Question 1

The value of the price elasticity of demand for a good will be relatively large when

Accepted Answer

A) there are no good substitutes available for the good. 
B) the time period in question is relatively short. 
C) the good is a luxury rather than a necessity. 
D) All of the above are correct. 
A) there are no good substitutes available for the good. 
B) the time period in question is relatively short. 
C) the good is a luxury rather than a necessity. 
D) All of the above are correct.

Question 2

Suppose that 500 candy bars are demanded at a particular price. If the price of candy bars rises from that price by 10 percent, the number of candy bars demanded falls to 480. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Accepted Answer

A) demand for candy bars in this price range is unit elastic. 
B) price increase will decrease the total revenue of candy bar sellers. 
C) price elasticity of demand for candy bars in this price range is about 0.41. 
D) price elasticity of demand for candy bars in this price range is about 0.24. 
A) demand for candy bars in this price range is unit elastic. 
B) price increase will decrease the total revenue of candy bar sellers. 
C) price elasticity of demand for candy bars in this price range is about 0.41. 
D) price elasticity of demand for candy bars in this price range is about 0.24.

Question 3

When quantity demanded responds strongly to changes in price, demand is said to be

Accepted Answer

A) fluid. 
B) elastic. 
C) dynamic. 
D) highly variable. 
A) fluid. 
B) elastic. 
C) dynamic. 
D) highly variable.

Question 4

The flatter the demand curve that passes through a given point, the more elastic the demand.

Accepted Answer

A) True 
 B)False

Question 5

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

Accepted Answer

A) True 
 B)False

Question 6

The price elasticity of demand for eggs

Accepted Answer

A) is computed as the percentage change in quantity demanded of eggs divided by the percentage change in price of eggs. 
B) will be lower if there is a new invention that is a close substitute for eggs. 
C) will be higher if consumers consider eggs to be a necessity. 
D) All of the above are correct. 
A) is computed as the percentage change in quantity demanded of eggs divided by the percentage change in price of eggs. 
B) will be lower if there is a new invention that is a close substitute for eggs. 
C) will be higher if consumers consider eggs to be a necessity. 
D) All of the above are correct.

Question 7

Elasticity is

Accepted Answer

A) a measure of how much buyers and sellers respond to changes in market conditions. 
B) the study of how the allocation of resources affects economic well-being. 
C) the maximum amount that a buyer will pay for a good. 
D) the value of everything a seller must give up to produce a good. 
A) a measure of how much buyers and sellers respond to changes in market conditions. 
B) the study of how the allocation of resources affects economic well-being. 
C) the maximum amount that a buyer will pay for a good. 
D) the value of everything a seller must give up to produce a good.

Question 8

When a supply curve is relatively flat,

Accepted Answer

A) sellers are not very responsive to changes in price. 
B) supply is relatively inelastic. 
C) supply is relatively elastic. 
D) Both a and b are correct. 
A) sellers are not very responsive to changes in price. 
B) supply is relatively inelastic. 
C) supply is relatively elastic. 
D) Both a and b are correct.

Question 9

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. Total consumer spending on milk will

Accepted Answer

A) increase, and total consumer spending on beef will increase. 
B) increase, and total consumer spending on beef will decrease. 
C) decrease, and total consumer spending on beef will increase. 
D) decrease, and total consumer spending on beef will decrease. 
A) increase, and total consumer spending on beef will increase. 
B) increase, and total consumer spending on beef will decrease. 
C) decrease, and total consumer spending on beef will increase. 
D) decrease, and total consumer spending on beef will decrease.

Question 10

On a downward-sloping linear demand curve, total revenue reaches its maximum value at the

Accepted Answer

A) midpoint of the demand curve. 
B) lower end of the demand curve. 
C) upper end of the demand curve. 
D) It is impossible to tell without knowing prices and quantities demanded. 
A) midpoint of the demand curve. 
B) lower end of the demand curve. 
C) upper end of the demand curve. 
D) It is impossible to tell without knowing prices and quantities demanded.

Question 11

Demand is said to be price elastic if

Accepted Answer

A) the price of the good responds substantially to changes in demand. 
B) demand shifts substantially when income or the expected future price of the good changes. 
C) buyers do not respond much to changes in the price of the good. 
D) buyers respond substantially to changes in the price of the good. 
A) the price of the good responds substantially to changes in demand. 
B) demand shifts substantially when income or the expected future price of the good changes. 
C) buyers do not respond much to changes in the price of the good. 
D) buyers respond substantially to changes in the price of the good.

