Question 1

For a vertical demand curve,

Accepted Answer

A) slope is undefined and price elasticity of demand is equal to 0. 
B) slope is equal to 0 and price elasticity of demand is undefined. 
C) slope and price elasticity of demand both are undefined. 
D) slope and price elasticity of demand both are equal to 0. 
A) slope is undefined and price elasticity of demand is equal to 0. 
B) slope is equal to 0 and price elasticity of demand is undefined. 
C) slope and price elasticity of demand both are undefined. 
D) slope and price elasticity of demand both are equal to 0.

Question 2

The midpoint method is used to compute elasticity because it

Accepted Answer

A) automatically computes a positive number instead of a negative number. 
B) results in an elasticity that is the same as the slope of the demand curve. 
C) gives the same answer regardless of the direction of change. 
D) automatically rounds quantities to the nearest whole unit. 
A) automatically computes a positive number instead of a negative number. 
B) results in an elasticity that is the same as the slope of the demand curve. 
C) gives the same answer regardless of the direction of change. 
D) automatically rounds quantities to the nearest whole unit.

Question 3

Suppose a producer is able to separate customers into two groups,one having an inelastic demand and the other having an elastic demand.If the producer's objective is to increase total revenue,she should

Accepted Answer

A) increase the price charged to customers with the elastic demand and decrease the price charged to customers with the inelastic demand. 
B) decrease the price charged to customers with the elastic demand and increase the price charged to customers with the inelastic demand. 
C) charge the same price to both groups of customers. 
D) increase the price for both groups of customers. 
A) increase the price charged to customers with the elastic demand and decrease the price charged to customers with the inelastic demand. 
B) decrease the price charged to customers with the elastic demand and increase the price charged to customers with the inelastic demand. 
C) charge the same price to both groups of customers. 
D) increase the price for both groups of customers.

Question 4

The demand for Chocolate Chip Cookie Dough ice cream is likely quite elastic because

Accepted Answer

A) ice cream must be eaten quickly. 
B) this particular flavor of ice cream is viewed as a necessity by many ice-cream lovers. 
C) the market is broadly defined. 
D) other flavors of ice cream are good substitutes for this particular flavor. 
A) ice cream must be eaten quickly. 
B) this particular flavor of ice cream is viewed as a necessity by many ice-cream lovers. 
C) the market is broadly defined. 
D) other flavors of ice cream are good substitutes for this particular flavor.

Question 5

Which of the following is not a determinant of the price elasticity of demand for a good?

Accepted Answer

A) the time horizon 
B) the steepness or flatness of the supply curve for the good 
C) the definition of the market for the good 
D) the availability of substitutes for the good 
A) the time horizon 
B) the steepness or flatness of the supply curve for the good 
C) the definition of the market for the good 
D) the availability of substitutes for the good

Question 6

Suppose that 50 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 4 percent,the number of candy bars demanded falls to 46.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) demand for candy bars in this price range is inelastic. 
C) demand for candy bars in this price range is unit elastic. 
D) price elasticity of demand for candy bars in this price range is 0. 
A) demand for candy bars in this price range is elastic. 
B) demand for candy bars in this price range is inelastic. 
C) demand for candy bars in this price range is unit elastic. 
D) price elasticity of demand for candy bars in this price range is 0.

Question 7

Demand is inelastic if the price elasticity of demand is greater than 1.

Accepted Answer

A) True 
 B)False

Question 8

Figure 5-10
  
-Refer to Figure 5-10.The price elasticity of supply between point B and point C,using the midpoint method,is approximately

Accepted Answer

A) 1.44. 
B) 1.29. 
C) 0.96. 
D) 0.78. 
A) 1.44. 
B) 1.29. 
C) 0.96. 
D) 0.78.

Question 9

Other things equal,the demand for a good tends to be more inelastic,the

Accepted Answer

A) fewer the available substitutes. 
B) longer the time period considered. 
C) more the good is considered a luxury good. 
D) more narrowly defined is the market for the good. 
A) fewer the available substitutes. 
B) longer the time period considered. 
C) more the good is considered a luxury good. 
D) more narrowly defined is the market for the good.

Question 10

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 11

Figure 5-1
  
-Refer to Figure 5-1.Assume,for the good in question,two specific points on the demand curve are (Q = 2,000,P = $15)and (Q = 2,400,P = $12).Then which of the following scenarios is possible?

Accepted Answer

A) Both of these points lie on section C of the demand curve. 
B) The vertical intercept of the demand curve is the point (Q = 0, P = $22). 
C) The horizontal intercept of the demand curve is the point (Q = 5,000, P = $0). 
D) Any of these scenarios is possible. 
A) Both of these points lie on section C of the demand curve. 
B) The vertical intercept of the demand curve is the point (Q = 0, P = $22). 
C) The horizontal intercept of the demand curve is the point (Q = 5,000, P = $0). 
D) Any of these scenarios is possible.

Question 12

The demand for Werthers candy is likely

Accepted Answer

A) elastic because candy is expensive relative to other snacks. 
B) elastic because there are many close substitutes for Werthers. 
C) elastic because Werthers are regarded as a necessity by many people. 
D) inelastic because it is usually eaten quickly, making the relevant time horizon short. 
A) elastic because candy is expensive relative to other snacks. 
B) elastic because there are many close substitutes for Werthers. 
C) elastic because Werthers are regarded as a necessity by many people. 
D) inelastic because it is usually eaten quickly, making the relevant time horizon short.

