Question 1

When will the supply of a good be more elastic

Accepted Answer

A) when the good is considered more of a luxury 
B) when the market is defined more broadly 
C) when the good has fewer close substitutes 
D) when the time period being considered is longer 
A) when the good is considered more of a luxury 
B) when the market is defined more broadly 
C) when the good has fewer close substitutes 
D) when the time period being considered is longer

Question 2

Suppose that an increase in the price of carrots from $1.50 to $1.70 per kilogram raises the amount of carrots that carrot farmers produce from 1.2 million kilograms to 1.6 million kilograms.Using the midpoint method,what would be the elasticity of supply

Accepted Answer

A) 0.50 
B) 0.54 
C) 1.86 
D) 2.28 
A) 0.50 
B) 0.54 
C) 1.86 
D) 2.28

Question 3

How does total revenue change as one moves down a linear demand curve

Accepted Answer

A) It increases. 
B) It decreases. 
C) It first increases then decreases. 
D) It first decreases then increases. 
A) It increases. 
B) It decreases. 
C) It first increases then decreases. 
D) It first decreases then increases.

Question 4

On a downward-sloping linear demand curve,where would total revenue be at a maximum

Accepted Answer

A) at the midpoint of the demand curve 
B) at the lower end of the demand curve 
C) at the upper end of the demand curve 
D) at the point of the demand curve where the change of the price and the change of the quantity is equal 
A) at the midpoint of the demand curve 
B) at the lower end of the demand curve 
C) at the upper end of the demand curve 
D) at the point of the demand curve where the change of the price and the change of the quantity is equal

Question 5

The discovery of a new hybrid wheat would tend to increase the supply of wheat.Under what conditions would wheat farmers realize an increase in revenue

Accepted Answer

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

Question 6

What is the demand for coffee at Tim Horton's

Accepted Answer

A) inelastic 
B) unitary elastic 
C) elastic 
D) cross elastic 
A) inelastic 
B) unitary elastic 
C) elastic 
D) cross elastic

Question 7

Moving down a linear demand curve,what happens to elasticity

Accepted Answer

A) It gets smaller, then larger. 
B) It gets larger. 
C) It gets smaller. 
D) It gets larger, then smaller. 
A) It gets smaller, then larger. 
B) It gets larger. 
C) It gets smaller. 
D) It gets larger, then smaller.

Question 8

If soybean farmers know that the demand for soybeans is inelastic,and they want to increase their total revenue,what should they all do

Accepted Answer

A) They should plant more soybeans so that they would be able to sell more each year. 
B) They should increase spending on fertilizer in an attempt to produce more on the acres they farm. 
C) They should reduce the number of acres they plant in soybeans. 
D) They should use better machinery. 
A) They should plant more soybeans so that they would be able to sell more each year. 
B) They should increase spending on fertilizer in an attempt to produce more on the acres they farm. 
C) They should reduce the number of acres they plant in soybeans. 
D) They should use better machinery.

Question 9

Figure 5-3
  
-Refer to Figure 5-3.What does the section of the demand curve labelled A represent

Accepted Answer

A) the elastic section of the demand curve 
B) the inelastic section of the demand curve 
C) the unit elastic section of the demand curve 
D) the perfectly elastic section of the demand curve 
A) the elastic section of the demand curve 
B) the inelastic section of the demand curve 
C) the unit elastic section of the demand curve 
D) the perfectly elastic section of the demand curve

Question 10

Suppose that when the price of corn is $2 per bushel,farmers can sell 12 million bushels.When the price of corn is $3 per bushel,farmers can sell 10 million bushels.Which of the following statements describes what will happen and why

Accepted Answer

A) The demand for corn is income inelastic, and so an increase in the price of corn will increase the income of corn farmers. 
B) The demand for corn is income elastic, and so an increase in the price of corn will increase the income of corn farmers. 
C) The demand for corn is price inelastic, and so an increase in the price of corn will increase the income of corn farmers. 
D) The demand for corn is price elastic, and so an increase in the price of corn will increase the income of corn farmers. 
A) The demand for corn is income inelastic, and so an increase in the price of corn will increase the income of corn farmers. 
B) The demand for corn is income elastic, and so an increase in the price of corn will increase the income of corn farmers. 
C) The demand for corn is price inelastic, and so an increase in the price of corn will increase the income of corn farmers. 
D) The demand for corn is price elastic, and so an increase in the price of corn will increase the income of corn farmers.

Question 11

Suppose the price elasticity of demand for basketballs is 1.2.What will result from a 20 percent increase in price

Accepted Answer

A) a 24 percent decrease in the quantity of basketballs demanded 
B) a 20 percent decrease in the quantity of basketballs demanded 
C) an 8 percent reduction in the number of basketballs demanded 
D) a 12.5 percent reduction in the number of basketballs demanded 
A) a 24 percent decrease in the quantity of basketballs demanded 
B) a 20 percent decrease in the quantity of basketballs demanded 
C) an 8 percent reduction in the number of basketballs demanded 
D) a 12.5 percent reduction in the number of basketballs demanded

Question 12

If a 30 percent change in price causes a 10 percent change in quantity supplied,what do we know about the price elasticity of supply

Accepted Answer

A) It is 1/3 and supply is elastic. 
B) It is 1/3 and supply is inelastic. 
C) It is 1 and supply is unit elastic. 
D) It is 3 and supply is elastic. 
A) It is 1/3 and supply is elastic. 
B) It is 1/3 and supply is inelastic. 
C) It is 1 and supply is unit elastic. 
D) It is 3 and supply is elastic.

