Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

A good will have a more inelastic demand, the

Accepted Answer

A) greater the availability of close substitutes. 
B) broader the definition of the market. 
C) longer the period of time. 
D) more it is regarded as a luxury. 
A) greater the availability of close substitutes. 
B) broader the definition of the market. 
C) longer the period of time. 
D) more it is regarded as a luxury.

Question 3

The measure of how willing consumers are to buy less of a good as its price rises is called

Accepted Answer

price elas

Question 4

Figure 5-14  
-Refer to Figure 5-14. Over which range is the supply curve in this figure the least elastic?

Accepted Answer

A) $16 to $40 
B) $40 to $100 
C) $100 to $220 
D) $220 to $430 
A) $16 to $40 
B) $40 to $100 
C) $100 to $220 
D) $220 to $430

Question 5

Total revenue will be at its largest value on a linear demand curve at the

Accepted Answer

A) top of the curve, where prices are highest. 
B) midpoint of the curve. 
C) low end of the curve, where quantity demanded is highest. 
D) None of the above is correct. 
A) top of the curve, where prices are highest. 
B) midpoint of the curve. 
C) low end of the curve, where quantity demanded is highest. 
D) None of the above is correct.

Question 6

Table 5-12  
-Refer to Table 5-12. Between which two quantities listed is demand most elastic?

Accepted Answer

The answer of Table 5-12  
-Refer to Table 5-12....

Question 7

If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

Accepted Answer

A) True 
 B)False

Question 8

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

Accepted Answer

A) -1.2, and X and Y are complements. 
B) -0.1, and X and Y are complements. 
C) 0.1, and X and Y are substitutes. 
D) 1.2, and X and Y are substitutes. 
A) -1.2, and X and Y are complements. 
B) -0.1, and X and Y are complements. 
C) 0.1, and X and Y are substitutes. 
D) 1.2, and X and Y are substitutes.

Question 9

Suppose the price elasticity of demand for a product is 1.3. If a supplier wants to increase revenue, what change should it make to price, if any?

Accepted Answer

The answer of Suppose the price elasticity of demand for...

Question 10

A linear, upward-sloping supply curve has

Accepted Answer

A) a constant slope and a changing price elasticity of supply. 
B) a changing slope and a constant price elasticity of supply. 
C) both a constant slope and a constant price elasticity of supply. 
D) both a changing slope and a changing price elasticity of supply. 
A) a constant slope and a changing price elasticity of supply. 
B) a changing slope and a constant price elasticity of supply. 
C) both a constant slope and a constant price elasticity of supply. 
D) both a changing slope and a changing price elasticity of supply.

Question 11

Figure 5-11  
-Refer to Figure 5-11. Suppose this demand curve is a straight, downward-sloping line all the way from the horizontal intercept to the vertical intercept. We choose two prices, P1 and P2, and the corresponding quantities demanded, Q1 and Q2, for the purpose of calculating the price elasticity of demand. Also suppose P2 > P1. In which of the following cases could we possibly find that (i) demand is elastic and (ii) a decrease in price from P1 to P2 causes an decrease in total revenue?

Accepted Answer

A) 0 1 2 1 2 1 > $20. 
D) None of the above is correct. 
A) 0 1 2 1 2 1 > $20. 
D) None of the above is correct.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

For which of the following goods is the price elasticity of demand most inelastic?

Accepted Answer

A) pizza 
B) large pizza 
C) large pepperoni pizza 
D) Domino's large pepperoni pizza 
A) pizza 
B) large pizza 
C) large pepperoni pizza 
D) Domino's large pepperoni pizza

Question 14

Which of the following was not a reason OPEC failed to keep the price of oil high?

Accepted Answer

A) Over the long run, producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity. 
B) Consumers responded to higher prices with greater conservation. 
C) Consumers replaced old inefficient cars with newer efficient ones. 
D) The agreement OPEC members signed allowed each country to produce as much oil as each wanted. 
A) Over the long run, producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity. 
B) Consumers responded to higher prices with greater conservation. 
C) Consumers replaced old inefficient cars with newer efficient ones. 
D) The agreement OPEC members signed allowed each country to produce as much oil as each wanted.

Question 15

The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not a determinant of the price elasticity of demand for a good?

Accepted Answer

A) the time horizon 
B) the steepness or flatness of the supply curve for the good 
C) the definition of the market for the good 
D) the availability of substitutes for the good 
A) the time horizon 
B) the steepness or flatness of the supply curve for the good 
C) the definition of the market for the good 
D) the availability of substitutes for the good

Question 17

Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice cream cones rises from that price by 4 percent, the number of ice cream cones demanded falls to 46. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Accepted Answer

A) demand for ice cream cones in this price range is elastic. 
B) demand for ice cream cones in this price range is inelastic. 
C) demand for ice cream cones in this price range is unit elastic. 
D) price elasticity of demand for ice cream cones in this price range is 0. 
A) demand for ice cream cones in this price range is elastic. 
B) demand for ice cream cones in this price range is inelastic. 
C) demand for ice cream cones in this price range is unit elastic. 
D) price elasticity of demand for ice cream cones in this price range is 0.

Question 18

Normal goods have positive income elasticities of demand, while inferior goods have negative income elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 19

Figure 5-19        
-Refer to Figure 5-19. Which of the following statements is correct?

Accepted Answer

A) Supply curve A is perfectly elastic. 
B) Supply curve B is perfectly inelastic. 
C) Supply curve C is more inelastic than supply curve D. 
D) Supply curve D is unit elastic. 
A) Supply curve A is perfectly elastic. 
B) Supply curve B is perfectly inelastic. 
C) Supply curve C is more inelastic than supply curve D. 
D) Supply curve D is unit elastic.

Question 20

Holding all other forces constant, if decreasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Accepted Answer

A) unit elastic. 
B) inelastic. 
C) elastic. 
D) None of the above is correct because a price decrease never leads to an increase in total revenue. 
A) unit elastic. 
B) inelastic. 
C) elastic. 
D) None of the above is correct because a price decrease never leads to an increase in total revenue.

Exam 5: Elasticity and Its Application

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

A good will have a more inelastic demand, the

The measure of how willing consumers are to buy less of a good as its price rises is called

Figure 5-14 -Refer to Figure 5-14. Over which range is the supply curve in this figure the least elastic?

Total revenue will be at its largest value on a linear demand curve at the

Table 5-12 -Refer to Table 5-12. Between which two quantities listed is demand most elastic?

If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

Suppose the price elasticity of demand for a product is 1.3. If a supplier wants to increase revenue, what change should it make to price, if any?

A linear, upward-sloping supply curve has

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

For which of the following goods is the price elasticity of demand most inelastic?

Which of the following was not a reason OPEC failed to keep the price of oil high?

The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

Which of the following is not a determinant of the price elasticity of demand for a good?

Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice cream cones rises from that price by 4 percent, the number of ice cream cones demanded falls to 46. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Normal goods have positive income elasticities of demand, while inferior goods have negative income elasticities of demand.

Figure 5-19 -Refer to Figure 5-19. Which of the following statements is correct?

Holding all other forces constant, if decreasing the price of a good leads to an increase in total revenue, then the demand for the good must be

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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