Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

When the rental price of DVD movies is $4,Denise rents five per month.When the price is $3,she rents nine per month.Denise's demand for DVD rentals is

Accepted Answer

A)  elastic,and her demand curve would be relatively flat. 
B)  elastic,and her demand curve would be relatively steep. 
C)  inelastic,and her demand curve would be relatively flat. 
D)  inelastic,and her demand curve would be relatively steep. 
A)  elastic,and her demand curve would be relatively flat. 
B)  elastic,and her demand curve would be relatively steep. 
C)  inelastic,and her demand curve would be relatively flat. 
D)  inelastic,and her demand curve would be relatively steep.

Question 3

Income elasticity of demand measures how

Accepted Answer

A)  the quantity demanded changes as consumer income changes. 
B)  consumer purchasing power is affected by a change in the price of a good. 
C)  the price of a good is affected when there is a change in consumer income. 
D)  many units of a good a consumer can buy given a certain income level. 
A)  the quantity demanded changes as consumer income changes. 
B)  consumer purchasing power is affected by a change in the price of a good. 
C)  the price of a good is affected when there is a change in consumer income. 
D)  many units of a good a consumer can buy given a certain income level.

Question 4

When demand is inelastic within a certain price range,then within that price range,

Accepted Answer

A)  an increase in price would increase total revenue because the decrease in quantity demanded is proportionately less than the increase in price. 
B)  an increase in price would decrease total revenue because the decrease in quantity demanded is proportionately greater than the increase in price. 
C)  a decrease in price would increase total revenue because the increase in quantity demanded is proportionately smaller than the decrease in price. 
D)  a decrease in price would not affect total revenue. 
A)  an increase in price would increase total revenue because the decrease in quantity demanded is proportionately less than the increase in price. 
B)  an increase in price would decrease total revenue because the decrease in quantity demanded is proportionately greater than the increase in price. 
C)  a decrease in price would increase total revenue because the increase in quantity demanded is proportionately smaller than the decrease in price. 
D)  a decrease in price would not affect total revenue.

Question 5

Which of the following statements is not valid when the market supply curve is vertical?

Accepted Answer

A)  Market quantity supplied does not change when the price changes. 
B)  Supply is perfectly inelastic. 
C)  An increase in market demand will increase the equilibrium quantity. 
D)  An increase in market demand will increase the equilibrium price. 
A)  Market quantity supplied does not change when the price changes. 
B)  Supply is perfectly inelastic. 
C)  An increase in market demand will increase the equilibrium quantity. 
D)  An increase in market demand will increase the equilibrium price.

Question 6

Figure 5-6  
-Refer to Figure 5-6.Sellers' total revenue would increase if the price

Accepted Answer

A)  increased from $6 to $8. 
B)  decreased from $18 to $16. 
C)  decreased from $16 to $15. 
D)  All of the above are correct. 
A)  increased from $6 to $8. 
B)  decreased from $18 to $16. 
C)  decreased from $16 to $15. 
D)  All of the above are correct.

Question 7

Price elasticity of demand along a linear,downward-sloping demand curve increases as price falls.

Accepted Answer

A) True 
 B)False

Question 8

Suppose that 50 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 5 percent,the number of candy bars demanded falls to 48.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 1.22. 
D)  price elasticity of demand for candy bars in this price range is about 0.82. 
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 1.22. 
D)  price elasticity of demand for candy bars in this price range is about 0.82.

Question 9

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

Accepted Answer

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

Question 10

If an increase in income results in a decrease in the quantity demanded of a good,then for that good,the

Accepted Answer

A)  cross-price elasticity of demand is negative. 
B)  price elasticity of demand is elastic. 
C)  income elasticity of demand is negative. 
D)  income elasticity of demand is positive. 
A)  cross-price elasticity of demand is negative. 
B)  price elasticity of demand is elastic. 
C)  income elasticity of demand is negative. 
D)  income elasticity of demand is positive.

Question 11

An advance in farm technology that results in an increased market supply is

Accepted Answer

A)  good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food. 
B)  bad for farmers because total revenue will fall but good for consumers because prices for food will fall. 
C)  good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption. 
D)  bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue. 
A)  good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food. 
B)  bad for farmers because total revenue will fall but good for consumers because prices for food will fall. 
C)  good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption. 
D)  bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue.

Question 12

The price elasticity of supply measures how responsive

Accepted Answer

A)  sellers are to a change in price. 
B)  sellers are to a change in buyers' income. 
C)  buyers are to a change in production costs. 
D)  equilibrium price is to a change in supply. 
A)  sellers are to a change in price. 
B)  sellers are to a change in buyers' income. 
C)  buyers are to a change in production costs. 
D)  equilibrium price is to a change in supply.

