Question 1

Figure 5-11  
-Refer to Figure 5-11.An increase in price from $30 to $35 would

Accepted Answer

A)  increase total revenue by $250 
B)  decrease total revenue by $250. 
C)  increase total revenue by $500. 
D)  decrease total revenue by $500. 
A)  increase total revenue by $250 
B)  decrease total revenue by $250. 
C)  increase total revenue by $500. 
D)  decrease total revenue by $500.

Question 2

Necessities tend to have inelastic demands,whereas luxuries have elastic demands.

Accepted Answer

A) True 
 B)False

Question 3

Suppose that 50 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 4 percent,the number of candy bars demanded falls to 46.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Accepted Answer

A)  demand for candy bars in this price range is elastic. 
B)  demand for candy bars in this price range is inelastic. 
C)  demand for candy bars in this price range is unit elastic. 
D)  price elasticity of demand for candy bars in this price range is 0. 
A)  demand for candy bars in this price range is elastic. 
B)  demand for candy bars in this price range is inelastic. 
C)  demand for candy bars in this price range is unit elastic. 
D)  price elasticity of demand for candy bars in this price range is 0.

Question 4

A key determinant of the price elasticity of supply is

Accepted Answer

A)  the ability of sellers to change the price of the good they produce. 
B)  the ability of sellers to change the amount of the good they produce. 
C)  how responsive buyers are to changes in sellers' prices. 
D)  the slope of the demand curve. 
A)  the ability of sellers to change the price of the good they produce. 
B)  the ability of sellers to change the amount of the good they produce. 
C)  how responsive buyers are to changes in sellers' prices. 
D)  the slope of the demand curve.

Question 5

Goods with many close substitutes tend to have

Accepted Answer

A)  more elastic demands. 
B)  less elastic demands. 
C)  price elasticities of demand that are unit elastic. 
D)  income elasticities of demand that are negative. 
A)  more elastic demands. 
B)  less elastic demands. 
C)  price elasticities of demand that are unit elastic. 
D)  income elasticities of demand that are negative.

Question 6

In which of the following situations will total revenue increase?

Accepted Answer

A)  Price elasticity of demand is 1.2,and the price of the good decreases. 
B)  Price elasticity of demand is 0.5,and the price of the good increases. 
C)  Price elasticity of demand is 3.0,and the price of the good decreases. 
D)  All of the above are correct. 
A)  Price elasticity of demand is 1.2,and the price of the good decreases. 
B)  Price elasticity of demand is 0.5,and the price of the good increases. 
C)  Price elasticity of demand is 3.0,and the price of the good decreases. 
D)  All of the above are correct.

Question 7

There are fewer farmers in the United States today than 200 years ago because of

Accepted Answer

A)  increases in farm technology. 
B)  increased government regulations in farming. 
C)  an elastic demand for food. 
D)  environmental programs designed to reduce soil erosion. 
A)  increases in farm technology. 
B)  increased government regulations in farming. 
C)  an elastic demand for food. 
D)  environmental programs designed to reduce soil erosion.

Question 8

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Accepted Answer

A) True 
 B)False

Question 9

Figure 5-12
The following figure shows the supply curve for a particular good.  
-Refer to Figure 5-12.Using the midpoint method,what is the price elasticity of supply between $100 and $220?

Accepted Answer

A)  0.58 
B)  0.67 
C)  1.00 
D)  1.73 
A)  0.58 
B)  0.67 
C)  1.00 
D)  1.73

Question 10

Figure 5-12
The following figure shows the supply curve for a particular good.  
-Refer to Figure 5-12.Over which range is the supply curve in this figure the most elastic?

Accepted Answer

A)  Between $16 and $40 
B)  Between $40 and $100 
C)  Between $100 and $220 
D)  Between $220 and $430 
A)  Between $16 and $40 
B)  Between $40 and $100 
C)  Between $100 and $220 
D)  Between $220 and $430

Question 11

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Accepted Answer

A)  The interdiction has the effect of shifting the demand curve for illegal drugs to the right. 
B)  The price elasticity of demand for illegal drugs is 1.3. 
C)  The price elasticity of supply for illegal drugs is 0.8. 
D)  As a result of the interdiction,the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent. 
A)  The interdiction has the effect of shifting the demand curve for illegal drugs to the right. 
B)  The price elasticity of demand for illegal drugs is 1.3. 
C)  The price elasticity of supply for illegal drugs is 0.8. 
D)  As a result of the interdiction,the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent.

Question 12

Figure 5-8  
-Refer to Figure 5-8.For prices above $5,demand is price

Accepted Answer

A)  elastic,and raising price will increase total revenue. 
B)  inelastic,and raising price will increase total revenue. 
C)  elastic,and lowering price will increase total revenue. 
D)  inelastic,and lowering price will increase total revenue. 
A)  elastic,and raising price will increase total revenue. 
B)  inelastic,and raising price will increase total revenue. 
C)  elastic,and lowering price will increase total revenue. 
D)  inelastic,and lowering price will increase total revenue.

