Question 1

If soybean farmers know that the demand for soybeans is price inelastic,in order to increase their total revenues they should

Accepted Answer

A)  use more fertilizers and weed killers to increase their yields. 
B)  plant additional acres to increase their output. 
C)  reduce the number of acres they plant to decrease their output. 
D)  Both a and b are correct. 
A)  use more fertilizers and weed killers to increase their yields. 
B)  plant additional acres to increase their output. 
C)  reduce the number of acres they plant to decrease their output. 
D)  Both a and b are correct.

Question 2

Figure 5-3
  
-Refer to Figure 5-3.Which demand curve is perfectly inelastic?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 3

Table 5-2
  
-Refer to Table 5-2.Using the midpoint method,if the price falls from $60 to $40,the absolute value of the price elasticity of demand is

Accepted Answer

A)  0.4. 
B)  1. 
C)  4. 
D)  20. 
A)  0.4. 
B)  1. 
C)  4. 
D)  20.

Question 4

Table 5-5
The following table shows a portion of the demand schedule for a particular good at various levels of income.
  
-Refer to Table 5-5.Using the midpoint method,when income equals $7,500,what is the price elasticity of demand between $16 and $20?

Accepted Answer

A)  0.56 
B)  0.75 
C)  1.33 
D)  1.80 
A)  0.56 
B)  0.75 
C)  1.33 
D)  1.80

Question 5

Table 5-1
  
-Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

Accepted Answer

A)  A is a luxury, and B is a necessity. 
B)  A is a good several years after a price increase, and B is that same good several days after the price increase. 
C)  A is a Kit Kat bar, and B is candy. 
D)  A has fewer substitutes than B. 
A)  A is a luxury, and B is a necessity. 
B)  A is a good several years after a price increase, and B is that same good several days after the price increase. 
C)  A is a Kit Kat bar, and B is candy. 
D)  A has fewer substitutes than B.

Question 6

Sandra purchases 5 pounds of coffee and 10 gallons of milk per month when the price of coffee is $10 per pound.She purchases 6 pounds of coffee and 12 gallons of milk per month when the price of coffee is $8 per pound.Sandra's cross-price elasticity of demand for coffee and milk is

Accepted Answer

A)  0.82, and they are substitutes. 
B)  -0.82, and they are complements. 
C)  1.22, and they are substitutes. 
D)  -1.22, and they are complements. 
A)  0.82, and they are substitutes. 
B)  -0.82, and they are complements. 
C)  1.22, and they are substitutes. 
D)  -1.22, and they are complements.

Question 7

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 8

Which of the following statements is valid when the market supply curve is vertical?

Accepted Answer

A)  Market quantity supplied does not change when the price changes. 
B)  Supply is perfectly elastic. 
C)  An increase in market demand will increase the equilibrium quantity. 
D)  An increase in market demand will not increase the equilibrium price. 
A)  Market quantity supplied does not change when the price changes. 
B)  Supply is perfectly elastic. 
C)  An increase in market demand will increase the equilibrium quantity. 
D)  An increase in market demand will not increase the equilibrium price.

Question 9

In which of these instances is demand said to be perfectly inelastic?

Accepted Answer

A)  An increase in price of 2% causes a decrease in quantity demanded of 2%. 
B)  A decrease in price of 2% causes an increase in quantity demanded of 0%. 
C)  A decrease in price of 2% causes a decrease in total revenue of 0%. 
D)  An increase in price of 2% causes a decrease in quantity demanded of 1/2%. 
A)  An increase in price of 2% causes a decrease in quantity demanded of 2%. 
B)  A decrease in price of 2% causes an increase in quantity demanded of 0%. 
C)  A decrease in price of 2% causes a decrease in total revenue of 0%. 
D)  An increase in price of 2% causes a decrease in quantity demanded of 1/2%.

Question 10

Suppose that when the price of wheat is $2 per bushel,farmers can sell 10 million bushels.When the price of wheat is $3 per bushel,farmers can sell 8 million bushels.Which of the following statements is true? The demand for wheat is

Accepted Answer

A)  income inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. 
B)  income elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. 
C)  price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. 
D)  price elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. 
A)  income inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. 
B)  income elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. 
C)  price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. 
D)  price elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.

Question 11

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

Accepted Answer

A)  dental floss 
B)  milk 
C)  salt 
D)  diamond earrings 
A)  dental floss 
B)  milk 
C)  salt 
D)  diamond earrings

Question 12

There are very few,if any,good substitutes for motor oil.Therefore,the

Accepted Answer

A)  demand for motor oil would tend to be inelastic. 
B)  demand for motor oil would tend to be elastic. 
C)  demand for motor oil would tend to respond strongly to changes in prices of other goods. 
D)  supply of motor oil would tend to respond strongly to changes in people's tastes for large cars relative to their tastes for small cars. 
A)  demand for motor oil would tend to be inelastic. 
B)  demand for motor oil would tend to be elastic. 
C)  demand for motor oil would tend to respond strongly to changes in prices of other goods. 
D)  supply of motor oil would tend to respond strongly to changes in people's tastes for large cars relative to their tastes for small cars.

