Question 1

Figure 5-11  
-Refer to Figure 5-11. Using the midpoint method, the price elasticity of demand between point A and point B is about

Accepted Answer

A) 0.33. 
B) 0.5. 
C) 2.0. 
D) 3.0. 
A) 0.33. 
B) 0.5. 
C) 2.0. 
D) 3.0.

Question 2

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

Accepted Answer

A) True 
 B)False

Question 3

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Accepted Answer

A) fall by 200 percent. 
B) fall by 40 percent. 
C) rise by 200 percent. 
D) rise by 40 percent. 
A) fall by 200 percent. 
B) fall by 40 percent. 
C) rise by 200 percent. 
D) rise by 40 percent.

Question 4

Goods with many close substitutes tend to have

Accepted Answer

A) more elastic demands. 
B) less elastic demands. 
C) price elasticities of demand that are unit elastic. 
D) income elasticities of demand that are negative. 
A) more elastic demands. 
B) less elastic demands. 
C) price elasticities of demand that are unit elastic. 
D) income elasticities of demand that are negative.

Question 5

Suppose the price elasticity of supply for candles is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for candles causes the price of candles to increase by 36%, then the quantity supplied of candles will increase by about

Accepted Answer

A) 0.8% in the short run and 3.3% in the long run. 
B) 1.2% in the short run and 0.3% in the long run. 
C) 10.8% in the short run and 43.2% in the long run. 
D) 120% in the short run and 30% in the long run. 
A) 0.8% in the short run and 3.3% in the long run. 
B) 1.2% in the short run and 0.3% in the long run. 
C) 10.8% in the short run and 43.2% in the long run. 
D) 120% in the short run and 30% in the long run.

Question 6

In which of these instances is demand said to be perfectly inelastic?

Accepted Answer

A) An increase in price of 2% causes a decrease in quantity demanded of 2%. 
B) A decrease in price of 2% causes an increase in quantity demanded of 0%. 
C) A decrease in price of 2% causes a decrease in total revenue of 0%. 
D) An increase in price of 2% causes a decrease in quantity demanded of 1/2%. 
A) An increase in price of 2% causes a decrease in quantity demanded of 2%. 
B) A decrease in price of 2% causes an increase in quantity demanded of 0%. 
C) A decrease in price of 2% causes a decrease in total revenue of 0%. 
D) An increase in price of 2% causes a decrease in quantity demanded of 1/2%.

Question 7

Table 5-5
The following table shows a portion of the demand schedule for a particular good at various levels of income. $\begin{array}{|c|c|c|c|}
\hline \text { Price } & \begin{array}{c}
\text { Quantity Demanded } \
\text { (Income }=\$ \mathbf{\$ 5 , 0 0 0})
\end{array} & \begin{array}{c}
\text { Quantity Demanded } \
\text { (Income }=\mathbf{\$ 7 , 5 0 0})
\end{array} & \begin{array}{c}
\text { Quantity Demanded } \
(\text { Income }=\mathbf{\$ 1 0 , 0 0 0})
\end{array} \
\hline \$ 24 & 2 & 3 & 4 \
\hline \$ 20 & 4 & 6 & 8 \
\hline \$ 16 & 6 & 9 & 12 \
\hline \$ 12 & 8 & 12 & 16 \
\hline \$ 8 & 10 & 15 & 20 \
\hline \$ 4 & 12 & 18 & 24 \
\hline
\end{array}$

-Refer to Table 5-5. Using the midpoint method, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

Accepted Answer

A) 0.00 
B) 0.50 
C) 1.00 
D) 1.50 
A) 0.00 
B) 0.50 
C) 1.00 
D) 1.50

Question 8

Figure 5-6  
-Refer to Figure 5-6. If the price decreased from $18 to $6, total revenue would

Accepted Answer

A) increase by $1,200, and demand is elastic between points A and C. 
B) increase by $800, and demand is elastic between points A and C. 
C) decrease by $1,200, and demand is inelastic between points A and C. 
D) decrease by $800, and demand is inelastic between points A and C. 
A) increase by $1,200, and demand is elastic between points A and C. 
B) increase by $800, and demand is elastic between points A and C. 
C) decrease by $1,200, and demand is inelastic between points A and C. 
D) decrease by $800, and demand is inelastic between points A and C.

Question 9

Table 5-2
 $$\begin{array} { | l | l | } 
\hline \text { Priea } & \text { Quintit } \
\hline \$ 100 & 0 \
\hline \$ 80 & 10 \
\hline \$ 60 & 20 \
\hline \$ 40 & 30 \
\hline \$ 20 & 40 \
\hline \$ 0 & 50 \
\hline
\end{array}$$
-Refer to Table 5-2. Using the midpoint method, if the price falls from $60 to $40, the price elasticity of demand is

Accepted Answer

A) zero. 
B) inelastic. 
C) unit elastic. 
D) elastic. 
A) zero. 
B) inelastic. 
C) unit elastic. 
D) elastic.

Question 10

For a vertical demand curve,

Accepted Answer

A) the slope is undefined, and the price elasticity of demand is equal to 0. 
B) the slope is equal to 0, and the price elasticity of demand is undefined. 
C) both the slope and price elasticity of demand are undefined. 
D) both the slope and price elasticity of demand are equal to 0. 
A) the slope is undefined, and the price elasticity of demand is equal to 0. 
B) the slope is equal to 0, and the price elasticity of demand is undefined. 
C) both the slope and price elasticity of demand are undefined. 
D) both the slope and price elasticity of demand are equal to 0.

