Question 1

When demand is inelastic,a decrease in price increases total revenue.

Accepted Answer

A) True 
 B)False

Question 2

If the price elasticity of demand for aluminum foil is 1.45,then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Accepted Answer

A)  1.66%,and aluminum foil sellers' total revenue will increase as a result. 
B)  1.66%,and aluminum foil sellers' total revenue will decrease as a result. 
C)  3.48%,and aluminum foil sellers' total revenue will increase as a result. 
D)  3.48%,and aluminum foil sellers' total revenue will decrease as a result. 
A)  1.66%,and aluminum foil sellers' total revenue will increase as a result. 
B)  1.66%,and aluminum foil sellers' total revenue will decrease as a result. 
C)  3.48%,and aluminum foil sellers' total revenue will increase as a result. 
D)  3.48%,and aluminum foil sellers' total revenue will decrease as a result.

Question 3

If two supply curves pass through the same point and one is steep and the other is flat,which of the following statements is correct?

Accepted Answer

A)  The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve. 
B)  The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve. 
C)  Given two prices with which to calculate the price elasticity of supply,that elasticity is the same for both curves. 
D)  A decrease in demand will increase total revenue if the steeper supply curve is relevant,while a decrease in demand will decrease total revenue if the flatter supply cure is relevant. 
A)  The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve. 
B)  The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve. 
C)  Given two prices with which to calculate the price elasticity of supply,that elasticity is the same for both curves. 
D)  A decrease in demand will increase total revenue if the steeper supply curve is relevant,while a decrease in demand will decrease total revenue if the flatter supply cure is relevant.

Question 4

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)  The demand for illegal drugs is inelastic. 
B)  Interdiction results in drug addicts having a greater need for quick cash. 
C)  Interdiction results in an increase in the amount of money needed to buy the same amount of drugs. 
D)  Government drug programs are more lenient now with drug offenders than they were in the 1980s. 
A)  The demand for illegal drugs is inelastic. 
B)  Interdiction results in drug addicts having a greater need for quick cash. 
C)  Interdiction results in an increase in the amount of money needed to buy the same amount of drugs. 
D)  Government drug programs are more lenient now with drug offenders than they were in the 1980s.

Question 5

Figure 5-3  
-Refer to Figure 5-3.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 6

Figure 5-4  
-Refer to Figure 5-4.The section of the demand curve from B to C represents the

Accepted Answer

A)  elastic section of the demand curve. 
B)  inelastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  perfectly elastic section of the demand curve. 
A)  elastic section of the demand curve. 
B)  inelastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  perfectly elastic section of the demand curve.

Question 7

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements about the price elasticity of demand is correct?

Accepted Answer

A)  The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. 
B)  Price elasticity of demand reflects the many economic,psychological,and social forces that shape consumer tastes. 
C)  Other things equal,if good x has close substitutes and good y does not have close substitutes,then the demand for good x will be more elastic than the demand for good y. 
D)  All of the above are correct. 
A)  The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. 
B)  Price elasticity of demand reflects the many economic,psychological,and social forces that shape consumer tastes. 
C)  Other things equal,if good x has close substitutes and good y does not have close substitutes,then the demand for good x will be more elastic than the demand for good y. 
D)  All of the above are correct.

Question 9

If the price elasticity of demand for a good is 0.4,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

Figure 5-5  
-Refer to Figure 5-5.At a price of $12 per unit,sellers' total revenue amounts to

Accepted Answer

A)  $150. 
B)  $200. 
C)  $288. 
D)  $364. 
A)  $150. 
B)  $200. 
C)  $288. 
D)  $364.

Question 11

To determine whether a good is considered normal or inferior,one could examine the value of the

Accepted Answer

A)  income elasticity of demand for that good. 
B)  price elasticity of demand for that good. 
C)  price elasticity of supply for that good. 
D)  cross-price elasticity of demand for that good. 
A)  income elasticity of demand for that good. 
B)  price elasticity of demand for that good. 
C)  price elasticity of supply for that good. 
D)  cross-price elasticity of demand for that good.

