Question 1

Other things equal,the demand for a good tends to be more inelastic,the

Accepted Answer

A)  fewer the available substitutes. 
B)  longer the time period considered. 
C)  more the good is considered a luxury good. 
D)  more narrowly defined is the market for the good. 
A)  fewer the available substitutes. 
B)  longer the time period considered. 
C)  more the good is considered a luxury good. 
D)  more narrowly defined is the market for the good.

Question 2

Which of the following is not a determinant of the price elasticity of demand for a good?

Accepted Answer

A)  the time horizon 
B)  the steepness or flatness of the supply curve for the good 
C)  the definition of the market for the good 
D)  the availability of substitutes for the good 
A)  the time horizon 
B)  the steepness or flatness of the supply curve for the good 
C)  the definition of the market for the good 
D)  the availability of substitutes for the good

Question 3

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Accepted Answer

A) True 
 B)False

Question 4

Figure 5-15  
-Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between point A and point B?

Accepted Answer

A)  0.58 
B)  0.71 
C)  1.06 
D)  1.4 
A)  0.58 
B)  0.71 
C)  1.06 
D)  1.4

Question 5

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country?

Accepted Answer

A)  Drug interdiction raises prices and total revenue in the drug market. 
B)  Drug interdiction can increase drug-related crime. 
C)  Drug interdiction shifts the demand curve for drugs to the left. 
D)  Drug interdiction shifts the supply curve of drugs to the left. 
A)  Drug interdiction raises prices and total revenue in the drug market. 
B)  Drug interdiction can increase drug-related crime. 
C)  Drug interdiction shifts the demand curve for drugs to the left. 
D)  Drug interdiction shifts the supply curve of drugs to the left.

Question 6

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 7

Suppose that 500 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 10 percent,the number of candy bars demanded falls to 480.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 0.41. 
D)  price elasticity of demand for candy bars in this price range is about 0.24. 
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 0.41. 
D)  price elasticity of demand for candy bars in this price range is about 0.24.

Question 8

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 9

Figure 5-1  
-Refer to Figure 5-1.Atog says he would buy one cup of coffee per day regardless of the price.If this is true,then Atog's demand for coffee is represented by demand curve

Accepted Answer

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

Question 10

For a vertical demand curve,

Accepted Answer

A)  slope is undefined,and price elasticity of demand is equal to 0. 
B)  slope is equal to 0,and price elasticity of demand is undefined. 
C)  slope and price elasticity of demand both are undefined. 
D)  slope and price elasticity of demand both are equal to 0. 
A)  slope is undefined,and price elasticity of demand is equal to 0. 
B)  slope is equal to 0,and price elasticity of demand is undefined. 
C)  slope and price elasticity of demand both are undefined. 
D)  slope and price elasticity of demand both are equal to 0.

Question 11

You and your college roommate eat three packages of Ramen noodles each week.After graduation last month,both of you were hired at several times your college income.You still enjoy Ramen noodles very much and buy even more,but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more.When looking at income elasticity of demand for Ramen noodles,

Accepted Answer

A)  yours would be negative and your roommate's would be positive. 
B)  yours would be positive and your roommate's would be negative. 
C)  yours would be zero and your roommate's would approach infinity. 
D)  yours would approach infinity and your roommate's would be zero. 
A)  yours would be negative and your roommate's would be positive. 
B)  yours would be positive and your roommate's would be negative. 
C)  yours would be zero and your roommate's would approach infinity. 
D)  yours would approach infinity and your roommate's would be zero.

Question 12

A key determinant of the price elasticity of supply is the

Accepted Answer

A)  time horizon. 
B)  income of consumers. 
C)  price elasticity of demand. 
D)  importance of the good in a consumer's budget. 
A)  time horizon. 
B)  income of consumers. 
C)  price elasticity of demand. 
D)  importance of the good in a consumer's budget.

Question 13

The demand for Neapolitan ice cream is likely quite elastic because

Accepted Answer

A)  ice cream must be eaten quickly. 
B)  this particular flavor of ice cream is viewed as a necessity by many ice-cream lovers. 
C)  the market is broadly defined. 
D)  other flavors of ice cream are good substitutes for this particular flavor. 
A)  ice cream must be eaten quickly. 
B)  this particular flavor of ice cream is viewed as a necessity by many ice-cream lovers. 
C)  the market is broadly defined. 
D)  other flavors of ice cream are good substitutes for this particular flavor.

