Question 1

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Accepted Answer

A) cross-price elasticity of demand is negative. 
B) price elasticity of demand is elastic. 
C) income elasticity of demand is negative. 
D) income elasticity of demand is positive. 
A) cross-price elasticity of demand is negative. 
B) price elasticity of demand is elastic. 
C) income elasticity of demand is negative. 
D) income elasticity of demand is positive. C

Question 2

Income elasticity of demand measures how

Accepted Answer

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

Question 3

Which of the following statements is correct?

Accepted Answer

A) The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. 
B) The demand for grandfather clocks is more elastic than the demand for clocks in general. 
C) The demand for cardboard is more elastic over a long period of time than over a short period of time. 
D) All of the above are correct. 
A) The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. 
B) The demand for grandfather clocks is more elastic than the demand for clocks in general. 
C) The demand for cardboard is more elastic over a long period of time than over a short period of time. 
D) All of the above are correct. D

Question 4

If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

Accepted Answer

A) increase by 4.2%. 
B) increase by 6%. 
C) decrease by 4.2%. 
D) decrease by 6%. 
A) increase by 4.2%. 
B) increase by 6%. 
C) decrease by 4.2%. 
D) decrease by 6%.

Question 5

Figure 5-6  
-Refer to Figure 5-6. Sellers' total revenue would increase if the price

Accepted Answer

A) increased from $4 to $6. 
B) increased from $16 to $18. 
C) decreased from $8 to $6. 
D) All of the above are correct. 
A) increased from $4 to $6. 
B) increased from $16 to $18. 
C) decreased from $8 to $6. 
D) All of the above are correct.

Question 6

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Accepted Answer

A) True 
 B)False

Question 7

When quantity moves proportionately the same amount as price, demand is

Accepted Answer

A) elastic, and the price elasticity of demand is 1. 
B) perfectly elastic, and the price elasticity of demand is infinitely large. 
C) perfectly inelastic, and the price elasticity of demand is 0. 
D) unit elastic, and the price elasticity of demand is 1. 
A) elastic, and the price elasticity of demand is 1. 
B) perfectly elastic, and the price elasticity of demand is infinitely large. 
C) perfectly inelastic, and the price elasticity of demand is 0. 
D) unit elastic, and the price elasticity of demand is 1.

Question 8

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 9

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about

Accepted Answer

A) 0.62. 
B) 0.77. 
C) 1.24. 
D) 1.63. 
A) 0.62. 
B) 0.77. 
C) 1.24. 
D) 1.63.

Question 10

Demand is inelastic if the price elasticity of demand is

Accepted Answer

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

Question 11

Suppose that 50 hot dogs are demanded at a particular price. If the price of hot dogs rises from that price by 5 percent, the number of hot dogs demanded falls to 48. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Accepted Answer

A) demand for hot dogs in this price range is unit elastic. 
B) price increase will decrease the total revenue of hot dog sellers. 
C) price elasticity of demand for hot dogs in this price range is about 1.22. 
D) price elasticity of demand for hot dogs in this price range is about 0.82. 
A) demand for hot dogs in this price range is unit elastic. 
B) price increase will decrease the total revenue of hot dog sellers. 
C) price elasticity of demand for hot dogs in this price range is about 1.22. 
D) price elasticity of demand for hot dogs in this price range is about 0.82.

Question 12

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

Accepted Answer

A) the price of the good 
B) prices of related goods 
C) tastes 
D) All of the above should be held constant. 
A) the price of the good 
B) prices of related goods 
C) tastes 
D) All of the above should be held constant.

Question 13

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 14

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 15

An increase in price causes an increase in total revenue when demand is

Accepted Answer

A) elastic. 
B) inelastic. 
C) unit elastic. 
D) All of the above are possible. 
A) elastic. 
B) inelastic. 
C) unit elastic. 
D) All of the above are possible.

Question 16

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

Accepted Answer

A) consumers to buy less of 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 respond to the tastes of consumers. 
A) consumers to buy less of 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 respond to the tastes of consumers.

Question 17

Demand is said to be inelastic if the

Accepted Answer

A) quantity demanded changes proportionately more than price. 
B) price changes proportionately more than income. 
C) quantity demanded changes proportionately less than price. 
D) quantity demanded changes proportionately the same as price. 
A) quantity demanded changes proportionately more than price. 
B) price changes proportionately more than income. 
C) quantity demanded changes proportionately less than price. 
D) quantity demanded changes proportionately the same as price.

Question 18

Scenario 5-3
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-3. The equilibrium price will

Accepted Answer

A) increase in both the milk and beef markets. 
B) increase in the milk market and decrease in the beef market. 
C) decrease in the milk market and increase in the beef market. 
D) decrease in both the milk and beef markets. 
A) increase in both the milk and beef markets. 
B) increase in the milk market and decrease in the beef market. 
C) decrease in the milk market and increase in the beef market. 
D) decrease in both the milk and beef markets.

Question 19

Total revenue will be at its largest value on a linear demand curve at the

Accepted Answer

A) top of the curve, where prices are highest. 
B) midpoint of the curve. 
C) low end of the curve, where quantity demanded is highest. 
D) None of the above is correct. 
A) top of the curve, where prices are highest. 
B) midpoint of the curve. 
C) low end of the curve, where quantity demanded is highest. 
D) None of the above is correct.

Question 20

How did the farm population in the United States change between 1950 and today?

Accepted Answer

A) It dropped from 10 million to fewer than 3 million people. 
B) It dropped from 20 million to fewer than 5 million people. 
C) It dropped from 30 million to just over 6 million people. 
D) It increased from 10 million to almost 13 million people. 
A) It dropped from 10 million to fewer than 3 million people. 
B) It dropped from 20 million to fewer than 5 million people. 
C) It dropped from 30 million to just over 6 million people. 
D) It increased from 10 million to almost 13 million people.

Exam 5: Elasticity and Its Application

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Income elasticity of demand measures how

Which of the following statements is correct?

If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

Figure 5-6 -Refer to Figure 5-6. Sellers' total revenue would increase if the price

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

When quantity moves proportionately the same amount as price, demand is

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

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about

Demand is inelastic if the price elasticity of demand is

Suppose that 50 hot dogs are demanded at a particular price. If the price of hot dogs rises from that price by 5 percent, the number of hot dogs demanded falls to 48. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

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

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

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

An increase in price causes an increase in total revenue when demand is

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

Demand is said to be inelastic if the

Scenario 5-3 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-3. The equilibrium price will

Total revenue will be at its largest value on a linear demand curve at the

How did the farm population in the United States change between 1950 and today?

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

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 Macroeconomic Models

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

Six Debates Over Macroeconomic Policy

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