Question 13

When does an increase in price cause an increase in total revenue

Accepted Answer

A) when demand is elastic 
B) when demand is inelastic 
C) when demand is unit elastic 
D) when demand is perfectly elastic 
A) when demand is elastic 
B) when demand is inelastic 
C) when demand is unit elastic 
D) when demand is perfectly elastic

Question 14

Figure 5-6
  
-Refer to Figure 5-6.If price decreases from $15 to $10,what will happen to total revenue,and what does this tell us about demand

Accepted Answer

A) It will decrease by $5, so demand must be inelastic. 
B) It will decrease by $20, so demand must be inelastic. 
C) It will increase by $10, so demand must be elastic. 
D) It will increase by $20, so demand must be elastic. 
A) It will decrease by $5, so demand must be inelastic. 
B) It will decrease by $20, so demand must be inelastic. 
C) It will increase by $10, so demand must be elastic. 
D) It will increase by $20, so demand must be elastic.

Question 15

If an increase in the price of a good results in an increase in total revenue for the firm,what must the supply of the good be

Accepted Answer

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

Question 16

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

Accepted Answer

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

Question 17

If the price elasticity of demand is equal to 0,demand is unit elastic.

Accepted Answer

A) True 
 B)False

Question 18

What happens when the price elasticity of demand increases

Accepted Answer

A) The responsiveness of quantity demanded to price decreases 
B) The responsiveness of quantity demanded to price decreases. 
C) The percentage change in price over the percentage change in quantity demanded increases. 
D) The responsiveness of quantity demanded to price increases. 
A) The responsiveness of quantity demanded to price decreases 
B) The responsiveness of quantity demanded to price decreases. 
C) The percentage change in price over the percentage change in quantity demanded increases. 
D) The responsiveness of quantity demanded to price increases.

Question 19

What does income elasticity of demand measure

Accepted Answer

A) how the quantity demanded changes as consumer income changes 
B) how consumer purchasing power is affected by a change in the price of a good 
C) how the price of a good is affected when there is a change in consumer income 
D) how many units of a good a consumer can buy given a certain income level 
A) how the quantity demanded changes as consumer income changes 
B) how consumer purchasing power is affected by a change in the price of a good 
C) how the price of a good is affected when there is a change in consumer income 
D) how many units of a good a consumer can buy given a certain income level

Question 20

Babar's Bakery made $200 last month selling 100 loaves of bread.This month it made $350 selling 70 loaves of bread.What is the price elasticity of demand for Babar's bread

Accepted Answer

A) 0.266 
B) 0.583 
C) 0.776 
D) 1.110 
A) 0.266 
B) 0.583 
C) 0.776 
D) 1.110

Exam 5: Elasticity and Its Application

When will the supply of a good be more elastic

Suppose that an increase in the price of carrots from $1.50 to $1.70 per kilogram raises the amount of carrots that carrot farmers produce from 1.2 million kilograms to 1.6 million kilograms.Using the midpoint method,what would be the elasticity of supply

How does total revenue change as one moves down a linear demand curve

On a downward-sloping linear demand curve,where would total revenue be at a maximum

The discovery of a new hybrid wheat would tend to increase the supply of wheat.Under what conditions would wheat farmers realize an increase in revenue

What is the demand for coffee at Tim Horton's

Moving down a linear demand curve,what happens to elasticity

If soybean farmers know that the demand for soybeans is inelastic,and they want to increase their total revenue,what should they all do

Figure 5-3 -Refer to Figure 5-3.What does the section of the demand curve labelled A represent

Suppose that when the price of corn is $2 per bushel,farmers can sell 12 million bushels.When the price of corn is $3 per bushel,farmers can sell 10 million bushels.Which of the following statements describes what will happen and why

Suppose the price elasticity of demand for basketballs is 1.2.What will result from a 20 percent increase in price

If a 30 percent change in price causes a 10 percent change in quantity supplied,what do we know about the price elasticity of supply

When does an increase in price cause an increase in total revenue

Figure 5-6 -Refer to Figure 5-6.If price decreases from $15 to $10,what will happen to total revenue,and what does this tell us about demand

If an increase in the price of a good results in an increase in total revenue for the firm,what must the supply of the good be

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

If the price elasticity of demand is equal to 0,demand is unit elastic.

What happens when the price elasticity of demand increases

What does income elasticity of demand measure

Babar's Bakery made $200 last month selling 100 loaves of bread.This month it made $350 selling 70 loaves of bread.What is the price elasticity of demand for Babar's bread

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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