Question 1

Figure 5-4  
-Refer to Figure 5-4.If the price increases in the region of the demand curve between points B and C,we can expect total revenue to

Accepted Answer

A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first decrease,then increase until total revenue is maximized. 
A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first decrease,then increase until total revenue is maximized.

Question 2

Table 5-2
The following table shows a portion of the demand schedule for a particular good at various levels of income.
  
-Refer to Table 5-2.Using the midpoint method,when income equals $5,000,what is the price elasticity of demand between $8 and $12?

Accepted Answer

A)  0.56 
B)  0.75 
C)  1.33 
D)  1.80 
A)  0.56 
B)  0.75 
C)  1.33 
D)  1.80

Question 3

If the income elasticity of demand for a good is negative,then the good must be an inferior good.

Accepted Answer

A) True 
 B)False

Question 4

Figure 5-5  
-Refer to Figure 5-5.At a price of $30 per unit,sellers' total revenue amounts to

Accepted Answer

A)  $150. 
B)  $200. 
C)  $288. 
D)  $450. 
A)  $150. 
B)  $200. 
C)  $288. 
D)  $450.

Question 5

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

Accepted Answer

A)  midpoint of the demand curve. 
B)  lower end of the demand curve. 
C)  upper end of the demand curve. 
D)  It is impossible to tell without knowing prices and quantities demanded. 
A)  midpoint of the demand curve. 
B)  lower end of the demand curve. 
C)  upper end of the demand curve. 
D)  It is impossible to tell without knowing prices and quantities demanded.

Question 6

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

Accepted Answer

A) True 
 B)False

Question 7

For a particular good,a 12 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)  There are many substitutes for this good. 
B)  The good is a necessity. 
C)  The market for the good is narrowly defined. 
D)  The relevant time horizon is long. 
A)  There are many substitutes for this good. 
B)  The good is a necessity. 
C)  The market for the good is narrowly defined. 
D)  The relevant time horizon is long.

Question 8

Table 5-1
  
-If a 15% increase in price for a good results in a 20% 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.

Question 9

Table 5-3
The following table shows the demand schedule for a particular good.
  
-Refer to Table 5-3.Using the midpoint method,when price rises from $6 to $9,the price elasticity of demand is

Accepted Answer

A)  0.43 
B)  0.67 
C)  1.00 
D)  1.5 
A)  0.43 
B)  0.67 
C)  1.00 
D)  1.5

Question 10

Figure 5-2  
-Refer to Figure 5-2.As price falls from Pa to Pb,we could use the three demand curves to calculate three different values of the price elasticity of demand.Which of the three demand curves would produce the smallest elasticity?

Accepted Answer

A)  D1 
B)  D2 
C)  D3 
D)  All of the above are equally elastic. 
A)  D1 
B)  D2 
C)  D3 
D)  All of the above are equally elastic.

Question 11

Suppose goods A and B are substitutes for each other.We would expect the cross-price elasticity between these two goods to be

Accepted Answer

A)  positive. 
B)  negative. 
C)  either positive or negative.It depends whether A and B are normal goods or inferior goods. 
D)  either positive or negative.It depends whether the current price level is on the elastic or inelastic portion of the demand curve. 
A)  positive. 
B)  negative. 
C)  either positive or negative.It depends whether A and B are normal goods or inferior goods. 
D)  either positive or negative.It depends whether the current price level is on the elastic or inelastic portion of the demand curve.

Question 12

Which of the following should be held constant when calculating an income elasticity of demand?

Accepted Answer

A)  the price of the good 
B)  prices of related goods 
C)  tastes 
D)  All of the above should be held constant. 
A)  the price of the good 
B)  prices of related goods 
C)  tastes 
D)  All of the above should be held constant.

Question 13

Assume that a 4 percent increase in income results in a 2 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 a normal good. 
D)  positive and therefore the good is an inferior 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 a normal good. 
D)  positive and therefore the good is an inferior good.

Question 14

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

Accepted Answer

A)  1.67 
B)  1.19 
C)  0.84 
D)  0.61 
A)  1.67 
B)  1.19 
C)  0.84 
D)  0.61

Question 15

If a 30 percent change in price causes a 15 percent change in quantity supplied,then the price elasticity of supply is

Accepted Answer

A)  0.5,and supply is elastic. 
B)  0.5,and supply is inelastic. 
C)  2,and supply is inelastic. 
D)  2,and supply is elastic. 
A)  0.5,and supply is elastic. 
B)  0.5,and supply is inelastic. 
C)  2,and supply is inelastic. 
D)  2,and supply is elastic.

