Question 1

It is likely that

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. C

Question 2

Figure 5-3
  
-Refer to Figure 5-3.If price falls within the A range of the demand curve we can expect total revenue to

Accepted Answer

A) increase. 
B) decrease. 
C) stay the same. 
D) This determination cannot be made without further information. 
A) increase. 
B) decrease. 
C) stay the same. 
D) This determination cannot be made without further information. A

Question 3

If sellers do not adjust their quantities supplied at all in response to a change in price,

Accepted Answer

A) advances in technology must be prevalent. 
B) the time period under consideration must be very long. 
C) supply is perfectly elastic. 
D) supply is perfectly inelastic. 
A) advances in technology must be prevalent. 
B) the time period under consideration must be very long. 
C) supply is perfectly elastic. 
D) supply is perfectly inelastic. D

Question 4

If marijuana were legalized,it is likely that there would be an increase in the supply of marijuana.Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana.These advocates believe that the

Accepted Answer

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

Question 5

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

Accepted Answer

A) True 
 B)False

Question 6

When quantity demanded responds strongly to changes in price,demand is said to be

Accepted Answer

A) fluid. 
B) elastic. 
C) dynamic. 
D) highly variable. 
A) fluid. 
B) elastic. 
C) dynamic. 
D) highly variable.

Question 7

Some firms eventually experience problems with their capacity to produce output as their output levels increase.For these firms,

Accepted Answer

A) market power is substantial. 
B) supply is perfectly inelastic. 
C) supply is more elastic at low levels of output and less elastic at high levels of output. 
D) supply is less elastic at low levels of output and more elastic at high levels of output. 
A) market power is substantial. 
B) supply is perfectly inelastic. 
C) supply is more elastic at low levels of output and less elastic at high levels of output. 
D) supply is less elastic at low levels of output and more elastic at high levels of output.

Question 8

The demand for Rice Krispies is more elastic than the demand for cereal in general.

Accepted Answer

A) True 
 B)False

Question 9

An increase in the price of pure chocolate morsels from $2.25 to $2.45 causes suppliers of chocolate morsels to increase their quantity supplied from 125 bags per minute to 145 bags per minute.Supply is

Accepted Answer

A) elastic and the price elasticity of supply is 1.74. 
B) elastic and the price elasticity of supply is 0.57. 
C) inelastic and the price elasticity of supply is 1.74. 
D) inelastic and the price elasticity of supply is 0.57. 
A) elastic and the price elasticity of supply is 1.74. 
B) elastic and the price elasticity of supply is 0.57. 
C) inelastic and the price elasticity of supply is 1.74. 
D) inelastic and the price elasticity of supply is 0.57.

Question 10

Eric produces jewelry boxes.If the demand for jewelry boxes is elastic and Eric wants to increase his total revenue,he should

Accepted Answer

A) increase the price of his jewelry boxes. 
B) decrease the price of his jewelry boxes. 
C) not change the price of his jewelry boxes. 
D) None of the above answers is correct. 
A) increase the price of his jewelry boxes. 
B) decrease the price of his jewelry boxes. 
C) not change the price of his jewelry boxes. 
D) None of the above answers is correct.

Question 11

Suppose that an increase in the price of carrots from $1.30 to $1.80 per pound increases the quantity of carrots that carrot farmers produce from 1.2 million pounds to 1.6 million pounds.Using the midpoint method,what is the approximate value of the price elasticity of supply?

Accepted Answer

A) -1.04 
B)  0.67 
C)  0.89 
D)  1.13 
A) -1.04 
B)  0.67 
C)  0.89 
D)  1.13

Question 12

Figure 5-3
  
-Refer to Figure 5-3.If price is originally within the C range of the demand curve and then it increases to a value within the A range of the demand curve,we can expect total revenue to

Accepted Answer

A) increase. 
B) decrease. 
C) stay the same. 
D) This determination cannot be made without further information. 
A) increase. 
B) decrease. 
C) stay the same. 
D) This determination cannot be made without further information.

Question 13

Suppose the income elasticity of demand for basketballs is 1.20.A 3 percent increase in the price of basketballs will result in

Accepted Answer

A) a 3.6 percent decrease in the quantity of basketballs demanded. 
B) a 3.6 percent increase in the quantity of basketballs demanded. 
C) a 4 percent decrease in the number of basketballs demanded. 
D) None of the above is correct. 
A) a 3.6 percent decrease in the quantity of basketballs demanded. 
B) a 3.6 percent increase in the quantity of basketballs demanded. 
C) a 4 percent decrease in the number of basketballs demanded. 
D) None of the above is correct.

Question 14

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded.Price elasticity of demand for X is

Accepted Answer

A) 0. 
B) 1. 
C) 6. 
D) 36. 
A) 0. 
B) 1. 
C) 6. 
D) 36.

