Question 1

In which of the following situations will total revenue increase?

Accepted Answer

A)  Price elasticity of demand is 1.2, and the price of the good decreases. 
B)  Price elasticity of demand is 0.5, and the price of the good increases. 
C)  Price elasticity of demand is 3.0, and the price of the good decreases. 
D)  All of the above are correct. 
A)  Price elasticity of demand is 1.2, and the price of the good decreases. 
B)  Price elasticity of demand is 0.5, and the price of the good increases. 
C)  Price elasticity of demand is 3.0, and the price of the good decreases. 
D)  All of the above are correct.

Question 2

The difference between slope and elasticity is that slope

Accepted Answer

A)  is a ratio of two changes, and elasticity is a ratio of two percentage changes. 
B)  is a ratio of two percentage changes, and elasticity is a ratio of two changes. 
C)  measures changes in quantity demanded more accurately than elasticity. 
D)  none of the above; there is no difference between slope and elasticity. 
A)  is a ratio of two changes, and elasticity is a ratio of two percentage changes. 
B)  is a ratio of two percentage changes, and elasticity is a ratio of two changes. 
C)  measures changes in quantity demanded more accurately than elasticity. 
D)  none of the above; there is no difference between slope and elasticity.

Question 3

The supply of a good will be more elastic,the

Accepted Answer

A)  more the good is considered a luxury. 
B)  broader is the definition of the market for the good. 
C)  larger the number of close substitutes for the good. 
D)  longer the time period being considered. 
A)  more the good is considered a luxury. 
B)  broader is the definition of the market for the good. 
C)  larger the number of close substitutes for the good. 
D)  longer the time period being considered.

Question 4

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 5

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 $5,000,what is the price elasticity of demand between $8 and $12?

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 6

Figure 5-11
  
-Refer to Figure 5-11.If the price rises from point D to point C,total revenue

Accepted Answer

A)  increases, and demand is price elastic. 
B)  decreases, and demand is price elastic. 
C)  increases, and demand is price inelastic. 
D)  decreases, and demand is price inelastic. 
A)  increases, and demand is price elastic. 
B)  decreases, and demand is price elastic. 
C)  increases, and demand is price inelastic. 
D)  decreases, and demand is price inelastic.

Question 7

If the price elasticity of demand for tuna is 0.7,then a 1.5% increase in the price of tuna will decrease the quantity demanded of tuna by

Accepted Answer

A)  1.05%, and tuna sellers' total revenue will increase as a result. 
B)  1.05%, and tuna sellers' total revenue will decrease as a result. 
C)  2.14%, and tuna sellers' total revenue will increase as a result. 
D)  2.14%, and tuna sellers' total revenue will decrease as a result. 
A)  1.05%, and tuna sellers' total revenue will increase as a result. 
B)  1.05%, and tuna sellers' total revenue will decrease as a result. 
C)  2.14%, and tuna sellers' total revenue will increase as a result. 
D)  2.14%, and tuna sellers' total revenue will decrease as a result.

Question 8

The supply of oil is likely to be

Accepted Answer

A)  inelastic in both the short run and long run. 
B)  elastic in both the short run and long run. 
C)  elastic in the short run and inelastic in the long run. 
D)  inelastic in the short run and elastic in the long run. 
A)  inelastic in both the short run and long run. 
B)  elastic in both the short run and long run. 
C)  elastic in the short run and inelastic in the long run. 
D)  inelastic in the short run and elastic in the long run.

Question 9

The price elasticity of supply measures how much

Accepted Answer

A)  the quantity supplied responds to changes in input prices. 
B)  the quantity supplied responds to changes in the price of the good. 
C)  the price of the good responds to changes in supply. 
D)  sellers respond to changes in technology. 
A)  the quantity supplied responds to changes in input prices. 
B)  the quantity supplied responds to changes in the price of the good. 
C)  the price of the good responds to changes in supply. 
D)  sellers respond to changes in technology.

Question 10

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 11

If the price elasticity of supply is 1.2,and price increased by 5%,quantity supplied would

Accepted Answer

A)  increase by 4.2%. 
B)  increase by 6%. 
C)  decrease by 4.2%. 
D)  decrease by 6%. 
A)  increase by 4.2%. 
B)  increase by 6%. 
C)  decrease by 4.2%. 
D)  decrease by 6%.

