Question 1

Good news for farming can be bad news for farmers because the

Accepted Answer

A) supply curve for an individual farmer is usually perfectly elastic. 
B) supply curve for an individual farmer is usually perfectly inelastic. 
C) demand for basic foodstuffs is usually inelastic, meaning that factors that shift supply to the right decrease total revenues to sellers. 
D) demand for basic foodstuffs is usually elastic, meaning that factors that shift supply to the right increase total revenues to sellers. 
A) supply curve for an individual farmer is usually perfectly elastic. 
B) supply curve for an individual farmer is usually perfectly inelastic. 
C) demand for basic foodstuffs is usually inelastic, meaning that factors that shift supply to the right decrease total revenues to sellers. 
D) demand for basic foodstuffs is usually elastic, meaning that factors that shift supply to the right increase total revenues to sellers.

Question 2

A linear, upward-sloping supply curve has

Accepted Answer

A) a constant slope and a changing price elasticity of supply. 
B) a changing slope and a constant price elasticity of supply. 
C) both a constant slope and a constant price elasticity of supply. 
D) both a changing slope and a changing price elasticity of supply. 
A) a constant slope and a changing price elasticity of supply. 
B) a changing slope and a constant price elasticity of supply. 
C) both a constant slope and a constant price elasticity of supply. 
D) both a changing slope and a changing price elasticity of supply.

Question 3

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

Accepted Answer

A) True 
 B)False

Question 4

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Accepted Answer

A) True 
 B)False

Question 5

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 6

Using the midpoint method, compute the elasticity of demand between points A and B. Is demand along this portion of the curve elastic or inelastic? Interpret your answer with regard to price and quantity demanded. Now compute the elasticity of demand between points B and C. Is demand along this portion of the curve elastic or inelastic?

Accepted Answer

In the section of the demand curve from

Question 7

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

Accepted Answer

A) the equilibrium quantity decreases, and the equilibrium price is unchanged. 
B) the equilibrium price increases, and the equilibrium quantity is unchanged. 
C) the equilibrium quantity and the equilibrium price both are unchanged. 
D) buyers' total expenditure on the good is unchanged. 
A) the equilibrium quantity decreases, and the equilibrium price is unchanged. 
B) the equilibrium price increases, and the equilibrium quantity is unchanged. 
C) the equilibrium quantity and the equilibrium price both are unchanged. 
D) buyers' total expenditure on the good is unchanged.

Question 8

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

Accepted Answer

A) first becomes smaller, then larger. 
B) always becomes larger. 
C) always becomes smaller. 
D) first becomes larger, then smaller. 
A) first becomes smaller, then larger. 
B) always becomes larger. 
C) always becomes smaller. 
D) first becomes larger, then smaller.

Question 9

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A) There are no close substitutes for this good. 
B) The good is a luxury. 
C) The market for the good is broadly defined. 
D) The relevant time horizon is short. 
A) There are no close substitutes for this good. 
B) The good is a luxury. 
C) The market for the good is broadly defined. 
D) The relevant time horizon is short.

Question 10

Total revenue

Accepted Answer

A) always increases as price increases. 
B) increases as price increases, as long as demand is elastic. 
C) decreases as price increases, as long as demand is inelastic. 
D) remains unchanged as price increases when demand is unit elastic. 
A) always increases as price increases. 
B) increases as price increases, as long as demand is elastic. 
C) decreases as price increases, as long as demand is inelastic. 
D) remains unchanged as price increases when demand is unit elastic.

Question 11

Figure 5-12  
-Refer to Figure 5-12. Total revenue when the price is P1 is represented by the area(s)

Accepted Answer

A) B + D. 
B) A + B. 
C) C + D. 
D) D. 
A) B + D. 
B) A + B. 
C) C + D. 
D) D.

Question 12

Figure 5-4  
-Refer to Figure 5-4. The section of the demand curve at point 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 13

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

Accepted Answer

A) True 
 B)False

Question 14

Figure 5-18  
-Refer to Figure 5-18. Which supply curve represents perfectly inelastic supply?

Accepted Answer

A) S1 
B) S2 
C) S3 
D) None of the supply curves is perfectly inelastic. 
A) S1 
B) S2 
C) S3 
D) None of the supply curves is perfectly inelastic.

Question 15

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 $40 to $20, the absolute value of the price elasticity of demand is

Accepted Answer

A)  20. 
B)  10. 
C)  2.33. 
D)  0.43. 
A)  20. 
B)  10. 
C)  2.33. 
D)  0.43.

Question 16

Assume that a 4 percent increase in income results in a 2 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 a normal good. 
D) positive, and the good is an inferior 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 a normal good. 
D) positive, and the good is an inferior good.

Question 17

Figure 5-1  
-Refer to Figure 5-1. Between point A and point B, the slope is equal to

Accepted Answer

A) -1/4, and the price elasticity of demand is equal to 2/3. 
B) -1/4, and the price elasticity of demand is equal to 3/2. 
C) -3/2, and the price elasticity of demand is equal to 1/4. 
D) -2/3, and the price elasticity of demand is equal to 3/2. 
A) -1/4, and the price elasticity of demand is equal to 2/3. 
B) -1/4, and the price elasticity of demand is equal to 3/2. 
C) -3/2, and the price elasticity of demand is equal to 1/4. 
D) -2/3, and the price elasticity of demand is equal to 3/2.

Question 18

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Accepted Answer

A) True 
 B)False

Question 19

If a firm is facing inelastic demand, then the firm should decrease price to increase revenue.

Accepted Answer

A) True 
 B)False

Question 20

Demand is said to have unit elasticity if the price elasticity of demand is

Accepted Answer

A) less than 1. 
B) greater than 1. 
C) equal to 1. 
D) equal to 0. 
A) less than 1. 
B) greater than 1. 
C) equal to 1. 
D) equal to 0.

Exam 5: Elasticity and Its Application

Good news for farming can be bad news for farmers because the

A linear, upward-sloping supply curve has

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Total revenue

Figure 5-12 -Refer to Figure 5-12. Total revenue when the price is P1 is represented by the area(s)

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve at point B represents the

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

Figure 5-18 -Refer to Figure 5-18. Which supply curve represents perfectly inelastic supply?

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 $40 to $20, the absolute value of the price elasticity of demand is

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, the slope is equal to

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

If a firm is facing inelastic demand, then the firm should decrease price to increase revenue.

Demand is said to have unit elasticity if 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

Figure 5-12 -Refer to Figure 5-12. Total revenue when the price is P₁ is represented by the area(s)