Question 1

Figure 5-14  
-Refer to Figure 5-14. Along which of these segments of the supply curve is supply least elastic?

Accepted Answer

A) GH 
B) CD 
C) AC 
D) AB 
A) GH 
B) CD 
C) AC 
D) AB

Question 2

The case of perfectly elastic demand is illustrated by a demand curve that is

Accepted Answer

A) vertical. 
B) horizontal. 
C) downward-sloping but relatively steep. 
D) downward-sloping but relatively flat. 
A) vertical. 
B) horizontal. 
C) downward-sloping but relatively steep. 
D) downward-sloping but relatively flat.

Question 3

Table 5-6
 $\begin{array}{|l|l|l|}
\hline \text { Income } & \begin{array}{l}
\text { Quantity of Good X } \
\text { Purchased }
\end{array} & \begin{array}{l}
\text { Quantity of Good Y } \
\text { Purchased }
\end{array} \
\hline \$ 30,000 & 2 & 20 \
\hline \$ 40,000 & 6 & 10 \
\hline
\end{array}$

-Refer to Table 5-6. Using the midpoint method, the income elasticity of demand for good Y is

Accepted Answer

A) 2.33, and good Y is a normal good. 
B) -2.33, and good Y is an inferior good. 
C) -0.43, and good Y is a normal good. 
D) -0.43, and good Y is an inferior good. 
A) 2.33, and good Y is a normal good. 
B) -2.33, and good Y is an inferior good. 
C) -0.43, and good Y is a normal good. 
D) -0.43, and good Y is an inferior good.

Question 4

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

Accepted Answer

A) 0.22. 
B) 0.67. 
C) 1.33. 
D) 1.50. 
A) 0.22. 
B) 0.67. 
C) 1.33. 
D) 1.50.

Question 5

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about

Accepted Answer

A) 0.67%. 
B) 0.83%. 
C) 1.20%. 
D) 2.70%. 
A) 0.67%. 
B) 0.83%. 
C) 1.20%. 
D) 2.70%.

Question 6

Figure 5-6  
-Refer to Figure 5-6. Using the midpoint method, the price elasticity of demand between point B and point C is

Accepted Answer

A) 0.5. 
B) 0.75. 
C) 1.0. 
D) 1.3. 
A) 0.5. 
B) 0.75. 
C) 1.0. 
D) 1.3.

Question 7

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 absolute value of the price elasticity of demand is

Accepted Answer

A)  20. 
B)  10. 
C)  2.33. 
D)  0.43. 
A)  20. 
B)  10. 
C)  2.33. 
D)  0.43.

Question 8

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A) There are many close substitutes for this good. 
B) The good is a luxury. 
C) The market for the good is broadly defined. 
D) The relevant time horizon is long. 
A) There are many close substitutes for this good. 
B) The good is a luxury. 
C) The market for the good is broadly defined. 
D) The relevant time horizon is long.

Question 9

Which of the following is likely to have the most price inelastic demand?

Accepted Answer

A) camcorders 
B) insulin 
C) apples 
D) devices that remove cores from apples 
A) camcorders 
B) insulin 
C) apples 
D) devices that remove cores from apples

Question 10

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

Accepted Answer

A) 0.62, and supply is elastic. 
B) 0.62, and supply is inelastic. 
C) 1.63, and supply is elastic. 
D) 1.63, and supply is inelastic. 
A) 0.62, and supply is elastic. 
B) 0.62, and supply is inelastic. 
C) 1.63, and supply is elastic. 
D) 1.63, and supply is inelastic.

Question 11

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Question 12

Figure 5-15  
-Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between $6 and $8?

Accepted Answer

A) 0.86 
B) 1.00 
C) 1.17 
D) 1.25 
A) 0.86 
B) 1.00 
C) 1.17 
D) 1.25

Question 13

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

Accepted Answer

A)  0. 
B)  1. 
C)  6. 
D)  36. 
A)  0. 
B)  1. 
C)  6. 
D)  36.

