Question 1

Drug interdiction,which reduces the supply of drugs,may decrease drug-related crime because the demand for drugs is inelastic.

Accepted Answer

A) True 
 B)False

Question 2

What would be the absolute value of the elasticity if demand is unit elastic

Accepted Answer

A) less than 1 
B) greater than 1 
C) equal to 1 
D) equal to 0 
A) less than 1 
B) greater than 1 
C) equal to 1 
D) equal to 0

Question 3

At the midpoint of a downward-sloping linear demand curve,what would price elasticity be

Accepted Answer

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

Question 4

What income elasticities do food and clothing tend to have,and why

Accepted Answer

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

Question 5

When small changes in price lead to infinite changes in quantity demanded,can be said of demand

Accepted Answer

A) Demand is perfectly elastic and will be horizontal. 
B) Demand is perfectly inelastic and will be horizontal. 
C) Demand is perfectly elastic and will be vertical. 
D) Demand is perfectly inelastic and will be vertical. 
A) Demand is perfectly elastic and will be horizontal. 
B) Demand is perfectly inelastic and will be horizontal. 
C) Demand is perfectly elastic and will be vertical. 
D) Demand is perfectly inelastic and will be vertical.

Question 6

Table 5-2  
-Refer to Table 5-2.Which of the following best describes good X

Accepted Answer

A) very price elastic 
B) an inferior good 
C) underpriced 
D) a normal good 
A) very price elastic 
B) an inferior good 
C) underpriced 
D) a normal good

Question 7

In the short run,how responsive is the quantity supplied to price changes

Accepted Answer

A) very responsive 
B) not very responsive 
C) indifferent 
D) totally responsive 
A) very responsive 
B) not very responsive 
C) indifferent 
D) totally responsive

Question 8

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 an online clothing store.What would your first step be

Accepted Answer

A) Increase the price of everything in the store. 
B) Look for ways to cut costs and increase profit for the store. 
C) Determine the elasticity of demand for the store's products. 
D) Suggest that the store purchase an entirely new line of clothing that they could sell more cheaply. 
A) Increase the price of everything in the store. 
B) Look for ways to cut costs and increase profit for the store. 
C) Determine the elasticity of demand for the store's products. 
D) Suggest that the store purchase an entirely new line of clothing that they could sell more cheaply.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

If an increase in income results in a decrease in the quantity demanded of a good,what is the good called

Accepted Answer

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

Question 11

Which of the following categories of goods would have the most elastic demand

Accepted Answer

A) beverages 
B) soda pop 
C) colas 
D) Pepsi 
A) beverages 
B) soda pop 
C) colas 
D) Pepsi

Question 12

There are very few,if any,good substitutes for motor oil.What does this imply

Accepted Answer

A) The supply of motor oil would tend to be price elastic. 
B) The demand for motor oil would tend to be price elastic. 
C) The demand for motor oil would tend to be price inelastic. 
D) The demand for motor oil would tend to be income elastic. 
A) The supply of motor oil would tend to be price elastic. 
B) The demand for motor oil would tend to be price elastic. 
C) The demand for motor oil would tend to be price inelastic. 
D) The demand for motor oil would tend to be income elastic.

Question 13

When a supply curve is relatively flat,what do we know

Accepted Answer

A) The supply is relatively elastic. 
B) The supply is relatively inelastic. 
C) Quantity supplied changes in the same proportion that price changes. 
D) Quantity supplied changes slightly when the price changes. 
A) The supply is relatively elastic. 
B) The supply is relatively inelastic. 
C) Quantity supplied changes in the same proportion that price changes. 
D) Quantity supplied changes slightly when the price changes.

Question 14

Last month,sellers of good Y took in $150 and sold 50 units of good Y.This month sellers of good Y raised their price,took in $160 and sold 40 units of good Y.At the same time,the price of good X stayed the same,but sales of good X increased from 20 units to 40 units.What can we conclude about goods X and Y

Accepted Answer

A) They are substitutes, and have a cross-price elasticity of 0.43. 
B) They are complements, and have a cross-price elasticity of 0.43. 
C) They are substitutes, and have a cross-price elasticity of 2.33. 
D) They are complements, and have a cross-price elasticity of 2.33. 
A) They are substitutes, and have a cross-price elasticity of 0.43. 
B) They are complements, and have a cross-price elasticity of 0.43. 
C) They are substitutes, and have a cross-price elasticity of 2.33. 
D) They are complements, and have a cross-price elasticity of 2.33.

