Question 1

Figure 5-4  
-Refer to Figure 5-4.If the price decreases in the region of the demand curve between points A and B,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

The case of perfectly elastic demand is illustrated by a demand curve that is

Accepted Answer

A)  vertical. 
B)  horizontal. 
C)  downward-sloping but relatively steep. 
D)  downward-sloping but relatively flat. 
A)  vertical. 
B)  horizontal. 
C)  downward-sloping but relatively steep. 
D)  downward-sloping but relatively flat.

Question 3

Generally,a firm is more willing and able to increase quantity supplied in response to a price change when

Accepted Answer

A)  the relevant time period is short rather than long. 
B)  the relevant time period is long rather than short. 
C)  supply is inelastic. 
D)  the firm is experiencing capacity problems. 
A)  the relevant time period is short rather than long. 
B)  the relevant time period is long rather than short. 
C)  supply is inelastic. 
D)  the firm is experiencing capacity problems.

Question 4

Table 5-4
  
-Refer to Table 5-4.As price rises from $10 to $12,the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A)  0.08. 
B)  0.18. 
C)  0.42. 
D)  0.58. 
A)  0.08. 
B)  0.18. 
C)  0.42. 
D)  0.58.

Question 5

Scenario 5-3
Milk has an inelastic demand and beef has an elastic demand.Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-3.The change in equilibrium price will be

Accepted Answer

A)  greater in the milk market than in the beef market. 
B)  greater in the beef market than in the milk market. 
C)  the same in the milk and beef markets. 
D)  may be greater in either the milk market or the beef market. 
A)  greater in the milk market than in the beef market. 
B)  greater in the beef market than in the milk market. 
C)  the same in the milk and beef markets. 
D)  may be greater in either the milk market or the beef market.

Question 6

Table 5-1
  
-Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

Accepted Answer

A)  A is grapes and B is fruit. 
B)  A is T-shirts and B is socks. 
C)  A is train tickets before cars were invented,and B is train tickets after cars were invented. 
D)  A is diamond necklaces and B is beds. 
A)  A is grapes and B is fruit. 
B)  A is T-shirts and B is socks. 
C)  A is train tickets before cars were invented,and B is train tickets after cars were invented. 
D)  A is diamond necklaces and B is beds.

Question 7

Consider the following pairs of goods.For which of the two goods would you expect the demand to be more price elastic? Why?
a.
water or diamonds
b.
insulin or nasal decongestant spray
c.
food in general or breakfast cereal
d.
gasoline over the course of a week or gasoline over the course of a year
e.
personal computers or IBM personal computers

Accepted Answer

a.
Diamonds are luxuries,and water is a

Question 8

Table 5-4
  
-Refer to Table 5-4.When price is between $10 and $14,demand is

Accepted Answer

A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  There is not enough information given to determine whether demand is elastic,unit elastic,or inelastic. 
A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  There is not enough information given to determine whether demand is elastic,unit elastic,or inelastic.

Question 9

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Accepted Answer

A) True 
 B)False

Question 10

Figure 5-11  
-Refer to Figure 5-11.When price falls from $50 to $40,it can be inferred that demand between those two prices is

Accepted Answer

A)  inelastic,since total revenue decreases from $8,000 to $5,000. 
B)  inelastic,since total revenue increases from $5,000 to $8,000. 
C)  elastic,since total revenue increases from $5,000 to $8,000. 
D)  unit elastic,since total revenue does not change. 
A)  inelastic,since total revenue decreases from $8,000 to $5,000. 
B)  inelastic,since total revenue increases from $5,000 to $8,000. 
C)  elastic,since total revenue increases from $5,000 to $8,000. 
D)  unit elastic,since total revenue does not change.

Question 11

Table 5-6
  
-Refer to Table 5-6.Along which of the supply curves does quantity supplied move proportionately more than the price?

Accepted Answer

A)  along supply curve B only 
B)  along supply curves B and C 
C)  along all three supply curves 
D)  Quantity supplied moves proportionately more than the price along none of the three supply curves. 
A)  along supply curve B only 
B)  along supply curves B and C 
C)  along all three supply curves 
D)  Quantity supplied moves proportionately more than the price along none of the three supply curves.

Question 12

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 5%,then the quantity supplied of how-to books will increase by

Accepted Answer

A)  1.5% in the short run and 6% in the long run. 
B)  6% in the short run and 1.5% in the long run. 
C)  16.7% in the short run and 4.2% in the long run. 
D)  4.2% in the short run and 16.7% in the long run. 
A)  1.5% in the short run and 6% in the long run. 
B)  6% in the short run and 1.5% in the long run. 
C)  16.7% in the short run and 4.2% in the long run. 
D)  4.2% in the short run and 16.7% in the long run.

Question 13

For a particular good,a 3 percent increase in price causes a 10 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 necessity. 
C)  The market for the good is broadly defined. 
D)  There are many close substitutes for this good. 
A)  The relevant time horizon is short. 
B)  The good is a necessity. 
C)  The market for the good is broadly defined. 
D)  There are many close substitutes for this good.

