Question 1

Which of the following statements is correct?

Accepted Answer

A)  The demand for natural gas is more elastic over a short period of time than over a long period of time. 
B)  The demand for smoke alarms is more elastic than the demand for Persian rugs. 
C)  The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general. 
D)  All of the above are correct. 
A)  The demand for natural gas is more elastic over a short period of time than over a long period of time. 
B)  The demand for smoke alarms is more elastic than the demand for Persian rugs. 
C)  The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general. 
D)  All of the above are correct.

Question 2

Table 5-6
  
-Refer to Table 5-6.Which scenario describes the market for oil in the long run?

Accepted Answer

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

Question 3

Goods with many close substitutes tend to have

Accepted Answer

A)  more elastic demands. 
B)  less elastic demands. 
C)  price elasticities of demand that are unit elastic. 
D)  income elasticities of demand that are negative. 
A)  more elastic demands. 
B)  less elastic demands. 
C)  price elasticities of demand that are unit elastic. 
D)  income elasticities of demand that are negative.

Question 4

When consumers face rising gasoline prices,they typically

Accepted Answer

A)  reduce their quantity demanded more in the long run than in the short run. 
B)  reduce their quantity demanded more in the short run than in the long run. 
C)  do not reduce their quantity demanded in the short run or the long run. 
D)  increase their quantity demanded in the short run but reduce their quantity demanded in the long run. 
A)  reduce their quantity demanded more in the long run than in the short run. 
B)  reduce their quantity demanded more in the short run than in the long run. 
C)  do not reduce their quantity demanded in the short run or the long run. 
D)  increase their quantity demanded in the short run but reduce their quantity demanded in the long run.

Question 5

Figure 5-13
  
-Refer to Figure 5-13.Using the midpoint method,what is the price elasticity of supply between $100 and $220?

Accepted Answer

A)  0.58 
B)  0.67 
C)  1.00 
D)  1.73 
A)  0.58 
B)  0.67 
C)  1.00 
D)  1.73

Question 6

If a firm is facing elastic demand,then the firm should decrease price to increase revenue.

Accepted Answer

A) True 
 B)False

Question 7

If the price of natural gas rises,when is the price elasticity of demand likely to be the highest?

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 8

At a price of $1.20,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.40,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)  0.15 
B)  0.375 
C)  2.5 
D)  2.60 
A)  0.15 
B)  0.375 
C)  2.5 
D)  2.60

Question 9

When the price of used cds is $4,Daphne buys five per month.When the price is $3,she buys nine per month.Daphne's demand for used cds is

Accepted Answer

A)  elastic, and her demand curve would be relatively flat. 
B)  elastic, and her demand curve would be relatively steep. 
C)  inelastic, and her demand curve would be relatively flat. 
D)  inelastic, and her demand curve would be relatively steep. 
A)  elastic, and her demand curve would be relatively flat. 
B)  elastic, and her demand curve would be relatively steep. 
C)  inelastic, and her demand curve would be relatively flat. 
D)  inelastic, and her demand curve would be relatively steep.

Question 10

If a firm is facing inelastic demand,then the firm should decrease price to increase revenue.

Accepted Answer

A) True 
 B)False

Question 11

When the price of a good is $5,the quantity demanded is 120 units per month; when the price is $7,the quantity demanded is 100 units per month.Using the midpoint method,the price elasticity of demand is about

Accepted Answer

A)  0.55. 
B)  1.83. 
C)  2. 
D)  10. 
A)  0.55. 
B)  1.83. 
C)  2. 
D)  10.

Question 12

Scenario 5-1
Suppose that 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 5-1.The price elasticity of supply for bread could be

Accepted Answer

A)  -1. 
B)  0. 
C)  0.5. 
D)  1.5. 
A)  -1. 
B)  0. 
C)  0.5. 
D)  1.5.

Question 13

Figure 5-4
  
-Refer to Figure 5-4.If the price decreases in the region of the demand curve between points A and B,we can expect total revenue to

Accepted Answer

A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first decrease, then increase until total revenue is maximized. 
A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first decrease, then increase until total revenue is maximized.

