Question 1

Ryan says that he would buy one cup of coffee every day regardless of the price.If he is telling the truth,Ryan's

Accepted Answer

A)  demand for coffee is perfectly inelastic. 
B)  price elasticity of demand for coffee is 1. 
C)  income elasticity of demand for coffee is 0. 
D)  None of the above answers is correct. 
A)  demand for coffee is perfectly inelastic. 
B)  price elasticity of demand for coffee is 1. 
C)  income elasticity of demand for coffee is 0. 
D)  None of the above answers is correct.

Question 2

Scenario 5-4
Suppose the government is concerned about firms in the United States importing illegal caviar. As a result, the government increases border patrols to catch illegal shipments. U.S. Customs agents perform DNA testing on the caviar to determine if it comes from endangered species of fish. If so, the government destroys the caviar.
-Refer to Scenario 5-4.What would we expect to observe in the caviar market?

Accepted Answer

A)  Equilibrium prices and quantities will increase. 
B)  Equilibrium prices will increase by more if the demand for caviar is elastic than if demand is inelastic. 
C)  Total revenues to caviar firms will increase if the demand for caviar is inelastic. 
D)  All of the above are correct. 
A)  Equilibrium prices and quantities will increase. 
B)  Equilibrium prices will increase by more if the demand for caviar is elastic than if demand is inelastic. 
C)  Total revenues to caviar firms will increase if the demand for caviar is inelastic. 
D)  All of the above are correct.

Question 3

Demand is said to be price elastic if

Accepted Answer

A)  the price of the good responds substantially to changes in demand. 
B)  demand shifts substantially when income or the expected future price of the good changes. 
C)  buyers do not respond much to changes in the price of the good. 
D)  buyers respond substantially to changes in the price of the good. 
A)  the price of the good responds substantially to changes in demand. 
B)  demand shifts substantially when income or the expected future price of the good changes. 
C)  buyers do not respond much to changes in the price of the good. 
D)  buyers respond substantially to changes in the price of the good.

Question 4

Which of the following statements is correct?

Accepted Answer

A)  The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. 
B)  The demand for grandfather clocks is more elastic than the demand for clocks in general. 
C)  The demand for cardboard is more elastic over a long period of time than over a short period of time. 
D)  All of the above are correct. 
A)  The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. 
B)  The demand for grandfather clocks is more elastic than the demand for clocks in general. 
C)  The demand for cardboard is more elastic over a long period of time than over a short period of time. 
D)  All of the above are correct.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

A) True 
 B)False

Question 8

Figure 5-5
  
-Refer to Figure 5-5.Using the midpoint method,between prices of $48 and $54,price elasticity of demand is about

Accepted Answer

A)  0.92. 
B)  3.89. 
C)  4.33. 
D)  5.67. 
A)  0.92. 
B)  3.89. 
C)  4.33. 
D)  5.67.

Question 9

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

Accepted Answer

A) True 
 B)False

Question 10

If the price elasticity of supply is 1.5,and a price increase led to a 3% increase in quantity supplied,then the price increase is about

Accepted Answer

A)  0.2%. 
B)  0.5%. 
C)  2.0%. 
D)  4.5%. 
A)  0.2%. 
B)  0.5%. 
C)  2.0%. 
D)  4.5%.

Question 11

Figure 5-15
  
-Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between $4 and $6?

Accepted Answer

A)  0.75 
B)  1.00 
C)  1.20 
D)  1.25 
A)  0.75 
B)  1.00 
C)  1.20 
D)  1.25

Question 12

If the price elasticity of demand for a good is 0.2,then a 3 percent decrease in price results in a

Accepted Answer

A)  0.6 percent increase in the quantity demanded. 
B)  1.5 percent increase in the quantity demanded. 
C)  2 percent increase in the quantity demanded. 
D)  6 percent increase in the quantity demanded. 
A)  0.6 percent increase in the quantity demanded. 
B)  1.5 percent increase in the quantity demanded. 
C)  2 percent increase in the quantity demanded. 
D)  6 percent increase in the quantity demanded.

Question 13

If the price elasticity of demand for a good is 10.0,then a 4 percent increase in price results in a

Accepted Answer

A)  0.4 percent decrease in the quantity demanded. 
B)  2.5 percent decrease in the quantity demanded. 
C)  4 percent decrease in the quantity demanded. 
D)  40 percent decrease in the quantity demanded. 
A)  0.4 percent decrease in the quantity demanded. 
B)  2.5 percent decrease in the quantity demanded. 
C)  4 percent decrease in the quantity demanded. 
D)  40 percent decrease in the quantity demanded.

Question 14

Elasticity of demand is closely related to the slope of the demand curve.The less responsive buyers are to a change in price,the

Accepted Answer

A)  steeper the demand curve will be. 
B)  flatter the demand curve will be. 
C)  further to the right the demand curve will sit. 
D)  closer to the vertical axis the demand curve will sit. 
A)  steeper the demand curve will be. 
B)  flatter the demand curve will be. 
C)  further to the right the demand curve will sit. 
D)  closer to the vertical axis the demand curve will sit.

Question 15

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

Accepted Answer

A) True 
 B)False

Question 16

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

Accepted Answer

A)  midpoint of the demand curve. 
B)  lower end of the demand curve. 
C)  upper end of the demand curve. 
D)  It is impossible to tell without knowing prices and quantities demanded. 
A)  midpoint of the demand curve. 
B)  lower end of the demand curve. 
C)  upper end of the demand curve. 
D)  It is impossible to tell without knowing prices and quantities demanded.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

A good will have a more elastic demand,the

Accepted Answer

A)  greater the availability of close substitutes. 
B)  more broad the definition of the market. 
C)  shorter the period of time. 
D)  more it is regarded as a necessity. 
A)  greater the availability of close substitutes. 
B)  more broad the definition of the market. 
C)  shorter the period of time. 
D)  more it is regarded as a necessity.

Question 19

If the demand for textbooks is inelastic,then a decrease in the price of textbooks will

Accepted Answer

A)  increase total revenue of textbook sellers. 
B)  decrease total revenue of textbook sellers. 
C)  not change total revenue of textbook sellers. 
D)  There is not enough information to answer this question. 
A)  increase total revenue of textbook sellers. 
B)  decrease total revenue of textbook sellers. 
C)  not change total revenue of textbook sellers. 
D)  There is not enough information to answer this question.

Question 20

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.

Exam 5: Elasticity and Its Application

Ryan says that he would buy one cup of coffee every day regardless of the price.If he is telling the truth,Ryan's

Demand is said to be price elastic if

Which of the following statements is correct?

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

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

A government program that reduces land under cultivation hurts farmers but helps consumers.

Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,between prices of $48 and $54,price elasticity of demand is about

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

If the price elasticity of supply is 1.5,and a price increase led to a 3% increase in quantity supplied,then the price increase is about

Figure 5-15 -Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between $4 and $6?

If the price elasticity of demand for a good is 0.2,then a 3 percent decrease in price results in a

If the price elasticity of demand for a good is 10.0,then a 4 percent increase in price results in a

Elasticity of demand is closely related to the slope of the demand curve.The less responsive buyers are to a change in price,the

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

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

A good will have a more elastic demand,the

If the demand for textbooks is inelastic,then a decrease in the price of textbooks will

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

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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