Question 1

If the price elasticity of demand is 1.5,regardless of which two points on the demand curve are used to compute the elasticity,then

Accepted Answer

A) demand is perfectly inelastic and the demand curve is vertical. 
B) demand is elastic and the demand curve is a straight, downward-sloping line. 
C) demand is perfectly elastic and the demand curve is horizontal. 
D) demand is elastic and the demand curve is something other than a straight, downward-sloping line. 
A) demand is perfectly inelastic and the demand curve is vertical. 
B) demand is elastic and the demand curve is a straight, downward-sloping line. 
C) demand is perfectly elastic and the demand curve is horizontal. 
D) demand is elastic and the demand curve is something other than a straight, downward-sloping line.

Question 2

Table 5-1
  
-Refer to Table 5-1.Using the midpoint method,what is the income elasticity of demand for good X?

Accepted Answer

A) -3.5 
B) -0.29 
C) 0.29 
D) 3.5 
A) -3.5 
B) -0.29 
C) 0.29 
D) 3.5

Question 3

Demand is said to be inelastic if

Accepted Answer

A) buyers respond substantially to changes in the price of the good. 
B) demand shifts only slightly when the price of the good changes. 
C) the quantity demanded changes only slightly when the price of the good changes. 
D) the price of the good responds only slightly to changes in demand. 
A) buyers respond substantially to changes in the price of the good. 
B) demand shifts only slightly when the price of the good changes. 
C) the quantity demanded changes only slightly when the price of the good changes. 
D) the price of the good responds only slightly to changes in demand.

Question 4

Last year,Sheila bought 6 pairs of shoes when her income was $40,000.This year,her income is $52,000 and she purchased 7 pairs of shoes.Holding other factors constant and using the midpoint method,it follows that Sheila's income elasticity of demand is about

Accepted Answer

A) 0.59 and Sheila regards shoes as an inferior good. 
B) 0.59 and Sheila regards shoes as a normal good. 
C) 1.7 and Sheila regards shoes as an inferior good. 
D) 1.7 and Sheila regards shoes as a normal good. 
A) 0.59 and Sheila regards shoes as an inferior good. 
B) 0.59 and Sheila regards shoes as a normal good. 
C) 1.7 and Sheila regards shoes as an inferior good. 
D) 1.7 and Sheila regards shoes as a normal good.

Question 5

If the price elasticity of demand for a good is 0.94,then which of the following events is consistent with a 4 percent decrease in the quantity of the good demanded?

Accepted Answer

A) a 0.235 percent increase in the price of the good 
B) a 2.350 percent increase in the price of the good 
C) a 3.760 percent increase in the price of the good 
D) a 4.255 percent increase in the price of the good 
A) a 0.235 percent increase in the price of the good 
B) a 2.350 percent increase in the price of the good 
C) a 3.760 percent increase in the price of the good 
D) a 4.255 percent increase in the price of the good

Question 6

How does total revenue change as one moves downward and to the right along a linear demand curve?

Accepted Answer

A) It always increases. 
B) It always decreases. 
C) It first increases, then decreases. 
D) It is unaffected by a movement along the demand curve. 
A) It always increases. 
B) It always decreases. 
C) It first increases, then decreases. 
D) It is unaffected by a movement along the demand curve.

Question 7

If the price elasticity of demand for aluminum foil is 1.45,then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Accepted Answer

A) 1.66% and aluminum foil sellers' total revenue will increase as a result. 
B) 1.66% and aluminum foil sellers' total revenue will decrease as a result. 
C) 3.48% and aluminum foil sellers' total revenue will increase as a result. 
D) 3.48% and aluminum foil sellers' total revenue will decrease as a result. 
A) 1.66% and aluminum foil sellers' total revenue will increase as a result. 
B) 1.66% and aluminum foil sellers' total revenue will decrease as a result. 
C) 3.48% and aluminum foil sellers' total revenue will increase as a result. 
D) 3.48% and aluminum foil sellers' total revenue will decrease as a result.

Question 8

The price elasticity of demand measures how much

Accepted Answer

A) quantity demanded responds to a change in price. 
B) quantity demanded responds to a change in income. 
C) price responds to a change in demand. 
D) demand responds to a change in supply. 
A) quantity demanded responds to a change in price. 
B) quantity demanded responds to a change in income. 
C) price responds to a change in demand. 
D) demand responds to a change in supply.

Question 9

The price elasticity of demand measures

Accepted Answer

A) buyers' responsiveness to a change in the price of a good. 
B) the extent to which demand increases as additional buyers enter the market. 
C) how much more of a good consumers will demand when incomes rise. 
D) the movement along a supply curve when there is a change in demand. 
A) buyers' responsiveness to a change in the price of a good. 
B) the extent to which demand increases as additional buyers enter the market. 
C) how much more of a good consumers will demand when incomes rise. 
D) the movement along a supply curve when there is a change in demand.