Question 12

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 short run?

Accepted Answer

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

Question 13

There are fewer farmers in the United States today than 200 years ago because of

Accepted Answer

A) improvements in farm technology. 
B) increased government regulations in farming. 
C) an elastic demand for food. 
D) environmental programs designed to reduce soil erosion. 
A) improvements in farm technology. 
B) increased government regulations in farming. 
C) an elastic demand for food. 
D) environmental programs designed to reduce soil erosion.

Question 14

Which of the following statements about the price elasticity of demand is correct?

Accepted Answer

A) The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. 
B) Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes. 
C) Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y. 
D) All of the above are correct. 
A) The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. 
B) Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes. 
C) Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y. 
D) All of the above are correct.

Question 15

In the market for oil in the short run, demand

Accepted Answer

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

Question 16

Figure 5-13  
-Refer to Figure 5-13. Over which range is the supply curve in this figure the least elastic?

Accepted Answer

A) $16 to $40 
B) $40 to $100 
C) $100 to $220 
D) $220 to $430 
A) $16 to $40 
B) $40 to $100 
C) $100 to $220 
D) $220 to $430

Question 17

The midpoint method for calculating elasticities is convenient in that it allows us to

Accepted Answer

A) ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price. 
B) calculate the same value for the elasticity, regardless of whether the price increases or decreases. 
C) assume that sellers' total revenue stays constant when the price changes. 
D) restrict all elasticity values to between 0 and 1. 
A) ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price. 
B) calculate the same value for the elasticity, regardless of whether the price increases or decreases. 
C) assume that sellers' total revenue stays constant when the price changes. 
D) restrict all elasticity values to between 0 and 1.

Question 18

Between 1950 and today there was a

Accepted Answer

A) 20 percent drop in the number of farmers, but farm output more than tripled. 
B) 30 percent drop in the number of farmers, but farm output more than tripled. 
C) 50 percent drop in the number of farmers, but farm output more than doubled. 
D) 70 percent drop in the number of farmers, but farm output more than doubled. 
A) 20 percent drop in the number of farmers, but farm output more than tripled. 
B) 30 percent drop in the number of farmers, but farm output more than tripled. 
C) 50 percent drop in the number of farmers, but farm output more than doubled. 
D) 70 percent drop in the number of farmers, but farm output more than doubled.

Question 19

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Accepted Answer

A) negative, and the good is an inferior good. 
B) negative, and the good is a normal good. 
C) positive, and the good is an inferior good. 
D) positive, and the good is a normal good. 
A) negative, and the good is an inferior good. 
B) negative, and the good is a normal good. 
C) positive, and the good is an inferior good. 
D) positive, and the good is a normal good.

Question 20

The greater the price elasticity of demand, the

Accepted Answer

A) more likely the product is a necessity. 
B) smaller the responsiveness of quantity demanded to a change in price. 
C) greater the percentage change in price over the percentage change in quantity demanded. 
D) greater the responsiveness of quantity demanded to a change in price. 
A) more likely the product is a necessity. 
B) smaller the responsiveness of quantity demanded to a change in price. 
C) greater the percentage change in price over the percentage change in quantity demanded. 
D) greater the responsiveness of quantity demanded to a change in price.

Exam 5: Elasticity and Its Application

The value of the price elasticity of demand for a good will be relatively large when

Suppose that 500 candy bars are demanded at a particular price. If the price of candy bars rises from that price by 10 percent, the number of candy bars demanded falls to 480. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

When quantity demanded responds strongly to changes in price, demand is said to be

The flatter the demand curve that passes through a given point, the more elastic the demand.

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

The price elasticity of demand for eggs

Elasticity is

When a supply curve is relatively flat,

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. Total consumer spending on milk will

On a downward-sloping linear demand curve, total revenue reaches its maximum value at the

Demand is said to be price elastic if

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 short run?

There are fewer farmers in the United States today than 200 years ago because of

Which of the following statements about the price elasticity of demand is correct?

In the market for oil in the short run, demand

Figure 5-13 -Refer to Figure 5-13. Over which range is the supply curve in this figure the least elastic?

The midpoint method for calculating elasticities is convenient in that it allows us to

Between 1950 and today there was a

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

The greater the price elasticity of demand, the

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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