Question 1

What would explain why government drug interdiction might increase drug-related crime

Accepted Answer

A) The demand for such drugs tends to be very elastic. 
B) Addicts would have a greater need for quick cash. 
C) Government drug programs are more lenient on drug offenders than in the 1980s. 
D) The total amount of money needed to buy the same amount of drugs needed decreases. 
A) The demand for such drugs tends to be very elastic. 
B) Addicts would have a greater need for quick cash. 
C) Government drug programs are more lenient on drug offenders than in the 1980s. 
D) The total amount of money needed to buy the same amount of drugs needed decreases.

Question 2

When would demand for a good tend to be more inelastic

Accepted Answer

A) when there are fewer available substitutes 
B) when the time period considered is longer 
C) when the good is considered more of a luxury good 
D) when the market is more narrowly defined 
A) when there are fewer available substitutes 
B) when the time period considered is longer 
C) when the good is considered more of a luxury good 
D) when the market is more narrowly defined

Question 3

As elasticity rises,what happens to the supply curve

Accepted Answer

A) It gets flatter. 
B) It gets steeper. 
C) It becomes vertical. 
D) It becomes downward sloping. 
A) It gets flatter. 
B) It gets steeper. 
C) It becomes vertical. 
D) It becomes downward sloping.

Question 4

The price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent.The price elasticity of demand is 3.

Accepted Answer

A) True 
 B)False

Question 5

What does the price elasticity of demand for a good measure

Accepted Answer

A) how willing consumers are to move away from the good as price rises 
B) how willing firms are to produce more of a good as price rises 
C) how willing consumers are to buy more of a substitute good as price falls 
D) how willing firms are to produce more of a good as price falls 
A) how willing consumers are to move away from the good as price rises 
B) how willing firms are to produce more of a good as price rises 
C) how willing consumers are to buy more of a substitute good as price falls 
D) how willing firms are to produce more of a good as price falls

Question 6

What can the cross-price elasticity of demand tell us

Accepted Answer

A) whether goods are normal or inferior 
B) whether goods are elastic or inelastic 
C) whether goods are luxuries or necessities 
D) whether goods are complements or substitutes 
A) whether goods are normal or inferior 
B) whether goods are elastic or inelastic 
C) whether goods are luxuries or necessities 
D) whether goods are complements or substitutes

Question 7

If the cross-price elasticity of demand of two goods is negative,what are those two goods called

Accepted Answer

A) substitutes 
B) complements 
C) normal goods 
D) inferior goods 
A) substitutes 
B) complements 
C) normal goods 
D) inferior goods

Question 8

If a good is a luxury,what would demand for the good tend to be

Accepted Answer

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

Question 9

Suppose there is a 3 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded.What is the price elasticity of demand for X

Accepted Answer

A) 0 
B) 2 
C) 6 
D) infinite 
A) 0 
B) 2 
C) 6 
D) infinite

Question 10

Figure 5-5
  
-Refer to Figure 5-5.When price falls from $40 to $30,what do we know about demand

Accepted Answer

A) It must be elastic since total revenue increases from $8000 to $9000. 
B) It must be inelastic since total revenue increases from $8000 to $9000. 
C) It must be inelastic since total revenue decreases from $9000 to $8000. 
D) It must be elastic since total revenue decreases from $9000 to $8000. 
A) It must be elastic since total revenue increases from $8000 to $9000. 
B) It must be inelastic since total revenue increases from $8000 to $9000. 
C) It must be inelastic since total revenue decreases from $9000 to $8000. 
D) It must be elastic since total revenue decreases from $9000 to $8000.

Question 11

Generally,over which time period will a firm be able to respond most to a change in price

Accepted Answer

A) in one month 
B) in six months 
C) in one year 
D) in five years 
A) in one month 
B) in six months 
C) in one year 
D) in five years

Question 12

Figure 5-5
  
-Refer to Figure 5-5.What would lowering price from $30 to $20 do

Accepted Answer

A) It would increase total revenue by $2000. 
B) It would decrease total revenue by $2000. 
C) It would increase total revenue by $1000. 
D) It would decrease total revenue by $1000. 
A) It would increase total revenue by $2000. 
B) It would decrease total revenue by $2000. 
C) It would increase total revenue by $1000. 
D) It would decrease total revenue by $1000.

Question 13

Suppose that 100 candy bars are demanded at a particular price.If the price of candy bars rises by 4 percent,the number of candy bars demanded falls to 92 candy bars.According to the midpoint method,what does this mean

Accepted Answer

A) The demand for candy bars in this price range is elastic. 
B) The demand for candy bars in this price range is inelastic. 
C) The price elasticity of demand for candy bars is 0. 
D) The demand for candy bars is unit elastic. 
A) The demand for candy bars in this price range is elastic. 
B) The demand for candy bars in this price range is inelastic. 
C) The price elasticity of demand for candy bars is 0. 
D) The demand for candy bars is unit elastic.

