Question 1

If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

Accepted Answer

A) a 20 percent increase in the quantity demanded. 
B) an 18 percent increase in the quantity demanded. 
C) a 2 percent increase in the quantity demanded. 
D) a 1.8 percent increase in the quantity demanded. 
A) a 20 percent increase in the quantity demanded. 
B) an 18 percent increase in the quantity demanded. 
C) a 2 percent increase in the quantity demanded. 
D) a 1.8 percent increase in the quantity demanded.

Question 2

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, what is the price elasticity of demand when price rises from $9 to $12?

Accepted Answer

A) 0.43 
B) 0.67 
C) 1.50 
D) 2.33 
A) 0.43 
B) 0.67 
C) 1.50 
D) 2.33

Question 3

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the

Accepted Answer

A) steeper the demand curve will be. 
B) flatter the demand curve will be. 
C) further to the right the demand curve will sit. 
D) closer to the vertical axis the demand curve will sit. 
A) steeper the demand curve will be. 
B) flatter the demand curve will be. 
C) further to the right the demand curve will sit. 
D) closer to the vertical axis the demand curve will sit.

Question 4

Figure 5-13  
-Refer to Figure 5-13. Using the midpoint method, what is the price elasticity of supply between $16 and $40?

Accepted Answer

A) 0.125 
B) 0.86 
C) 1.0 
D) 2.5 
A) 0.125 
B) 0.86 
C) 1.0 
D) 2.5

Question 5

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Accepted Answer

A) positive. 
B) negative. 
C) either positive or negative. It depends whether A and B are normal goods or inferior goods. 
D) either positive or negative. It depends whether the current price level is on the elastic or inelastic portion of the demand curve. 
A) positive. 
B) negative. 
C) either positive or negative. It depends whether A and B are normal goods or inferior goods. 
D) either positive or negative. It depends whether the current price level is on the elastic or inelastic portion of the demand curve.

Question 6

Economists compute the price elasticity of demand as the

Accepted Answer

A) percentage change in price divided by the percentage change in quantity demanded. 
B) change in quantity demanded divided by the change in the price. 
C) percentage change in quantity demanded divided by the percentage change in price. 
D) percentage change in quantity demanded divided by the percentage change in income. 
A) percentage change in price divided by the percentage change in quantity demanded. 
B) change in quantity demanded divided by the change in the price. 
C) percentage change in quantity demanded divided by the percentage change in price. 
D) percentage change in quantity demanded divided by the percentage change in income.

Question 7

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 price elasticity of demand is

Accepted Answer

A) zero. 
B) inelastic. 
C) unit elastic. 
D) elastic. 
A) zero. 
B) inelastic. 
C) unit elastic. 
D) elastic.

Question 8

Figure 5-18  
-Refer to Figure 5-18. Which supply curve is most likely relevant over a very long period of time?

Accepted Answer

A) S1 
B) S2 
C) S3 
D) All of the above are equally likely to be relevant over a very long period of time. 
A) S1 
B) S2 
C) S3 
D) All of the above are equally likely to be relevant over a very long period of time.

Question 9

On a certain supply curve, one point is (quantity supplied = 200, price = $2.00) and another point is (quantity supplied = 250, price = $2.50). Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A) 0.2. 
B) 0.5. 
C) 1.0. 
D) 2.5. 
A) 0.2. 
B) 0.5. 
C) 1.0. 
D) 2.5.

Question 10

Figure 5-9  
-Refer to Figure 5-9. A decrease in price from $15 to $10 leads to a

Accepted Answer

A) decrease in total revenue of $10, so the price elasticity of demand is greater than 1 in this price range. 
B) decrease in total revenue of $10, so the price elasticity of demand is less than 1 in this price range. 
C) decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this price range. 
D) decrease in total revenue of $20, so demand is elastic in this price range. 
A) decrease in total revenue of $10, so the price elasticity of demand is greater than 1 in this price range. 
B) decrease in total revenue of $10, so the price elasticity of demand is less than 1 in this price range. 
C) decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this price range. 
D) decrease in total revenue of $20, so demand is elastic in this price range.

Question 11

Whether a good is a luxury or necessity depends on the

Accepted Answer

A) price of the good. 
B) preferences of the buyer. 
C) intrinsic properties of the good. 
D) scarcity of the good. 
A) price of the good. 
B) preferences of the buyer. 
C) intrinsic properties of the good. 
D) scarcity of the good.

