Question 1

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

Accepted Answer

A) inelastic. 
B) unit elastic. 
C) elastic. 
D) highly responsive to changes in income. 
A) inelastic. 
B) unit elastic. 
C) elastic. 
D) highly responsive to changes in income.

Question 2

Normal goods have negative income elasticities of demand, while inferior goods have positive income elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 3

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

Accepted Answer

A) True 
 B)False

Question 4

For a good that is a necessity,

Accepted Answer

A) quantity demanded tends to respond substantially to a change in price. 
B) demand tends to be inelastic. 
C) the law of demand does not apply. 
D) All of the above are correct. 
A) quantity demanded tends to respond substantially to a change in price. 
B) demand tends to be inelastic. 
C) the law of demand does not apply. 
D) All of the above are correct.

Question 5

Figure 5-4  
-Refer to Figure 5-4. If the price decreases in the region of the demand curve between points A and B, we can expect total revenue to

Accepted Answer

A) increase. 
B) stay the same. 
C) decrease. 
D) first decrease, then increase until total revenue is maximized. 
A) increase. 
B) stay the same. 
C) decrease. 
D) first decrease, then increase until total revenue is maximized.

Question 6

Figure 5-7  
-Refer to Figure 5-7. For prices below $8, demand is price

Accepted Answer

A) elastic, and total revenue will rise as price rises. 
B) inelastic, and total revenue will rise as price rises. 
C) elastic, and total revenue will fall as price rises. 
D) inelastic, and total revenue will fall as price rises. 
A) elastic, and total revenue will rise as price rises. 
B) inelastic, and total revenue will rise as price rises. 
C) elastic, and total revenue will fall as price rises. 
D) inelastic, and total revenue will fall as price rises.

Question 7

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Accepted Answer

A) True 
 B)False

Question 8

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?

Accepted Answer

A) Both the mayor and city manager would be correct if demand were price elastic. 
B) Both the mayor and city manager would be correct if demand were price inelastic. 
C) The mayor would be correct if demand were price elastic; the city manager would be correct if demand were price inelastic. 
D) The mayor would be correct if demand were price inelastic; the city manager would be correct if demand were price elastic. 
A) Both the mayor and city manager would be correct if demand were price elastic. 
B) Both the mayor and city manager would be correct if demand were price inelastic. 
C) The mayor would be correct if demand were price elastic; the city manager would be correct if demand were price inelastic. 
D) The mayor would be correct if demand were price inelastic; the city manager would be correct if demand were price elastic.

Question 9

Figure 5-4  
-Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $8 and $16. Then, when the price changes between $9 and $10,

Accepted Answer

A) quantity demanded changes proportionately less than the price. 
B) quantity demanded changes proportionately more than the price. 
C) quantity demanded changes the same amount proportionately as price. 
D) the price elasticity of demand equals 1. 
A) quantity demanded changes proportionately less than the price. 
B) quantity demanded changes proportionately more than the price. 
C) quantity demanded changes the same amount proportionately as price. 
D) the price elasticity of demand equals 1.

Question 10

Tyler purchases 5 pounds of hot dogs per month when his monthly income is $2,000 and 4 pounds of hot dogs per month when his monthly income is $2,200. Tyler's income elasticity of demand for hot dogs is

Accepted Answer

A) 2.33, and hot dogs are a normal good. 
B) -2.33, and hot dogs are an inferior good. 
C) 0.43, and hot dogs are a normal good. 
D) -0.43, and hot dogs are an inferior good. 
A) 2.33, and hot dogs are a normal good. 
B) -2.33, and hot dogs are an inferior good. 
C) 0.43, and hot dogs are a normal good. 
D) -0.43, and hot dogs are an inferior good.

Question 11

Price elasticity of demand along a linear, downward-sloping demand curve increases as price falls.

Accepted Answer

A) True 
 B)False

Question 12

Scenario 5-2
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-2. The change in equilibrium quantity will be

Accepted Answer

A) greater in the aged cheddar cheese market than in the bread market. 
B) greater in the bread market than in the aged cheddar cheese market. 
C) the same in the aged cheddar cheese and bread markets. 
D) Any of the above could be correct. 
A) greater in the aged cheddar cheese market than in the bread market. 
B) greater in the bread market than in the aged cheddar cheese market. 
C) the same in the aged cheddar cheese and bread markets. 
D) Any of the above could be correct.

