Question 1

Table 5-2
  
-Refer to Table 5-2.Using the midpoint method,if the price falls from $80 to $60,the price elasticity of demand is

Accepted Answer

A)  zero. 
B)  unit elastic. 
C)  inelastic. 
D)  elastic. 
A)  zero. 
B)  unit elastic. 
C)  inelastic. 
D)  elastic.

Question 2

Holding all other factors constant and using the midpoint method,if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60,then supply is

Accepted Answer

A)  inelastic,since the price elasticity of supply is equal to .91. 
B)  inelastic,since the price elasticity of supply is equal to 1.1. 
C)  elastic,since the price elasticity of supply is equal to 0.91. 
D)  elastic,since the price elasticity of supply is equal to 1.1. 
A)  inelastic,since the price elasticity of supply is equal to .91. 
B)  inelastic,since the price elasticity of supply is equal to 1.1. 
C)  elastic,since the price elasticity of supply is equal to 0.91. 
D)  elastic,since the price elasticity of supply is equal to 1.1.

Question 3

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.

Question 4

Figure 5-13  
-Refer to Figure 5-13.Over which range is the supply curve in this figure the most elastic?

Accepted Answer

A)  $16 to $40 
B)  $40 to $100 
C)  $100 to $220 
D)  $220 to $430 
A)  $16 to $40 
B)  $40 to $100 
C)  $100 to $220 
D)  $220 to $430

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

Accepted Answer

A) True 
 B)False

Question 7

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 equilibrium price will

Accepted Answer

A)  increase in both the milk and beef markets. 
B)  increase in the milk market and decrease in the beef market. 
C)  decrease in the milk market and increase in the beef market. 
D)  decrease in both the milk and beef markets. 
A)  increase in both the milk and beef markets. 
B)  increase in the milk market and decrease in the beef market. 
C)  decrease in the milk market and increase in the beef market. 
D)  decrease in both the milk and beef markets.

Question 8

Elasticity is

Accepted Answer

A)  a measure of how much buyers and sellers respond to changes in market conditions. 
B)  the study of how the allocation of resources affects economic well-being. 
C)  the maximum amount that a buyer will pay for a good. 
D)  the value of everything a seller must give up to produce a good. 
A)  a measure of how much buyers and sellers respond to changes in market conditions. 
B)  the study of how the allocation of resources affects economic well-being. 
C)  the maximum amount that a buyer will pay for a good. 
D)  the value of everything a seller must give up to produce a good.

Question 9

The flatter the demand curve that passes through a given point,the more inelastic the demand.

Accepted Answer

A) True 
 B)False

Question 10

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 11

At price of $1.20,a local pencil manufacturer is willing to supply 150 boxes per day.At a price of $1.40,the manufacturer is willing to supply 170 boxes per day.Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)  2.0. 
B)  1.23. 
C)  1.00. 
D)  0.81. 
A)  2.0. 
B)  1.23. 
C)  1.00. 
D)  0.81.

Question 12

Ryan says that he would buy one cup of coffee every day regardless of the price.If he is telling the truth,Ryan's

Accepted Answer

A)  demand for coffee is perfectly inelastic. 
B)  price elasticity of demand for coffee is 1. 
C)  income elasticity of demand for coffee is 0. 
D)  None of the above answers is correct. 
A)  demand for coffee is perfectly inelastic. 
B)  price elasticity of demand for coffee is 1. 
C)  income elasticity of demand for coffee is 0. 
D)  None of the above answers is correct.

Question 13

Which of the following is likely to have the most price inelastic demand?

Accepted Answer

A)  white chocolate chip with macadamia nut cookies 
B)  Mrs.Field's chocolate chip cookies 
C)  milk chocolate chip cookies 
D)  cookies 
A)  white chocolate chip with macadamia nut cookies 
B)  Mrs.Field's chocolate chip cookies 
C)  milk chocolate chip cookies 
D)  cookies

Question 14

An advance in farm technology that results in an increased market supply is

Accepted Answer

A)  good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food. 
B)  bad for farmers because total revenue will fall but good for consumers because prices for food will fall. 
C)  good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption. 
D)  bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue. 
A)  good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food. 
B)  bad for farmers because total revenue will fall but good for consumers because prices for food will fall. 
C)  good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption. 
D)  bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue.

Question 15

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Accepted Answer

A) True 
 B)False

Question 16

A bakery would be willing to supply 500 donuts per day at a price of $0.50 each.At a price of $0.80,the bakery would be willing to supply 1,100 donuts.Using the midpoint method,the price elasticity of supply for donuts is about

Accepted Answer

A)  0.62,and supply is elastic. 
B)  0.62,and supply is inelastic. 
C)  1.63,and supply is elastic. 
D)  1.63,and supply is inelastic. 
A)  0.62,and supply is elastic. 
B)  0.62,and supply is inelastic. 
C)  1.63,and supply is elastic. 
D)  1.63,and supply is inelastic.

Question 17

Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

Accepted Answer

A) True 
 B)False

Question 18

If the price elasticity of demand is 1.5,regardless of which two points on the demand curve are used to compute the elasticity,then demand is

Accepted Answer

A)  perfectly inelastic,and the demand curve is vertical. 
B)  elastic,and the demand curve is a straight,downward-sloping line. 
C)  perfectly elastic,and the demand curve is horizontal. 
D)  elastic,and the demand curve is something other than a straight,downward-sloping line. 
A)  perfectly inelastic,and the demand curve is vertical. 
B)  elastic,and the demand curve is a straight,downward-sloping line. 
C)  perfectly elastic,and the demand curve is horizontal. 
D)  elastic,and the demand curve is something other than a straight,downward-sloping line.

Question 19

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 20

Demand is said to be unit elastic if quantity demanded

Accepted Answer

A)  changes by the same percent as the price. 
B)  changes by a larger percent than the price. 
C)  changes by a smaller percent than the price. 
D)  does not respond to a change in price. 
A)  changes by the same percent as the price. 
B)  changes by a larger percent than the price. 
C)  changes by a smaller percent than the price. 
D)  does not respond to a change in price.

Exam 5: Elasticity and Its Application

Table 5-2 -Refer to Table 5-2.Using the midpoint method,if the price falls from $80 to $60,the price elasticity of demand is

Holding all other factors constant and using the midpoint method,if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60,then supply is

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

Figure 5-13 -Refer to Figure 5-13.Over which range is the supply curve in this figure the most elastic?

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

A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

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 equilibrium price will

Elasticity is

The flatter the demand curve that passes through a given point,the more inelastic the demand.

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

At price of $1.20,a local pencil manufacturer is willing to supply 150 boxes per day.At a price of $1.40,the manufacturer is willing to supply 170 boxes per day.Using the midpoint method,the price elasticity of supply is about

Ryan says that he would buy one cup of coffee every day regardless of the price.If he is telling the truth,Ryan's

Which of the following is likely to have the most price inelastic demand?

An advance in farm technology that results in an increased market supply is

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

A bakery would be willing to supply 500 donuts per day at a price of $0.50 each.At a price of $0.80,the bakery would be willing to supply 1,100 donuts.Using the midpoint method,the price elasticity of supply for donuts is about

Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

If the price elasticity of demand is 1.5,regardless of which two points on the demand curve are used to compute the elasticity,then demand is

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

Demand is said to be unit elastic if quantity demanded

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 Costs of Production

Firms in Competitive Markets

Monopoly

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

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Filters