Question 15

What is the slope of a perfectly inelastic demand curve,and why

Accepted Answer

A) negatively sloped, because buyers decrease their purchases when the price rises 
B) vertical, because buyers purchase the same amount whether the price rises or falls 
C) positively sloped, because buyers respond by increasing their purchases when price rises 
D) horizontal, because buyers increase their purchases by huge amounts with slight changes in price 
A) negatively sloped, because buyers decrease their purchases when the price rises 
B) vertical, because buyers purchase the same amount whether the price rises or falls 
C) positively sloped, because buyers respond by increasing their purchases when price rises 
D) horizontal, because buyers increase their purchases by huge amounts with slight changes in price

Question 16

Your younger sister needs $80 to buy a new longboard.She has opened a lemonade stand to make the money she needs.She currently is charging $1 per cup,but wants to adjust her price to earn the money faster.What is your advice to her

Accepted Answer

A) If the demand for lemonade is perfectly elastic, leave the price the same and be patient. 
B) If the demand for lemonade is elastic, raise the price to increase total revenue. 
C) If the demand for lemonade is elastic, lower the price to increase total revenue. 
D) If the demand for lemonade is inelastic, lower the price to increase total revenue. 
A) If the demand for lemonade is perfectly elastic, leave the price the same and be patient. 
B) If the demand for lemonade is elastic, raise the price to increase total revenue. 
C) If the demand for lemonade is elastic, lower the price to increase total revenue. 
D) If the demand for lemonade is inelastic, lower the price to increase total revenue.

Question 17

What is the difference between slope and elasticity

Accepted Answer

A) Slope measures actual changes and elasticity measures percentage changes. 
B) Slope measures percentage changes and elasticity measures actual changes. 
C) Slope and elasticity both measure actual changes. 
D) Slope and elasticity both measure percentage changes. 
A) Slope measures actual changes and elasticity measures percentage changes. 
B) Slope measures percentage changes and elasticity measures actual changes. 
C) Slope and elasticity both measure actual changes. 
D) Slope and elasticity both measure percentage changes.

Question 18

If a demand curve is horizontal,what are its slope and elasticity

Accepted Answer

A) undefined and elasticity equals 0 
B) 0 and elasticity is undefined 
C) undefined, as is elasticity 
D) 0, as is elasticity 
A) undefined and elasticity equals 0 
B) 0 and elasticity is undefined 
C) undefined, as is elasticity 
D) 0, as is elasticity

Question 19

Figure 5-2
  
-Refer to Figure 5-2.As price falls from PA to PB,which demand curve is least elastic

Accepted Answer

A) D₁ 
B) D₂ 
C) D₃ 
D) D₄ 
A) D₁ 
B) D₂ 
C) D₃ 
D) D₄

Question 20

To determine whether a good is considered normal or inferior,what would one consider

Accepted Answer

A) the good's income elasticity of demand 
B) the good's price elasticity of demand 
C) the good's price elasticity of supply 
D) the good's cross-price elasticity of demand 
A) the good's income elasticity of demand 
B) the good's price elasticity of demand 
C) the good's price elasticity of supply 
D) the good's cross-price elasticity of demand

Exam 5: Elasticity and Its Application

Drug interdiction,which reduces the supply of drugs,may decrease drug-related crime because the demand for drugs is inelastic.

What would be the absolute value of the elasticity if demand is unit elastic

At the midpoint of a downward-sloping linear demand curve,what would price elasticity be

What income elasticities do food and clothing tend to have,and why

When small changes in price lead to infinite changes in quantity demanded,can be said of demand

Table 5-2 -Refer to Table 5-2.Which of the following best describes good X

In the short run,how responsive is the quantity supplied to price changes

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 an online clothing store.What would your first step be

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

If an increase in income results in a decrease in the quantity demanded of a good,what is the good called

Which of the following categories of goods would have the most elastic demand

There are very few,if any,good substitutes for motor oil.What does this imply

When a supply curve is relatively flat,what do we know

What is the slope of a perfectly inelastic demand curve,and why

Your younger sister needs $80 to buy a new longboard.She has opened a lemonade stand to make the money she needs.She currently is charging $1 per cup,but wants to adjust her price to earn the money faster.What is your advice to her

What is the difference between slope and elasticity

If a demand curve is horizontal,what are its slope and elasticity

Figure 5-2 -Refer to Figure 5-2.As price falls from PA to PB,which demand curve is least elastic

To determine whether a good is considered normal or inferior,what would one consider

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

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters