Question 1

A linear,upward-sloping supply curve has

Accepted Answer

A)  a constant slope and a changing elasticity of supply. 
B)  a changing slope and a constant elasticity of supply. 
C)  both a constant slope and a constant elasticity of supply. 
D)  both a changing slope and a changing elasticity of supply. 
A)  a constant slope and a changing elasticity of supply. 
B)  a changing slope and a constant elasticity of supply. 
C)  both a constant slope and a constant elasticity of supply. 
D)  both a changing slope and a changing elasticity of supply.

Question 2

The local pizza restaurant makes such great bread sticks that consumers do not respond much at all to a change in the price.If the owner is only interested in increasing revenue,he should

Accepted Answer

A)  lower the price of the bread sticks. 
B)  leave the price of the bread sticks alone. 
C)  raise the price of the bread sticks. 
D)  reduce costs. 
A)  lower the price of the bread sticks. 
B)  leave the price of the bread sticks alone. 
C)  raise the price of the bread sticks. 
D)  reduce costs.

Question 3

A key determinant of the price elasticity of supply is the

Accepted Answer

A)  number of close substitutes for the good in question. 
B)  definition of the market. 
C)  length of the time period. 
D)  extent to which buyers alter their quantities demanded in response to changes in their incomes. 
A)  number of close substitutes for the good in question. 
B)  definition of the market. 
C)  length of the time period. 
D)  extent to which buyers alter their quantities demanded in response to changes in their incomes.

Question 4

If a change in the price of a good results in no change in total revenue,then

Accepted Answer

A)  the demand for the good must be elastic. 
B)  the demand for the good must be inelastic. 
C)  the demand for the good must be unit elastic. 
D)  buyers must not respond very much to a change in price. 
A)  the demand for the good must be elastic. 
B)  the demand for the good must be inelastic. 
C)  the demand for the good must be unit elastic. 
D)  buyers must not respond very much to a change in price.

Question 5

If the price elasticity of demand for a good is 10.0,then a 4 percent increase in price results in a

Accepted Answer

A)  0.4 percent decrease in the quantity demanded. 
B)  2.5 percent decrease in the quantity demanded. 
C)  4 percent decrease in the quantity demanded. 
D)  40 percent decrease in the quantity demanded. 
A)  0.4 percent decrease in the quantity demanded. 
B)  2.5 percent decrease in the quantity demanded. 
C)  4 percent decrease in the quantity demanded. 
D)  40 percent decrease in the quantity demanded.

Question 6

In January the price of widgets was $2.00,and Wendy's Widgets produced 80 widgets.In February the price of widgets was $2.50,and Wendy's Widgets produced 110 widgets.In March the price of widgets was $3.00,and Wendy's Widgets produced 140 widgets.The price elasticity of supply of Wendy's Widgets was

Accepted Answer

A)  0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00. 
B)  0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00. 
C)  1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00. 
D)  1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00. 
A)  0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00. 
B)  0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00. 
C)  1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00. 
D)  1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00.

Question 7

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

Accepted Answer

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

Question 8

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Accepted Answer

A)  About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars. 
B)  About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars. 
C)  About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars. 
D)  Because gasoline is a necessity,consumers do not decrease their quantity demanded in either the short run or the long run. 
A)  About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars. 
B)  About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars. 
C)  About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars. 
D)  Because gasoline is a necessity,consumers do not decrease their quantity demanded in either the short run or the long run.

Question 9

If the price elasticity of demand for a good is 4.0,then a 10 percent increase in price results in a

Accepted Answer

A)  0.4 percent decrease in the quantity demanded. 
B)  2.5 percent decrease in the quantity demanded. 
C)  4 percent decrease in the quantity demanded. 
D)  40 percent decrease in the quantity demanded. 
A)  0.4 percent decrease in the quantity demanded. 
B)  2.5 percent decrease in the quantity demanded. 
C)  4 percent decrease in the quantity demanded. 
D)  40 percent decrease in the quantity demanded.

Question 10

Whether a good is a luxury or necessity depends on

Accepted Answer

A)  the price of the good. 
B)  the preferences of the buyer. 
C)  the intrinsic properties of the good. 
D)  how scarce the good is. 
A)  the price of the good. 
B)  the preferences of the buyer. 
C)  the intrinsic properties of the good. 
D)  how scarce the good is.

Question 11

Table 5-6
  
-Refer to Table 5-6.Which of the three supply curves represents the most elastic supply?

Accepted Answer

A)  supply curve A 
B)  supply curve B 
C)  supply curve C 
D)  There is no difference in the elasticity of the three supply curves. 
A)  supply curve A 
B)  supply curve B 
C)  supply curve C 
D)  There is no difference in the elasticity of the three supply curves.