Question 13

Demand is said to be unit elastic if

Accepted Answer

A)  quantity demanded changes by the same percent as the price. 
B)  quantity demanded changes by a larger percent than the price. 
C)  the demand curve shifts by the same percentage amount as the price. 
D)  quantity demanded does not respond to a change in price. 
A)  quantity demanded changes by the same percent as the price. 
B)  quantity demanded changes by a larger percent than the price. 
C)  the demand curve shifts by the same percentage amount as the price. 
D)  quantity demanded does not respond to a change in price.

Question 14

Necessities such as food and clothing tend to have

Accepted Answer

A)  high price elasticities of demand and high income elasticities of demand. 
B)  high price elasticities of demand and low income elasticities of demand. 
C)  low price elasticities of demand and high income elasticities of demand. 
D)  low price elasticities of demand and low income elasticities of demand. 
A)  high price elasticities of demand and high income elasticities of demand. 
B)  high price elasticities of demand and low income elasticities of demand. 
C)  low price elasticities of demand and high income elasticities of demand. 
D)  low price elasticities of demand and low income elasticities of demand.

Question 15

When studying how some event or policy affects a market,elasticity provides information on the

Accepted Answer

A)  equity effects on the market by identifying the winners and losers. 
B)  magnitude of the effect on the market. 
C)  speed of adjustment of the market in response to the event or policy. 
D)  number of market participants who are directly affected by the event or policy. 
A)  equity effects on the market by identifying the winners and losers. 
B)  magnitude of the effect on the market. 
C)  speed of adjustment of the market in response to the event or policy. 
D)  number of market participants who are directly affected by the event or policy.

Question 16

Farm programs that pay farmers not to plant crops on all their land

Accepted Answer

A)  hurt farmers by lowering their total revenue and hurt consumers by causing shortages of some food items. 
B)  help farmers by cutting costs,which helps consumers by lowering food prices. 
C)  help farmers by increasing total revenue in the market but hurt consumers by raising prices. 
D)  help farmers directly since they receive government payments but have no real effects on consumers. 
A)  hurt farmers by lowering their total revenue and hurt consumers by causing shortages of some food items. 
B)  help farmers by cutting costs,which helps consumers by lowering food prices. 
C)  help farmers by increasing total revenue in the market but hurt consumers by raising prices. 
D)  help farmers directly since they receive government payments but have no real effects on consumers.

Question 17

Last year,Sheila bought 6 pairs of shoes when her income was $40,000.This year,her income is $50,000 and she purchased 10 pairs of shoes.Holding other factors constant,it follows that Sheila

Accepted Answer

A)  considers shoes to be a necessity. 
B)  considers shoes to be an inferior good. 
C)  considers shoes to be a normal good. 
D)  has a low price elasticity of demand for shoes. 
A)  considers shoes to be a necessity. 
B)  considers shoes to be an inferior good. 
C)  considers shoes to be a normal good. 
D)  has a low price elasticity of demand for shoes.

Question 18

Demand is said to be inelastic if

Accepted Answer

A)  buyers respond substantially to changes in the price of the good. 
B)  demand shifts only slightly when the price of the good changes. 
C)  the quantity demanded changes only slightly when the price of the good changes. 
D)  the price of the good responds only slightly to changes in demand. 
A)  buyers respond substantially to changes in the price of the good. 
B)  demand shifts only slightly when the price of the good changes. 
C)  the quantity demanded changes only slightly when the price of the good changes. 
D)  the price of the good responds only slightly to changes in demand.

Question 19

If the cross-price elasticity of two goods is negative,then those two goods are

Accepted Answer

A)  necessities. 
B)  complements. 
C)  normal goods. 
D)  inferior goods. 
A)  necessities. 
B)  complements. 
C)  normal goods. 
D)  inferior goods.

Question 20

The price elasticity of demand changes as we move along a

Accepted Answer

A)  horizontal demand curve. 
B)  vertical demand curve. 
C)  linear,downward-sloping demand curve. 
D)  All of the above are correct. 
A)  horizontal demand curve. 
B)  vertical demand curve. 
C)  linear,downward-sloping demand curve. 
D)  All of the above are correct.

Exam 5: Elasticity and Its Application

Figure 5-11 -Refer to Figure 5-11.An increase in price from $30 to $35 would

Necessities tend to have inelastic demands,whereas luxuries have elastic demands.

Suppose that 50 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 4 percent,the number of candy bars demanded falls to 46.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

A key determinant of the price elasticity of supply is

Goods with many close substitutes tend to have

In which of the following situations will total revenue increase?

There are fewer farmers in the United States today than 200 years ago because of

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Figure 5-12 The following figure shows the supply curve for a particular good. -Refer to Figure 5-12.Using the midpoint method,what is the price elasticity of supply between $100 and $220?

Figure 5-12 The following figure shows the supply curve for a particular good. -Refer to Figure 5-12.Over which range is the supply curve in this figure the most elastic?

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Figure 5-8 -Refer to Figure 5-8.For prices above $5,demand is price

Demand is said to be unit elastic if

Necessities such as food and clothing tend to have

When studying how some event or policy affects a market,elasticity provides information on the

Farm programs that pay farmers not to plant crops on all their land

Last year,Sheila bought 6 pairs of shoes when her income was $40,000.This year,her income is $50,000 and she purchased 10 pairs of shoes.Holding other factors constant,it follows that Sheila

Demand is said to be inelastic if

If the cross-price elasticity of two goods is negative,then those two goods are

The price elasticity of demand changes as we move along 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

Filters