Question 1

Elasticity measures how responsive quantity is to changes in price.

Accepted Answer

A) True 
 B)False

Question 2

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

Accepted Answer

A) True 
 B)False

Question 3

Figure 5-9  
-Refer to Figure 5-9. Suppose this demand curve is a straight, downward-sloping line all the way from the horizontal intercept to the vertical intercept. We choose two prices, P1 and P2, and the corresponding quantities demanded, Q1 and Q2, for the purpose of calculating the price elasticity of demand. Also suppose P2 > P1. In which of the following cases could we possibly find that (i) demand is elastic and (ii) an increase in price from P1 to P2 causes an increase in total revenue?

Accepted Answer

A) 0 1 2 1 2 1 > $15. 
D) None of the above is correct. 
A) 0 1 2 1 2 1 > $15. 
D) None of the above is correct.

Question 4

Figure 5-14  
-Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between points D and G?

Accepted Answer

A) 1.89 
B) 1.26 
C) 0.53 
D) 0.34 
A) 1.89 
B) 1.26 
C) 0.53 
D) 0.34

Question 5

If the cross-price elasticity of demand for two goods is 1.25, then

Accepted Answer

A) the two goods are luxuries. 
B) the two goods are substitutes. 
C) one of the goods is normal and the other good is inferior. 
D) the demand for one of the goods conforms to the law of demand, but the demand for the other good violates the law of demand. 
A) the two goods are luxuries. 
B) the two goods are substitutes. 
C) one of the goods is normal and the other good is inferior. 
D) the demand for one of the goods conforms to the law of demand, but the demand for the other good violates the law of demand.

Question 6

If the price elasticity of demand for a good is 1.5, then a 3 percent decrease in price results in a

Accepted Answer

A) 0.5 percent increase in the quantity demanded. 
B) 2 percent increase in the quantity demanded. 
C) 4.5 percent increase in the quantity demanded. 
D) 5 percent increase in the quantity demanded. 
A) 0.5 percent increase in the quantity demanded. 
B) 2 percent increase in the quantity demanded. 
C) 4.5 percent increase in the quantity demanded. 
D) 5 percent increase in the quantity demanded.

Question 7

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

Accepted Answer

A) white chocolate chip with macadamia nut cookies 
B) Mrs. Field's chocolate chip cookies 
C) milk chocolate chip cookies 
D) cookies 
A) white chocolate chip with macadamia nut cookies 
B) Mrs. Field's chocolate chip cookies 
C) milk chocolate chip cookies 
D) cookies

Question 8

If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

Accepted Answer

A) True 
 B)False

Question 9

Holding all other forces constant, if decreasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Accepted Answer

A) unit elastic. 
B) inelastic. 
C) elastic. 
D) None of the above is correct because a price increase always leads to an increase in total revenue. 
A) unit elastic. 
B) inelastic. 
C) elastic. 
D) None of the above is correct because a price increase always leads to an increase in total revenue.

Question 10

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

Accepted Answer

A) the quantity of the good demanded 
B) the price of the good 
C) income 
D) All of the above should be held constant. 
A) the quantity of the good demanded 
B) the price of the good 
C) income 
D) All of the above should be held constant.

Question 11

In January the price of dark chocolate candy bars was $2.00, and Willy's Chocolate Factory produced 80 pounds. In February the price of dark chocolate candy bars was $2.50, and Willy's produced 110 pounds. In March the price of dark chocolate candy bars was $3.00, and Willy's produced 140 pounds. The price elasticity of supply of Willy's dark chocolate candy bars was about

Accepted Answer

A) 0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00. 
B) 0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00. 
C) 1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00. 
D) 1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00. 
A) 0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00. 
B) 0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00. 
C) 1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00. 
D) 1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00.

Question 12

Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

A) True 
 B)False

Question 13

When the Shaffers had a monthly income of $4,000, they usually ate out 8 times a month. Now that the couple makes $4,500 a month, they eat out 10 times a month. Compute the couple's income elasticity of demand using the midpoint method. Explain your answer. Is a restaurant meal a normal or inferior good to the couple?

Accepted Answer

The income elasticity of deman

Question 14

Suppose good X has a positive income elasticity of demand. This implies that good X could be (i)
A normal good.(ii)
A necessity.(iii)
An inferior good.(iv)
A luxury.