Question 13

Table 5-1
  
-Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

Accepted Answer

A)  A is grapes, and B is fruit. 
B)  A is T-shirts, and B is socks. 
C)  A is train tickets before cars were invented, and B is train tickets after cars were invented. 
D)  A is diamond necklaces, and B is beds. 
A)  A is grapes, and B is fruit. 
B)  A is T-shirts, and B is socks. 
C)  A is train tickets before cars were invented, and B is train tickets after cars were invented. 
D)  A is diamond necklaces, and B is beds.

Question 14

Suppose that when the price rises by 10% for a particular good,the quantity demanded of that good falls by 20%.The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Question 15

On a certain supply curve,one point is (quantity supplied = 200,price = $4.00)and another point is (quantity supplied = 250,price = $4.50).Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)  0.22. 
B)  0.53. 
C)  1.00. 
D)  1.89. 
A)  0.22. 
B)  0.53. 
C)  1.00. 
D)  1.89.

Question 16

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 17

Figure 5-4
  
-Refer to Figure 5-4.If the price decreases in the region of the demand curve between points B and C,we can expect total revenue to

Accepted Answer

A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first increase, then decrease until total revenue is maximized. 
A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first increase, then decrease until total revenue is maximized.

Question 18

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 19

Cross-price elasticity of demand measures how

Accepted Answer

A)  the price of one good changes in response to a change in the price of another good. 
B)  the quantity demanded of one good changes in response to a change in the quantity demanded of another good. 
C)  the quantity demanded of one good changes in response to a change in the price of another good. 
D)  strongly normal or inferior a good is. 
A)  the price of one good changes in response to a change in the price of another good. 
B)  the quantity demanded of one good changes in response to a change in the quantity demanded of another good. 
C)  the quantity demanded of one good changes in response to a change in the price of another good. 
D)  strongly normal or inferior a good is.

Question 20

The price elasticity of demand measures the

Accepted Answer

A)  magnitude of the response in quantity demanded to a change in price. 
B)  direction of the shift in the demand curve in response to a market event. 
C)  size of the shortage created by the increase in demand. 
D)  responsiveness of quantity demanded to a change in income. 
A)  magnitude of the response in quantity demanded to a change in price. 
B)  direction of the shift in the demand curve in response to a market event. 
C)  size of the shortage created by the increase in demand. 
D)  responsiveness of quantity demanded to a change in income.

Exam 5: Elasticity and Its Application

If soybean farmers know that the demand for soybeans is price inelastic,in order to increase their total revenues they should

Figure 5-3 -Refer to Figure 5-3.Which demand curve is perfectly inelastic?

Table 5-2 -Refer to Table 5-2.Using the midpoint method,if the price falls from $60 to $40,the absolute value of the price elasticity of demand is

Table 5-5 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-5.Using the midpoint method,when income equals $7,500,what is the price elasticity of demand between $16 and $20?

Table 5-1 -Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

Sandra purchases 5 pounds of coffee and 10 gallons of milk per month when the price of coffee is $10 per pound.She purchases 6 pounds of coffee and 12 gallons of milk per month when the price of coffee is $8 per pound.Sandra's cross-price elasticity of demand for coffee and milk is

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

Which of the following statements is valid when the market supply curve is vertical?

In which of these instances is demand said to be perfectly inelastic?

Suppose that when the price of wheat is $2 per bushel,farmers can sell 10 million bushels.When the price of wheat is $3 per bushel,farmers can sell 8 million bushels.Which of the following statements is true? The demand for wheat is

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

There are very few,if any,good substitutes for motor oil.Therefore,the

Table 5-1 -Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

Suppose that when the price rises by 10% for a particular good,the quantity demanded of that good falls by 20%.The price elasticity of demand for this good is equal to 2.0.

On a certain supply curve,one point is (quantity supplied = 200,price = $4.00)and another point is (quantity supplied = 250,price = $4.50).Using the midpoint method,the price elasticity of supply is about

When demand is perfectly inelastic,the price elasticity of demand

Figure 5-4 -Refer to Figure 5-4.If the price decreases in the region of the demand curve between points B and C,we can expect total revenue to

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

Cross-price elasticity of demand measures how

The price elasticity of demand measures 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.

Application: 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 Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

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