Question 1

Suppose that corn farmers want to increase their total revenue. Knowing that the demand for corn is inelastic, corn farmers should

Accepted Answer

A) plant more corn so that they would be able to sell more each year. 
B) increase spending on fertilizer in an attempt to produce more corn on the acres they farm. 
C) reduce the number of acres on which they plant corn. 
D) contribute to a fund that promotes technological advances in corn production. 
A) plant more corn so that they would be able to sell more each year. 
B) increase spending on fertilizer in an attempt to produce more corn on the acres they farm. 
C) reduce the number of acres on which they plant corn. 
D) contribute to a fund that promotes technological advances in corn production.

Question 2

If the price of milk rises, when is the price elasticity of demand likely to be the lowest?

Accepted Answer

A) immediately after the price increase 
B) one month after the price increase 
C) three months after the price increase 
D) one year after the price increase 
A) immediately after the price increase 
B) one month after the price increase 
C) three months after the price increase 
D) one year after the price increase

Question 3

Supply tends to be more elastic in the short run and more inelastic in the long run.

Accepted Answer

A) True 
 B)False

Question 4

Figure 5-1  
-Refer to Figure 5-1. Between point A and point B on the graph, demand is

Accepted Answer

A) perfectly elastic. 
B) inelastic. 
C) unit elastic. 
D) elastic, but not perfectly elastic. 
A) perfectly elastic. 
B) inelastic. 
C) unit elastic. 
D) elastic, but not perfectly elastic.

Question 5

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is

Accepted Answer

A) zero, and the supply curve is horizontal. 
B) zero, and the supply curve is vertical. 
C) infinity, and the supply curve is horizontal. 
D) infinity, and the supply curve is vertical. 
A) zero, and the supply curve is horizontal. 
B) zero, and the supply curve is vertical. 
C) infinity, and the supply curve is horizontal. 
D) infinity, and the supply curve is vertical.

Question 6

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

Accepted Answer

A) positive, so Joan considers hamburger to be an inferior good. 
B) positive, so Joan considers hamburger to be a normal good and a necessity. 
C) negative, so Joan considers hamburger to be an inferior good. 
D) negative, so Joan considers hamburger to be a normal good but not a necessity. 
A) positive, so Joan considers hamburger to be an inferior good. 
B) positive, so Joan considers hamburger to be a normal good and a necessity. 
C) negative, so Joan considers hamburger to be an inferior good. 
D) negative, so Joan considers hamburger to be a normal good but not a necessity.

Question 7

Figure 5-13  
-Refer to Figure 5-13. Over which range is the supply curve in this figure the most 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 8

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then

Accepted Answer

A) consumers of wheat would buy more wheat. 
B) wheat farmers would suffer a reduction in their total revenue. 
C) wheat farmers would experience an increase in their total revenue. 
D) the demand for wheat would decrease. 
A) consumers of wheat would buy more wheat. 
B) wheat farmers would suffer a reduction in their total revenue. 
C) wheat farmers would experience an increase in their total revenue. 
D) the demand for wheat would decrease.

Question 9

Figure 5-7  
-Refer to Figure 5-7. For prices above $8, demand is price

Accepted Answer

A) elastic, and total revenue will rise as price rises. 
B) inelastic, and total revenue will rise as price rises. 
C) elastic, and total revenue will fall as price rises. 
D) inelastic, and total revenue will fall as price rises. 
A) elastic, and total revenue will rise as price rises. 
B) inelastic, and total revenue will rise as price rises. 
C) elastic, and total revenue will fall as price rises. 
D) inelastic, and total revenue will fall as price rises.

Question 10

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

A) True 
 B)False

Question 11

Table 5-4
 $$\begin{array} { | c | c } 
\hline \text { Prica } & \begin{array} { c } 
\text { Tatal } \
\text { Revenup }
\end{array} \
\hline \$ 10 & \$ 100 \
\hline \$ 12 & \$ 108 \
\hline \$ 14 & \$ 112 \
\hline \$ 16 & \$ 112 \
\hline
\end{array}$$
-Refer to Table 5-4. Demand is unit elastic when quantity demanded changes from

Accepted Answer

A) 10 to 9. 
B) 9 to 8. 
C) 8 to 7. 
D) There is not enough information given to determine the correct answer. 
A) 10 to 9. 
B) 9 to 8. 
C) 8 to 7. 
D) There is not enough information given to determine the correct answer.