Question 10

Which of the following should be held constant when calculating an income elasticity of demand?

Accepted Answer

A) the quantity of the good demanded 
B) the price of the good 
C) income 
D) All of the above should be held constant. 
A) the quantity of the good demanded 
B) the price of the good 
C) income 
D) All of the above should be held constant.

Question 11

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 cannot result in different 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 cannot result in different 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 12

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.

Question 13

For a particular good,a 3 percent increase in price causes a 10 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A) The relevant time horizon is short. 
B) The good is a necessity. 
C) The market for the good is broadly defined. 
D) There are many close substitutes for this good. 
A) The relevant time horizon is short. 
B) The good is a necessity. 
C) The market for the good is broadly defined. 
D) There are many close substitutes for this good.

Question 14

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

A) True 
 B)False

Question 15

Suppose demand is perfectly inelastic and the supply of the good in question decreases.As a result,

Accepted Answer

A) the equilibrium quantity decreases and the equilibrium price is unchanged. 
B) the equilibrium price increases and the equilibrium quantity is unchanged. 
C) the equilibrium quantity and the equilibrium price both are unchanged. 
D) buyers' total expenditure on the good is unchanged. 
A) the equilibrium quantity decreases and the equilibrium price is unchanged. 
B) the equilibrium price increases and the equilibrium quantity is unchanged. 
C) the equilibrium quantity and the equilibrium price both are unchanged. 
D) buyers' total expenditure on the good is unchanged.

Question 16

Demand is said to be unit elastic if

Accepted Answer

A) quantity demanded changes by the same percent as the price. 
B) quantity demanded changes by a larger percent than the price. 
C) the demand curve shifts by the same percentage amount as the price. 
D) quantity demanded does not respond to a change in price. 
A) quantity demanded changes by the same percent as the price. 
B) quantity demanded changes by a larger percent than the price. 
C) the demand curve shifts by the same percentage amount as the price. 
D) quantity demanded does not respond to a change in price.

Question 17

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

Accepted Answer

A) midpoint of the demand curve. 
B) lower end of the demand curve. 
C) upper end of the demand curve. 
D) It is impossible to tell without knowing prices and quantities demanded. 
A) midpoint of the demand curve. 
B) lower end of the demand curve. 
C) upper end of the demand curve. 
D) It is impossible to tell without knowing prices and quantities demanded.

Question 18

If demand is perfectly inelastic,the demand curve is vertical,and elasticity is equal to 0.

Accepted Answer

A) True 
 B)False

Question 19

To determine whether a good is considered normal or inferior,one could examine the value of the

Accepted Answer

A) income elasticity of demand for that good. 
B) price elasticity of demand for that good. 
C) price elasticity of supply for that good. 
D) cross-price elasticity of demand for that good. 
A) income elasticity of demand for that good. 
B) price elasticity of demand for that good. 
C) price elasticity of supply for that good. 
D) cross-price elasticity of demand for that good.

Question 20

Knowing that the demand for wheat is inelastic,if all farmers voluntarily plowed under 10 percent of their wheat crop,then

Accepted Answer

A) consumers of wheat would buy more wheat. 
B) wheat farmers would suffer a reduction in their total revenue. 
C) wheat farmers would experience an increase in their total revenue. 
D) the demand for wheat would decrease. 
A) consumers of wheat would buy more wheat. 
B) wheat farmers would suffer a reduction in their total revenue. 
C) wheat farmers would experience an increase in their total revenue. 
D) the demand for wheat would decrease.

Exam 5: Elasticity and Its Applications

If the price elasticity of demand is 1.5,regardless of which two points on the demand curve are used to compute the elasticity,then

Table 5-1 -Refer to Table 5-1.Using the midpoint method,what is the income elasticity of demand for good X?

Demand is said to be inelastic if

Last year,Sheila bought 6 pairs of shoes when her income was $40,000.This year,her income is $52,000 and she purchased 7 pairs of shoes.Holding other factors constant and using the midpoint method,it follows that Sheila's income elasticity of demand is about

If the price elasticity of demand for a good is 0.94,then which of the following events is consistent with a 4 percent decrease in the quantity of the good demanded?

How does total revenue change as one moves downward and to the right along a linear demand curve?

If the price elasticity of demand for aluminum foil is 1.45,then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

The price elasticity of demand measures how much

The price elasticity of demand measures

Which of the following should be held constant when calculating an income elasticity of demand?

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

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

For a particular good,a 3 percent increase in price causes a 10 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

A government program that reduces land under cultivation hurts farmers but helps consumers.

Suppose demand is perfectly inelastic and the supply of the good in question decreases.As a result,

Demand is said to be unit elastic if

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

If demand is perfectly inelastic,the demand curve is vertical,and elasticity is equal to 0.

To determine whether a good is considered normal or inferior,one could examine the value of the

Knowing that the demand for wheat is inelastic,if all farmers voluntarily plowed under 10 percent of their wheat crop,then

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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