Question 14

In the long run,the quantity supplied of most goods

Accepted Answer

A)  will increase in almost all cases, regardless of what happens to price. 
B)  cannot respond at all to a change in price. 
C)  can respond to a change in price, but the change is almost always inconsequential. 
D)  can respond substantially to a change in price. 
A)  will increase in almost all cases, regardless of what happens to price. 
B)  cannot respond at all to a change in price. 
C)  can respond to a change in price, but the change is almost always inconsequential. 
D)  can respond substantially to a change in price.

Question 15

Suppose that quantity demand rises by 10% as a result of a 15% decrease in price.The price elasticity of demand for this good is

Accepted Answer

A)  inelastic and equal to 0.67. 
B)  elastic and equal to 0.67. 
C)  inelastic and equal to 1.50. 
D)  elastic and equal to 1.50. 
A)  inelastic and equal to 0.67. 
B)  elastic and equal to 0.67. 
C)  inelastic and equal to 1.50. 
D)  elastic and equal to 1.50.

Question 16

If a supply curve is horizontal,then supply is said to be perfectly elastic,and the price elasticity of supply approaches infinity.

Accepted Answer

A) True 
 B)False

Question 17

If the demand curve is linear and downward sloping,which of the following statements is not correct?

Accepted Answer

A)  Demand is more elastic on the lower part of the demand curve than on the upper part. 
B)  Different pairs of points on the demand curve can result in different values of the price elasticity of demand. 
C)  Different pairs of points on the demand curve result in identical values of the slope of the demand curve. 
D)  Starting from a point on the upper part of the demand curve, an increase in price leads to a decrease in total revenue. 
A)  Demand is more elastic on the lower part of the demand curve than on the upper part. 
B)  Different pairs of points on the demand curve can result in different values of the price elasticity of demand. 
C)  Different pairs of points on the demand curve result in identical values of the slope of the demand curve. 
D)  Starting from a point on the upper part of the demand curve, an increase in price leads to a decrease in total revenue.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  athletic shoes 
B)  running shoes 
C)  Nike running shoes 
D)  Nike Shox running shoes 
A)  athletic shoes 
B)  running shoes 
C)  Nike running shoes 
D)  Nike Shox running shoes

Question 20

An advance in farm technology that results in an increased market supply is

Accepted Answer

A)  good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food. 
B)  bad for farmers because total revenue will fall but good for consumers because prices for food will fall. 
C)  good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption. 
D)  bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue. 
A)  good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food. 
B)  bad for farmers because total revenue will fall but good for consumers because prices for food will fall. 
C)  good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption. 
D)  bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue.

Exam 5: Elasticity and Its Application

Which of the following statements is correct?

Table 5-6 -Refer to Table 5-6.Which scenario describes the market for oil in the long run?

Goods with many close substitutes tend to have

When consumers face rising gasoline prices,they typically

Figure 5-13 -Refer to Figure 5-13.Using the midpoint method,what is the price elasticity of supply between $100 and $220?

If a firm is facing elastic demand,then the firm should decrease price to increase revenue.

If the price of natural gas rises,when is the price elasticity of demand likely to be the highest?

At a price of $1.20,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.40,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is about

When the price of used cds is $4,Daphne buys five per month.When the price is $3,she buys nine per month.Daphne's demand for used cds is

If a firm is facing inelastic demand,then the firm should decrease price to increase revenue.

When the price of a good is $5,the quantity demanded is 120 units per month; when the price is $7,the quantity demanded is 100 units per month.Using the midpoint method,the price elasticity of demand is about

Figure 5-4 -Refer to Figure 5-4.If the price decreases in the region of the demand curve between points A and B,we can expect total revenue to

In the long run,the quantity supplied of most goods

Suppose that quantity demand rises by 10% as a result of a 15% decrease in price.The price elasticity of demand for this good is

If a supply curve is horizontal,then supply is said to be perfectly elastic,and the price elasticity of supply approaches infinity.

If the demand curve is linear and downward sloping,which of the following statements is not correct?

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

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

An advance in farm technology that results in an increased market supply is

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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