Question 1

Total revenue

Accepted Answer

A)  always increases as price increases. 
B)  increases as price increases, as long as demand is elastic. 
C)  decreases as price increases, as long as demand is inelastic. 
D)  remains unchanged as price increases when demand is unit elastic. 
A)  always increases as price increases. 
B)  increases as price increases, as long as demand is elastic. 
C)  decreases as price increases, as long as demand is inelastic. 
D)  remains unchanged as price increases when demand is unit elastic.

Question 2

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

Accepted Answer

A)  laptop computers 
B)  iPod shuffles 
C)  designer jeans 
D)  college tuition for a junior or senior 
A)  laptop computers 
B)  iPod shuffles 
C)  designer jeans 
D)  college tuition for a junior or senior

Question 3

When we move upward and to the left along a linear,downward-sloping demand curve,price elasticity of demand

Accepted Answer

A)  first becomes smaller, then larger. 
B)  always becomes larger. 
C)  always becomes smaller. 
D)  first becomes larger, then smaller. 
A)  first becomes smaller, then larger. 
B)  always becomes larger. 
C)  always becomes smaller. 
D)  first becomes larger, then smaller.

Question 4

For which of the following goods is the income elasticity of demand likely highest?

Accepted Answer

A)  natural gas 
B)  doctor's visits 
C)  hamburgers 
D)  boats 
A)  natural gas 
B)  doctor's visits 
C)  hamburgers 
D)  boats

Question 5

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Accepted Answer

A) True 
 B)False

Question 6

Figure 5-4
  
-Refer to Figure 5-4.Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00.Then,between prices of $4.99 and $5.01,the price elasticity of demand is

Accepted Answer

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

Question 7

Necessities such as food and clothing tend to have

Accepted Answer

A)  high price elasticities of demand and high income elasticities of demand. 
B)  high price elasticities of demand and low income elasticities of demand. 
C)  low price elasticities of demand and high income elasticities of demand. 
D)  low price elasticities of demand and low income elasticities of demand. 
A)  high price elasticities of demand and high income elasticities of demand. 
B)  high price elasticities of demand and low income elasticities of demand. 
C)  low price elasticities of demand and high income elasticities of demand. 
D)  low price elasticities of demand and low income elasticities of demand.

Question 8

Figure 5-14
  
-Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points B and C?

Accepted Answer

A)  1.67 
B)  1.19 
C)  0.84 
D)  0.61 
A)  1.67 
B)  1.19 
C)  0.84 
D)  0.61

Question 9

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

Accepted Answer

A)  ice cream 
B)  frozen yogurt 
C)  vanilla ice cream 
D)  Häagen-Dazs® vanilla bean ice cream 
A)  ice cream 
B)  frozen yogurt 
C)  vanilla ice cream 
D)  Häagen-Dazs® vanilla bean ice cream

Question 10

Figure 5-6
  
-Refer to Figure 5-6.Sellers' total revenue would increase if the price

Accepted Answer

A)  increased from $4 to $6. 
B)  increased from $16 to $18. 
C)  decreased from $8 to $6. 
D)  All of the above are correct. 
A)  increased from $4 to $6. 
B)  increased from $16 to $18. 
C)  decreased from $8 to $6. 
D)  All of the above are correct.

Question 11

On a certain supply curve,one point is (quantity supplied = 200,price = $2.00)and another point is (quantity supplied = 250,price = $2.50).Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)  0.2. 
B)  0.5. 
C)  1.0. 
D)  2.5. 
A)  0.2. 
B)  0.5. 
C)  1.0. 
D)  2.5.

Question 12

Scenario 5-3
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-3.The change in equilibrium price will be

Accepted Answer

A)  greater in the milk market than in the beef market. 
B)  greater in the beef market than in the milk market. 
C)  the same in the milk and beef markets. 
D)  Any of the above could be correct. 
A)  greater in the milk market than in the beef market. 
B)  greater in the beef market than in the milk market. 
C)  the same in the milk and beef markets. 
D)  Any of the above could be correct.

