Question 1

If the quantity supplied responds only slightly to changes in price,then

Accepted Answer

A) supply is said to be elastic. 
B) supply is said to be inelastic. 
C) an increase in price will not shift the supply curve very much. 
D) even a large decrease in demand will change the equilibrium price only slightly. 
A) supply is said to be elastic. 
B) supply is said to be inelastic. 
C) an increase in price will not shift the supply curve very much. 
D) even a large decrease in demand will change the equilibrium price only slightly.

Question 2

Figure 5-7
  
-Refer to Figure 5-7.Total revenue when the price is P₁ is represented by the area(s)

Accepted Answer

A) B + D. 
B) A + B. 
C) C + D. 
D) D. 
A) B + D. 
B) A + B. 
C) C + D. 
D) D.

Question 3

Technological advances in wheat production can lower farmers' total revenue because the

Accepted Answer

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

Question 4

If,for two goods,the cross-price elasticity of demand is 1.25,then

Accepted Answer

A) the two goods are luxuries. 
B) the two goods are substitutes. 
C) one of the goods is normal and the other good is inferior. 
D) the demand for one of the goods conforms to the law of demand and the demand for the other good violates the law of demand. 
A) the two goods are luxuries. 
B) the two goods are substitutes. 
C) one of the goods is normal and the other good is inferior. 
D) the demand for one of the goods conforms to the law of demand and the demand for the other good violates the law of demand.

Question 5

Table 5-2
  
-Refer to Table 5-2.Which of the three supply curves represents the least elastic supply?

Accepted Answer

A) supply curve A 
B) supply curve B 
C) supply curve C 
D) There is no difference in the elasticity of the three supply curves. 
A) supply curve A 
B) supply curve B 
C) supply curve C 
D) There is no difference in the elasticity of the three supply curves.

Question 6

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 7

As price elasticity of supply increases,the supply curve

Accepted Answer

A) becomes flatter. 
B) becomes steeper. 
C) becomes downward sloping. 
D) shifts to the right. 
A) becomes flatter. 
B) becomes steeper. 
C) becomes downward sloping. 
D) shifts to the right.

Question 8

Consider airfares on flights between New York and Minneapolis.When the airfare is $250,the quantity demanded of tickets is 2,000 per week.When the airfare is $280,the quantity demanded of tickets is 1,700 per week.Using the midpoint method,

Accepted Answer

A) the price elasticity of demand is about 1.43 and an increase in the airfare will cause airlines' total revenue to decrease. 
B) the price elasticity of demand is about 1.43 and an increase in the airfare will cause airlines' total revenue to increase. 
C) the price elasticity of demand is about 0.70 and an increase in the airfare will cause airlines' total revenue to decrease. 
D) the price elasticity of demand is about 0.70 and an increase in the airfare will cause airlines' total revenue to increase. 
A) the price elasticity of demand is about 1.43 and an increase in the airfare will cause airlines' total revenue to decrease. 
B) the price elasticity of demand is about 1.43 and an increase in the airfare will cause airlines' total revenue to increase. 
C) the price elasticity of demand is about 0.70 and an increase in the airfare will cause airlines' total revenue to decrease. 
D) the price elasticity of demand is about 0.70 and an increase in the airfare will cause airlines' total revenue to increase.

Question 9

Figure 5-9
  
-Refer to Figure 5-9.Between point A and point B,

Accepted Answer

A) the slope is equal to -1/4 and the price elasticity of demand is equal to 2/3. 
B) the slope is equal to -1/4 and the price elasticity of demand is equal to 3/2. 
C) the slope is equal to -3/2 and the price elasticity of demand is equal to 1/4. 
D) the slope is equal to -2/3 and the price elasticity of demand is equal to 3/2. 
A) the slope is equal to -1/4 and the price elasticity of demand is equal to 2/3. 
B) the slope is equal to -1/4 and the price elasticity of demand is equal to 3/2. 
C) the slope is equal to -3/2 and the price elasticity of demand is equal to 1/4. 
D) the slope is equal to -2/3 and the price elasticity of demand is equal to 3/2.

Question 10

The price elasticity of demand for a good measures the willingness of

Accepted Answer

A) consumers to move away from the good as price rises. 
B) consumers to avoid monopolistic markets in favor of competitive markets. 
C) firms to produce more of a good as price rises. 
D) firms to cater to the tastes of consumers. 
A) consumers to move away from the good as price rises. 
B) consumers to avoid monopolistic markets in favor of competitive markets. 
C) firms to produce more of a good as price rises. 
D) firms to cater to the tastes of consumers.

Question 11

Recently,in Smalltown,the price of Twinkies fell from $0.80 to $0.70.As a result,the quantity demanded of Ho-Ho's decreased from 120 to 100.What would be the appropriate elasticity to compute? Using the midpoint method,compute this elasticity.What does your answer tell you?

Accepted Answer

The appropriate elasticity to compute wo

Question 12

If the quantity supplied is the same regardless of price,then supply is

Accepted Answer

A) elastic. 
B) perfectly elastic. 
C) perfectly inelastic. 
D) inelastic. 
A) elastic. 
B) perfectly elastic. 
C) perfectly inelastic. 
D) inelastic.

Question 13

Because the demand for wheat tends to be inelastic,the development of a new,more productive hybrid wheat would tend to

Accepted Answer

A) increase the total revenue of wheat farmers. 
B) decrease the total revenue of wheat farmers. 
C) decrease the demand for wheat. 
D) decrease the supply of wheat. 
A) increase the total revenue of wheat farmers. 
B) decrease the total revenue of wheat farmers. 
C) decrease the demand for wheat. 
D) decrease the supply of wheat.

