Question 1

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

Question 2

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

Accepted Answer

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

Question 3

In the market for oil in the short run,demand

Accepted Answer

A) and supply are both elastic. 
B) and supply are both inelastic. 
C) is elastic and supply is inelastic. 
D) is inelastic and supply is elastic. 
A) and supply are both elastic. 
B) and supply are both inelastic. 
C) is elastic and supply is inelastic. 
D) is inelastic and supply is elastic.

Question 4

When a supply curve is relatively flat,

Accepted Answer

A) sellers are not at all responsive to a change in price. 
B) the equilibrium price changes substantially when the demand for the good changes. 
C) the supply is relatively elastic. 
D) the supply is relatively inelastic. 
A) sellers are not at all responsive to a change in price. 
B) the equilibrium price changes substantially when the demand for the good changes. 
C) the supply is relatively elastic. 
D) the supply is relatively inelastic.

Question 5

OPEC successfully raised the world price of oil in the 1970s and early 1980s,primarily due to

Accepted Answer

A) an inelastic demand for oil and a reduction in the amount of oil supplied. 
B) a reduction in the amount of oil supplied and a world-wide oil embargo. 
C) a world-wide oil embargo and an elastic demand for oil. 
D) a reduction in the amount of oil supplied and an elastic demand for oil. 
A) an inelastic demand for oil and a reduction in the amount of oil supplied. 
B) a reduction in the amount of oil supplied and a world-wide oil embargo. 
C) a world-wide oil embargo and an elastic demand for oil. 
D) a reduction in the amount of oil supplied and an elastic demand for oil.

Question 6

Figure 5-5
  
-Refer to Figure 5-5.When price falls from $50 to $40,it can be inferred that demand between those two prices is

Accepted Answer

A) inelastic, since total revenue decreases from $8,000 to $5,000. 
B) inelastic, since total revenue increases from $5,000 to $8,000. 
C) elastic, since total revenue increases from $5,000 to $8,000. 
D) unit elastic, since total revenue increases from $5,000 to $8,000. 
A) inelastic, since total revenue decreases from $8,000 to $5,000. 
B) inelastic, since total revenue increases from $5,000 to $8,000. 
C) elastic, since total revenue increases from $5,000 to $8,000. 
D) unit elastic, since total revenue increases from $5,000 to $8,000.

Question 7

Figure 5-8. A demand curve is shown on the graph below. On the graph, Q represents quantity demanded and P represents price.
  
-Refer to Figure 5-8.The maximum value of total revenue corresponds to a price of

Accepted Answer

A) $18. 
B) $30. 
C) $42. 
D) $48. 
A) $18. 
B) $30. 
C) $42. 
D) $48.

Question 8

Which of the following expressions is valid for the price elasticity of demand?

Accepted Answer

A) Price elasticity of demand =   
B) Price elasticity of demand =   
C) Price elasticity of demand =   
D) Price elasticity of demand =   
A) Price elasticity of demand =   
B) Price elasticity of demand =   
C) Price elasticity of demand =   
D) Price elasticity of demand =

Question 9

Suppose good X has a negative income elasticity of demand.This implies that good X is

Accepted Answer

A) a normal good. 
B) a necessity. 
C) an inferior good. 
D) a luxury. 
A) a normal good. 
B) a necessity. 
C) an inferior good. 
D) a luxury.

Question 10

Normal goods have negative income elasticities of demand,while inferior goods have positive income elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 11

Cross-price elasticity of demand measures how

Accepted Answer

A) the price of one good changes in response to a change in the price of another good. 
B) the quantity demanded of one good changes in response to a change in the quantity demanded of another good. 
C) the quantity demanded of one good changes in response to a change in the price of another good. 
D) strongly normal or inferior a good is. 
A) the price of one good changes in response to a change in the price of another good. 
B) the quantity demanded of one good changes in response to a change in the quantity demanded of another good. 
C) the quantity demanded of one good changes in response to a change in the price of another good. 
D) strongly normal or inferior a good is.

Question 12

Using the midpoint method,compute the elasticity of demand between points A and B.Is demand along this portion of the curve elastic or inelastic? Interpret your answer with regard to price and quantity demanded.Now compute the elasticity of demand between points B and C.Is demand along this portion of the curve elastic or inelastic?

Accepted Answer

In the section of the demand curve from

Question 13

You have just been hired as a business consultant to determine what pricing policy would be appropriate in order to increase the total revenue of a major shoe store.The first step you would take would be to

Accepted Answer

A) increase the price of every shoe in the store. 
B) look for ways to cut costs and increase profit for the store. 
C) determine the price elasticity of demand for the store's products. 
D) determine the price elasticity of supply for the store's products. 
A) increase the price of every shoe in the store. 
B) look for ways to cut costs and increase profit for the store. 
C) determine the price elasticity of demand for the store's products. 
D) determine the price elasticity of supply for the store's products.

