Question 1

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

Accepted Answer

A) athletic shoes 
B) running shoes 
C) Nike running shoes 
D) Nike Shox running shoes 
A) athletic shoes 
B) running shoes 
C) Nike running shoes 
D) Nike Shox running shoes

Question 2

For which of the following goods is the income elasticity of demand likely highest?

Accepted Answer

A) water 
B) diamonds 
C) hamburgers 
D) housing 
A) water 
B) diamonds 
C) hamburgers 
D) housing

Question 3

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

Accepted Answer

A) clothing 
B) blue jeans 
C) Tommy Hilfiger jeans 
D) All three would have the same elasticity of demand because they are all related. 
A) clothing 
B) blue jeans 
C) Tommy Hilfiger jeans 
D) All three would have the same elasticity of demand because they are all related.

Question 4

The midpoint method is used to compute elasticity because it

Accepted Answer

A) automatically computes a positive number instead of a negative number. 
B) results in an elasticity that is the same as the slope of the demand curve. 
C) gives the same answer regardless of the direction of change. 
D) automatically rounds quantities to the nearest whole unit. 
A) automatically computes a positive number instead of a negative number. 
B) results in an elasticity that is the same as the slope of the demand curve. 
C) gives the same answer regardless of the direction of change. 
D) automatically rounds quantities to the nearest whole unit.

Question 5

If the demand for apples is elastic, then an increase in the price of apples will

Accepted Answer

A) increase total revenue of apple sellers. 
B) decrease total revenue of apple sellers. 
C) not change total revenue of apple sellers. 
D) There is not enough information to answer this question. 
A) increase total revenue of apple sellers. 
B) decrease total revenue of apple sellers. 
C) not change total revenue of apple sellers. 
D) There is not enough information to answer this question.

Question 6

Figure 5-17  
-Refer to Figure 5-17. Which of the following statements is not correct?

Accepted Answer

A) Supply curve A is perfectly inelastic. 
B) Supply curve B is perfectly elastic. 
C) Supply curve C is unit elastic. 
D) Supply curve D is more elastic than supply curve C. 
A) Supply curve A is perfectly inelastic. 
B) Supply curve B is perfectly elastic. 
C) Supply curve C is unit elastic. 
D) Supply curve D is more elastic than supply curve C.

Question 7

Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice cream cones rises from that price by 4 percent, the number of ice cream cones demanded falls to 46. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Accepted Answer

A) demand for ice cream cones in this price range is elastic. 
B) demand for ice cream cones in this price range is inelastic. 
C) demand for ice cream cones in this price range is unit elastic. 
D) price elasticity of demand for ice cream cones in this price range is 0. 
A) demand for ice cream cones in this price range is elastic. 
B) demand for ice cream cones in this price range is inelastic. 
C) demand for ice cream cones in this price range is unit elastic. 
D) price elasticity of demand for ice cream cones in this price range is 0.

Question 8

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

Accepted Answer

A) Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept. 
B) Elasticity provides us with a better rationale for statements such as "an increase in x will lead to a decrease in y" than we would have in the absence of the elasticity concept. 
C) Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus or a shortage. 
D) Without elasticity, it is very difficult to assess the degree of competition within a market. 
A) Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept. 
B) Elasticity provides us with a better rationale for statements such as "an increase in x will lead to a decrease in y" than we would have in the absence of the elasticity concept. 
C) Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus or a shortage. 
D) Without elasticity, it is very difficult to assess the degree of competition within a market.

Question 9

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A) 0.63, and supply is elastic. 
B) 0.63, and supply is inelastic. 
C) 1.60, and supply is elastic. 
D) 1.60, and supply is inelastic. 
A) 0.63, and supply is elastic. 
B) 0.63, and supply is inelastic. 
C) 1.60, and supply is elastic. 
D) 1.60, and supply is inelastic.

Question 10

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 equilibrium price will

Accepted Answer

A) increase in both the aged cheddar cheese and bread markets. 
B) increase in the aged cheddar cheese market and decrease in the bread market. 
C) decrease in the aged cheddar cheese market and increase in the bread market. 
D) decrease in both the aged cheddar cheese and bread markets. 
A) increase in both the aged cheddar cheese and bread markets. 
B) increase in the aged cheddar cheese market and decrease in the bread market. 
C) decrease in the aged cheddar cheese market and increase in the bread market. 
D) decrease in both the aged cheddar cheese and bread markets.

Question 11

The federal government is concerned about obesity in the United States. Congress is considering two plans. One will ban the production and sale of "junk food." The other will increase nutrition-education programs and include substantial advertising campaigns to encourage healthy eating habits. The junk-food ban program

Accepted Answer

A) and the education program will reduce the quantity of junk food sold and raise the price. 
B) and the education program will reduce the quantity of junk food sold and lower the price. 
C) will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price. 
D) will reduce the quantity of junk food sold and lower the price. The education program will reduce the quantity of junk food sold and raise the price. 
A) and the education program will reduce the quantity of junk food sold and raise the price. 
B) and the education program will reduce the quantity of junk food sold and lower the price. 
C) will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price. 
D) will reduce the quantity of junk food sold and lower the price. The education program will reduce the quantity of junk food sold and raise the price.

Question 12

For a good that is a necessity, demand

Accepted Answer

A) tends to be inelastic. 
B) tends to be elastic. 
C) has unit elasticity. 
D) cannot be represented by a demand curve in the usual way. 
A) tends to be inelastic. 
B) tends to be elastic. 
C) has unit elasticity. 
D) cannot be represented by a demand curve in the usual way.