Question 12

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%,then the price must have decreased by 3%.

Accepted Answer

A) True 
 B)False

Question 13

In which of these instances is demand said to be perfectly inelastic?

Accepted Answer

A)  An increase in price of 2% causes a decrease in quantity demanded of 2%. 
B)  A decrease in price of 2% causes an increase in quantity demanded of 0%. 
C)  A decrease in price of 2% causes a decrease in total revenue of 0%. 
D)  The demand curve is horizontal. 
A)  An increase in price of 2% causes a decrease in quantity demanded of 2%. 
B)  A decrease in price of 2% causes an increase in quantity demanded of 0%. 
C)  A decrease in price of 2% causes a decrease in total revenue of 0%. 
D)  The demand curve is horizontal.

Question 14

Figure 5-11  
-Refer to Figure 5-11.An increase in price from $20 to $30 would

Accepted Answer

A)  increase total revenue by $2,000. 
B)  decrease total revenue by $2,000. 
C)  increase total revenue by $1,000. 
D)  decrease total revenue by $1,000. 
A)  increase total revenue by $2,000. 
B)  decrease total revenue by $2,000. 
C)  increase total revenue by $1,000. 
D)  decrease total revenue by $1,000.

Question 15

When the price of good A is $50,the quantity demanded of good A is 500 units.When the price of good A rises to $70,the quantity demanded of good A falls to 400 units.Using the midpoint method,

Accepted Answer

A)  the price elasticity of demand for good A is 1.50,and an increase in price will result in an increase in total revenue for good A. 
B)  the price elasticity of demand for good A is 1.50,and an increase in price will result in a decrease in total revenue for good A. 
C)  the price elasticity of demand for good A is 0.67,and an increase in price will result in an increase in total revenue for good A. 
D)  the price elasticity of demand for good A is 0.67,and an increase in price will result in a decrease in total revenue for good A. 
A)  the price elasticity of demand for good A is 1.50,and an increase in price will result in an increase in total revenue for good A. 
B)  the price elasticity of demand for good A is 1.50,and an increase in price will result in a decrease in total revenue for good A. 
C)  the price elasticity of demand for good A is 0.67,and an increase in price will result in an increase in total revenue for good A. 
D)  the price elasticity of demand for good A is 0.67,and an increase in price will result in a decrease in total revenue for good A.

Question 16

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 17

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Accepted Answer

A) True 
 B)False

Question 18

If corn farmers know that the demand for corn is inelastic,and they want to increase their total revenue,they should all

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 they plant in 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 they plant in corn. 
D)  contribute to a fund that promotes technological advances in corn production.

Question 19

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.Total consumer spending on aged cheddar cheese will

Accepted Answer

A)  increase,and total consumer spending on bread will increase. 
B)  increase,and total consumer spending on bread will decrease. 
C)  decrease,and total consumer spending on bread will increase. 
D)  decrease,and total consumer spending on bread will decrease. 
A)  increase,and total consumer spending on bread will increase. 
B)  increase,and total consumer spending on bread will decrease. 
C)  decrease,and total consumer spending on bread will increase. 
D)  decrease,and total consumer spending on bread will decrease.

Question 20

Total revenue will be at its largest value on a linear demand curve at

Accepted Answer

A)  the top of the curve,where prices are highest. 
B)  the midpoint of the curve. 
C)  the low end of the curve,where quantity demanded is highest. 
D)  None of the above is correct. 
A)  the top of the curve,where prices are highest. 
B)  the midpoint of the curve. 
C)  the low end of the curve,where quantity demanded is highest. 
D)  None of the above is correct.

Exam 5: Elasticity and Its Application

A linear,upward-sloping supply curve has

The local pizza restaurant makes such great bread sticks that consumers do not respond much at all to a change in the price.If the owner is only interested in increasing revenue,he should

A key determinant of the price elasticity of supply is the

If a change in the price of a good results in no change in total revenue,then

If the price elasticity of demand for a good is 10.0,then a 4 percent increase in price results in a

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

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

If the price elasticity of demand for a good is 4.0,then a 10 percent increase in price results in a

Whether a good is a luxury or necessity depends on

Table 5-6 -Refer to Table 5-6.Which of the three supply curves represents the most elastic supply?

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%,then the price must have decreased by 3%.

In which of these instances is demand said to be perfectly inelastic?

Figure 5-11 -Refer to Figure 5-11.An increase in price from $20 to $30 would

When the price of good A is $50,the quantity demanded of good A is 500 units.When the price of good A rises to $70,the quantity demanded of good A falls to 400 units.Using the midpoint method,

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

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

If corn farmers know that the demand for corn is inelastic,and they want to increase their total revenue,they should all

Total revenue will be at its largest value on a linear demand curve at

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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