Question 14

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

Accepted Answer

A) inelastic. 
B) unit elastic. 
C) elastic. 
D) highly responsive to changes in income. 
A) inelastic. 
B) unit elastic. 
C) elastic. 
D) highly responsive to changes in income.

Question 15

Which of the following statements is not valid when supply is perfectly elastic?

Accepted Answer

A) The elasticity of supply approaches infinity. 
B) The supply curve is horizontal. 
C) Very small changes in price lead to large changes in quantity supplied. 
D) The time period under consideration is more likely a short period rather than a long period. 
A) The elasticity of supply approaches infinity. 
B) The supply curve is horizontal. 
C) Very small changes in price lead to large changes in quantity supplied. 
D) The time period under consideration is more likely a short period rather than a long period.

Question 16

The smaller the price elasticity of demand,the

Accepted Answer

A) steeper the demand curve will be through a given point. 
B) flatter the demand curve will be through a given point. 
C) more strongly buyers respond to a change in price between any two prices P₁ and P₂. 
D) larger the decrease in equilibrium price when the supply curve shifts rightward from S₁ to S₂. 
A) steeper the demand curve will be through a given point. 
B) flatter the demand curve will be through a given point. 
C) more strongly buyers respond to a change in price between any two prices P₁ and P₂. 
D) larger the decrease in equilibrium price when the supply curve shifts rightward from S₁ to S₂.

Question 17

Suppose that 50 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 5 percent,the number of candy bars demanded falls to 48.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Accepted Answer

A) demand for candy bars in this price range is elastic. 
B) price increase will decrease the total revenue of candy bar sellers. 
C) price elasticity of demand for candy bars in this price range is about 1.22. 
D) price elasticity of demand for candy bars in this price range is about 0.82. 
A) demand for candy bars in this price range is elastic. 
B) price increase will decrease the total revenue of candy bar sellers. 
C) price elasticity of demand for candy bars in this price range is about 1.22. 
D) price elasticity of demand for candy bars in this price range is about 0.82.

Question 18

It is likely that

Accepted Answer

A) the demand for flat-screen computer monitors is more elastic than the demand for monitors in general. 
B) the demand for grandfather clocks is more elastic than the demand for wristwatches. 
C) the demand for cardboard is more elastic over a long period of time than over a short period of time. 
D) All of the above are correct. 
A) the demand for flat-screen computer monitors is more elastic than the demand for monitors in general. 
B) the demand for grandfather clocks is more elastic than the demand for wristwatches. 
C) the demand for cardboard is more elastic over a long period of time than over a short period of time. 
D) All of the above are correct.

Question 19

The price elasticity of supply measures how responsive

Accepted Answer

A) sellers are to a change in price. 
B) sellers are to a change in buyers' income. 
C) buyers are to a change in production costs. 
D) equilibrium price is to a change in supply. 
A) sellers are to a change in price. 
B) sellers are to a change in buyers' income. 
C) buyers are to a change in production costs. 
D) equilibrium price is to a change in supply.

Question 20

The income elasticity of demand for caviar tends to be

Accepted Answer

A) high because caviar is relatively expensive. 
B) low because caviar is packaged in small containers. 
C) high because buyers generally feel that they can do without it. 
D) low because it is almost always in short supply. 
A) high because caviar is relatively expensive. 
B) low because caviar is packaged in small containers. 
C) high because buyers generally feel that they can do without it. 
D) low because it is almost always in short supply.

Exam 5: Elasticity and Its Applications

Which of the following statements is valid when the market supply curve is vertical?

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

In the market for oil in the short run,demand

When a supply curve is relatively flat,

OPEC successfully raised the world price of oil in the 1970s and early 1980s,primarily due to

Figure 5-5 -Refer to Figure 5-5.When price falls from $50 to $40,it can be inferred that demand between those two prices is

Figure 5-8. A demand curve is shown on the graph below. On the graph, Q represents quantity demanded and P represents price. -Refer to Figure 5-8.The maximum value of total revenue corresponds to a price of

Which of the following expressions is valid for the price elasticity of demand?

Suppose good X has a negative income elasticity of demand.This implies that good X is

Normal goods have negative income elasticities of demand,while inferior goods have positive income elasticities of demand.

Cross-price elasticity of demand measures how

You have just been hired as a business consultant to determine what pricing policy would be appropriate in order to increase the total revenue of a major shoe store.The first step you would take would be to

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

Which of the following statements is not valid when supply is perfectly elastic?

The smaller the price elasticity of demand,the

Suppose that 50 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 5 percent,the number of candy bars demanded falls to 48.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

It is likely that

The price elasticity of supply measures how responsive

The income elasticity of demand for caviar tends to be

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

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