Question 14

Pierre says that he will spend exactly 75 cents a day on candy bars, regardless of the price of candy bars. Pierre's demand for candy bars is

Accepted Answer

A) perfectly elastic. 
B) unit elastic. 
C) perfectly inelastic. 
D) None of the above answers is correct. 
A) perfectly elastic. 
B) unit elastic. 
C) perfectly inelastic. 
D) None of the above answers is correct.

Question 15

Frequently, in the short run, the quantity supplied of a good is

Accepted Answer

A) impossible, or nearly impossible, to measure. 
B) not very responsive to price changes. 
C) determined by the quantity demanded of the good. 
D) determined by psychological forces and other non-economic forces. 
A) impossible, or nearly impossible, to measure. 
B) not very responsive to price changes. 
C) determined by the quantity demanded of the good. 
D) determined by psychological forces and other non-economic forces.

Question 16

If the quantity supplied responds only slightly to changes in price, then

Accepted Answer

A) supply is said to be elastic. 
B) supply is said to be inelastic. 
C) an increase in price will not shift the supply curve very much. 
D) even a large decrease in demand will change the equilibrium price only slightly. 
A) supply is said to be elastic. 
B) supply is said to be inelastic. 
C) an increase in price will not shift the supply curve very much. 
D) even a large decrease in demand will change the equilibrium price only slightly.

Question 17

Scenario 5-4
Suppose the government is concerned about firms in the United States importing illegal caviar. As a result, the government increases border patrols to catch illegal shipments. U.S. Customs agents perform DNA testing on the caviar to determine if it comes from endangered species of fish. If so, the government destroys the caviar.
-Refer to Scenario 5-4. What would we expect to observe in the caviar market?

Accepted Answer

A) Equilibrium prices and quantities will increase. 
B) Equilibrium prices will increase by more if the demand for caviar is elastic than if demand is inelastic. 
C) Total revenues to caviar firms will increase if the demand for caviar is inelastic. 
D) All of the above are correct. 
A) Equilibrium prices and quantities will increase. 
B) Equilibrium prices will increase by more if the demand for caviar is elastic than if demand is inelastic. 
C) Total revenues to caviar firms will increase if the demand for caviar is inelastic. 
D) All of the above are correct.

Question 18

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

Accepted Answer

A) The elasticity of supply approaches infinity. 
B) The supply curve is vertical. 
C) At a price below $4, quantity supplied is infinite. 
D) At a price above $4, quantity supplied is zero. 
A) The elasticity of supply approaches infinity. 
B) The supply curve is vertical. 
C) At a price below $4, quantity supplied is infinite. 
D) At a price above $4, quantity supplied is zero.

Question 19

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Accepted Answer

A) True 
 B)False

Question 20

Figure 5-5  
-Refer to Figure 5-5. Using the midpoint method, between prices of $30 and $36, price elasticity of demand is about

Accepted Answer

A) 0.5. 
B) 0.82. 
C) 1.22. 
D) 2. 
A) 0.5. 
B) 0.82. 
C) 1.22. 
D) 2.

Exam 5: Elasticity and Its Application

Figure 5-14 -Refer to Figure 5-14. Along which of these segments of the supply curve is supply least elastic?

The case of perfectly elastic demand is illustrated by a demand curve that is

Table 5-6 Income Quantity of Good X Purchased Quantity of Good Y Purchased \ 30,000 2 20 \ 40,000 6 10 -Refer to Table 5-6. Using the midpoint method, the income elasticity of demand for good Y is

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about

Figure 5-6 -Refer to Figure 5-6. Using the midpoint method, the price elasticity of demand between point B and point C is

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 absolute value of the price elasticity of demand is

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Which of the following is likely to have the most price inelastic demand?

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

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between $6 and $8?

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

Pierre says that he will spend exactly 75 cents a day on candy bars, regardless of the price of candy bars. Pierre's demand for candy bars is

Frequently, in the short run, the quantity supplied of a good is

If the quantity supplied responds only slightly to changes in price, then

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $30 and $36, price elasticity of demand is about

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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