Question 1

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

Accepted Answer

A) True 
 B)False

Question 2

Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she needs. Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. If you know that the demand for lemonade is elastic, what is your advice to her?

Accepted Answer

A) Leave the price at 25 cents and be patient. 
B) Raise the price to increase total revenue. 
C) Lower the price to increase total revenue. 
D) There isn't enough information given to answer this question. 
A) Leave the price at 25 cents and be patient. 
B) Raise the price to increase total revenue. 
C) Lower the price to increase total revenue. 
D) There isn't enough information given to answer this question.

Question 3

Suppose a freeze in Florida significantly reduces the supply of oranges this year. As a result, would you expect the total revenue from the sale of orange juice to rise or fall? Explain.

Accepted Answer

Since oranges are an input into the prod

Question 4

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would

Accepted Answer

A) be negative, and your roommate's would be positive. 
B) be positive, and your roommate's would be negative. 
C) be zero, and your roommate's would approach infinity. 
D) approach infinity, and your roommate's would be zero. 
A) be negative, and your roommate's would be positive. 
B) be positive, and your roommate's would be negative. 
C) be zero, and your roommate's would approach infinity. 
D) approach infinity, and your roommate's would be zero.

Question 5

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 6

Scenario 5-2
Milk has an inelastic demand, and steak has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-2. The change in equilibrium price will be

Accepted Answer

A) greater in the milk market than in the steak market. 
B) greater in the steak market than in the milk market. 
C) the same in the milk and steak markets. 
D) unknown without more information. 
A) greater in the milk market than in the steak market. 
B) greater in the steak market than in the milk market. 
C) the same in the milk and steak markets. 
D) unknown without more information.

Question 7

What is the price elasticity of demand at any point on a perfectly elastic demand curve?

Accepted Answer

The price

Question 8

If the demand for donuts is inelastic, then an increase in the price of donuts will

Accepted Answer

A) increase total revenue of donuts sellers. 
B) decrease total revenue of donuts sellers. 
C) not change total revenue of donuts sellers. 
D) change total revenue of donuts sellers but in an unknown way without more information. 
A) increase total revenue of donuts sellers. 
B) decrease total revenue of donuts sellers. 
C) not change total revenue of donuts sellers. 
D) change total revenue of donuts sellers but in an unknown way without more information.

Question 9

Suppose the price of a bag of frozen chicken nuggets decreases from $6.10 to $5.90 and, as a result, the quantity of bags demanded increases from 560 to 620. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

Accepted Answer

A) 0.33. 
B) 0.10. 
C) 3.05. 
D) 0.03. 
A) 0.33. 
B) 0.10. 
C) 3.05. 
D) 0.03.

Question 10

Table 5-6
Consider the following demand schedule.
 $$\begin{array} { | l | l | } 
\hline \text { Price } & \text { Quantity Demanded } \
\hline \$ 0 & 1,000 \
\hline \$ 3 & 800 \
\hline \$ 6 & 600 \
\hline \$ 9 & 400 \
\hline \$ 12 & 200 \
\hline \$ 15 & 0 \
\hline
\end{array}$$
-Refer to Table 5-6. Using the midpoint method, demand is unit elastic when price changes from

Accepted Answer

The answer of Table 5-6
Consider the following demand schedule.
 \[\begin{array}...

Question 11

If the income elasticity of demand for a good is -1.40, is the good a normal or inferior good?

Accepted Answer

The good i

Question 12

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 13

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Accepted Answer

A) True 
 B)False

Question 14

A decrease in supply will cause the largest increase in price when

Accepted Answer

A) both supply and demand are inelastic. 
B) both supply and demand are elastic. 
C) demand is elastic and supply is inelastic. 
D) demand is inelastic and supply is elastic. 
A) both supply and demand are inelastic. 
B) both supply and demand are elastic. 
C) demand is elastic and supply is inelastic. 
D) demand is inelastic and supply is elastic.

Question 15

Consider the following pairs of goods. For which of the two goods would you expect the demand to be more price elastic? Why?
a.water or diamonds
b.insulin or nasal decongestant spray
c.food in general or breakfast cereal
d.gasoline over the course of a week or gasoline over the course of a year
e.personal computers or IBM personal computers

Accepted Answer

a.
Diamonds are luxuries, and water is a

Question 16

A key determinant of the price elasticity of supply is the

Accepted Answer

A) time horizon. 
B) income of consumers. 
C) price elasticity of demand. 
D) importance of the good in a consumer's budget. 
A) time horizon. 
B) income of consumers. 
C) price elasticity of demand. 
D) importance of the good in a consumer's budget.

Question 17

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 18

A linear, downward-sloping demand curve has a constant elasticity but a changing slope.

Accepted Answer

A) True 
 B)False

Question 19

Scenario 5-4
​
Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000.
-Refer to Scenario 5-6. Considering the cross price elasticity of demand for mobile and landline telephone service, is the cross price elasticity of demand positive or negative and do the consumers of Plainville regard these goods as substitutes or complements?

Accepted Answer

The cross price elas

Question 20

Table 5-3
​
​
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Income } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Quantity of Good X } \
\text { Purchased }
\end{array} & \begin{array} { c } 
\text { Quantity of Good Y } \
\text { Purchased }
\end{array} \
\hline 30,000 & 2 & 20 \
\hline 40,000 & 6 & 10 \
\hline
\end{array}$$
-Refer to Table 5-3. Using the midpoint method, the income elasticity of demand for good Y is

Accepted Answer

A) 2.33, and good Y is a normal good. 
B) −2.33, and good Y is an inferior good. 
C) −0.43, and good Y is a normal good. 
D) −0.43, and good Y is an inferior good. 
A) 2.33, and good Y is a normal good. 
B) −2.33, and good Y is an inferior good. 
C) −0.43, and good Y is a normal good. 
D) −0.43, and good Y is an inferior good.

Exam 5: Elasticity and Its Application

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

Suppose a freeze in Florida significantly reduces the supply of oranges this year. As a result, would you expect the total revenue from the sale of orange juice to rise or fall? Explain.

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

Scenario 5-2 Milk has an inelastic demand, and steak has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-2. The change in equilibrium price will be

What is the price elasticity of demand at any point on a perfectly elastic demand curve?

If the demand for donuts is inelastic, then an increase in the price of donuts will

Suppose the price of a bag of frozen chicken nuggets decreases from $6.10 to $5.90 and, as a result, the quantity of bags demanded increases from 560 to 620. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

Table 5-6 Consider the following demand schedule. Price Quantity Demanded \ 0 1,000 \ 3 800 \ 6 600 \ 9 400 \ 12 200 \ 15 0 -Refer to Table 5-6. Using the midpoint method, demand is unit elastic when price changes from

If the income elasticity of demand for a good is -1.40, is the good a normal or inferior good?

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

A decrease in supply will cause the largest increase in price when

A key determinant of the price elasticity of supply is the

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

A linear, downward-sloping demand curve has a constant elasticity but a changing slope.

Table 5-3 ​ ​ Income (Dollars) Quantity of Good X Purchased Quantity of Good Y Purchased 30,000 2 20 40,000 6 10 -Refer to Table 5-3. Using the midpoint method, the income elasticity of demand for good Y is

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

Table 5-3 Income (Dollars) Quantity of Good X Purchased Quantity of Good Y Purchased 30,000 2 20 40,000 6 10 -Refer to Table 5-3. Using the midpoint method, the income elasticity of demand for good Y is