Question 13

A key determinant of the price elasticity of supply is the

Accepted Answer

A) time horizon. 
B) income of consumers. 
C) price elasticity of demand. 
D) importance of the good in a consumer's budget. 
A) time horizon. 
B) income of consumers. 
C) price elasticity of demand. 
D) importance of the good in a consumer's budget.

Question 14

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Accepted Answer

A) -1.3 
B) 0 
C) 0.2 
D) 1.4 
A) -1.3 
B) 0 
C) 0.2 
D) 1.4

Question 15

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds. Using the midpoint method, what is the approximate value of the price elasticity of supply?

Accepted Answer

A) 0.67 
B) 0.89 
C) 1.00 
D) 1.13 
A) 0.67 
B) 0.89 
C) 1.00 
D) 1.13

Question 16

As price elasticity of supply increases, the supply curve

Accepted Answer

A) becomes flatter. 
B) becomes steeper. 
C) becomes downward sloping. 
D) shifts to the right. 
A) becomes flatter. 
B) becomes steeper. 
C) becomes downward sloping. 
D) shifts to the right.

Question 17

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

Accepted Answer

A) 2.33 
B) 1.0 
C) 0.43 
D) 0.1 
A) 2.33 
B) 1.0 
C) 0.43 
D) 0.1

Question 18

When studying how some event or policy affects a market, elasticity provides information on the

Accepted Answer

A) equity effects on the market by identifying the winners and losers. 
B) magnitude of the effect on the market. 
C) speed of adjustment of the market in response to the event or policy. 
D) number of market participants who are directly affected by the event or policy. 
A) equity effects on the market by identifying the winners and losers. 
B) magnitude of the effect on the market. 
C) speed of adjustment of the market in response to the event or policy. 
D) number of market participants who are directly affected by the event or policy.

Question 19

While in college, John and Bethany each buy five packages of mac-n-cheese per week. After they graduate and have full-time jobs, John buys six packages per week, but Bethany buys only two packages per week. When looking at income elasticity of demand for mac-n-cheese, John's

Accepted Answer

A) is negative, and Bethany's is positive. 
B) is positive, and Bethany's is negative. 
C) is zero, and Bethany's approaches infinity. 
D) approaches infinity, and Bethany's is zero. 
A) is negative, and Bethany's is positive. 
B) is positive, and Bethany's is negative. 
C) is zero, and Bethany's approaches infinity. 
D) approaches infinity, and Bethany's is zero.

Question 20

The price elasticity of demand for bread

Accepted Answer

A) is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread. 
B) depends, in part, on the availability of close substitutes for bread. 
C) reflects the many economic, social, and psychological forces that influence consumers' tastes for bread. 
D) All of the above are correct. 
A) is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread. 
B) depends, in part, on the availability of close substitutes for bread. 
C) reflects the many economic, social, and psychological forces that influence consumers' tastes for bread. 
D) All of the above are correct.

Exam 5: Elasticity and Its Application

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

Normal goods have negative income elasticities of demand, while inferior goods have positive income elasticities of demand.

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

For a good that is a necessity,

Figure 5-4 -Refer to Figure 5-4. If the price decreases in the region of the demand curve between points A and B, we can expect total revenue to

Figure 5-7 -Refer to Figure 5-7. For prices below $8, demand is price

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Figure 5-4 -Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $8 and $16. Then, when the price changes between $9 and $10,

Tyler purchases 5 pounds of hot dogs per month when his monthly income is $2,000 and 4 pounds of hot dogs per month when his monthly income is $2,200. Tyler's income elasticity of demand for hot dogs is

Price elasticity of demand along a linear, downward-sloping demand curve increases as price falls.

A key determinant of the price elasticity of supply is the

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds. Using the midpoint method, what is the approximate value of the price elasticity of supply?

As price elasticity of supply increases, the supply curve

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

When studying how some event or policy affects a market, elasticity provides information on the

While in college, John and Bethany each buy five packages of mac-n-cheese per week. After they graduate and have full-time jobs, John buys six packages per week, but Bethany buys only two packages per week. When looking at income elasticity of demand for mac-n-cheese, John's

The price elasticity of demand for bread

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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