Question 1

Figure 5-11  
-Refer to Figure 5-11.Using the midpoint method,the price elasticity of demand between point A and point B is about

Accepted Answer

A)  0.33. 
B)  0.5. 
C)  2.0. 
D)  3.0. 
A)  0.33. 
B)  0.5. 
C)  2.0. 
D)  3.0.

Question 2

Table 5-5
  
-Refer to Table 5-5.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)  None.Quantity supplied moves proportionately less than the price along all 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)  None.Quantity supplied moves proportionately less than the price along all of the three supply curves.

Question 3

Figure 5-14  
-Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points A and B?

Accepted Answer

A)  2.33 
B)  1.0 
C)  0.43 
D)  0.1 
A)  2.33 
B)  1.0 
C)  0.43 
D)  0.1

Question 4

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 5

The price elasticity of supply measures how much

Accepted Answer

A)  the quantity supplied responds to changes in input prices. 
B)  the quantity supplied responds to changes in the price of the good. 
C)  the price of the good responds to changes in supply. 
D)  sellers respond to changes in technology. 
A)  the quantity supplied responds to changes in input prices. 
B)  the quantity supplied responds to changes in the price of the good. 
C)  the price of the good responds to changes in supply. 
D)  sellers respond to changes in technology.

Question 6

Get Smart University is contemplating an increase in tuition to enhance revenue.If GSU feels that raising tuition would enhance revenue,it is

Accepted Answer

A)  ignoring the law of demand. 
B)  assuming that the demand for university education is elastic. 
C)  assuming that the demand for university education is inelastic. 
D)  assuming that the supply of university education is elastic. 
A)  ignoring the law of demand. 
B)  assuming that the demand for university education is elastic. 
C)  assuming that the demand for university education is inelastic. 
D)  assuming that the supply of university education is elastic.

Question 7

The midpoint method for calculating elasticities is convenient in that it allows us to

Accepted Answer

A)  ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price. 
B)  calculate the same value for the elasticity,regardless of whether the price increases or decreases. 
C)  assume that sellers' total revenue stays constant when the price changes. 
D)  restrict all elasticity values to between 0 and 1. 
A)  ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price. 
B)  calculate the same value for the elasticity,regardless of whether the price increases or decreases. 
C)  assume that sellers' total revenue stays constant when the price changes. 
D)  restrict all elasticity values to between 0 and 1.

Question 8

Figure 5-4  
-Refer to Figure 5-4.The section of the demand curve from B to C represents the

Accepted Answer

A)  elastic section of the demand curve. 
B)  perfectly elastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  inelastic section of the demand curve. 
A)  elastic section of the demand curve. 
B)  perfectly elastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  inelastic section of the demand curve.

Question 9

Figure 5-4  
-Refer to Figure 5-4.Assume the section of the demand curve from B to C corresponds to prices between $0 and $15.Then,when the price changes between $7 and $9,

Accepted Answer

A)  quantity demanded changes proportionately less than the price. 
B)  quantity demanded changes proportionately more than the price. 
C)  quantity demanded changes the same amount proportionately as price. 
D)  the price elasticity of demand equals zero. 
A)  quantity demanded changes proportionately less than the price. 
B)  quantity demanded changes proportionately more than the price. 
C)  quantity demanded changes the same amount proportionately as price. 
D)  the price elasticity of demand equals zero.

Question 10

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 11

If demand is price inelastic,then

Accepted Answer

A)  buyers do not respond much to a change in price. 
B)  buyers respond substantially to a change in price,but the response is very slow. 
C)  buyers do not alter their quantities demanded much in response to advertising,fads,or general changes in tastes. 
D)  the demand curve is very flat. 
A)  buyers do not respond much to a change in price. 
B)  buyers respond substantially to a change in price,but the response is very slow. 
C)  buyers do not alter their quantities demanded much in response to advertising,fads,or general changes in tastes. 
D)  the demand curve is very flat.

Question 12

When the price of a good is $5,the quantity demanded is 120 units per month; when the price is $7,the quantity demanded is 100 units per month.Using the midpoint method,the price elasticity of demand is about

Accepted Answer

A)  0.55. 
B)  1.83. 
C) 10. 
D) 2. 
A)  0.55. 
B)  1.83. 
C) 10. 
D) 2.

