Question 1

A key determinant of the price elasticity of supply is the time period under consideration.Which of the following statements best explains this fact?

Accepted Answer

A)  Supply curves are steeper over long periods of time than over short periods of time. 
B)  Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time. 
C)  The number of firms in a market tends to be more variable over long periods of time than over short periods of time. 
D)  Firms prefer to change their prices in the short run rather than in the long run. 
A)  Supply curves are steeper over long periods of time than over short periods of time. 
B)  Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time. 
C)  The number of firms in a market tends to be more variable over long periods of time than over short periods of time. 
D)  Firms prefer to change their prices in the short run rather than in the long run.

Question 2

When the price of used cds is $4,Daphne buys five per month.When the price is $3,she buys nine per month.Daphne's demand for used cds is

Accepted Answer

A)  elastic,and her demand curve would be relatively flat. 
B)  elastic,and her demand curve would be relatively steep. 
C)  inelastic,and her demand curve would be relatively flat. 
D)  inelastic,and her demand curve would be relatively steep. 
A)  elastic,and her demand curve would be relatively flat. 
B)  elastic,and her demand curve would be relatively steep. 
C)  inelastic,and her demand curve would be relatively flat. 
D)  inelastic,and her demand curve would be relatively steep.

Question 3

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

A) True 
 B)False

Question 4

Figure 5-16  
-Refer to Figure 5-16.Using the midpoint method,what is the price elasticity of supply between point B and point C?

Accepted Answer

A)  1.44 
B)  1.29 
C)  0.96 
D)  0.78 
A)  1.44 
B)  1.29 
C)  0.96 
D)  0.78

Question 5

The demand for Rice Krispies is more elastic than the demand for cereal in general.

Accepted Answer

A) True 
 B)False

Question 6

For a particular good,a 5 percent increase in price causes a 2 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A)  There are many close substitutes for this good. 
B)  The good is a luxury. 
C)  The market for the good is broadly defined. 
D)  The relevant time horizon is long. 
A)  There are many close substitutes for this good. 
B)  The good is a luxury. 
C)  The market for the good is broadly defined. 
D)  The relevant time horizon is long.

Question 7

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

Accepted Answer

A)  0.5. 
B)  0.75. 
C)  1.0. 
D)  1.3. 
A)  0.5. 
B)  0.75. 
C)  1.0. 
D)  1.3.

Question 8

Pierre says that he will spend exactly 75 cents a day on candy bars,regardless of the price of candy bars.Pierre's demand for candy bars is

Accepted Answer

A)  perfectly elastic. 
B)  unit elastic. 
C)  perfectly inelastic. 
D)  None of the above answers is correct. 
A)  perfectly elastic. 
B)  unit elastic. 
C)  perfectly inelastic. 
D)  None of the above answers is correct.

Question 9

Consider luxury weekend hotel packages in Las Vegas.When the price is $250,the quantity demanded is 2,000 packages per week.When the price is $280,the quantity demanded is 1,700 packages per week.Using the midpoint method,the price elasticity of demand is about

Accepted Answer

A)  1.43,and an increase in the price will cause hotels' total revenue to decrease. 
B)  1.43,and an increase in the price will cause hotels' total revenue to increase. 
C)  0.70,and an increase in the price will cause hotels' total revenue to decrease. 
D)  0.70,and an increase in the price will cause hotels' total revenue to increase. 
A)  1.43,and an increase in the price will cause hotels' total revenue to decrease. 
B)  1.43,and an increase in the price will cause hotels' total revenue to increase. 
C)  0.70,and an increase in the price will cause hotels' total revenue to decrease. 
D)  0.70,and an increase in the price will cause hotels' total revenue to increase.

Question 10

Other things equal,the demand for a good tends to be more inelastic,the

Accepted Answer

A)  fewer the available substitutes. 
B)  longer the time period considered. 
C)  more the good is considered a luxury good. 
D)  more narrowly defined is the market for the good. 
A)  fewer the available substitutes. 
B)  longer the time period considered. 
C)  more the good is considered a luxury good. 
D)  more narrowly defined is the market for the good.

Question 11

Suppose that when the price of ginger ale is $2 per bottle,firms can sell 4 million bottles.When the price of ginger ale is $3 per bottle,firms can sell 2 million bottles.Which of the following statements is true?

Accepted Answer

A)  The demand for ginger ale is income inelastic,so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
B)  The demand for ginger ale is income elastic,so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
C)  The demand for ginger ale is price inelastic,so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
D)  The demand for ginger ale is price elastic,so an increase in the price of ginger ale will decrease the total revenue of ginger ale producers. 
A)  The demand for ginger ale is income inelastic,so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
B)  The demand for ginger ale is income elastic,so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
C)  The demand for ginger ale is price inelastic,so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. 
D)  The demand for ginger ale is price elastic,so an increase in the price of ginger ale will decrease the total revenue of ginger ale producers.