Question 14

In each of the following cases,do you think the price elasticity of supply is (i) perfectly elastic; (ii) perfectly inelastic; (iii) elastic,but not perfectly elastic; or (iv) inelastic,but not perfectly inelastic
a.An a series of severe winter storm warnings leads to a huge jump in the sales price of power generators.
b.The price of a kilowatt of electricity is the same during periods of high electricity demand as during periods of low electricity demand.
c.Fewer people want to fly during November than during any other month.The airlines cancel about 10 percent of their flights as ticket prices fall about 20 percent during this month.
d.Owners of vacation homes in Sandbanks rent them out during the summer.Due to the soft economy this year,a 30 percent decline in the price of a vacation rental leads more than half of homeowners to occupy their vacation homes themselves during the summer.

Accepted Answer

a.Supply is inelasti

Question 15

Figure 5-9
  
-Refer to Figure 5-9.What is the price elasticity of supply from point A to point C,using the midpoint method

Accepted Answer

A) 0.375 
B) 0.750 
C) 1.330 
D) 2.670 
A) 0.375 
B) 0.750 
C) 1.330 
D) 2.670

Question 16

Suppose the price of Twinkle snack cakes is reduced from $1.50 to $1.00 and,as a result,the quantity of Twinkle snack cakes demanded increases from 2000 to 2200.Using the midpoint method,what is the price elasticity of demand for Twinkle snack cakes in the given price range

Accepted Answer

A) 0.24 
B) 0.40 
C) 1.50 
D) 4.21 
A) 0.24 
B) 0.40 
C) 1.50 
D) 4.21

Question 17

The local Greek restaurant makes such great chicken souvlaki that consumers do not respond much to a change in the price.If the owner is interested only in increasing revenue,what should he do

Accepted Answer

A) He should lower the price of the chicken souvlaki. 
B) He should leave the price of the chicken souvlaki alone. 
C) He should raise the price of the chicken souvlaki. 
D) He should reduce costs. 
A) He should lower the price of the chicken souvlaki. 
B) He should leave the price of the chicken souvlaki alone. 
C) He should raise the price of the chicken souvlaki. 
D) He should reduce costs.

Question 18

What does a flatter demand curve represent

Accepted Answer

A) greater price elasticity of demand 
B) smaller price elasticity of demand 
C) price elasticity of demand that is close to the slope of the curve 
D) price elasticity of demand that is equal to the slope of the curve 
A) greater price elasticity of demand 
B) smaller price elasticity of demand 
C) price elasticity of demand that is close to the slope of the curve 
D) price elasticity of demand that is equal to the slope of the curve

Question 19

A linear demand curve has constant elasticity,but not constant slope.

Accepted Answer

A) True 
 B)False

Question 20

When demand is inelastic,what will a decrease in price cause

Accepted Answer

A) an increase in total revenue 
B) a decrease in total revenue 
C) no change in total revenue 
D) an uncertain change in total revenue 
A) an increase in total revenue 
B) a decrease in total revenue 
C) no change in total revenue 
D) an uncertain change in total revenue

Exam 5: Elasticity and Its Application

What would explain why government drug interdiction might increase drug-related crime

When would demand for a good tend to be more inelastic

As elasticity rises,what happens to the supply curve

The price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent.The price elasticity of demand is 3.

What does the price elasticity of demand for a good measure

What can the cross-price elasticity of demand tell us

If the cross-price elasticity of demand of two goods is negative,what are those two goods called

If a good is a luxury,what would demand for the good tend to be

Suppose there is a 3 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded.What is the price elasticity of demand for X

Figure 5-5 -Refer to Figure 5-5.When price falls from $40 to $30,what do we know about demand

Generally,over which time period will a firm be able to respond most to a change in price

Figure 5-5 -Refer to Figure 5-5.What would lowering price from $30 to $20 do

Suppose that 100 candy bars are demanded at a particular price.If the price of candy bars rises by 4 percent,the number of candy bars demanded falls to 92 candy bars.According to the midpoint method,what does this mean

Figure 5-9 -Refer to Figure 5-9.What is the price elasticity of supply from point A to point C,using the midpoint method

Suppose the price of Twinkle snack cakes is reduced from $1.50 to $1.00 and,as a result,the quantity of Twinkle snack cakes demanded increases from 2000 to 2200.Using the midpoint method,what is the price elasticity of demand for Twinkle snack cakes in the given price range

The local Greek restaurant makes such great chicken souvlaki that consumers do not respond much to a change in the price.If the owner is interested only in increasing revenue,what should he do

What does a flatter demand curve represent

A linear demand curve has constant elasticity,but not constant slope.

When demand is inelastic,what will a decrease in price cause

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

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