Question 1

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

Question 2

Use the graph shown to answer the following questions.Put the correct letter(s)in the blank.
   
a.The elastic section of the graph is represented by section from _______.
b.The inelastic section of the graph is represented by section from _______.
c.The unit elastic section of the graph is represented by section _______.
d.The portion of the graph in which a decrease in price would cause total revenue to fall would be from _________.
e.The portion of the graph in which a decrease in price would cause total revenue to rise would be from _________.
f.The portion of the graph in which a decrease in price would not cause a change in total revenue would be _________.
g.The section of the graph in which total revenue would be at a maximum would be _______.
h.The section of the graph in which elasticity is greater than 1 is _______.
i.The section of the graph in which elasticity is equal to 1 is ______.
j.The section of the graph in which elasticity is less than 1 is _______.

Accepted Answer

a.A to B
b.B to C
c.

Question 3

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

Accepted Answer

A)  The elasticity of supply approaches infinity. 
B)  The supply curve is vertical. 
C)  At a price below $4, quantity supplied is infinite. 
D)  At a price above $4, quantity supplied is zero. 
A)  The elasticity of supply approaches infinity. 
B)  The supply curve is vertical. 
C)  At a price below $4, quantity supplied is infinite. 
D)  At a price above $4, quantity supplied is zero.

Question 4

The price elasticity of demand for bread

Accepted Answer

A)  is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread. 
B)  depends, in part, on the availability of close substitutes for bread. 
C)  reflects the many economic, social, and psychological forces that influence consumers' tastes for bread. 
D)  All of the above are correct. 
A)  is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread. 
B)  depends, in part, on the availability of close substitutes for bread. 
C)  reflects the many economic, social, and psychological forces that influence consumers' tastes for bread. 
D)  All of the above are correct.

Question 5

The discovery of a new hybrid wheat would increase the supply of wheat.As a result,wheat farmers would realize an increase in total revenue if the

Accepted Answer

A)  supply of wheat is elastic. 
B)  supply of wheat is inelastic. 
C)  demand for wheat is inelastic. 
D)  demand for wheat is elastic. 
A)  supply of wheat is elastic. 
B)  supply of wheat is inelastic. 
C)  demand for wheat is inelastic. 
D)  demand for wheat is elastic.

Question 6

Figure 5-5
  
-Refer to Figure 5-5.Using the midpoint method,demand is unit elastic between prices of

Accepted Answer

A)  $18 and $24. 
B)  $24 and $30. 
C)  $24 and $36. 
D)  $30 and $36. 
A)  $18 and $24. 
B)  $24 and $30. 
C)  $24 and $36. 
D)  $30 and $36.

Question 7

If we observe that when the price of ice cream rises by 10%,ice cream manufacturers increase the quantity supplied of ice cream by 20%,then the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 8

The production of methamphetamine (meth)is a social problem in the Midwest.Iowa is considering two potential programs: Operation Methbust would increase the number of sheriffs' deputies to search out and destroy methamphetamine labs.Operation Say No to Meth would increase the training required of public school teachers so that they could better educate students about the health risks of using meth.Assuming that each program were successful,which of the following statements is correct?

Accepted Answer

A)  Both Operation Methbust and Say No would reduce the equilibrium quantity and increase the equilibrium price of meth. 
B)  Both Operation Methbust and Say No would increase the equilibrium quantity and reduce the equilibrium price of meth. 
C)  Both Operation Methbust and Say No would reduce the equilibrium quantity of meth; Operation Methbust would increase the equilibrium price, whereas Say No would reduce the equilibrium price of meth. 
D)  Both Operation Methbust and Say No would reduce the equilibrium price of meth; Operation Methbust would reduce the equilibrium quantity, whereas Say No would increase the equilibrium quantity of meth. 
A)  Both Operation Methbust and Say No would reduce the equilibrium quantity and increase the equilibrium price of meth. 
B)  Both Operation Methbust and Say No would increase the equilibrium quantity and reduce the equilibrium price of meth. 
C)  Both Operation Methbust and Say No would reduce the equilibrium quantity of meth; Operation Methbust would increase the equilibrium price, whereas Say No would reduce the equilibrium price of meth. 
D)  Both Operation Methbust and Say No would reduce the equilibrium price of meth; Operation Methbust would reduce the equilibrium quantity, whereas Say No would increase the equilibrium quantity of meth.

Question 9

Figure 5-1
  
-Refer to Figure 5-1.Between point A and point B,the slope is equal to

Accepted Answer

A)  -1/4, and the price elasticity of demand is equal to 2/3. 
B)  -1/4, and the price elasticity of demand is equal to 3/2. 
C)  -3/2, and the price elasticity of demand is equal to 1/4. 
D)  -2/3, and the price elasticity of demand is equal to 3/2. 
A)  -1/4, and the price elasticity of demand is equal to 2/3. 
B)  -1/4, and the price elasticity of demand is equal to 3/2. 
C)  -3/2, and the price elasticity of demand is equal to 1/4. 
D)  -2/3, and the price elasticity of demand is equal to 3/2.

Question 10

Which of the following is an illustration of the market for original paintings by deceased artist Vincent Van Gogh?

Accepted Answer

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

Question 11

A bakery would be willing to supply 500 donuts per day at a price of $0.50 each.At a price of $0.80,the bakery would be willing to supply 1,100 donuts.Using the midpoint method,the price elasticity of supply for donuts is about

Accepted Answer

A)  0.62, and supply is elastic. 
B)  0.62, and supply is inelastic. 
C)  1.63, and supply is elastic. 
D)  1.63, and supply is inelastic. 
A)  0.62, and supply is elastic. 
B)  0.62, and supply is inelastic. 
C)  1.63, and supply is elastic. 
D)  1.63, and supply is inelastic.

