
B) allergy medication 
C) clothing 
D) cell phone contracts

Question 9

When supply is perfectly elastic, the value of the price elasticity of supply is

Accepted Answer

A) 0. 
B) 1. 
C) greater than 0 and less than 1. 
D) infinity. 
A) 0. 
B) 1. 
C) greater than 0 and less than 1. 
D) infinity.

Question 10

Figure 5-10  
-Refer to Figure 5-10. If rectangle D is larger than rectangle A, then

Accepted Answer

A) demand is elastic between prices P1 and P2. 
B) a decrease in price from P2 to P1 will cause an increase in total revenue. 
C) the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded. 
D) All of the above are correct. 
A) demand is elastic between prices P1 and P2. 
B) a decrease in price from P2 to P1 will cause an increase in total revenue. 
C) the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded. 
D) All of the above are correct.

Question 11

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?

Accepted Answer

A) the mayor 
B) the city manager 
C) The answer depends on the price elasticity of demand. 
D) The answer depends on the costs of construction of the new municipal swimming pool. 
A) the mayor 
B) the city manager 
C) The answer depends on the price elasticity of demand. 
D) The answer depends on the costs of construction of the new municipal swimming pool.

Question 12

Figure 5-10  
-Refer to Figure 5-10. Total revenue when the price is P2 is represented by the area(s)

Accepted Answer

A) B + D. 
B) A + B. 
C) C + D. 
D) D. 
A) B + D. 
B) A + B. 
C) C + D. 
D) D.

Question 13

Suppose a farmer knows that he will be able to harvest and sell 3,000 bushels of wheat. Would he prefer a market in which conditions are favorable and most farmers harvest large crops or a market in which conditions are unfavorable and many farmers harvest small crops? Why?

Accepted Answer

The farmer prefers a market in

Question 14

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

Accepted Answer

A) white chocolate chip with macadamia nut cookies 
B) hardback novels 
C) salt 
D) box seats at a major league baseball game 
A) white chocolate chip with macadamia nut cookies 
B) hardback novels 
C) salt 
D) box seats at a major league baseball game

Question 15

Suppose a market has the demand function Qd=20-0.5P. Between which of the following price ranges is demand most inelastic?

Accepted Answer

A) $0 to $10 
B) $10 to $20 
C) $20 to $30 
D) $30 to $40 
A) $0 to $10 
B) $10 to $20 
C) $20 to $30 
D) $30 to $40

Question 16

A government program that reduces land under cultivation can help farmers by raising prices but hurts consumers.

Accepted Answer

A) True 
 B)False

Question 17

Tyler purchases 5 pounds of hot dogs per month when his monthly income is $2,000 and 4 pounds of hot dogs per month when his monthly income is $2,200. Tyler's income elasticity of demand for hot dogs is

Accepted Answer

A) 2.33, and hot dogs are a normal good. 
B) -2.33, and hot dogs are an inferior good. 
C) 0.43, and hot dogs are a normal good. 
D) -0.43, and hot dogs are an inferior good. 
A) 2.33, and hot dogs are a normal good. 
B) -2.33, and hot dogs are an inferior good. 
C) 0.43, and hot dogs are a normal good. 
D) -0.43, and hot dogs are an inferior good.

Question 18

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

Accepted Answer

A) fountain ink pens 
B) milk 
C) disposable diapers 
D) shampoo 
A) fountain ink pens 
B) milk 
C) disposable diapers 
D) shampoo

Question 19

Figure 5-9  
-Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point C and point D is about

Accepted Answer

A) 0.29. 
B) 0.54. 
C) 1.86. 
D) 2.0. 
A) 0.29. 
B) 0.54. 
C) 1.86. 
D) 2.0.

Question 20

Demand is said to be inelastic if the

Accepted Answer

A) quantity demanded changes proportionately more than price. 
B) price changes proportionately more than income. 
C) quantity demanded changes proportionately less than price. 
D) quantity demanded changes proportionately the same as price. 
A) quantity demanded changes proportionately more than price. 
B) price changes proportionately more than income. 
C) quantity demanded changes proportionately less than price. 
D) quantity demanded changes proportionately the same as price.

Exam 5: Elasticity and Its Application

If the price elasticity of demand for a good is 1, then a 3 percent decrease in price results in a

If the cross-price elasticity of demand for two goods is -4.5, then

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Elasticity is

Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the

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

When supply is perfectly elastic, the value of the price elasticity of supply is

Figure 5-10 -Refer to Figure 5-10. If rectangle D is larger than rectangle A, then

Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P2 is represented by the area(s)

Suppose a farmer knows that he will be able to harvest and sell 3,000 bushels of wheat. Would he prefer a market in which conditions are favorable and most farmers harvest large crops or a market in which conditions are unfavorable and many farmers harvest small crops? Why?

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

Suppose a market has the demand function Qd=20-0.5P. Between which of the following price ranges is demand most inelastic?

A government program that reduces land under cultivation can help farmers by raising prices but hurts consumers.

Tyler purchases 5 pounds of hot dogs per month when his monthly income is $2,000 and 4 pounds of hot dogs per month when his monthly income is $2,200. Tyler's income elasticity of demand for hot dogs is

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

Figure 5-9 -Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point C and point D is about

Demand is said to be inelastic if the

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

Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P₂ is represented by the area(s)

Suppose a market has the demand function Q^d=20-0.5P. Between which of the following price ranges is demand most inelastic?