Question 13

On a certain supply curve,one point is (quantity supplied = 200,price = $4.00)and another point is (quantity supplied = 250,price = $4.50).Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)  0.22. 
B)  0.53. 
C)  1.00. 
D)  1.89. 
A)  0.22. 
B)  0.53. 
C)  1.00. 
D)  1.89.

Question 14

Figure 5-2  
-Refer to Figure 5-2.As price falls from Pa to Pb,which demand curve represents the most elastic demand?

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 15

Whether a good is a luxury or necessity depends on the

Accepted Answer

A)  price of the good. 
B)  preferences of the buyer. 
C)  intrinsic properties of the good. 
D)  scarcity of the good. 
A)  price of the good. 
B)  preferences of the buyer. 
C)  intrinsic properties of the good. 
D)  scarcity of the good.

Question 16

If the demand curve is linear and downward sloping,which of the following statements is not correct?

Accepted Answer

A)  Demand is more elastic on the lower part of the demand curve than on the upper part. 
B)  Different pairs of points on the demand curve can result in different values of the price elasticity of demand. 
C)  Different pairs of points on the demand curve result in identical values of the slope of the demand curve. 
D)  Starting from a point on the upper part of the demand curve,an increase in price leads to a decrease in total revenue. 
A)  Demand is more elastic on the lower part of the demand curve than on the upper part. 
B)  Different pairs of points on the demand curve can result in different values of the price elasticity of demand. 
C)  Different pairs of points on the demand curve result in identical values of the slope of the demand curve. 
D)  Starting from a point on the upper part of the demand curve,an increase in price leads to a decrease in total revenue.

Question 17

Figure 5-14  
-Refer to Figure 5-14.Along which of these segments of the supply curve is supply least elastic?

Accepted Answer

A)  GH 
B)  CD 
C)  AC 
D)  AB 
A)  GH 
B)  CD 
C)  AC 
D)  AB

Question 18

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

Accepted Answer

A) True 
 B)False

Question 19

At a price of $1.00,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.20,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)  0.45 
B)  0.90 
C)  1.11 
D)  2.20 
A)  0.45 
B)  0.90 
C)  1.11 
D)  2.20

Question 20

If the price elasticity of demand for a good is 0.25,then a 20 percent decrease in price results in a

Accepted Answer

A)  0.0125 percent increase in the quantity demanded. 
B)  4 percent increase in the quantity demanded. 
C)  5 percent increase in the quantity demanded. 
D)  80 percent increase in the quantity demanded. 
A)  0.0125 percent increase in the quantity demanded. 
B)  4 percent increase in the quantity demanded. 
C)  5 percent increase in the quantity demanded. 
D)  80 percent increase in the quantity demanded.

Exam 5: Elasticity and Its Application

Figure 5-11 -Refer to Figure 5-11.Using the midpoint method,the price elasticity of demand between point A and point B is about

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

Figure 5-14 -Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points A and B?

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?

The price elasticity of supply measures how much

Get Smart University is contemplating an increase in tuition to enhance revenue.If GSU feels that raising tuition would enhance revenue,it is

The midpoint method for calculating elasticities is convenient in that it allows us to

Figure 5-4 -Refer to Figure 5-4.The section of the demand curve from B to C represents the

Figure 5-4 -Refer to Figure 5-4.Assume the section of the demand curve from B to C corresponds to prices between $0 and $15.Then,when the price changes between $7 and $9,

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

If demand is price inelastic,then

When the price of a good is $5,the quantity demanded is 120 units per month; when the price is $7,the quantity demanded is 100 units per month.Using the midpoint method,the price elasticity of demand is about

On a certain supply curve,one point is (quantity supplied = 200,price = $4.00)and another point is (quantity supplied = 250,price = $4.50).Using the midpoint method,the price elasticity of supply is about

Figure 5-2 -Refer to Figure 5-2.As price falls from Pa to Pb,which demand curve represents the most elastic demand?

Whether a good is a luxury or necessity depends on the

If the demand curve is linear and downward sloping,which of the following statements is not correct?

Figure 5-14 -Refer to Figure 5-14.Along which of these segments of the supply curve is supply least elastic?

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

At a price of $1.00,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.20,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is about

If the price elasticity of demand for a good is 0.25,then a 20 percent decrease in price results in 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 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

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