Question 13

There are very few,if any,good substitutes for motor oil.Therefore,

Accepted Answer

A) the demand for motor oil would tend to be inelastic. 
B) the demand for motor oil would tend to be elastic. 
C) the demand for motor oil would tend to respond strongly to changes in prices of other goods. 
D) the supply of motor oil would tend to respond strongly to changes in people's tastes for large cars relative to their tastes for small cars. 
A) the demand for motor oil would tend to be inelastic. 
B) the demand for motor oil would tend to be elastic. 
C) the demand for motor oil would tend to respond strongly to changes in prices of other goods. 
D) the supply of motor oil would tend to respond strongly to changes in people's tastes for large cars relative to their tastes for small cars.

Question 14

Whether a good is a luxury or necessity depends on

Accepted Answer

A) the price of the good. 
B) the preferences of the buyer. 
C) the intrinsic properties of the good. 
D) how scarce the good is. 
A) the price of the good. 
B) the preferences of the buyer. 
C) the intrinsic properties of the good. 
D) how scarce the good is.

Question 15

When demand is inelastic the price elasticity of demand is

Accepted Answer

A) less than 1, and price and total revenue will move in the same direction. 
B) less than 1, and price and total revenue will move in opposite directions. 
C) greater than 1, and price and total revenue will move in the same direction. 
D) greater than 1, and price and total revenue will move in opposite directions. 
A) less than 1, and price and total revenue will move in the same direction. 
B) less than 1, and price and total revenue will move in opposite directions. 
C) greater than 1, and price and total revenue will move in the same direction. 
D) greater than 1, and price and total revenue will move in opposite directions.

Question 16

Jean-Paul says that he will spend exactly 75 cents a day on M&Ms,regardless of the price of M&Ms.Jean-Paul's demand for M&Ms is

Accepted Answer

A) perfectly elastic. 
B) unit elastic. 
C) perfectly inelastic. 
D) None of the above answers is correct. 
A) perfectly elastic. 
B) unit elastic. 
C) perfectly inelastic. 
D) None of the above answers is correct.

Question 17

The difference between slope and elasticity is that

Accepted Answer

A) slope is a ratio of two changes and elasticity is a ratio of two percentage changes. 
B) slope is a ratio of two percentage changes and elasticity is a ratio of two changes. 
C) slope measures changes in quantity demanded more accurately than elasticity. 
D) none of the above; there is no difference between slope and elasticity. 
A) slope is a ratio of two changes and elasticity is a ratio of two percentage changes. 
B) slope is a ratio of two percentage changes and elasticity is a ratio of two changes. 
C) slope measures changes in quantity demanded more accurately than elasticity. 
D) none of the above; there is no difference between slope and elasticity.

Question 18

The local pizza restaurant makes such great bread sticks that consumers do not respond much at all to a change in the price.If the owner is only interested in increasing revenue,he should

Accepted Answer

A) lower the price of the bread sticks. 
B) leave the price of the bread sticks alone. 
C) raise the price of the bread sticks. 
D) reduce costs. 
A) lower the price of the bread sticks. 
B) leave the price of the bread sticks alone. 
C) raise the price of the bread sticks. 
D) reduce costs.

Question 19

If demand is inelastic,then

Accepted Answer

A) buyers do not respond much to a change in price. 
B) buyers respond substantially to a change in price, but the response is very slow. 
C) buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes. 
D) the demand curve is very flat. 
A) buyers do not respond much to a change in price. 
B) buyers respond substantially to a change in price, but the response is very slow. 
C) buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes. 
D) the demand curve is very flat.

Question 20

Your younger sister needs $50 to buy a new bike.She has opened a lemonade stand to make the money she needs.She currently is charging 25 cents per cup,but she wants to adjust her price to earn the $50 faster.If you know that the demand for lemonade is elastic,what is your advice to her?

Accepted Answer

A) Leave the price at 25 cents and be patient. 
B) Raise the price to increase total revenue. 
C) Lower the price to increase total revenue. 
D) There isn't enough information given to answer this question. 
A) Leave the price at 25 cents and be patient. 
B) Raise the price to increase total revenue. 
C) Lower the price to increase total revenue. 
D) There isn't enough information given to answer this question.

Exam 5: Elasticity and Its Applications

For a vertical demand curve,

The midpoint method is used to compute elasticity because it

Suppose a producer is able to separate customers into two groups,one having an inelastic demand and the other having an elastic demand.If the producer's objective is to increase total revenue,she should

The demand for Chocolate Chip Cookie Dough ice cream is likely quite elastic because

Which of the following is not a determinant of the price elasticity of demand for a good?

Suppose that 50 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 4 percent,the number of candy bars demanded falls to 46.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Demand is inelastic if the price elasticity of demand is greater than 1.

Figure 5-10 -Refer to Figure 5-10.The price elasticity of supply between point B and point C,using the midpoint method,is approximately

Other things equal,the demand for a good tends to be more inelastic,the

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

Figure 5-1 -Refer to Figure 5-1.Assume,for the good in question,two specific points on the demand curve are (Q = 2,000,P = $15)and (Q = 2,400,P = $12).Then which of the following scenarios is possible?

The demand for Werthers candy is likely

There are very few,if any,good substitutes for motor oil.Therefore,

Whether a good is a luxury or necessity depends on

When demand is inelastic the price elasticity of demand is

Jean-Paul says that he will spend exactly 75 cents a day on M&Ms,regardless of the price of M&Ms.Jean-Paul's demand for M&Ms is

The difference between slope and elasticity is that

The local pizza restaurant makes such great bread sticks that consumers do not respond much at all to a change in the price.If the owner is only interested in increasing revenue,he should

If demand is inelastic,then

Your younger sister needs $50 to buy a new bike.She has opened a lemonade stand to make the money she needs.She currently is charging 25 cents per cup,but she wants to adjust her price to earn the $50 faster.If you know that the demand for lemonade is elastic,what is your advice to her?

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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