Question 13

At a price of $1.00,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.20,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)  0.45 
B)  0.90 
C)  1.11 
D)  2.20 
A)  0.45 
B)  0.90 
C)  1.11 
D)  2.20

Question 14

If the price elasticity of demand is 1.5,regardless of which two points on the demand curve are used to compute the elasticity,then demand is

Accepted Answer

A)  perfectly inelastic, and the demand curve is vertical. 
B)  elastic, and the demand curve is a straight, downward-sloping line. 
C)  perfectly elastic, and the demand curve is horizontal. 
D)  elastic, and the demand curve is something other than a straight, downward-sloping line. 
A)  perfectly inelastic, and the demand curve is vertical. 
B)  elastic, and the demand curve is a straight, downward-sloping line. 
C)  perfectly elastic, and the demand curve is horizontal. 
D)  elastic, and the demand curve is something other than a straight, downward-sloping line.

Question 15

If a 30 percent change in price causes a 15 percent change in quantity supplied,then the price elasticity of supply is about

Accepted Answer

A)  0.5, and supply is elastic. 
B)  0.5, and supply is inelastic. 
C)  2, and supply is inelastic. 
D)  2, and supply is elastic. 
A)  0.5, and supply is elastic. 
B)  0.5, and supply is inelastic. 
C)  2, and supply is inelastic. 
D)  2, and supply is elastic.

Question 16

Table 5-4
  
-Refer to Table 5-4.As price rises from $10 to $12,the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A)  0.08. 
B)  0.18. 
C)  0.42. 
D)  0.58. 
A)  0.08. 
B)  0.18. 
C)  0.42. 
D)  0.58.

Question 17

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 price 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 18

When demand is inelastic,a decrease in price increases total revenue.

Accepted Answer

A) True 
 B)False

Question 19

The demand for Godiva pumpkin truffles is likely quite elastic because

Accepted Answer

A)  truffles melt easily. 
B)  this particular type of chocolate is viewed as a necessity by many chocolate lovers. 
C)  the market is broadly defined. 
D)  other types of chocolate are good substitutes for this particular flavor. 
A)  truffles melt easily. 
B)  this particular type of chocolate is viewed as a necessity by many chocolate lovers. 
C)  the market is broadly defined. 
D)  other types of chocolate are good substitutes for this particular flavor.

Question 20

When demand is inelastic,an increase in price will cause

Accepted Answer

A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded. 
A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded.

Exam 5: Elasticity and Its Application

Total revenue

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

When we move upward and to the left along a linear,downward-sloping demand curve,price elasticity of demand

For which of the following goods is the income elasticity of demand likely highest?

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Figure 5-4 -Refer to Figure 5-4.Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00.Then,between prices of $4.99 and $5.01,the price elasticity of demand is

Necessities such as food and clothing tend to have

Figure 5-14 -Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points B and C?

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

Figure 5-6 -Refer to Figure 5-6.Sellers' total revenue would increase if the price

On a certain supply curve,one point is (quantity supplied = 200,price = $2.00)and another point is (quantity supplied = 250,price = $2.50).Using the midpoint method,the price elasticity of supply is about

Scenario 5-3 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-3.The change in equilibrium price will be

At a price of $1.00,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.20,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is about

If the price elasticity of demand is 1.5,regardless of which two points on the demand curve are used to compute the elasticity,then demand is

If a 30 percent change in price causes a 15 percent change in quantity supplied,then the price elasticity of supply is about

Table 5-4 -Refer to Table 5-4.As price rises from $10 to $12,the price elasticity of demand using the midpoint method is approximately

When demand is inelastic,a decrease in price increases total revenue.

The demand for Godiva pumpkin truffles is likely quite elastic because

When demand is inelastic,an increase in price will cause

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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