Question 16

If the price elasticity of demand for a good is 1.5,then a 3 percent decrease in price results in a

Accepted Answer

A)  0.5 percent increase in the quantity demanded. 
B)  2 percent increase in the quantity demanded. 
C)  4.5 percent increase in the quantity demanded. 
D)  5 percent increase in the quantity demanded. 
A)  0.5 percent increase in the quantity demanded. 
B)  2 percent increase in the quantity demanded. 
C)  4.5 percent increase in the quantity demanded. 
D)  5 percent increase in the quantity demanded.

Question 17

Figure 5-1  
-Refer to Figure 5-1.The demand curve representing the demand for a luxury good with several close substitutes is

Accepted Answer

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

Question 18

Figure 5-6  
-Refer to Figure 5-6.If the price decreased from $18 to $6,

Accepted Answer

A)  total revenue would increase by $1,200,and demand is elastic between points A and C. 
B)  total revenue would increase by $800,and demand is elastic between points A and C. 
C)  total revenue would decrease by $1,200,and demand is inelastic between points A and C. 
D)  total revenue would decrease by $800,and demand is inelastic between points A and C. 
A)  total revenue would increase by $1,200,and demand is elastic between points A and C. 
B)  total revenue would increase by $800,and demand is elastic between points A and C. 
C)  total revenue would decrease by $1,200,and demand is inelastic between points A and C. 
D)  total revenue would decrease by $800,and demand is inelastic between points A and C.

Question 19

Table 5-2
The following table shows a portion of the demand schedule for a particular good at various levels of income.
  
-Refer to Table 5-2.Using the midpoint method,at a price of $12,what is the income elasticity of demand when income rises from $5,000 to $10,000?

Accepted Answer

A)  0.00 
B)  0.41 
C)  1.00 
D)  2.45 
A)  0.00 
B)  0.41 
C)  1.00 
D)  2.45

Question 20

When small changes in price lead to infinite changes in quantity demanded,demand is perfectly

Accepted Answer

A)  elastic,and the demand curve will be horizontal. 
B)  inelastic,and the demand curve will be horizontal. 
C)  elastic,and the demand curve will be vertical. 
D)  inelastic,and the demand curve will be vertical. 
A)  elastic,and the demand curve will be horizontal. 
B)  inelastic,and the demand curve will be horizontal. 
C)  elastic,and the demand curve will be vertical. 
D)  inelastic,and the demand curve will be vertical.

Exam 5: Elasticity and Its Application

Figure 5-4 -Refer to Figure 5-4.If the price increases in the region of the demand curve between points B and C,we can expect total revenue to

Table 5-2 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-2.Using the midpoint method,when income equals $5,000,what is the price elasticity of demand between $8 and $12?

If the income elasticity of demand for a good is negative,then the good must be an inferior good.

Figure 5-5 -Refer to Figure 5-5.At a price of $30 per unit,sellers' total revenue amounts to

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

For a particular good,a 12 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

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

Table 5-3 The following table shows the demand schedule for a particular good. -Refer to Table 5-3.Using the midpoint method,when price rises from $6 to $9,the price elasticity of demand is

Figure 5-2 -Refer to Figure 5-2.As price falls from Pa to Pb,we could use the three demand curves to calculate three different values of the price elasticity of demand.Which of the three demand curves would produce the smallest elasticity?

Suppose goods A and B are substitutes for each other.We would expect the cross-price elasticity between these two goods to be

Which of the following should be held constant when calculating an income elasticity of demand?

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good.The income elasticity of demand for the good is

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

If a 30 percent change in price causes a 15 percent change in quantity supplied,then the price elasticity of supply is

If the price elasticity of demand for a good is 1.5,then a 3 percent decrease in price results in a

Figure 5-1 -Refer to Figure 5-1.The demand curve representing the demand for a luxury good with several close substitutes is

Figure 5-6 -Refer to Figure 5-6.If the price decreased from $18 to $6,

Table 5-2 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-2.Using the midpoint method,at a price of $12,what is the income elasticity of demand when income rises from $5,000 to $10,000?

When small changes in price lead to infinite changes in quantity demanded,demand is perfectly

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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