Question 1

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

Accepted Answer

A) supply decreases, demand is unaffected, and price increases. 
B) demand decreases, supply is unaffected, and price decreases. 
C) demand and supply both decrease, leaving price essentially unchanged. 
D) supply decreases, demand increases, and price increases substantially. 
A) supply decreases, demand is unaffected, and price increases. 
B) demand decreases, supply is unaffected, and price decreases. 
C) demand and supply both decrease, leaving price essentially unchanged. 
D) supply decreases, demand increases, and price increases substantially.

Question 2

A good will have a more elastic demand, the

Accepted Answer

A) greater the availability of close substitutes. 
B) more broad the definition of the market. 
C) shorter the period of time. 
D) more it is regarded as a necessity. 
A) greater the availability of close substitutes. 
B) more broad the definition of the market. 
C) shorter the period of time. 
D) more it is regarded as a necessity.

Question 3

Table 5-3
The following table shows the demand schedule for a particular good. $$\begin{array} { | c | c | } 
\hline \text { Prise } & \text { Quantity } \
\hline \$ 15 & 0 \
\hline \$ 12 & 5 \
\hline \$ 9 & 10 \
\hline \$ 6 & 15 \
\hline \$ 3 & 20 \
\hline \$ 0 & 25 \
\hline
\end{array}$$
-Refer to Table 5-3. Using the midpoint method, when price rises from $6 to $9, the price elasticity of demand is

Accepted Answer

A) 0.43 
B) 0.67 
C) 1.00 
D) 1.5 
A) 0.43 
B) 0.67 
C) 1.00 
D) 1.5

Question 4

If sellers do not adjust their quantities supplied at all in response to a change in price,

Accepted Answer

A) advances in technology must be prevalent. 
B) the time period under consideration must be very long. 
C) supply is perfectly elastic. 
D) supply is perfectly inelastic. 
A) advances in technology must be prevalent. 
B) the time period under consideration must be very long. 
C) supply is perfectly elastic. 
D) supply is perfectly inelastic.

Question 5

The price elasticity of supply measures how much

Accepted Answer

A) the quantity supplied responds to changes in input prices. 
B) the quantity supplied responds to changes in the price of the good. 
C) the price of the good responds to changes in supply. 
D) sellers respond to changes in technology. 
A) the quantity supplied responds to changes in input prices. 
B) the quantity supplied responds to changes in the price of the good. 
C) the price of the good responds to changes in supply. 
D) sellers respond to changes in technology.

Question 6

The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, she should

Accepted Answer

A) lower the price of the cinnamon rolls. 
B) leave the price of the cinnamon rolls unchanged. 
C) raise the price of the cinnamon rolls. 
D) reduce costs. 
A) lower the price of the cinnamon rolls. 
B) leave the price of the cinnamon rolls unchanged. 
C) raise the price of the cinnamon rolls. 
D) reduce costs.

Question 7

Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples illustrate the importance of

Accepted Answer

A) the availability of close substitutes in determining the price elasticity of demand. 
B) a necessity versus a luxury in determining the price elasticity of demand. 
C) the definition of a market in determining the price elasticity of demand. 
D) the time horizon in determining the price elasticity of demand. 
A) the availability of close substitutes in determining the price elasticity of demand. 
B) a necessity versus a luxury in determining the price elasticity of demand. 
C) the definition of a market in determining the price elasticity of demand. 
D) the time horizon in determining the price elasticity of demand.

Question 8

If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

Accepted Answer

A) 0.24%. 
B) 4.2%. 
C) 6%. 
D) 6.2%. 
A) 0.24%. 
B) 4.2%. 
C) 6%. 
D) 6.2%.

Question 9

The price elasticity of supply along a typical supply curve is

Accepted Answer

A) constant. 
B) equal to zero. 
C) higher at low levels of quantity supplied and lower at high levels of quantity supplied. 
D) lower at low levels of quantity supplied and higher at high levels of quantity supplied. 
A) constant. 
B) equal to zero. 
C) higher at low levels of quantity supplied and lower at high levels of quantity supplied. 
D) lower at low levels of quantity supplied and higher at high levels of quantity supplied.