Question 11

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

Accepted Answer

A) 1.50, and an increase in price will result in an increase in total revenue for good A. 
B) 1.50, and an increase in price will result in a decrease in total revenue for good A. 
C) 0.67, and an increase in price will result in an increase in total revenue for good A. 
D) 0.67, and an increase in price will result in a decrease in total revenue for good A. 
A) 1.50, and an increase in price will result in an increase in total revenue for good A. 
B) 1.50, and an increase in price will result in a decrease in total revenue for good A. 
C) 0.67, and an increase in price will result in an increase in total revenue for good A. 
D) 0.67, and an increase in price will result in a decrease in total revenue for good A.

Question 12

On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50). Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A) 0.22. 
B) 0.53. 
C) 1.00. 
D) 1.89. 
A) 0.22. 
B) 0.53. 
C) 1.00. 
D) 1.89.

Question 13

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 14

Table 5-6
 $\begin{array}{l|l|l} 
& \text { Supply is } & \text { Demand is } \
\hline \text { Scenario A } & \text { elastic } & \text { elastic } \
\hline \text { Scenario B } & \text { elastic } & \text { inelastic } \
\hline \text { Scenario C } & \text { inelastic } & \text { elastic } \
\hline \text { Scenario D } & \text { inelastic } & \text { inelastic } \
\hline
\end{array}$

-Refer to Table 5-6. Which scenario describes the market for oil in the short run in comparison to the long run?

Accepted Answer

A) Scenario A describes both the short run and the long run. 
B) Scenario D describes both the short run and the long run. 
C) Scenario D describes the short run, whereas scenario A describes the long run. 
D) Scenario C describes the short run, whereas scenario B describes the long run. 
A) Scenario A describes both the short run and the long run. 
B) Scenario D describes both the short run and the long run. 
C) Scenario D describes the short run, whereas scenario A describes the long run. 
D) Scenario C describes the short run, whereas scenario B describes the long run.

Question 15

Table 5-2
 $$\begin{array} { | l | l | } 
\hline \text { Priea } & \text { Quintit } \
\hline \$ 100 & 0 \
\hline \$ 80 & 10 \
\hline \$ 60 & 20 \
\hline \$ 40 & 30 \
\hline \$ 20 & 40 \
\hline \$ 0 & 50 \
\hline
\end{array}$$
-Refer to Table 5-2. Using the midpoint method, if the price falls from $80 to $60, the price elasticity of demand is

Accepted Answer

A) zero. 
B) unit elastic. 
C) inelastic. 
D) elastic. 
A) zero. 
B) unit elastic. 
C) inelastic. 
D) elastic.

Question 16

Consider the following pairs of goods. For which of the two goods would you expect the demand to be more price elastic? Why?
a.water or diamonds
b.insulin or nasal decongestant spray
c.food in general or breakfast cereal
d.gasoline over the course of a week or gasoline over the course of a year
e.personal computers or IBM personal computers

Accepted Answer

a.Diamonds are luxuries, and water is a

Question 17

If two goods are complements, their cross-price elasticity will be

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) equal to the difference between the income elasticities of demand for the two goods. 
A) positive. 
B) negative. 
C) zero. 
D) equal to the difference between the income elasticities of demand for the two goods.

Question 18

Suppose demand is perfectly elastic, 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 19

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

Accepted Answer

A) True 
 B)False

Question 20

Figure 5-5  
-Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of

Accepted Answer

A) $18. 
B) $30. 
C) $42. 
D) $48. 
A) $18. 
B) $30. 
C) $42. 
D) $48.

Exam 5: Elasticity and Its Application

Figure 5-11 -Refer to Figure 5-11. Using the midpoint method, the price elasticity of demand between point A and point B is about

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Goods with many close substitutes tend to have

Suppose the price elasticity of supply for candles is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for candles causes the price of candles to increase by 36%, then the quantity supplied of candles will increase by about

In which of these instances is demand said to be perfectly inelastic?

Figure 5-6 -Refer to Figure 5-6. If the price decreased from $18 to $6, total revenue would

Table 5-2 Priea Quintit \ 100 0 \ 80 10 \ 60 20 \ 40 30 \ 20 40 \ 0 50 -Refer to Table 5-2. Using the midpoint method, if the price falls from $60 to $40, the price elasticity of demand is

For a vertical demand curve,

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50). Using the midpoint method, the price elasticity of supply is about

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

Table 5-6 Supply is Demand is Scenario A elastic elastic Scenario B elastic inelastic Scenario C inelastic elastic Scenario D inelastic inelastic -Refer to Table 5-6. Which scenario describes the market for oil in the short run in comparison to the long run?

Table 5-2 Priea Quintit \ 100 0 \ 80 10 \ 60 20 \ 40 30 \ 20 40 \ 0 50 -Refer to Table 5-2. Using the midpoint method, if the price falls from $80 to $60, the price elasticity of demand is

If two goods are complements, their cross-price elasticity will be

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

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

Figure 5-5 -Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of

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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