Question 12

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is

Accepted Answer

A) inelastic and equal to 6. 
B) elastic and equal to 6. 
C) inelastic and equal to 0.17. 
D) elastic and equal to 0.17. 
A) inelastic and equal to 6. 
B) elastic and equal to 6. 
C) inelastic and equal to 0.17. 
D) elastic and equal to 0.17.

Question 13

Demand is said to be unit elastic if quantity demanded

Accepted Answer

A) changes by the same percent as the price. 
B) changes by a larger percent than the price. 
C) changes by a smaller percent than the price. 
D) does not respond to a change in price. 
A) changes by the same percent as the price. 
B) changes by a larger percent than the price. 
C) changes by a smaller percent than the price. 
D) does not respond to a change in price.

Question 14

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A) There are many substitutes for this good. 
B) The good is a necessity. 
C) The market for the good is broadly defined. 
D) The relevant time horizon is short. 
A) There are many substitutes for this good. 
B) The good is a necessity. 
C) The market for the good is broadly defined. 
D) The relevant time horizon is short.

Question 15

Figure 5-14  
-Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between points B and C?

Accepted Answer

A) 1.67 
B) 1.19 
C) 0.84 
D) 0.61 
A) 1.67 
B) 1.19 
C) 0.84 
D) 0.61

Question 16

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

Accepted Answer

A) raise both price and total revenues. 
B) lower both price and total revenues. 
C) raise price and lower total revenues. 
D) lower price and raise total revenues. 
A) raise both price and total revenues. 
B) lower both price and total revenues. 
C) raise price and lower total revenues. 
D) lower price and raise total revenues.

Question 17

The production of methamphetamine (meth) is a social problem in the Midwest. Iowa is considering two potential programs: Operation Methbust would increase the number of sheriffs' deputies to search out and destroy methamphetamine labs. Operation Say No to Meth would increase the training required of public school teachers so that they could better educate students about the health risks of using meth. Assuming that each program were successful, which of the following statements is correct?

Accepted Answer

A) Both Operation Methbust and Say No would reduce the demand for meth. 
B) Both Operation Methbust and Say No would reduce the supply of meth. 
C) Operation Methbust would reduce the demand for meth; Operation Say No would reduce the supply of meth. 
D) Operation Methbust would reduce the supply of meth; Operation Say No would reduce the demand for meth. 
A) Both Operation Methbust and Say No would reduce the demand for meth. 
B) Both Operation Methbust and Say No would reduce the supply of meth. 
C) Operation Methbust would reduce the demand for meth; Operation Say No would reduce the supply of meth. 
D) Operation Methbust would reduce the supply of meth; Operation Say No would reduce the demand for meth.

Question 18

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following could be the price elasticity of demand for a good for which an increase in price would decrease revenue?

Accepted Answer

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

Question 20

Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

Suppose that corn farmers want to increase their total revenue. Knowing that the demand for corn is inelastic, corn farmers should

If the price of milk rises, when is the price elasticity of demand likely to be the lowest?

Supply tends to be more elastic in the short run and more inelastic in the long run.

Figure 5-1 -Refer to Figure 5-1. Between point A and point B on the graph, demand is

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

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

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then

Figure 5-7 -Refer to Figure 5-7. For prices above $8, demand is price

A government program that reduces land under cultivation hurts farmers but helps consumers.

Table 5-4 Prica Tatal Revenup \ 10 \ 100 \ 12 \ 108 \ 14 \ 112 \ 16 \ 112 -Refer to Table 5-4. Demand is unit elastic when quantity demanded changes from

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is

Demand is said to be unit elastic if quantity demanded

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Figure 5-14 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between points B and C?

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Which of the following could be the price elasticity of demand for a good for which an increase in price would decrease revenue?

Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

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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