Question 1

For which of the following goods would demand be most elastic?

Accepted Answer

A)  clothing 
B)  blue jeans 
C)  Tommy Hilfiger jeans 
D)  All three would have the same elasticity of demand since they are all related. 
A)  clothing 
B)  blue jeans 
C)  Tommy Hilfiger jeans 
D)  All three would have the same elasticity of demand since they are all related.

Question 2

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

Question 3

Moving downward and to the right along a linear demand curve,we know that total revenue

Accepted Answer

A)  first increases,then decreases. 
B)  first decreases,then increases. 
C)  always increases. 
D)  always decreases. 
A)  first increases,then decreases. 
B)  first decreases,then increases. 
C)  always increases. 
D)  always decreases.

Question 4

When demand is perfectly inelastic,the price elasticity of demand

Accepted Answer

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

Question 5

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

Accepted Answer

A)  increased from $4 to $6. 
B)  increased from $16 to $18. 
C)  decreased from $8 to $6. 
D)  All of the above are correct. 
A)  increased from $4 to $6. 
B)  increased from $16 to $18. 
C)  decreased from $8 to $6. 
D)  All of the above are correct.

Question 6

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good.The income elasticity of demand for the good is

Accepted Answer

A)  negative and therefore the good is an inferior good. 
B)  negative and therefore the good is a normal good. 
C)  positive and therefore the good is an inferior good. 
D)  positive and therefore the good is a normal good. 
A)  negative and therefore the good is an inferior good. 
B)  negative and therefore the good is a normal good. 
C)  positive and therefore the good is an inferior good. 
D)  positive and therefore the good is a normal good.

Question 7

In the case of perfectly inelastic demand,

Accepted Answer

A)  the change in quantity demanded equals the change in price. 
B)  the percentage change in quantity demanded equals the percentage change in price. 
C)  infinitely-large changes in quantity demanded result from very small changes in the price. 
D)  quantity demanded stays the same whenever price changes. 
A)  the change in quantity demanded equals the change in price. 
B)  the percentage change in quantity demanded equals the percentage change in price. 
C)  infinitely-large changes in quantity demanded result from very small changes in the price. 
D)  quantity demanded stays the same whenever price changes.

Question 8

When demand is inelastic,a decrease in price will cause

Accepted Answer

A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue,but an increase in quantity demanded. 
D)  no change in total revenue,but a decrease in quantity demanded. 
A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue,but an increase in quantity demanded. 
D)  no change in total revenue,but a decrease in quantity demanded.

Question 9

Total revenue

Accepted Answer

A)  always increases as price increases. 
B)  increases as price increases,as long as demand is elastic. 
C)  decreases as price increases,as long as demand is inelastic. 
D)  remains unchanged as price increases when demand is unit elastic. 
A)  always increases as price increases. 
B)  increases as price increases,as long as demand is elastic. 
C)  decreases as price increases,as long as demand is inelastic. 
D)  remains unchanged as price increases when demand is unit elastic.

Question 10

Which of the following expressions is valid for the price elasticity of demand?

Accepted Answer

A)  Price elasticity of demand =. 
B)  Price elasticity of demand = 
C)  Price elasticity of demand = . 
D)  Price elasticity of  demand =. 
A)  Price elasticity of demand =. 
B)  Price elasticity of demand = 
C)  Price elasticity of demand = . 
D)  Price elasticity of  demand =.

Question 11

On a certain supply curve,one point is (quantity supplied = 200,price = $2.00)and another point is (quantity supplied = 250,price = $2.50).Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)  0.2. 
B)  0.5. 
C)  1.0. 
D)  2.5. 
A)  0.2. 
B)  0.5. 
C)  1.0. 
D)  2.5.

Question 12

If sellers do not adjust their quantities supplied at all in response to a change in price,

Accepted Answer

A)  advances in technology must be prevalent. 
B)  the time period under consideration must be very long. 
C)  supply is perfectly elastic. 
D)  supply is perfectly inelastic. 
A)  advances in technology must be prevalent. 
B)  the time period under consideration must be very long. 
C)  supply is perfectly elastic. 
D)  supply is perfectly inelastic.