Question 10

If the price elasticity of demand for tuna is 0.7, then a 1.5% increase in the price of tuna will decrease the quantity demanded of tuna by

Accepted Answer

A) 1.05%, and tuna sellers' total revenue will increase as a result. 
B) 1.05%, and tuna sellers' total revenue will decrease as a result. 
C) 2.14%, and tuna sellers' total revenue will increase as a result. 
D) 2.14%, and tuna sellers' total revenue will decrease as a result. 
A) 1.05%, and tuna sellers' total revenue will increase as a result. 
B) 1.05%, and tuna sellers' total revenue will decrease as a result. 
C) 2.14%, and tuna sellers' total revenue will increase as a result. 
D) 2.14%, and tuna sellers' total revenue will decrease as a result.

Question 11

Table 5-6
 $\begin{array}{l|l|l} 
& \text { Supply is } & \text { Demand is } \
\hline \text { Scenario A } & \text { elastic } & \text { elastic } \
\hline \text { Scenario B } & \text { elastic } & \text { inelastic } \
\hline \text { Scenario C } & \text { inelastic } & \text { elastic } \
\hline \text { Scenario D } & \text { inelastic } & \text { inelastic } \
\hline
\end{array}$

-Refer to Table 5-6. Which scenario describes the market for oil in the long run?

Accepted Answer

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

Question 12

If demand is price inelastic, then

Accepted Answer

A) buyers do not respond much to a change in price. 
B) buyers respond substantially to a change in price, but the response is very slow. 
C) buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes. 
D) the demand curve is very flat. 
A) buyers do not respond much to a change in price. 
B) buyers respond substantially to a change in price, but the response is very slow. 
C) buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes. 
D) the demand curve is very flat.

Question 13

You own a small town movie theatre. You currently charge $5 per ticket for everyone who comes to your movies. Your friend who took an economics course in college tells you that there may be a way to increase your total revenue. Given the demand curves shown, answer the following questions.     
a. What is your current total revenue for both groups?
b. The elasticity of demand is more elastic in which market?
c. Which market has the more inelastic demand?
d. What is the elasticity of demand between the prices of $5 and $2 in the adult market? Is this elastic or inelastic?
e. What is the elasticity of demand between $5 and $2 in the children's market? Is this elastic or inelastic?
f. Given the graphs and what your friend knows about economics, he recommends you increase the price of adult tickets to $8 each and lower the price of a child's ticket to $3. How much could you increase total revenue if you take his advice?

Accepted Answer

a.Total revenue from children's tickets

Question 14

The cross-price elasticity of demand can tell us whether goods are

Accepted Answer

A) normal or inferior. 
B) elastic or inelastic. 
C) luxuries or necessities. 
D) complements or substitutes. 
A) normal or inferior. 
B) elastic or inelastic. 
C) luxuries or necessities. 
D) complements or substitutes.

Question 15

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 change in equilibrium price will be

Accepted Answer

A) greater in the milk market than in the beef market. 
B) greater in the beef market than in the milk market. 
C) the same in the milk and beef markets. 
D) Any of the above could be correct. 
A) greater in the milk market than in the beef market. 
B) greater in the beef market than in the milk market. 
C) the same in the milk and beef markets. 
D) Any of the above could be correct.

Question 16

A decrease in supply will cause the largest increase in price when

Accepted Answer

A) both supply and demand are inelastic. 
B) both supply and demand are elastic. 
C) demand is elastic and supply is inelastic. 
D) demand is inelastic and supply is elastic. 
A) both supply and demand are inelastic. 
B) both supply and demand are elastic. 
C) demand is elastic and supply is inelastic. 
D) demand is inelastic and supply is elastic.

