Question 1

The greater the price elasticity of demand,the

Accepted Answer

A)  more likely the product is a necessity. 
B)  smaller the responsiveness of quantity demanded to a change in price. 
C)  greater the percentage change in price over the percentage change in quantity demanded. 
D)  greater the responsiveness of quantity demanded to a change in price. 
A)  more likely the product is a necessity. 
B)  smaller the responsiveness of quantity demanded to a change in price. 
C)  greater the percentage change in price over the percentage change in quantity demanded. 
D)  greater the responsiveness of quantity demanded to a change in price.

Question 2

Figure 5-16
  
-Refer to Figure 5-16.Using the midpoint method,what is the price elasticity of supply between point A and point B?

Accepted Answer

A)  0.58 
B)  0.71 
C)  1.06 
D)  1.4 
A)  0.58 
B)  0.71 
C)  1.06 
D)  1.4

Question 3

Which of the following expressions represents a cross-price elasticity of demand?

Accepted Answer

A)  percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread 
B)  percentage change in quantity demanded of bread divided by percentage change in price of butter 
C)  percentage change in price of bread divided by percentage change in quantity demanded of bread 
D)  percentage change in quantity demanded of bread divided by percentage change in income 
A)  percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread 
B)  percentage change in quantity demanded of bread divided by percentage change in price of butter 
C)  percentage change in price of bread divided by percentage change in quantity demanded of bread 
D)  percentage change in quantity demanded of bread divided by percentage change in income

Question 4

Figure 5-8
  
-Refer to Figure 5-8.For prices below $5,demand is price

Accepted Answer

A)  elastic, and raising price will increase total revenue. 
B)  inelastic, and raising price will increase total revenue. 
C)  elastic, and lowering price will increase total revenue. 
D)  inelastic, and lowering price will increase total revenue. 
A)  elastic, and raising price will increase total revenue. 
B)  inelastic, and raising price will increase total revenue. 
C)  elastic, and lowering price will increase total revenue. 
D)  inelastic, and lowering price will increase total revenue.

Question 5

Along the elastic portion of a linear demand curve,total revenue rises as price rises.

Accepted Answer

A) True 
 B)False

Question 6

Scenario 5-2
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-2.The change in equilibrium quantity will be

Accepted Answer

A)  greater in the aged cheddar cheese market than in the bread market. 
B)  greater in the bread market than in the aged cheddar cheese market. 
C)  the same in the aged cheddar cheese and bread markets. 
D)  Any of the above could be correct. 
A)  greater in the aged cheddar cheese market than in the bread market. 
B)  greater in the bread market than in the aged cheddar cheese market. 
C)  the same in the aged cheddar cheese and bread markets. 
D)  Any of the above could be correct.

Question 7

If the price elasticity of demand for aluminum foil is 1.45,then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Accepted Answer

A)  1.66%, and aluminum foil sellers' total revenue will increase as a result. 
B)  1.66%, and aluminum foil sellers' total revenue will decrease as a result. 
C)  3.48%, and aluminum foil sellers' total revenue will increase as a result. 
D)  3.48%, and aluminum foil sellers' total revenue will decrease as a result. 
A)  1.66%, and aluminum foil sellers' total revenue will increase as a result. 
B)  1.66%, and aluminum foil sellers' total revenue will decrease as a result. 
C)  3.48%, and aluminum foil sellers' total revenue will increase as a result. 
D)  3.48%, and aluminum foil sellers' total revenue will decrease as a result.

Question 8

You own a small town movie theatre.You currently charge $5 per ticket for everyone who comes to your movies.Your friend who took an economics course in college tells you that there may be a way to increase your total revenue.Given the demand curves shown,answer the following questions.

a.What is your current total revenue for both groups?
b.The elasticity of demand is more elastic in which market?
c.Which market has the more inelastic demand?
d.What is the elasticity of demand between the prices of $5 and $2 in the adult market? Is this elastic or inelastic?
e.What is the elasticity of demand between $5 and $2 in the children's market? Is this elastic or inelastic?
f.Given the graphs and what your friend knows about economics,he recommends you increase the price of adult tickets to $8 each and lower the price of a child's ticket to $3.How much could you increase total revenue if you take his advice?

Accepted Answer

a.Total revenue from children's tickets

Question 9

If a 15% increase in price for a good results in a 20% decrease in quantity demanded,the price elasticity of demand is

Accepted Answer

A)  0.75. 
B)  1.25. 
C)  1.33. 
D)  1.60. 
A)  0.75. 
B)  1.25. 
C)  1.33. 
D)  1.60.

Question 10

Figure 5-16
  
-Refer to Figure 5-16.If,holding the supply curve fixed,there were an increase in demand that caused the equilibrium price to increase from $6 to $8,then sellers' total revenue would

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  The effect on total revenue cannot be determined from the given information. 
A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  The effect on total revenue cannot be determined from the given information.

Question 11

If the price elasticity of supply is 1.2,and a price increase led to a 5% increase in quantity supplied,then the price increase is about

Accepted Answer

A)  0.24%. 
B)  4.2%. 
C)  6%. 
D)  6.2%. 
A)  0.24%. 
B)  4.2%. 
C)  6%. 
D)  6.2%.

Question 12

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,at a price of $8,what is the income elasticity of demand when income rises from $7,500 to $10,000?

Accepted Answer

A)  0.00 
B)  0.41 
C)  1.00 
D)  2.45 
A)  0.00 
B)  0.41 
C)  1.00 
D)  2.45

Question 13

Figure 5-6
  
-Refer to Figure 5-6.Using the midpoint method,the price elasticity of demand between point A and point B is

Accepted Answer

A)  1. 
B)  1.5. 
C)  2. 
D)  2.5. 
A)  1. 
B)  1.5. 
C)  2. 
D)  2.5.