Accepted Answer

A) (i) only 
B) (i) and (ii) only 
C) (i), (ii), and (iv) only 
D) (iii) only 
A) (i) only 
B) (i) and (ii) only 
C) (i), (ii), and (iv) only 
D) (iii) only

Question 15

Table 5-4
 $$\begin{array} { | c | c } 
\hline \text { Prica } & \begin{array} { c } 
\text { Tatal } \
\text { Revenup }
\end{array} \
\hline \$ 10 & \$ 100 \
\hline \$ 12 & \$ 108 \
\hline \$ 14 & \$ 112 \
\hline \$ 16 & \$ 112 \
\hline
\end{array}$$
-Refer to Table 5-4. As price rises from $10 to $12, the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A) 0.08. 
B) 0.18. 
C) 0.42. 
D) 0.58. 
A) 0.08. 
B) 0.18. 
C) 0.42. 
D) 0.58.

Question 16

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Accepted Answer

A) unit elastic. 
B) inelastic. 
C) elastic. 
D) None of the above is correct because a price increase always leads to an increase in total revenue. 
A) unit elastic. 
B) inelastic. 
C) elastic. 
D) None of the above is correct because a price increase always leads to an increase in total revenue.

Question 17

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

Accepted Answer

A) 0.58 
B) 0.71 
C) 1.06 
D) 1.4 
A) 0.58 
B) 0.71 
C) 1.06 
D) 1.4

Question 18

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is

Accepted Answer

A) elastic, and the price elasticity of supply is 1.74. 
B) elastic, and the price elasticity of supply is 0.57. 
C) inelastic, and the price elasticity of supply is 1.74. 
D) inelastic, and the price elasticity of supply is 0.57. 
A) elastic, and the price elasticity of supply is 1.74. 
B) elastic, and the price elasticity of supply is 0.57. 
C) inelastic, and the price elasticity of supply is 1.74. 
D) inelastic, and the price elasticity of supply is 0.57.

Question 19

Table 5-5
  
-Refer to Table 5-5. Along which of the supply curves does quantity supplied move proportionately more than the price?

Accepted Answer

A) along supply curve B only 
B) along supply curves B and C 
C) along all three supply curves 
D) None. Quantity supplied moves proportionately less than the price along all of the three supply curves. 
A) along supply curve B only 
B) along supply curves B and C 
C) along all three supply curves 
D) None. Quantity supplied moves proportionately less than the price along all of the three supply curves.

Question 20

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 absolute value of the price elasticity of demand is

Accepted Answer

A)  0.4. 
B)  1. 
C)  4. 
D)  20. 
A)  0.4. 
B)  1. 
C)  4. 
D)  20.

Elasticity measures how responsive quantity is to changes in price.

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

Figure 5-14 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between points D and G?

If the cross-price elasticity of demand for two goods is 1.25, then

If the price elasticity of demand for a good is 1.5, then a 3 percent decrease in price results in a

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

If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

Holding all other forces constant, if decreasing the price of a good leads to an increase in total revenue, then the demand for the good must be

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

Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Suppose good X has a positive income elasticity of demand. This implies that good X could be (i) A normal good.(ii) A necessity.(iii) An inferior good.(iv) A luxury.

Table 5-4 Prica Tatal Revenup \ 10 \ 100 \ 12 \ 108 \ 14 \ 112 \ 16 \ 112 -Refer to Table 5-4. As price rises from $10 to $12, the price elasticity of demand using the midpoint method is approximately

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

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

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is

Table 5-5 -Refer to Table 5-5. Along which of the supply curves does quantity supplied move proportionately more than the price?

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 absolute value of the price elasticity of demand is

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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Exam 5: Elasticity and Its Application

Elasticity measures how responsive quantity is to changes in price.

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

Figure 5-14 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between points D and G?

If the cross-price elasticity of demand for two goods is 1.25, then

If the price elasticity of demand for a good is 1.5, then a 3 percent decrease in price results in a

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

If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

Holding all other forces constant, if decreasing the price of a good leads to an increase in total revenue, then the demand for the good must be

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

Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Suppose good X has a positive income elasticity of demand. This implies that good X could be (i) A normal good.(ii) A necessity.(iii) An inferior good.(iv) A luxury.

Table 5-4 Prica Tatal Revenup \ 10 \ 100 \ 12 \ 108 \ 14 \ 112 \ 16 \ 112 -Refer to Table 5-4. As price rises from $10 to $12, the price elasticity of demand using the midpoint method is approximately

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

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

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is

Table 5-5 -Refer to Table 5-5. Along which of the supply curves does quantity supplied move proportionately more than the price?

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 absolute value of the price elasticity of demand is

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