Question 12

Table 5-1
 $$\begin{array} { | c | c | } 
\hline \text { Gond } & \text { Price Elaticity of Demend } \
\hline \text { A } & 1.3 \
\hline \mathrm { B } & \mathbf { 2 . 1 } \
\hline
\end{array}$$
-Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Accepted Answer

A) A is a luxury, and B is a necessity. 
B) A is a good several years after a price increase, and B is that same good several days after the price increase. 
C) A is a Kit Kat bar, and B is candy. 
D) A has fewer substitutes than B. 
A) A is a luxury, and B is a necessity. 
B) A is a good several years after a price increase, and B is that same good several days after the price increase. 
C) A is a Kit Kat bar, and B is candy. 
D) A has fewer substitutes than B.

Question 13

Figure 5-3  
-Refer to Figure 5-3. The demand curve representing the demand for a luxury good with several close substitutes is

Accepted Answer

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

Question 14

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

A) True 
 B)False

Question 15

When consumers face rising gasoline prices, they typically

Accepted Answer

A) reduce their quantity demanded more in the long run than in the short run. 
B) reduce their quantity demanded more in the short run than in the long run. 
C) do not reduce their quantity demanded in the short run or the long run. 
D) increase their quantity demanded in the short run but reduce their quantity demanded in the long run. 
A) reduce their quantity demanded more in the long run than in the short run. 
B) reduce their quantity demanded more in the short run than in the long run. 
C) do not reduce their quantity demanded in the short run or the long run. 
D) increase their quantity demanded in the short run but reduce their quantity demanded in the long run.

Question 16

Figure 5-4  
-Refer to Figure 5-4. If the price increases in the region of the demand curve between points B and C, 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 17

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

Accepted Answer

A) water 
B) sapphire pendant necklaces 
C) filet mignon steaks 
D) fresh fruit 
A) water 
B) sapphire pendant necklaces 
C) filet mignon steaks 
D) fresh fruit

Question 18

If the price elasticity of demand for a good is 0.25, then a 20 percent decrease in price results in a

Accepted Answer

A) 0.0125 percent increase in the quantity demanded. 
B) 4 percent increase in the quantity demanded. 
C) 5 percent increase in the quantity demanded. 
D) 80 percent increase in the quantity demanded. 
A) 0.0125 percent increase in the quantity demanded. 
B) 4 percent increase in the quantity demanded. 
C) 5 percent increase in the quantity demanded. 
D) 80 percent increase in the quantity demanded.

Question 19

In January the price of widgets was $1.00, and Wendy's Widgets produced 80 widgets. In February the price of widgets was $1.50, and Wendy's Widgets produced 110 widgets. In March the price of widgets was $2.00, and Wendy's Widgets produced 140 widgets. The price elasticity of supply of Wendy's Widgets was about

Accepted Answer

A) 0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00. 
B) 1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00. 
C) 0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00. 
D) 1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00. 
A) 0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00. 
B) 1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00. 
C) 0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00. 
D) 1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.

Question 20

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A) 0.45 
B) 0.90 
C) 1.11 
D) 2.20 
A) 0.45 
B) 0.90 
C) 1.11 
D) 2.20

Exam 5: Elasticity and Its Application

If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

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, what is the price elasticity of demand when price rises from $9 to $12?

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the

Figure 5-13 -Refer to Figure 5-13. Using the midpoint method, what is the price elasticity of supply between $16 and $40?

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Economists compute the price elasticity of demand as the

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 price elasticity of demand is

Figure 5-18 -Refer to Figure 5-18. Which supply curve is most likely relevant over a very long period of time?

On a certain supply curve, one point is (quantity supplied = 200, price = $2.00) and another point is (quantity supplied = 250, price = $2.50). Using the midpoint method, the price elasticity of supply is about

Figure 5-9 -Refer to Figure 5-9. A decrease in price from $15 to $10 leads to a

Whether a good is a luxury or necessity depends on the

Table 5-1 Gond Price Elaticity of Demend A 1.3 -Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Figure 5-3 -Refer to Figure 5-3. The demand curve representing the demand for a luxury good with several close substitutes is

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

When consumers face rising gasoline prices, they typically

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

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

If the price elasticity of demand for a good is 0.25, then a 20 percent decrease in price results in a

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

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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