Question 14

Recently,in Smalltown,the price of Twinkies fell from $0.80 to $0.70.As a result,the quantity demanded of Ho-Ho's decreased from 120 to 100.What would be the appropriate elasticity to compute? Using the midpoint method,compute this elasticity.What does your answer tell you?

Accepted Answer

The appropriate elasticity to compute wo

Question 15

Figure 5-18
  
-Refer to Figure 5-18.Which supply curve represents perfectly inelastic supply?

Accepted Answer

A)  S1 
B)  S2 
C)  S3 
D)  None of the supply curves is perfectly inelastic. 
A)  S1 
B)  S2 
C)  S3 
D)  None of the supply curves is perfectly inelastic.

Question 16

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts,the price elasticity of supply approaches

Accepted Answer

A)  zero, and the supply curve is horizontal. 
B)  zero, and the supply curve is vertical. 
C)  infinity, and the supply curve is horizontal. 
D)  infinity, and the supply curve is vertical. 
A)  zero, and the supply curve is horizontal. 
B)  zero, and the supply curve is vertical. 
C)  infinity, and the supply curve is horizontal. 
D)  infinity, and the supply curve is vertical.

Question 17

Demand is inelastic if the price elasticity of demand is

Accepted Answer

A)  less than 1. 
B)  equal to 1. 
C)  greater than 1. 
D)  equal to 0. 
A)  less than 1. 
B)  equal to 1. 
C)  greater than 1. 
D)  equal to 0.

Question 18

Figure 5-11
  
-Refer to Figure 5-11.Using the midpoint method,the price elasticity of demand between point A and point B is about

Accepted Answer

A)  0.33. 
B)  0.5. 
C)  2.0. 
D)  3.0. 
A)  0.33. 
B)  0.5. 
C)  2.0. 
D)  3.0.

Question 19

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Accepted Answer

A) True 
 B)False

Question 20

The value of the price elasticity of demand for a good will be relatively large when

Accepted Answer

A)  there are no good substitutes available for the good. 
B)  the time period in question is relatively short. 
C)  the good is a luxury rather than a necessity. 
D)  All of the above are correct. 
A)  there are no good substitutes available for the good. 
B)  the time period in question is relatively short. 
C)  the good is a luxury rather than a necessity. 
D)  All of the above are correct.

The greater the price elasticity of demand,the

Figure 5-16 -Refer to Figure 5-16.Using the midpoint method,what is the price elasticity of supply between point A and point B?

Which of the following expressions represents a cross-price elasticity of demand?

Figure 5-8 -Refer to Figure 5-8.For prices below $5,demand is price

Along the elastic portion of a linear demand curve,total revenue rises as price rises.

If the price elasticity of demand for aluminum foil is 1.45,then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

If a 15% increase in price for a good results in a 20% decrease in quantity demanded,the price elasticity of demand is

Figure 5-16 -Refer to Figure 5-16.If,holding the supply curve fixed,there were an increase in demand that caused the equilibrium price to increase from $6 to $8,then sellers' total revenue would

If the price elasticity of supply is 1.2,and a price increase led to a 5% increase in quantity supplied,then the price increase is about

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,at a price of $8,what is the income elasticity of demand when income rises from $7,500 to $10,000?

Figure 5-6 -Refer to Figure 5-6.Using the midpoint method,the price elasticity of demand between point A and point B is

Recently,in Smalltown,the price of Twinkies fell from $0.80 to $0.70.As a result,the quantity demanded of Ho-Ho's decreased from 120 to 100.What would be the appropriate elasticity to compute? Using the midpoint method,compute this elasticity.What does your answer tell you?

Figure 5-18 -Refer to Figure 5-18.Which supply curve represents perfectly inelastic supply?

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts,the price elasticity of supply approaches

Demand is inelastic if the price elasticity of demand is

Figure 5-11 -Refer to Figure 5-11.Using the midpoint method,the price elasticity of demand between point A and point B is about

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

The value of the price elasticity of demand for a good will be relatively large when

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

Exam 5: Elasticity and Its Application

The greater the price elasticity of demand,the

Figure 5-16 -Refer to Figure 5-16.Using the midpoint method,what is the price elasticity of supply between point A and point B?

Which of the following expressions represents a cross-price elasticity of demand?

Figure 5-8 -Refer to Figure 5-8.For prices below $5,demand is price

Along the elastic portion of a linear demand curve,total revenue rises as price rises.

If the price elasticity of demand for aluminum foil is 1.45,then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

If a 15% increase in price for a good results in a 20% decrease in quantity demanded,the price elasticity of demand is

Figure 5-16 -Refer to Figure 5-16.If,holding the supply curve fixed,there were an increase in demand that caused the equilibrium price to increase from $6 to $8,then sellers' total revenue would

If the price elasticity of supply is 1.2,and a price increase led to a 5% increase in quantity supplied,then the price increase is about

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,at a price of $8,what is the income elasticity of demand when income rises from $7,500 to $10,000?

Figure 5-6 -Refer to Figure 5-6.Using the midpoint method,the price elasticity of demand between point A and point B is

Recently,in Smalltown,the price of Twinkies fell from $0.80 to $0.70.As a result,the quantity demanded of Ho-Ho's decreased from 120 to 100.What would be the appropriate elasticity to compute? Using the midpoint method,compute this elasticity.What does your answer tell you?

Figure 5-18 -Refer to Figure 5-18.Which supply curve represents perfectly inelastic supply?

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts,the price elasticity of supply approaches

Demand is inelastic if the price elasticity of demand is

Figure 5-11 -Refer to Figure 5-11.Using the midpoint method,the price elasticity of demand between point A and point B is about

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

The value of the price elasticity of demand for a good will be relatively large when

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