Question 1

Suppose demand is given by the equation:
QD = 50 - 5P
At what price will total revenue be maximized?

Accepted Answer

Total revenue will be maximized at the midpoint of a linear demand curve - $5 with this demand curve.

Question 2

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Accepted Answer

A) True 
 B)False  True

Question 3

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

Accepted Answer

A) True 
 B)False  True

Question 4

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 5

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

Accepted Answer

A) True 
 B)False

Question 6

Using the midpoint method, compute the elasticity of demand between points A and B. Is demand along this portion of the curve elastic or inelastic? Interpret your answer with regard to price and quantity demanded. Now compute the elasticity of demand between points B and C. Is demand along this portion of the curve elastic or inelastic?
​

Accepted Answer

In the section of the demand curve from

Question 7

Scenario 5-3
​
Suppose the demand function for good X is given by:
 $$Q _ { d x } = 15 - 0.5 P _ { x } - 0.8 P _ { y }$$ where
 $$Q _ { d x }$$ is the quantity demanded of good X,
 $$P _ { x }$$ is the price of good X, and
 $$P _ { y }$$ 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?

Accepted Answer

The answer of Scenario 5-3
​
Suppose the demand function for good...

Question 8

Table 5-2
​
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Price } \
\text { (Dollars per unit) }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded } \
\text { (Units) }
\end{array} \
\hline 100 & 0 \
\hline 80 & 50 \
\hline 60 & 100 \
\hline 40 & 150 \
\hline 20 & 200 \
\hline 0 & 250 \
\hline
\end{array}$$
-Refer to Table 5-2. Using the midpoint method, if the price falls from $80 to $60, the absolute value of the price elasticity of demand is

Accepted Answer

A) 0.43. 
B) 2.33. 
C) 0.29. 
D) 0.67. 
A) 0.43. 
B) 2.33. 
C) 0.29. 
D) 0.67.

Question 9

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15 percent, then the quantity supplied of cheese will increase by

Accepted Answer

A) 0.4 percent in the short run and 4.6 percent in the long run. 
B) 1.7 percent in the short run and 0.7 percent in the long run. 
C) 9 percent in the short run and 21 percent in the long run. 
D) 25 percent in the short run and 10.7 percent in the long run. 
A) 0.4 percent in the short run and 4.6 percent in the long run. 
B) 1.7 percent in the short run and 0.7 percent in the long run. 
C) 9 percent in the short run and 21 percent in the long run. 
D) 25 percent in the short run and 10.7 percent in the long run.

Question 10

Suppose demand is given by the equation:
QD = 80/P
Using the midpoint method, what is the price elasticity of demand between $1 and $2?

Accepted Answer

The price

Question 11

If the income elasticity of demand for a good is negative, then the good must be an inferior good.

Accepted Answer

A) True 
 B)False

Question 12

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

Accepted Answer

A) True 
 B)False

Question 13

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 14

If the quantity supplied is exactly the same regardless of the price, supply is

Accepted Answer

perfectly

Question 15

Figure 5-1
  
-Refer to Figure 5-1. Between point A and point B on the graph, demand is

Accepted Answer

A) perfectly elastic. 
B) inelastic. 
C) unit elastic. 
D) elastic, but not perfectly elastic. 
A) perfectly elastic. 
B) inelastic. 
C) unit elastic. 
D) elastic, but not perfectly elastic.

Question 16

Table 5-5
​
​
 $$\begin{array} { | c | c | } 
\hline \text { Price } & \text { Quantity Demanded } \
\hline \$ 0 & 50 \
\hline \$ 2 & 40 \
\hline \$ 4 & 30 \
\hline \$ 6 & 20 \
\hline 48 & 10 \
\hline
\end{array}$$
-Refer to Table 5-5. Using the midpoint method, what is the price elasticity of demand between $6 and $8?

Accepted Answer

The price

Question 17

Figure 5-6
   ​
-Refer to Figure 5-6. Along which of these segments of the supply curve is supply least elastic?

Accepted Answer

A) BA 
B) DC 
C) FD 
D) FE 
A) BA 
B) DC 
C) FD 
D) FE

Question 18

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

Accepted Answer

A) The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve. 
B) The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve. 
C) Given two prices with which to calculate the price elasticity of supply, that elasticity would be the same for both curves. 
D) A decrease in demand will increase total revenue if the steeper supply curve is relevant, while a decrease in demand will decrease total revenue if the flatter supply curve is relevant. 
A) The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve. 
B) The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve. 
C) Given two prices with which to calculate the price elasticity of supply, that elasticity would be the same for both curves. 
D) A decrease in demand will increase total revenue if the steeper supply curve is relevant, while a decrease in demand will decrease total revenue if the flatter supply curve is relevant.

Question 19

Suppose the cross-price elasticity of demand between peanut butter and jelly is −2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Accepted Answer

A) fall by 8 percent. 
B) fall by 50 percent. 
C) rise by 8 percent. 
D) rise by 50 percent. 
A) fall by 8 percent. 
B) fall by 50 percent. 
C) rise by 8 percent. 
D) rise by 50 percent.

Question 20

In the short run, as compared to the long run, both the price elasticity of demand and the price elasticity of supply tend to be more

Accepted Answer

The answer of In the short run, as compared to...

Exam 5: Elasticity and Its Application

Suppose demand is given by the equation: QD = 50 - 5P At what price will total revenue be maximized?

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

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.

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

Table 5-2 ​ Price (Dollars per unit) Quantity Demanded (Units) 100 0 80 50 60 100 40 150 20 200 0 250 -Refer to Table 5-2. Using the midpoint method, if the price falls from $80 to $60, the absolute value of the price elasticity of demand is

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15 percent, then the quantity supplied of cheese will increase by

Suppose demand is given by the equation: QD = 80/P Using the midpoint method, what is the price elasticity of demand between $1 and $2?

If the income elasticity of demand for a good is negative, then the good must be an inferior good.

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

If the quantity supplied is exactly the same regardless of the price, supply is

Figure 5-1 -Refer to Figure 5-1. Between point A and point B on the graph, demand is

Table 5-5 ​ ​ Price Quantity Demanded \ 0 50 \ 2 40 \ 4 30 \ 6 20 48 10 -Refer to Table 5-5. Using the midpoint method, what is the price elasticity of demand between $6 and $8?

Figure 5-6 ​ -Refer to Figure 5-6. Along which of these segments of the supply curve is supply least elastic?

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

Suppose the cross-price elasticity of demand between peanut butter and jelly is −2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

In the short run, as compared to the long run, both the price elasticity of demand and the price elasticity of supply tend to be more

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 Nations 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

Suppose demand is given by the equation: Q^D= 50 - 5P At what price will total revenue be maximized?

Table 5-2 Price (Dollars per unit) Quantity Demanded (Units) 100 0 80 50 60 100 40 150 20 200 0 250 -Refer to Table 5-2. Using the midpoint method, if the price falls from $80 to $60, the absolute value of the price elasticity of demand is

Suppose demand is given by the equation: Q^D= 80/P Using the midpoint method, what is the price elasticity of demand between $1 and $2?

Table 5-5 Price Quantity Demanded \ 0 50 \ 2 40 \ 4 30 \ 6 20 48 10 -Refer to Table 5-5. Using the midpoint method, what is the price elasticity of demand between $6 and $8?

Figure 5-6 -Refer to Figure 5-6. Along which of these segments of the supply curve is supply least elastic?