Question 15

Figure 5-5
  
-Refer to Figure 5-5.An increase in price from $20 to $30 would

Accepted Answer

A) increase total revenue by $2,000. 
B) decrease total revenue by $2,000. 
C) increase total revenue by $1,000. 
D) decrease total revenue by $1,000. 
A) increase total revenue by $2,000. 
B) decrease total revenue by $2,000. 
C) increase total revenue by $1,000. 
D) decrease total revenue by $1,000.

Question 16

When the rental price of DVD movies is $4,Denise rents five per month.When the price is $3,she rents nine per month.Denise's demand for DVD rentals 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 17

Holding all other forces constant,when the price of gasoline rises,the number of gallons of gasoline demanded would fall substantially over a ten-year period because

Accepted Answer

A) buyers tend to be much less sensitive to a change in price when given more time to react. 
B) buyers tend to be much more sensitive to a change in price when given more time to react. 
C) buyers will have substantially more income over a ten-year period. 
D) the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline. 
A) buyers tend to be much less sensitive to a change in price when given more time to react. 
B) buyers tend to be much more sensitive to a change in price when given more time to react. 
C) buyers will have substantially more income over a ten-year period. 
D) the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline.

Question 18

The main reason for using the midpoint method to calculate an elasticity is that it

Accepted Answer

A) gives the same answer regardless of whether the price increases or decreases. 
B) recognizes that prices are usually increasing, not decreasing. 
C) rounds prices to the nearest dollar and quantities to the nearest whole unit. 
D) uses fewer numbers than alternative methods. 
A) gives the same answer regardless of whether the price increases or decreases. 
B) recognizes that prices are usually increasing, not decreasing. 
C) rounds prices to the nearest dollar and quantities to the nearest whole unit. 
D) uses fewer numbers than alternative methods.

Question 19

In general,elasticity is a measure of

Accepted Answer

A) the extent to which advances in technology are adopted by producers. 
B) the extent to which a market is competitive. 
C) how fast the price of a good responds to a shift of the supply curve or demand curve. 
D) how much buyers and sellers respond to changes in market conditions. 
A) the extent to which advances in technology are adopted by producers. 
B) the extent to which a market is competitive. 
C) how fast the price of a good responds to a shift of the supply curve or demand curve. 
D) how much buyers and sellers respond to changes in market conditions.

Question 20

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Accepted Answer

A) The interdiction has the effect of shifting the demand curve for illegal drugs to the right. 
B) The price elasticity of demand for illegal drugs is 1.3. 
C) The price elasticity of supply for illegal drugs is 0.8. 
D) As a result of the interdiction, the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent. 
A) The interdiction has the effect of shifting the demand curve for illegal drugs to the right. 
B) The price elasticity of demand for illegal drugs is 1.3. 
C) The price elasticity of supply for illegal drugs is 0.8. 
D) As a result of the interdiction, the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent.

Exam 5: Elasticity and Its Applications

It is likely that

Figure 5-3 -Refer to Figure 5-3.If price falls within the A range of the demand curve we can expect total revenue to

If sellers do not adjust their quantities supplied at all in response to a change in price,

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

When quantity demanded responds strongly to changes in price,demand is said to be

Some firms eventually experience problems with their capacity to produce output as their output levels increase.For these firms,

The demand for Rice Krispies is more elastic than the demand for cereal in general.

An increase in the price of pure chocolate morsels from $2.25 to $2.45 causes suppliers of chocolate morsels to increase their quantity supplied from 125 bags per minute to 145 bags per minute.Supply is

Eric produces jewelry boxes.If the demand for jewelry boxes is elastic and Eric wants to increase his total revenue,he should

Suppose that an increase in the price of carrots from $1.30 to $1.80 per pound increases the quantity of carrots that carrot farmers produce from 1.2 million pounds to 1.6 million pounds.Using the midpoint method,what is the approximate value of the price elasticity of supply?

Figure 5-3 -Refer to Figure 5-3.If price is originally within the C range of the demand curve and then it increases to a value within the A range of the demand curve,we can expect total revenue to

Suppose the income elasticity of demand for basketballs is 1.20.A 3 percent increase in the price of basketballs will result in

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded.Price elasticity of demand for X is

Figure 5-5 -Refer to Figure 5-5.An increase in price from $20 to $30 would

When the rental price of DVD movies is $4,Denise rents five per month.When the price is $3,she rents nine per month.Denise's demand for DVD rentals is

Holding all other forces constant,when the price of gasoline rises,the number of gallons of gasoline demanded would fall substantially over a ten-year period because

The main reason for using the midpoint method to calculate an elasticity is that it

In general,elasticity is a measure of

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters