Question 1

As we move downward and to the right along a linear, downward-sloping demand curve,

Accepted Answer

A) both slope and elasticity remain constant. 
B) slope changes but elasticity remains constant. 
C) both slope and elasticity change. 
D) slope remains constant but elasticity changes. 
A) both slope and elasticity remain constant. 
B) slope changes but elasticity remains constant. 
C) both slope and elasticity change. 
D) slope remains constant but elasticity changes.

Question 2

Figure 5-4  
-Refer to Figure 5-4. The section of the demand curve from A to B represents the

Accepted Answer

A) elastic section of the demand curve. 
B) inelastic section of the demand curve. 
C) unit elastic section of the demand curve. 
D) perfectly elastic section of the demand curve. 
A) elastic section of the demand curve. 
B) inelastic section of the demand curve. 
C) unit elastic section of the demand curve. 
D) perfectly elastic section of the demand curve.

Question 3

Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms,

Accepted Answer

A) market power is substantial. 
B) supply is perfectly inelastic. 
C) supply is more elastic at low levels of output and less elastic at high levels of output. 
D) supply is less elastic at low levels of output and more elastic at high levels of output. 
A) market power is substantial. 
B) supply is perfectly inelastic. 
C) supply is more elastic at low levels of output and less elastic at high levels of output. 
D) supply is less elastic at low levels of output and more elastic at high levels of output.

Question 4

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

Accepted Answer

A) increase by 4%. 
B) increase by 6.25%. 
C) decrease by 4%. 
D) decrease by 6.25%. 
A) increase by 4%. 
B) increase by 6.25%. 
C) decrease by 4%. 
D) decrease by 6.25%.

Question 5

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following expressions represents a cross-price elasticity of demand?

Accepted Answer

A) percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread 
B) percentage change in quantity demanded of bread divided by percentage change in price of butter 
C) percentage change in price of bread divided by percentage change in quantity demanded of bread 
D) percentage change in quantity demanded of bread divided by percentage change in income 
A) percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread 
B) percentage change in quantity demanded of bread divided by percentage change in price of butter 
C) percentage change in price of bread divided by percentage change in quantity demanded of bread 
D) percentage change in quantity demanded of bread divided by percentage change in income

Question 7

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

Accepted Answer

A) all inferior goods 
B) all normal goods 
C) goods for which there are many complements 
D) luxuries 
A) all inferior goods 
B) all normal goods 
C) goods for which there are many complements 
D) luxuries

Question 8

When demand is inelastic, the price elasticity of demand is

Accepted Answer

A) less than 1, and price and total revenue will move in the same direction. 
B) less than 1, and price and total revenue will move in opposite directions. 
C) greater than 1, and price and total revenue will move in the same direction. 
D) greater than 1, and price and total revenue will move in opposite directions. 
A) less than 1, and price and total revenue will move in the same direction. 
B) less than 1, and price and total revenue will move in opposite directions. 
C) greater than 1, and price and total revenue will move in the same direction. 
D) greater than 1, and price and total revenue will move in opposite directions.

Question 9

If the income elasticity of demand for a good is negative, then the good must be an inferior good.

Accepted Answer

A) True 
 B)False

Question 10

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?

Accepted Answer

A) Supply curves are steeper over long periods of time than over short periods of time. 
B) Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time. 
C) The number of firms in a market tends to be more variable over long periods of time than over short periods of time. 
D) Firms prefer to change their prices in the short run rather than in the long run. 
A) Supply curves are steeper over long periods of time than over short periods of time. 
B) Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time. 
C) The number of firms in a market tends to be more variable over long periods of time than over short periods of time. 
D) Firms prefer to change their prices in the short run rather than in the long run.

Question 11

Figure 5-15  
-Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between $4 and $6?

Accepted Answer

A) 0.75 
B) 1.00 
C) 1.20 
D) 1.25 
A) 0.75 
B) 1.00 
C) 1.20 
D) 1.25

Question 12

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

Accepted Answer

A) increased from $6 to $8. 
B) decreased from $18 to $16. 
C) decreased from $16 to $15. 
D) All of the above are correct. 
A) increased from $6 to $8. 
B) decreased from $18 to $16. 
C) decreased from $16 to $15. 
D) All of the above are correct.