Question 12

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 a luxury,and B is a necessity. 
B)  A is a good several years after a price increase,and B is that same good several days after the price increase. 
C)  A is a Kit Kat bar,and B is candy. 
D)  A has fewer substitutes than B. 
A)  A is a luxury,and B is a necessity. 
B)  A is a good several years after a price increase,and B is that same good several days after the price increase. 
C)  A is a Kit Kat bar,and B is candy. 
D)  A has fewer substitutes than B.

Question 13

Table 5-6
  
-Refer to Table 5-6.Which scenario describes the market for oil in the short run in comparison to the long run?

Accepted Answer

A)  Scenario A describes both the short run and the long run. 
B)  Scenario D describes both the short run and the long run. 
C)  Scenario D describes the short run,whereas scenario A describes the long run. 
D)  Scenario C describes the short run,whereas scenario B describes the long run. 
A)  Scenario A describes both the short run and the long run. 
B)  Scenario D describes both the short run and the long run. 
C)  Scenario D describes the short run,whereas scenario A describes the long run. 
D)  Scenario C describes the short run,whereas scenario B describes the long run.

Question 14

Given the market for illegal drugs,when the government is successful in reducing the flow of drugs into the United States,

Accepted Answer

A)  supply decreases,demand is unaffected,and price increases. 
B)  demand decreases,supply is unaffected,and price decreases. 
C)  demand and supply both decrease,leaving price essentially unchanged. 
D)  supply decreases,demand increases,and price increases substantially. 
A)  supply decreases,demand is unaffected,and price increases. 
B)  demand decreases,supply is unaffected,and price decreases. 
C)  demand and supply both decrease,leaving price essentially unchanged. 
D)  supply decreases,demand increases,and price increases substantially.

Question 15

Figure 5-4  
-Refer to Figure 5-4.The section of the demand curve at point B represents the

Accepted Answer

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

Question 16

For a horizontal demand curve,

Accepted Answer

A)  the slope is undefined,and the price elasticity of demand is equal to 0. 
B)  the slope is equal to 0,and the price elasticity of demand is undefined. 
C)  both the slope and price elasticity of demand are undefined. 
D)  both the slope and price elasticity of demand are equal to 0. 
A)  the slope is undefined,and the price elasticity of demand is equal to 0. 
B)  the slope is equal to 0,and the price elasticity of demand is undefined. 
C)  both the slope and price elasticity of demand are undefined. 
D)  both the slope and price elasticity of demand are equal to 0.

Question 17

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

Accepted Answer

A) True 
 B)False

Question 18

Figure 5-4  
-Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 1,000,P = $40)and (Q = 1,500,P = $30).Then which of the following scenarios is possible?

Accepted Answer

A)  Both of these points lie on the section of the demand curve from B to C. 
B)  The vertical intercept of the demand curve is the point (Q = 0,P = $60). 
C)  The horizontal intercept of the demand curve is the point (Q = 1,800,P = $0). 
D)  Any of these scenarios is possible. 
A)  Both of these points lie on the section of the demand curve from B to C. 
B)  The vertical intercept of the demand curve is the point (Q = 0,P = $60). 
C)  The horizontal intercept of the demand curve is the point (Q = 1,800,P = $0). 
D)  Any of these scenarios is possible.

Question 19

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 20

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

Accepted Answer

The answer of Which of the following expressions can be...

Exam 5: Elasticity and Its Application

A key determinant of the price elasticity of supply is the time period under consideration.Which of the following statements best explains this fact?

When the price of used cds is $4,Daphne buys five per month.When the price is $3,she buys nine per month.Daphne's demand for used cds is

A government program that reduces land under cultivation hurts farmers but helps consumers.

Figure 5-16 -Refer to Figure 5-16.Using the midpoint method,what is the price elasticity of supply between point B and point C?

The demand for Rice Krispies is more elastic than the demand for cereal in general.

For a particular good,a 5 percent increase in price causes a 2 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

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

Pierre says that he will spend exactly 75 cents a day on candy bars,regardless of the price of candy bars.Pierre's demand for candy bars is

Consider luxury weekend hotel packages in Las Vegas.When the price is $250,the quantity demanded is 2,000 packages per week.When the price is $280,the quantity demanded is 1,700 packages per week.Using the midpoint method,the price elasticity of demand is about

Other things equal,the demand for a good tends to be more inelastic,the

Suppose that when the price of ginger ale is $2 per bottle,firms can sell 4 million bottles.When the price of ginger ale is $3 per bottle,firms can sell 2 million bottles.Which of the following statements is true?

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

Table 5-6 -Refer to Table 5-6.Which scenario describes the market for oil in the short run in comparison to the long run?

Given the market for illegal drugs,when the government is successful in reducing the flow of drugs into the United States,

Figure 5-4 -Refer to Figure 5-4.The section of the demand curve at point B represents the

For a horizontal demand curve,

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

Figure 5-4 -Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 1,000,P = $40)and (Q = 1,500,P = $30).Then which of the following scenarios is possible?

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

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

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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