Question 13

Elasticity measures how responsive quantity is to changes in price.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following expressions represents a cross-price elasticity of demand?

Accepted Answer

A)  percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread 
B)  percentage change in quantity demanded of bread divided by percentage change in price of butter 
C)  percentage change in price of bread divided by percentage change in quantity demanded of bread 
D)  percentage change in quantity demanded of bread divided by percentage change in income 
A)  percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread 
B)  percentage change in quantity demanded of bread divided by percentage change in price of butter 
C)  percentage change in price of bread divided by percentage change in quantity demanded of bread 
D)  percentage change in quantity demanded of bread divided by percentage change in income

Question 15

Figure 5-10  
-Refer to Figure 5-10.Total revenue when the price is P2 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 16

When demand is perfectly inelastic,the demand curve will be

Accepted Answer

A)  negatively sloped,because buyers decrease their purchases when the price rises. 
B)  vertical,because buyers purchase the same amount as before whenever the price rises or falls. 
C)  positively sloped,because buyers increase their purchases when price rises. 
D)  positively sloped,because buyers increase their total expenditures when price rises. 
A)  negatively sloped,because buyers decrease their purchases when the price rises. 
B)  vertical,because buyers purchase the same amount as before whenever the price rises or falls. 
C)  positively sloped,because buyers increase their purchases when price rises. 
D)  positively sloped,because buyers increase their total expenditures when price rises.

Question 17

Figure 5-5  
-Refer to Figure 5-5.Using the midpoint method,between prices of $48 and $54,price elasticity of demand is about

Accepted Answer

A)  0.92. 
B)  3.89. 
C)  4.33. 
D)  5.67. 
A)  0.92. 
B)  3.89. 
C)  4.33. 
D)  5.67.

Question 18

Measures of elasticity enhance our ability to study the magnitudes of changes.

Accepted Answer

A) True 
 B)False

Question 19

At a price of $1.20,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.40,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is

Accepted Answer

A)  0.15 
B)  0.375 
C)  2.5 
D)  2.60 
A)  0.15 
B)  0.375 
C)  2.5 
D)  2.60

Question 20

Figure 5-4  
-Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 1,000,P = $40)and (Q = 1,500,P = $30).Then which of the following scenarios is possible?

Accepted Answer

A)  Both of these points lie on the section of the demand curve from B to C. 
B)  The vertical intercept of the demand curve is the point (Q = 0,P = $60). 
C)  The horizontal intercept of the demand curve is the point (Q = 1,800,P = $0). 
D)  Any of these scenarios is possible. 
A)  Both of these points lie on the section of the demand curve from B to C. 
B)  The vertical intercept of the demand curve is the point (Q = 0,P = $60). 
C)  The horizontal intercept of the demand curve is the point (Q = 1,800,P = $0). 
D)  Any of these scenarios is possible.

Exam 5: Elasticity and Its Application

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

When the rental price of DVD movies is $4,Denise rents five per month.When the price is $3,she rents nine per month.Denise's demand for DVD rentals is

Income elasticity of demand measures how

When demand is inelastic within a certain price range,then within that price range,

Which of the following statements is not valid when the market supply curve is vertical?

Figure 5-6 -Refer to Figure 5-6.Sellers' total revenue would increase if the price

Price elasticity of demand along a linear,downward-sloping demand curve increases as price falls.

Suppose that 50 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 5 percent,the number of candy bars demanded falls to 48.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

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

If an increase in income results in a decrease in the quantity demanded of a good,then for that good,the

An advance in farm technology that results in an increased market supply is

The price elasticity of supply measures how responsive

Elasticity measures how responsive quantity is to changes in price.

Which of the following expressions represents a cross-price elasticity of demand?

Figure 5-10 -Refer to Figure 5-10.Total revenue when the price is P2 is represented by the area(s)

When demand is perfectly inelastic,the demand curve will be

Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,between prices of $48 and $54,price elasticity of demand is about

Measures of elasticity enhance our ability to study the magnitudes of changes.

At a price of $1.20,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.40,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is

Figure 5-4 -Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 1,000,P = $40)and (Q = 1,500,P = $30).Then which of the following scenarios is possible?

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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 Macroeconomics: Basic Concepts

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

Five Debates Over Macroeconomic Policy

Filters

Figure 5-10 -Refer to Figure 5-10.Total revenue when the price is P₂ is represented by the area(s)