Question 17

In the early 1970s, OPEC's goal was to

Accepted Answer

A) decrease the world-wide price of oil so that the quantity demanded increased, thus raising total revenues for OPEC members. 
B) increase the world-wide price of oil by reducing the quantity of oil supplied. 
C) increase the world-wide price of oil by increasing the quantity of oil supplied, thus raising total revenues for OPEC members. 
D) decrease the world-wide price of oil so that quantity demanded increased. 
A) decrease the world-wide price of oil so that the quantity demanded increased, thus raising total revenues for OPEC members. 
B) increase the world-wide price of oil by reducing the quantity of oil supplied. 
C) increase the world-wide price of oil by increasing the quantity of oil supplied, thus raising total revenues for OPEC members. 
D) decrease the world-wide price of oil so that quantity demanded increased.

Question 18

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

Accepted Answer

A) strawberry-banana milk shakes 
B) gasoline in the short run 
C) diamond earrings 
D) box seats at a major league baseball game 
A) strawberry-banana milk shakes 
B) gasoline in the short run 
C) diamond earrings 
D) box seats at a major league baseball game

Question 19

Scenario 5-1
Suppose that 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 5-1. The price elasticity of supply for aged cheddar cheese could be

Accepted Answer

A)  -1. 
B)  0. 
C)  0.5. 
D)  1.5. 
A)  -1. 
B)  0. 
C)  0.5. 
D)  1.5.

Question 20

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Accepted Answer

A) The interdiction has the effect of shifting the demand curve for illegal drugs to the right. 
B) The price elasticity of demand for illegal drugs is 1.3. 
C) The price elasticity of supply for illegal drugs is 0.8. 
D) As a result of the interdiction, the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent. 
A) The interdiction has the effect of shifting the demand curve for illegal drugs to the right. 
B) The price elasticity of demand for illegal drugs is 1.3. 
C) The price elasticity of supply for illegal drugs is 0.8. 
D) As a result of the interdiction, the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent.

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

A good will have a more elastic demand, the

Table 5-3 The following table shows the demand schedule for a particular good. Prise Quantity \ 15 0 \ 12 5 \ 9 10 \ 6 15 \ 3 20 \ 0 25 -Refer to Table 5-3. Using the midpoint method, when price rises from $6 to $9, the price elasticity of demand is

If sellers do not adjust their quantities supplied at all in response to a change in price,

The price elasticity of supply measures how much

The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, she should

If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

The price elasticity of supply along a typical supply curve is

If the price elasticity of demand for tuna is 0.7, then a 1.5% increase in the price of tuna will decrease the quantity demanded of tuna by

Table 5-6 Supply is Demand is Scenario A elastic elastic Scenario B elastic inelastic Scenario C inelastic elastic Scenario D inelastic inelastic -Refer to Table 5-6. Which scenario describes the market for oil in the long run?

If demand is price inelastic, then

The cross-price elasticity of demand can tell us whether goods are

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 change in equilibrium price will be

A decrease in supply will cause the largest increase in price when

In the early 1970s, OPEC's goal was to

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

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

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

Exam 5: Elasticity and Its Application

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

A good will have a more elastic demand, the

Table 5-3 The following table shows the demand schedule for a particular good. Prise Quantity \ 15 0 \ 12 5 \ 9 10 \ 6 15 \ 3 20 \ 0 25 -Refer to Table 5-3. Using the midpoint method, when price rises from $6 to $9, the price elasticity of demand is

If sellers do not adjust their quantities supplied at all in response to a change in price,

The price elasticity of supply measures how much

The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, she should

If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

The price elasticity of supply along a typical supply curve is

If the price elasticity of demand for tuna is 0.7, then a 1.5% increase in the price of tuna will decrease the quantity demanded of tuna by

Table 5-6 Supply is Demand is Scenario A elastic elastic Scenario B elastic inelastic Scenario C inelastic elastic Scenario D inelastic inelastic -Refer to Table 5-6. Which scenario describes the market for oil in the long run?

If demand is price inelastic, then

The cross-price elasticity of demand can tell us whether goods are

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 change in equilibrium price will be

A decrease in supply will cause the largest increase in price when

In the early 1970s, OPEC's goal was to

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

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

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