Question 14

Figure 5-2
  
-Refer to Figure 5-2.If the price decreased from $18 to $6,

Accepted Answer

A) total revenue would increase by $1,200 and demand is elastic between points A and C. 
B) total revenue would increase by $800 and demand is elastic between points A and C. 
C) total revenue would decrease by $1,200 and demand is inelastic between points A and C. 
D) total revenue would decrease by $800 and demand is inelastic between points A and C. 
A) total revenue would increase by $1,200 and demand is elastic between points A and C. 
B) total revenue would increase by $800 and demand is elastic between points A and C. 
C) total revenue would decrease by $1,200 and demand is inelastic between points A and C. 
D) total revenue would decrease by $800 and demand is inelastic between points A and C.

Question 15

Figure 5-6
  
-Refer to Figure 5-6.If price increases from $10 to $15,total revenue will

Accepted Answer

A) increase by $20, so demand must be inelastic in this price range. 
B) increase by $5, so demand must be inelastic in this price range. 
C) decrease by $20, so demand must be elastic in this price range. 
D) decrease by $10, so demand must be elastic in this price range. 
A) increase by $20, so demand must be inelastic in this price range. 
B) increase by $5, so demand must be inelastic in this price range. 
C) decrease by $20, so demand must be elastic in this price range. 
D) decrease by $10, so demand must be elastic in this price range.

Question 16

Suppose the point (Q = 2,000,P = $60)is the midpoint on a certain downward-sloping,linear demand curve.Then

Accepted Answer

A) an increase in price from $40 to $42 will increase total revenue. 
B) a decrease in price from $61 to $59 will leave total revenue unchanged. 
C) the maximum value of total revenue is $120,000. 
D) All of the above are correct. 
A) an increase in price from $40 to $42 will increase total revenue. 
B) a decrease in price from $61 to $59 will leave total revenue unchanged. 
C) the maximum value of total revenue is $120,000. 
D) All of the above are correct.

Question 17

The value of the price elasticity of demand for a good will be relatively large when

Accepted Answer

A) there are no good substitutes available for the good. 
B) the time period in question is relatively short. 
C) the good is a luxury as opposed to a necessity. 
D) All of the above are correct. 
A) there are no good substitutes available for the good. 
B) the time period in question is relatively short. 
C) the good is a luxury as opposed to a necessity. 
D) All of the above are correct.

Question 18

Food and clothing tend to have

Accepted Answer

A) small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods. 
B) small income elasticities because consumers buy proportionately more of both goods at higher income levels than they buy at low income levels. 
C) large income elasticities because they are necessities. 
D) large income elasticities because they are relatively inexpensive. 
A) small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods. 
B) small income elasticities because consumers buy proportionately more of both goods at higher income levels than they buy at low income levels. 
C) large income elasticities because they are necessities. 
D) large income elasticities because they are relatively inexpensive.

Question 19

Figure 5-2
  
-Refer to Figure 5-2.The elasticity of demand between point B and point C,using the midpoint method,is

Accepted Answer

A) 0.5. 
B) 0.75. 
C) 1.0. 
D) 1.3. 
A) 0.5. 
B) 0.75. 
C) 1.0. 
D) 1.3.

Question 20

Figure 5-4
  
-Refer to Figure 5-4.As price falls from PA to PB,which demand curve represents the most elastic demand?

Accepted Answer

A) D₁ 
B) D₂ 
C) D₃ 
D) All of the above are equally elastic. 
A) D₁ 
B) D₂ 
C) D₃ 
D) All of the above are equally elastic.

Exam 5: Elasticity and Its Applications

If the quantity supplied responds only slightly to changes in price,then

Figure 5-7 -Refer to Figure 5-7.Total revenue when the price is P₁ is represented by the area(s)

Technological advances in wheat production can lower farmers' total revenue because the

If,for two goods,the cross-price elasticity of demand is 1.25,then

Table 5-2 -Refer to Table 5-2.Which of the three supply curves represents the least elastic supply?

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

As price elasticity of supply increases,the supply curve

Consider airfares on flights between New York and Minneapolis.When the airfare is $250,the quantity demanded of tickets is 2,000 per week.When the airfare is $280,the quantity demanded of tickets is 1,700 per week.Using the midpoint method,

Figure 5-9 -Refer to Figure 5-9.Between point A and point B,

The price elasticity of demand for a good measures the willingness of

Recently,in Smalltown,the price of Twinkies fell from $0.80 to $0.70.As a result,the quantity demanded of Ho-Ho's decreased from 120 to 100.What would be the appropriate elasticity to compute? Using the midpoint method,compute this elasticity.What does your answer tell you?

If the quantity supplied is the same regardless of price,then supply is

Because the demand for wheat tends to be inelastic,the development of a new,more productive hybrid wheat would tend to

Figure 5-2 -Refer to Figure 5-2.If the price decreased from $18 to $6,

Figure 5-6 -Refer to Figure 5-6.If price increases from $10 to $15,total revenue will

Suppose the point (Q = 2,000,P = $60)is the midpoint on a certain downward-sloping,linear demand curve.Then

The value of the price elasticity of demand for a good will be relatively large when

Food and clothing tend to have

Figure 5-2 -Refer to Figure 5-2.The elasticity of demand between point B and point C,using the midpoint method,is

Figure 5-4 -Refer to Figure 5-4.As price falls from PA to PB,which demand curve represents the most elastic demand?

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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