Question 13

OPEC failed to maintain a high price of oil in the long run, partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 14

Table 5-5
The following table shows a portion of the demand schedule for a particular good at various levels of income. $\begin{array}{|c|c|c|c|}
\hline \text { Price } & \begin{array}{c}
\text { Quantity Demanded } \
\text { (Income }=\$ \mathbf{\$ 5 , 0 0 0})
\end{array} & \begin{array}{c}
\text { Quantity Demanded } \
\text { (Income }=\mathbf{\$ 7 , 5 0 0})
\end{array} & \begin{array}{c}
\text { Quantity Demanded } \
(\text { Income }=\mathbf{\$ 1 0 , 0 0 0})
\end{array} \
\hline \$ 24 & 2 & 3 & 4 \
\hline \$ 20 & 4 & 6 & 8 \
\hline \$ 16 & 6 & 9 & 12 \
\hline \$ 12 & 8 & 12 & 16 \
\hline \$ 8 & 10 & 15 & 20 \
\hline \$ 4 & 12 & 18 & 24 \
\hline
\end{array}$

-Refer to Table 5-5. Using the midpoint method, when income equals $5,000, what is the price elasticity of demand between $8 and $12?

Accepted Answer

A) 0.56 
B) 0.75 
C) 1.33 
D) 1.80 
A) 0.56 
B) 0.75 
C) 1.33 
D) 1.80

Question 15

Demand is inelastic if the price elasticity of demand is greater than 1.

Accepted Answer

A) True 
 B)False

Question 16

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A) 0.5, and supply is elastic. 
B) 0.5, and supply is inelastic. 
C) 2, and supply is inelastic. 
D) 2, and supply is elastic. 
A) 0.5, and supply is elastic. 
B) 0.5, and supply is inelastic. 
C) 2, and supply is inelastic. 
D) 2, and supply is elastic.

Question 17

In the long run, the quantity supplied of most goods

Accepted Answer

A) will increase in almost all cases, regardless of what happens to price. 
B) cannot respond at all to a change in price. 
C) can respond to a change in price, but the change is almost always inconsequential. 
D) can respond substantially to a change in price. 
A) will increase in almost all cases, regardless of what happens to price. 
B) cannot respond at all to a change in price. 
C) can respond to a change in price, but the change is almost always inconsequential. 
D) can respond substantially to a change in price.

Question 18

You have just been hired as a business consultant to determine what pricing policy would be appropriate in order to increase the total revenue of a bakery. The first step you would take would be to

Accepted Answer

A) increase the price of every loaf of bread in the store. 
B) look for ways to cut costs and increase profit for the bakery. 
C) determine the price elasticity of demand for the bakery's products. 
D) determine the price elasticity of supply for the bakery's products. 
A) increase the price of every loaf of bread in the store. 
B) look for ways to cut costs and increase profit for the bakery. 
C) determine the price elasticity of demand for the bakery's products. 
D) determine the price elasticity of supply for the bakery's products.

Question 19

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

Accepted Answer

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

Question 20

Last year, Shelley bought 6 pairs of designer jeans when her income was $40,000. This year, her income is $50,000, and she purchased 10 pairs of designer jeans. Holding other factors constant, it follows that Shelley

Accepted Answer

A) considers designer jeans to be a necessity. 
B) considers designer jeans to be an inferior good. 
C) considers designer jeans to be a normal good. 
D) has a low price elasticity of demand for jeans. 
A) considers designer jeans to be a necessity. 
B) considers designer jeans to be an inferior good. 
C) considers designer jeans to be a normal good. 
D) has a low price elasticity of demand for jeans.

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

For which of the following goods is the income elasticity of demand likely highest?

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

The midpoint method is used to compute elasticity because it

If the demand for apples is elastic, then an increase in the price of apples will

Figure 5-17 -Refer to Figure 5-17. Which of the following statements is not correct?

Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice cream cones rises from that price by 4 percent, the number of ice cream cones demanded falls to 46. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about

For a good that is a necessity, demand

OPEC failed to maintain a high price of oil in the long run, partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

Demand is inelastic if the price elasticity of demand is greater than 1.

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about

In the long run, the quantity supplied of most goods

You have just been hired as a business consultant to determine what pricing policy would be appropriate in order to increase the total revenue of a bakery. The first step you would take would be to

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

Last year, Shelley bought 6 pairs of designer jeans when her income was $40,000. This year, her income is $50,000, and she purchased 10 pairs of designer jeans. Holding other factors constant, it follows that Shelley

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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Exam 5: Elasticity and Its Application

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

For which of the following goods is the income elasticity of demand likely highest?

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

The midpoint method is used to compute elasticity because it

If the demand for apples is elastic, then an increase in the price of apples will

Figure 5-17 -Refer to Figure 5-17. Which of the following statements is not correct?

Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice cream cones rises from that price by 4 percent, the number of ice cream cones demanded falls to 46. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about

For a good that is a necessity, demand

OPEC failed to maintain a high price of oil in the long run, partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

Demand is inelastic if the price elasticity of demand is greater than 1.

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about

In the long run, the quantity supplied of most goods

You have just been hired as a business consultant to determine what pricing policy would be appropriate in order to increase the total revenue of a bakery. The first step you would take would be to

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

Last year, Shelley bought 6 pairs of designer jeans when her income was $40,000. This year, her income is $50,000, and she purchased 10 pairs of designer jeans. Holding other factors constant, it follows that Shelley

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