Question 1

Figure 5-11  
-Refer to Figure 5-11. If the price falls from point A to point B, total revenue

Accepted Answer

A) increases, and demand is price elastic. 
B) decreases, and demand is price elastic. 
C) increases, and demand is price inelastic. 
D) decreases, and demand is price inelastic. 
A) increases, and demand is price elastic. 
B) decreases, and demand is price elastic. 
C) increases, and demand is price inelastic. 
D) decreases, and demand is price inelastic.

Question 2

Holding all other factors constant and using the midpoint method, if a calculator manufacturer increases production from 40 to 50 units when price increases by 20 percent, then supply is

Accepted Answer

A) inelastic, since the price elasticity of supply is equal to .91. 
B) inelastic, since the price elasticity of supply is equal to 1.1. 
C) elastic, since the price elasticity of supply is equal to 0.91. 
D) elastic, since the price elasticity of supply is equal to 1.1. 
A) inelastic, since the price elasticity of supply is equal to .91. 
B) inelastic, since the price elasticity of supply is equal to 1.1. 
C) elastic, since the price elasticity of supply is equal to 0.91. 
D) elastic, since the price elasticity of supply is equal to 1.1.

Question 3

Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for soccer balls causes the price of soccer balls to increase by 20%, then the quantity supplied of soccer balls will increase by about

Accepted Answer

A) 0.67% in the short run and 0.17% in the long run. 
B) 3% in the short run and 1.2% in the long run. 
C) 6% in the short run and 24% in the long run. 
D) 66.7% in the short run and 16.7% in the long run. 
A) 0.67% in the short run and 0.17% in the long run. 
B) 3% in the short run and 1.2% in the long run. 
C) 6% in the short run and 24% in the long run. 
D) 66.7% in the short run and 16.7% in the long run.

Question 4

If the price elasticity of demand for a good is 0.8, then which of the following events is consistent with a 4 percent decrease in the quantity of the good demanded?

Accepted Answer

A) a 0.2 percent increase in the price of the good 
B) a 3.2 percent increase in the price of the good 
C) a 4.8 percent increase in the price of the good 
D) a 5 percent increase in the price of the good 
A) a 0.2 percent increase in the price of the good 
B) a 3.2 percent increase in the price of the good 
C) a 4.8 percent increase in the price of the good 
D) a 5 percent increase in the price of the good

Question 5

Figure 5-6  
-Refer to Figure 5-6. Which of the following price changes would result in no change in sellers' total revenue?

Accepted Answer

A) The price increases from $6 to $9. 
B) The price increases from $9 to $15. 
C) The price decreases from $12 to $9. 
D) The price decreases from $9 to $5. 
A) The price increases from $6 to $9. 
B) The price increases from $9 to $15. 
C) The price decreases from $12 to $9. 
D) The price decreases from $9 to $5.

Question 6

When demand is inelastic, a decrease in price increases total revenue.

Accepted Answer

A) True 
 B)False

Question 7

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

Accepted Answer

A) True 
 B)False

Question 8

A linear, downward-sloping demand curve has a constant elasticity but a changing slope.

Accepted Answer

A) True 
 B)False

Question 9

Figure 5-16  
-Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between point B and point C?

Accepted Answer

A) 1.44 
B) 1.29 
C) 0.96 
D) 0.78 
A) 1.44 
B) 1.29 
C) 0.96 
D) 0.78

Question 10

When demand is perfectly inelastic, the price elasticity of demand

Accepted Answer

A) is zero, and the demand curve is vertical. 
B) is zero, and the demand curve is horizontal. 
C) approaches infinity, and the demand curve is vertical. 
D) approaches infinity, and the demand curve is horizontal. 
A) is zero, and the demand curve is vertical. 
B) is zero, and the demand curve is horizontal. 
C) approaches infinity, and the demand curve is vertical. 
D) approaches infinity, and the demand curve is horizontal.