Question 12

Table 5-2
  
-Refer to Table 5-2.Using the midpoint method,if the price falls from $40 to $20,the absolute value of the price elasticity of demand is

Accepted Answer

A)  20. 
B)  10. 
C)  2.33. 
D)  0.43. 
A)  20. 
B)  10. 
C)  2.33. 
D)  0.43.

Question 13

Table 5-6
  
-Refer to Table 5-6.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.

Question 14

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 cure 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 cure is relevant.

Question 15

Figure 5-10
  
-Refer to Figure 5-10.An increase in price from $30 to $35 would

Accepted Answer

A)  increase total revenue by $250 
B)  decrease total revenue by $250. 
C)  increase total revenue by $500. 
D)  decrease total revenue by $500. 
A)  increase total revenue by $250 
B)  decrease total revenue by $250. 
C)  increase total revenue by $500. 
D)  decrease total revenue by $500.

Question 16

If the price elasticity of supply is 0.8,and price increased by 5%,quantity supplied would

Accepted Answer

A)  increase by 4%. 
B)  increase by 6.25%. 
C)  decrease by 4%. 
D)  decrease by 6.25%. 
A)  increase by 4%. 
B)  increase by 6.25%. 
C)  decrease by 4%. 
D)  decrease by 6.25%.

Question 17

Table 5-5
  
-Refer to Table 5-5.Along which of the supply curves does quantity supplied move proportionately more than the price?

Accepted Answer

A)  along supply curve B only 
B)  along supply curves B and C 
C)  along all three supply curves 
D)  None. Quantity supplied moves proportionately less than the price along all of the three supply curves. 
A)  along supply curve B only 
B)  along supply curves B and C 
C)  along all three supply curves 
D)  None. Quantity supplied moves proportionately less than the price along all of the three supply curves.

Question 18

If the price of milk rises,when is the price elasticity of demand likely to be the lowest?

Accepted Answer

A)  immediately after the price increase 
B)  one month after the price increase 
C)  three months after the price increase 
D)  one year after the price increase 
A)  immediately after the price increase 
B)  one month after the price increase 
C)  three months after the price increase 
D)  one year after the price increase

Question 19

Table 5-3
The following table shows the demand schedule for a particular good.
  
-Refer to Table 5-3.Using the midpoint method,when price rises from $6 to $9,the price elasticity of demand is

Accepted Answer

A)  0.43 
B)  0.67 
C)  1.00 
D)  1.5 
A)  0.43 
B)  0.67 
C)  1.00 
D)  1.5

Question 20

Price elasticity of demand along a linear,downward-sloping demand curve increases as price falls.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

In which of the following situations will total revenue increase?

The difference between slope and elasticity is that slope

The supply of a good will be more elastic,the

Figure 5-1 -Refer to Figure 5-1.Between point A and point B on the graph,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 $5,000,what is the price elasticity of demand between $8 and $12?

Figure 5-11 -Refer to Figure 5-11.If the price rises from point D to point C,total revenue

If the price elasticity of demand for tuna is 0.7,then a 1.5% increase in the price of tuna will decrease the quantity demanded of tuna by

The supply of oil is likely to be

The price elasticity of supply measures how much

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 price elasticity of supply is 1.2,and price increased by 5%,quantity supplied would

Table 5-2 -Refer to Table 5-2.Using the midpoint method,if the price falls from $40 to $20,the absolute value of the price elasticity of demand is

Table 5-6 -Refer to Table 5-6.Using the midpoint method,the income elasticity of demand for good Y is

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?

Figure 5-10 -Refer to Figure 5-10.An increase in price from $30 to $35 would

If the price elasticity of supply is 0.8,and price increased by 5%,quantity supplied would

Table 5-5 -Refer to Table 5-5.Along which of the supply curves does quantity supplied move proportionately more than the price?

If the price of milk rises,when is the price elasticity of demand likely to be the lowest?

Table 5-3 The following table shows the demand schedule for a particular good. -Refer to Table 5-3.Using the midpoint method,when price rises from $6 to $9,the price elasticity of demand is

Price elasticity of demand along a linear,downward-sloping demand curve increases as price falls.

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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