Question 12

Demand is said to have unit elasticity if elasticity is

Accepted Answer

A)  less than 1. 
B)  greater than 1. 
C)  equal to 1. 
D)  equal to 0. 
A)  less than 1. 
B)  greater than 1. 
C)  equal to 1. 
D)  equal to 0.

Question 13

Figure 5-4  
-Refer to Figure 5-4.The section of the demand curve from A to B represents the

Accepted Answer

A)  elastic section of the demand curve. 
B)  inelastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  perfectly elastic section of the demand curve. 
A)  elastic section of the demand curve. 
B)  inelastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  perfectly elastic section of the demand curve.

Question 14

A key determinant of the price elasticity of supply is the time period under consideration.Which of the following statements best explains this fact?

Accepted Answer

A)  Supply curves are steeper over long periods of time than over short periods of time. 
B)  Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time. 
C)  The number of firms in a market tends to be more variable over long periods of time than over short periods of time. 
D)  Firms prefer to change their prices in the short run rather than in the long run. 
A)  Supply curves are steeper over long periods of time than over short periods of time. 
B)  Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time. 
C)  The number of firms in a market tends to be more variable over long periods of time than over short periods of time. 
D)  Firms prefer to change their prices in the short run rather than in the long run.

Question 15

The demand for soap is more elastic than the demand for Dove soap.

Accepted Answer

A) True 
 B)False

Question 16

The cross-price elasticity of garlic salt and onion salt is -2,which indicates that garlic salt and onion salt are substitutes.

Accepted Answer

A) True 
 B)False

Question 17

Cross-price elasticity is used to determine whether goods are substitutes or complements.

Accepted Answer

A) True 
 B)False

Question 18

Figure 5-13  
-Refer to Figure 5-13.Using the midpoint method,what is the price elasticity of supply between points D and G?

Accepted Answer

A)  1.89 
B)  1.26 
C)  0.53 
D)  0.34 
A)  1.89 
B)  1.26 
C)  0.53 
D)  0.34

Question 19

Table 5-6
  
-Refer to Table 5-6.Which of the three supply curves represents the least 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 20

When the price of a good is $5,the quantity demanded is 120 units per month;when the price is $7,the quantity demanded is 100 units per month.Using the midpoint method,the price elasticity of demand is about

Accepted Answer

A)  0.55. 
B)  1.83. 
C) 2 
D)  10. 
A)  0.55. 
B)  1.83. 
C) 2 
D)  10.

Exam 5: Elasticity and Its Application

When demand is inelastic,a decrease in price increases total revenue.

If the price elasticity of demand for aluminum foil is 1.45,then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

If two supply curves pass through the same point and one is steep and the other is flat,which of the following statements is correct?

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Figure 5-3 -Refer to Figure 5-3.Between point A and point B on the graph,demand is

Figure 5-4 -Refer to Figure 5-4.The section of the demand curve from B to C represents the

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Which of the following statements about the price elasticity of demand is correct?

If the price elasticity of demand for a good is 0.4,then a 10 percent increase in price results in a

Figure 5-5 -Refer to Figure 5-5.At a price of $12 per unit,sellers' total revenue amounts to

To determine whether a good is considered normal or inferior,one could examine the value of the

Demand is said to have unit elasticity if elasticity is

Figure 5-4 -Refer to Figure 5-4.The section of the demand curve from A to B represents the

A key determinant of the price elasticity of supply is the time period under consideration.Which of the following statements best explains this fact?

The demand for soap is more elastic than the demand for Dove soap.

The cross-price elasticity of garlic salt and onion salt is -2,which indicates that garlic salt and onion salt are substitutes.

Cross-price elasticity is used to determine whether goods are substitutes or complements.

Figure 5-13 -Refer to Figure 5-13.Using the midpoint method,what is the price elasticity of supply between points D and G?

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

When the price of a good is $5,the quantity demanded is 120 units per month;when the price is $7,the quantity demanded is 100 units per month.Using the midpoint method,the price elasticity of demand 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

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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