Question 13

Suppose the price elasticity of supply for how-to books is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for how-to books causes the price of how-to books to increase by 36%,then the quantity supplied of how-to books will increase by

Accepted Answer

A)  0.8% in the short run and 3.3% in the long run. 
B)  1.2% in the short run and 0.3% in the long run. 
C)  10.8% in the short run and 43.2% in the long run. 
D)  120% in the short run and 30% in the long run. 
A)  0.8% in the short run and 3.3% in the long run. 
B)  1.2% in the short run and 0.3% in the long run. 
C)  10.8% in the short run and 43.2% in the long run. 
D)  120% in the short run and 30% in the long run.

Question 14

Suppose that when the price of corn is $2 per bushel,farmers can sell 10 million bushels.When the price of corn is $3 per bushel,farmers can sell 8 million bushels.Which of the following statements is true?

Accepted Answer

A)  The demand for corn is income inelastic,and so an increase in the price of corn will increase the total revenue of corn farmers. 
B)  The demand for corn is income elastic,and so an increase in the price of corn will increase the total revenue of corn farmers. 
C)  The demand for corn is price inelastic,and so an increase in the price of corn will increase the total revenue of corn farmers. 
D)  The demand for corn is price elastic,and so an increase in the price of corn will increase the total revenue of corn farmers. 
A)  The demand for corn is income inelastic,and so an increase in the price of corn will increase the total revenue of corn farmers. 
B)  The demand for corn is income elastic,and so an increase in the price of corn will increase the total revenue of corn farmers. 
C)  The demand for corn is price inelastic,and so an increase in the price of corn will increase the total revenue of corn farmers. 
D)  The demand for corn is price elastic,and so an increase in the price of corn will increase the total revenue of corn farmers.

Question 15

If the demand for textbooks is inelastic,then an increase 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 16

Which of the following is not possible?

Accepted Answer

A)  Demand is elastic,and a decrease in price causes an increase in revenue. 
B)  Demand is unit elastic,and a decrease in price causes an increase in revenue. 
C)  Demand is inelastic,and an increase in price causes an increase in revenue. 
D)  Demand is perfectly inelastic,and an increase in price causes an increase in revenue. 
A)  Demand is elastic,and a decrease in price causes an increase in revenue. 
B)  Demand is unit elastic,and a decrease in price causes an increase in revenue. 
C)  Demand is inelastic,and an increase in price causes an increase in revenue. 
D)  Demand is perfectly inelastic,and an increase in price causes an increase in revenue.

Question 17

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

Accepted Answer

A)  0 
B)  0.2 
C)  1 
D)  2.1 
A)  0 
B)  0.2 
C)  1 
D)  2.1

Question 18

For a particular good,a 10 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

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

Question 19

If demand is perfectly elastic,the demand curve is horizontal,and the price elasticity of demand equals 1.

Accepted Answer

A) True 
 B)False

Question 20

Table 5-1
  
-If a 20% increase in price for a good results in a 15% decrease in quantity demanded,the price elasticity of demand is

Accepted Answer

A)  0.75. 
B)  1.25. 
C)  1.33. 
D)  1.60. 
A)  0.75. 
B)  1.25. 
C)  1.33. 
D)  1.60.

Exam 5: Elasticity and Its Application

For which of the following goods would demand be most elastic?

Which of the following statements is valid when the market supply curve is vertical?

Moving downward and to the right along a linear demand curve,we know that total revenue

When demand is perfectly inelastic,the price elasticity of demand

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

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good.The income elasticity of demand for the good is

In the case of perfectly inelastic demand,

When demand is inelastic,a decrease in price will cause

Total revenue

Which of the following expressions is valid for the price elasticity of demand?

On a certain supply curve,one point is (quantity supplied = 200,price = $2.00)and another point is (quantity supplied = 250,price = $2.50).Using the midpoint method,the price elasticity of supply is about

If sellers do not adjust their quantities supplied at all in response to a change in price,

Suppose the price elasticity of supply for how-to books is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for how-to books causes the price of how-to books to increase by 36%,then the quantity supplied of how-to books will increase by

Suppose that when the price of corn is $2 per bushel,farmers can sell 10 million bushels.When the price of corn is $3 per bushel,farmers can sell 8 million bushels.Which of the following statements is true?

If the demand for textbooks is inelastic,then an increase in the price of textbooks will

Which of the following is not possible?

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

For a particular good,a 10 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

If demand is perfectly elastic,the demand curve is horizontal,and the price elasticity of demand equals 1.

Table 5-1 -If a 20% increase in price for a good results in a 15% decrease in quantity demanded,the price elasticity of demand 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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