Question 14

Figure 5-4  
-Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 2,000,P = $15)and (Q = 2,400,P = $12).Then which of the following scenarios is possible?

Accepted Answer

A)  Both of these points lie on section C of the demand curve. 
B)  The vertical intercept of the demand curve is the point (Q = 0,P = $22). 
C)  The horizontal intercept of the demand curve is the point (Q = 5,000,P = $0). 
D)  Any of these scenarios is possible. 
A)  Both of these points lie on section C of the demand curve. 
B)  The vertical intercept of the demand curve is the point (Q = 0,P = $22). 
C)  The horizontal intercept of the demand curve is the point (Q = 5,000,P = $0). 
D)  Any of these scenarios is possible.

Question 15

Use the graph shown to answer the following questions.Put the correct letter(s)in the blank.   
a.The elastic section of the graph is represented by section from _______.
b.The inelastic section of the graph is represented by section from _______.
c.The unit elastic section of the graph is represented by section _______.
d.The portion of the graph in which a decrease in price would cause total revenue to fall would be from _________.
e.The portion of the graph in which a decrease in price would cause total revenue to rise would be from _________.
f.The portion of the graph in which a decrease in price would not cause a change in total revenue would be _________.
g.The section of the graph in which total revenue would be at a maximum would be _______.
h.The section of the graph in which elasticity is greater than 1 is _______.
i.The section of the graph in which elasticity is equal to 1 is ______.
j.The section of the graph in which elasticity is less than 1 is _______.

Accepted Answer

a.
A to B
b.
B to C

Question 16

Which of the following expressions can be used to compute 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 17

Which of the following was not a reason OPEC failed to keep the price of oil high?

Accepted Answer

A)  Over the long run,producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity. 
B)  Consumers responded to higher prices with greater conservation. 
C)  Consumers replaced old inefficient cars with newer efficient ones. 
D)  The agreement OPEC members signed allowed each country to produce as much oil as each wanted. 
A)  Over the long run,producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity. 
B)  Consumers responded to higher prices with greater conservation. 
C)  Consumers replaced old inefficient cars with newer efficient ones. 
D)  The agreement OPEC members signed allowed each country to produce as much oil as each wanted.

Question 18

Figure 5-6  
-Refer to Figure 5-6.Using the midpoint method,the price elasticity of demand between point A and point B is

Accepted Answer

A)  1 
B)  1.5 
C)  2 
D)  2.5. 
A)  1 
B)  1.5 
C)  2 
D)  2.5.

Question 19

Between 1950 and 2008 there was a

Accepted Answer

A)  20 percent drop in the number of farmers,but farm output more than tripled. 
B)  30 percent drop in the number of farmers,but farm output more than tripled. 
C)  50 percent drop in the number of farmers,but farm output more than doubled. 
D)  70 percent drop in the number of farmers,but farm output more than doubled. 
A)  20 percent drop in the number of farmers,but farm output more than tripled. 
B)  30 percent drop in the number of farmers,but farm output more than tripled. 
C)  50 percent drop in the number of farmers,but farm output more than doubled. 
D)  70 percent drop in the number of farmers,but farm output more than doubled.

Question 20

When the Shaffers had a monthly income of $4,000,they usually ate out 8 times a month.Now that the couple makes $4,500 a month,they eat out 10 times a month.Compute the couple's income elasticity of demand using the midpoint method.Explain your answer.(Is a restaurant meal a normal or inferior good to the couple?)

Accepted Answer

The income elasticity of deman

Exam 5: Elasticity and Its Application

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

The case of perfectly elastic demand is illustrated by a demand curve that is

Generally,a firm is more willing and able to increase quantity supplied in response to a price change when

Table 5-4 -Refer to Table 5-4.As price rises from $10 to $12,the price elasticity of demand using the midpoint method is approximately

Scenario 5-3 Milk has an inelastic demand and beef has an elastic demand.Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-3.The change in equilibrium price will be

Table 5-1 -Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

Table 5-4 -Refer to Table 5-4.When price is between $10 and $14,demand is

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Figure 5-11 -Refer to Figure 5-11.When price falls from $50 to $40,it can be inferred that demand between those two prices is

Table 5-6 -Refer to Table 5-6.Along which of the supply curves does quantity supplied move proportionately more than the 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 5%,then the quantity supplied of how-to books will increase by

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

Figure 5-4 -Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 2,000,P = $15)and (Q = 2,400,P = $12).Then which of the following scenarios is possible?

Which of the following expressions can be used to compute the price elasticity of demand?

Which of the following was not a reason OPEC failed to keep the price of oil high?

Figure 5-6 -Refer to Figure 5-6.Using the midpoint method,the price elasticity of demand between point A and point B is

Between 1950 and 2008 there was a

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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