Question 13

For a particular good, a 10 percent increase in price causes a 5 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 necessity. 
C) The market for the good is narrowly defined. 
D) The relevant time horizon is long. 
A) There are many close substitutes for this good. 
B) The good is a necessity. 
C) The market for the good is narrowly defined. 
D) The relevant time horizon is long.

Question 14

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 quantity 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 15

When the local used bookstore prices economics books at $15 each, it generally sells 70 books per month. If it lowers the price to $7, sales increase to 90 books per month. Given this information, we know that the price elasticity of demand for economics books is about

Accepted Answer

A) 2.91, and an increase in price from $7 to $15 results in an increase in total revenue. 
B) 2.91, and an increase in price from $7 to $15 results in a decrease in total revenue. 
C) 0.34, and an increase in price from $7 to $15 results in an increase in total revenue. 
D) 0.34, and an increase in price from $7 to $15 results in a decrease in total revenue. 
A) 2.91, and an increase in price from $7 to $15 results in an increase in total revenue. 
B) 2.91, and an increase in price from $7 to $15 results in a decrease in total revenue. 
C) 0.34, and an increase in price from $7 to $15 results in an increase in total revenue. 
D) 0.34, and an increase in price from $7 to $15 results in a decrease in total revenue.

Question 16

Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price of ginger ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statements is true?

Accepted Answer

A) The demand for ginger ale is income inelastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
B) The demand for ginger ale is income elastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
C) The demand for ginger ale is price inelastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
D) The demand for ginger ale is price elastic, so an increase in the price of ginger ale will decrease the total revenue of ginger ale producers. 
A) The demand for ginger ale is income inelastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
B) The demand for ginger ale is income elastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
C) The demand for ginger ale is price inelastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
D) The demand for ginger ale is price elastic, so an increase in the price of ginger ale will decrease the total revenue of ginger ale producers.

Question 17

If we observe that when the price of chocolate increases by 10%, quantity demanded falls by 5%, then the demand for chocolate is price inelastic.

Accepted Answer

A) True 
 B)False

Question 18

Figure 5-10  
-Refer to Figure 5-10. An increase in price from $30 to $35 would

Accepted Answer

A) increase total revenue by $250 
B) decrease total revenue by $250. 
C) increase total revenue by $500. 
D) decrease total revenue by $500. 
A) increase total revenue by $250 
B) decrease total revenue by $250. 
C) increase total revenue by $500. 
D) decrease total revenue by $500.

Question 19

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is

Accepted Answer

A) 0.75. 
B) 1.25. 
C) 1.33. 
D) 1.60. 
A) 0.75. 
B) 1.25. 
C) 1.33. 
D) 1.60.

Question 20

Figure 5-16  
-Refer to Figure 5-16. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $8, then sellers' total revenue would

Accepted Answer

A) increase. 
B) decrease. 
C) remain unchanged. 
D) The effect on total revenue cannot be determined from the given information. 
A) increase. 
B) decrease. 
C) remain unchanged. 
D) The effect on total revenue cannot be determined from the given information.

Exam 5: Elasticity and Its Application

As we move downward and to the right along a linear, downward-sloping demand curve,

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from A to B represents the

Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms,

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

Which of the following expressions represents a cross-price elasticity of demand?

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

When demand is inelastic, the price elasticity of demand is

If the income elasticity of demand for a good is negative, then the good must be an inferior good.

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between $4 and $6?

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

For a particular good, a 10 percent increase in price causes a 5 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

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 quantity will

When the local used bookstore prices economics books at $15 each, it generally sells 70 books per month. If it lowers the price to $7, sales increase to 90 books per month. Given this information, we know that the price elasticity of demand for economics books is about

Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price of ginger ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statements is true?

If we observe that when the price of chocolate increases by 10%, quantity demanded falls by 5%, then the demand for chocolate is price inelastic.

Figure 5-10 -Refer to Figure 5-10. An increase in price from $30 to $35 would

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is

Figure 5-16 -Refer to Figure 5-16. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $8, then sellers' total revenue would

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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