Question 11

Sandra purchases 5 pounds of coffee and 10 gallons of milk per month when the price of coffee is $10 per pound. She purchases 6 pounds of coffee and 12 gallons of milk per month when the price of coffee is $8 per pound. Sandra's cross-price elasticity of demand for coffee and milk is

Accepted Answer

A) 0.82, and they are substitutes. 
B) -0.82, and they are complements. 
C) 1.22, and they are substitutes. 
D) -1.22, and they are complements. 
A) 0.82, and they are substitutes. 
B) -0.82, and they are complements. 
C) 1.22, and they are substitutes. 
D) -1.22, and they are complements.

Question 12

Figure 5-3  
-Refer to Figure 5-3. Which demand curve is perfectly inelastic?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 13

The price elasticity of demand changes as we move along a

Accepted Answer

A) horizontal demand curve. 
B) vertical demand curve. 
C) linear, downward-sloping demand curve. 
D) All of the above are correct. 
A) horizontal demand curve. 
B) vertical demand curve. 
C) linear, downward-sloping demand curve. 
D) All of the above are correct.

Question 14

The supply of a good will be more elastic, the

Accepted Answer

A) more the good is considered a luxury. 
B) broader is the definition of the market for the good. 
C) larger the number of close substitutes for the good. 
D) longer the time period being considered. 
A) more the good is considered a luxury. 
B) broader is the definition of the market for the good. 
C) larger the number of close substitutes for the good. 
D) longer the time period being considered.

Question 15

How does total revenue change as one moves downward and to the right along a linear demand curve?

Accepted Answer

A) It always increases. 
B) It always decreases. 
C) It first increases, then decreases. 
D) It is unaffected by a movement along the demand curve. 
A) It always increases. 
B) It always decreases. 
C) It first increases, then decreases. 
D) It is unaffected by a movement along the demand curve.

Question 16

If the price elasticity of demand for a good is 10.0, then a 4 percent increase in price results in a

Accepted Answer

A) 0.4 percent decrease in the quantity demanded. 
B) 2.5 percent decrease in the quantity demanded. 
C) 4 percent decrease in the quantity demanded. 
D) 40 percent decrease in the quantity demanded. 
A) 0.4 percent decrease in the quantity demanded. 
B) 2.5 percent decrease in the quantity demanded. 
C) 4 percent decrease in the quantity demanded. 
D) 40 percent decrease in the quantity demanded.

Question 17

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Accepted Answer

A) True 
 B)False

Question 18

If the cross-price elasticity of demand for two goods is negative, then the two goods are substitutes.

Accepted Answer

A) True 
 B)False

Question 19

For a horizontal 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 20

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

Accepted Answer

A) dental floss 
B) milk 
C) salt 
D) diamond earrings 
A) dental floss 
B) milk 
C) salt 
D) diamond earrings

Exam 5: Elasticity and Its Application

Figure 5-11 -Refer to Figure 5-11. If the price falls from point A to point B, total revenue

Holding all other factors constant and using the midpoint method, if a calculator manufacturer increases production from 40 to 50 units when price increases by 20 percent, then supply is

Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for soccer balls causes the price of soccer balls to increase by 20%, then the quantity supplied of soccer balls will increase by about

If the price elasticity of demand for a good is 0.8, then which of the following events is consistent with a 4 percent decrease in the quantity of the good demanded?

Figure 5-6 -Refer to Figure 5-6. Which of the following price changes would result in no change in sellers' total revenue?

When demand is inelastic, a decrease in price increases total revenue.

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

A linear, downward-sloping demand curve has a constant elasticity but a changing slope.

Figure 5-16 -Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between point B and point C?

When demand is perfectly inelastic, the price elasticity of demand

Sandra purchases 5 pounds of coffee and 10 gallons of milk per month when the price of coffee is $10 per pound. She purchases 6 pounds of coffee and 12 gallons of milk per month when the price of coffee is $8 per pound. Sandra's cross-price elasticity of demand for coffee and milk is

Figure 5-3 -Refer to Figure 5-3. Which demand curve is perfectly inelastic?

The price elasticity of demand changes as we move along a

The supply of a good will be more elastic, the

How does total revenue change as one moves downward and to the right along a linear demand curve?

If the price elasticity of demand for a good is 10.0, then a 4 percent increase in price results in a

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

If the cross-price elasticity of demand for two goods is negative, then the two goods are substitutes.

For a horizontal demand curve,

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

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

Filters