Question 14

When the price of a good is $5,the quantity demanded is 100 units per month;when the price is $7,the quantity demanded is 80 units per month.Using the midpoint method,the price elasticity of demand is about

Accepted Answer

A)  0.22. 
B)  0.67. 
C)  1.33. 
D)  1.50. 
A)  0.22. 
B)  0.67. 
C)  1.33. 
D)  1.50.

Question 15

If the demand curve is linear and downward sloping,which of the following statements is not correct?

Accepted Answer

A)  Demand is more elastic on the lower part of the demand curve than on the upper part. 
B)  Different pairs of points on the demand curve can result in different values of the price elasticity of demand. 
C)  Different pairs of points on the demand curve result in identical values of the slope of the demand curve. 
D)  Starting from a point on the upper part of the demand curve,an increase in price leads to a decrease in total revenue. 
A)  Demand is more elastic on the lower part of the demand curve than on the upper part. 
B)  Different pairs of points on the demand curve can result in different values of the price elasticity of demand. 
C)  Different pairs of points on the demand curve result in identical values of the slope of the demand curve. 
D)  Starting from a point on the upper part of the demand curve,an increase in price leads to a decrease in total revenue.

Question 16

If the demand for textbooks is inelastic,then a decrease in the price of textbooks will

Accepted Answer

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

Question 17

The price elasticity of demand for eggs

Accepted Answer

A)  is computed as the percentage change in quantity demanded of eggs divided by the percentage change in price of eggs. 
B)  will be lower if there is a new invention that is a close substitute for eggs. 
C)  will be higher if consumers consider eggs to be a luxury good. 
D)  All of the above are correct. 
A)  is computed as the percentage change in quantity demanded of eggs divided by the percentage change in price of eggs. 
B)  will be lower if there is a new invention that is a close substitute for eggs. 
C)  will be higher if consumers consider eggs to be a luxury good. 
D)  All of the above are correct.

Question 18

The cross-price elasticity of demand can tell us whether goods are

Accepted Answer

A)  normal or inferior. 
B)  elastic or inelastic. 
C)  luxuries or necessities. 
D)  complements or substitutes. 
A)  normal or inferior. 
B)  elastic or inelastic. 
C)  luxuries or necessities. 
D)  complements or substitutes.

Question 19

Holding all other forces constant,if increasing the price of a good leads to a decrease in total revenue,then the demand for the good must be

Accepted Answer

A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct,since a price increase always leads to an increase in total revenue. 
A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct,since a price increase always leads to an increase in total revenue.

Question 20

Elasticity is

Accepted Answer

A)  a measure of how much buyers and sellers respond to changes in market conditions. 
B)  the study of how the allocation of resources affects economic well-being. 
C)  the maximum amount that a buyer will pay for a good. 
D)  the value of everything a seller must give up to produce a good. 
A)  a measure of how much buyers and sellers respond to changes in market conditions. 
B)  the study of how the allocation of resources affects economic well-being. 
C)  the maximum amount that a buyer will pay for a good. 
D)  the value of everything a seller must give up to produce a good.

Exam 5: Elasticity and Its Application

Other things equal,the demand for a good tends to be more inelastic,the

Which of the following is not a determinant of the price elasticity of demand for a good?

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Figure 5-15 -Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between point A and point B?

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country?

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

Suppose that 500 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 10 percent,the number of candy bars demanded falls to 480.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Figure 5-1 -Refer to Figure 5-1.Atog says he would buy one cup of coffee per day regardless of the price.If this is true,then Atog's demand for coffee is represented by demand curve

For a vertical demand curve,

A key determinant of the price elasticity of supply is the

The demand for Neapolitan ice cream is likely quite elastic because

When the price of a good is $5,the quantity demanded is 100 units per month;when the price is $7,the quantity demanded is 80 units per month.Using the midpoint method,the price elasticity of demand is about

If the demand curve is linear and downward sloping,which of the following statements is not correct?

If the demand for textbooks is inelastic,then a decrease in the price of textbooks will

The price elasticity of demand for eggs

The cross-price elasticity of demand can tell us whether goods are

Holding all other forces constant,if increasing the price of a good leads to a decrease in total revenue,then the demand for the good must be

Elasticity 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

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

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