Question 12

A city wants to raise revenues to build a new municipal swimming pool next year.The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues.The city manager suggests that the city lower the price of admission to raise revenues.Who is correct?

Accepted Answer

A)  the mayor 
B)  the city manager 
C)  The answer depends on the price elasticity of demand. 
D)  The answer depends on the costs of construction of the new municipal swimming pool. 
A)  the mayor 
B)  the city manager 
C)  The answer depends on the price elasticity of demand. 
D)  The answer depends on the costs of construction of the new municipal swimming pool.

Question 13

Which of the following statements about the price elasticity of demand is correct?

Accepted Answer

A)  The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. 
B)  Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes. 
C)  Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y. 
D)  All of the above are correct. 
A)  The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. 
B)  Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes. 
C)  Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y. 
D)  All of the above are correct.

Question 14

If demand is perfectly inelastic,the demand curve is vertical,and the price elasticity of demand equals 0.

Accepted Answer

A) True 
 B)False

Question 15

Figure 5-17

-Refer to Figure 5-17.Which of the following statements is correct?

Accepted Answer

A)  Supply curve A is perfectly elastic. 
B)  Supply curve B is perfectly inelastic. 
C)  Supply curve C is more inelastic than supply curve D. 
D)  Supply curve D is unit elastic. 
A)  Supply curve A is perfectly elastic. 
B)  Supply curve B is perfectly inelastic. 
C)  Supply curve C is more inelastic than supply curve D. 
D)  Supply curve D is unit elastic.

Question 16

Figure 5-2
  
-Refer to Figure 5-2.As price falls from Pa to Pb,which demand curve represents the most elastic demand?

Accepted Answer

A)  D1 
B)  D2 
C)  D3 
D)  All of the above are equally elastic. 
A)  D1 
B)  D2 
C)  D3 
D)  All of the above are equally elastic.

Question 17

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)  The demand for illegal drugs is inelastic. 
B)  Interdiction results in drug addicts having a greater need for quick cash. 
C)  Interdiction results in an increase in the amount of money needed to buy the same amount of drugs. 
D)  Government drug programs are more lenient now with drug offenders than they were in the 1980s. 
A)  The demand for illegal drugs is inelastic. 
B)  Interdiction results in drug addicts having a greater need for quick cash. 
C)  Interdiction results in an increase in the amount of money needed to buy the same amount of drugs. 
D)  Government drug programs are more lenient now with drug offenders than they were in the 1980s.

Question 19

If the price elasticity of supply is 1.5,and a price increase led to a 1.8% increase in quantity supplied,then the price increase is about

Accepted Answer

A)  0.67%. 
B)  0.83%. 
C)  1.20%. 
D)  2.70%. 
A)  0.67%. 
B)  0.83%. 
C)  1.20%. 
D)  2.70%.

Question 20

Demand is inelastic if the price elasticity of demand is greater than 1.

Accepted Answer

A) True 
 B)False

Which of the following statements is not valid when the market supply curve is vertical?

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

The price elasticity of demand for bread

The discovery of a new hybrid wheat would increase the supply of wheat.As a result,wheat farmers would realize an increase in total revenue if the

Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,demand is unit elastic between prices of

If we observe that when the price of ice cream rises by 10%,ice cream manufacturers increase the quantity supplied of ice cream by 20%,then the price elasticity of supply is 2.

Figure 5-1 -Refer to Figure 5-1.Between point A and point B,the slope is equal to

Which of the following is an illustration of the market for original paintings by deceased artist Vincent Van Gogh?

A bakery would be willing to supply 500 donuts per day at a price of $0.50 each.At a price of $0.80,the bakery would be willing to supply 1,100 donuts.Using the midpoint method,the price elasticity of supply for donuts is about

Which of the following statements about the price elasticity of demand is correct?

If demand is perfectly inelastic,the demand curve is vertical,and the price elasticity of demand equals 0.

Figure 5-17 -Refer to Figure 5-17.Which of the following statements is correct?

Figure 5-2 -Refer to Figure 5-2.As price falls from Pa to Pb,which demand curve represents the most elastic demand?

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

If the price elasticity of supply is 1.5,and a price increase led to a 1.8% increase in quantity supplied,then the price increase is about

Demand is inelastic if the price elasticity of demand is greater than 1.

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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Exam 5: Elasticity and Its Application

Which of the following statements is not valid when the market supply curve is vertical?

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

The price elasticity of demand for bread

The discovery of a new hybrid wheat would increase the supply of wheat.As a result,wheat farmers would realize an increase in total revenue if the

Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,demand is unit elastic between prices of

If we observe that when the price of ice cream rises by 10%,ice cream manufacturers increase the quantity supplied of ice cream by 20%,then the price elasticity of supply is 2.

Figure 5-1 -Refer to Figure 5-1.Between point A and point B,the slope is equal to

Which of the following is an illustration of the market for original paintings by deceased artist Vincent Van Gogh?

A bakery would be willing to supply 500 donuts per day at a price of $0.50 each.At a price of $0.80,the bakery would be willing to supply 1,100 donuts.Using the midpoint method,the price elasticity of supply for donuts is about

Which of the following statements about the price elasticity of demand is correct?

If demand is perfectly inelastic,the demand curve is vertical,and the price elasticity of demand equals 0.

Figure 5-17 -Refer to Figure 5-17.Which of the following statements is correct?

Figure 5-2 -Refer to Figure 5-2.As price falls from Pa to Pb,which demand curve represents the most elastic demand?

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

If the price elasticity of supply is 1.5,and a price increase led to a 1.8% increase in quantity supplied,then the price increase is about

Demand is inelastic if the price elasticity of demand is greater than 1.

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.

Filters