Question 1

Figure 5-12  
-Refer to Figure 5-12.Total revenue when the price is P1 is represented by the area(s)

Accepted Answer

A)  B + D. 
B)  A + B. 
C)  C + D. 
D)  D. 
A)  B + D. 
B)  A + B. 
C)  C + D. 
D)  D.

Question 2

Which of the following could be the price elasticity of demand for a good for which an increase in price would decrease revenue?

Accepted Answer

A)  0 
B)  0.5 
C)  1 
D)  1.5 
A)  0 
B)  0.5 
C)  1 
D)  1.5

Question 3

When demand is inelastic,a decrease in price will cause

Accepted Answer

A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded. 
A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded.

Question 4

If demand is perfectly inelastic,the demand curve is vertical,and the price elasticity of demand equals 0.

Accepted Answer

A) True 
 B)False

Question 5

Supply tends to be more elastic in the short run and more inelastic in the long run.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)  chocolate 
B)  Godiva chocolate 
C)  Hershey's chocolate 
D)  All three would have the same elasticity of demand because they are all related. 
A)  chocolate 
B)  Godiva chocolate 
C)  Hershey's chocolate 
D)  All three would have the same elasticity of demand because they are all related.

Question 7

You are in charge of the local city-owned aquatic center.You need to increase the revenue generated by the aquatic center in order to meet expenses.The mayor advises you to increase the price of a day pass.The city manager recommends reducing the price of a day pass.You realize that

Accepted Answer

A)  the mayor thinks demand is elastic,and the city manager thinks demand is inelastic. 
B)  both the mayor and the city manager think that demand is elastic. 
C)  both the mayor and the city manager think that demand is inelastic. 
D)  the mayor thinks demand is inelastic,and the city manager thinks demand is elastic. 
A)  the mayor thinks demand is elastic,and the city manager thinks demand is inelastic. 
B)  both the mayor and the city manager think that demand is elastic. 
C)  both the mayor and the city manager think that demand is inelastic. 
D)  the mayor thinks demand is inelastic,and the city manager thinks demand is elastic.

Question 8

When the price of a good is $5,the quantity demanded is 100 units per month; when the price is $7,the quantity demanded is 80 units per month.Using the midpoint method,the price elasticity of demand is about

Accepted Answer

A)  0.22. 
B)  0.67. 
C)  1.33. 
D)  1.50. 
A)  0.22. 
B)  0.67. 
C)  1.33. 
D)  1.50.

Question 9

Tyler purchases 5 pounds of hot dogs per month when his monthly income is $2,000 and 4 pounds of hot dogs per month when his monthly income is $2,200.Tyler's income elasticity of demand for hot dogs is

Accepted Answer

A)  2.33,and hot dogs are a normal good. 
B)  -2.33,and hot dogs are an inferior good. 
C)  0.43,and hot dogs are a normal good. 
D)  -0.43,and hot dogs are an inferior good. 
A)  2.33,and hot dogs are a normal good. 
B)  -2.33,and hot dogs are an inferior good. 
C)  0.43,and hot dogs are a normal good. 
D)  -0.43,and hot dogs are an inferior good.

Question 10

The price elasticity of demand measures

Accepted Answer

A)  buyers' responsiveness to a change in the price of a good. 
B)  the extent to which demand increases as additional buyers enter the market. 
C)  how much more of a good consumers will demand when incomes rise. 
D)  the movement along a supply curve when there is a change in demand. 
A)  buyers' responsiveness to a change in the price of a good. 
B)  the extent to which demand increases as additional buyers enter the market. 
C)  how much more of a good consumers will demand when incomes rise. 
D)  the movement along a supply curve when there is a change in demand.

Question 11

The price elasticity of supply along a typical supply curve is

Accepted Answer

A)  constant. 
B)  equal to zero. 
C)  higher at low levels of quantity supplied and lower at high levels of quantity supplied. 
D)  lower at low levels of quantity supplied and higher at high levels of quantity supplied. 
A)  constant. 
B)  equal to zero. 
C)  higher at low levels of quantity supplied and lower at high levels of quantity supplied. 
D)  lower at low levels of quantity supplied and higher at high levels of quantity supplied.

Question 12

When the price of bubble gum is $0.50,the quantity demanded is 400 packs per day.When the price falls to $0.40,the quantity demanded increases to 600.Given this information and using the midpoint method,we know that the demand for bubble gum is

Accepted Answer

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

Question 13

Figure 5-5  
-Refer to Figure 5-5.At a price of $30 per unit,sellers' total revenue equals

Accepted Answer

A)  $150. 
B)  $200. 
C)  $288. 
D)  $450. 
A)  $150. 
B)  $200. 
C)  $288. 
D)  $450.

Question 14

Which of the following statements is not valid when supply is perfectly elastic?

Accepted Answer

A)  The elasticity of supply approaches infinity. 
B)  The supply curve is horizontal. 
C)  Very small changes in price lead to very large changes in quantity supplied. 
D)  The time period under consideration is more likely a short period rather than a long period. 
A)  The elasticity of supply approaches infinity. 
B)  The supply curve is horizontal. 
C)  Very small changes in price lead to very large changes in quantity supplied. 
D)  The time period under consideration is more likely a short period rather than a long period.

Question 15

For a good that is a luxury,demand

Accepted Answer

A)  tends to be inelastic. 
B)  tends to be elastic. 
C)  has unit elasticity. 
D)  cannot be represented by a demand curve in the usual way. 
A)  tends to be inelastic. 
B)  tends to be elastic. 
C)  has unit elasticity. 
D)  cannot be represented by a demand curve in the usual way.

Question 16

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

Accepted Answer

A)  camcorders 
B)  insulin 
C)  apples 
D)  devices that remove cores from apples 
A)  camcorders 
B)  insulin 
C)  apples 
D)  devices that remove cores from apples

Question 17

Figure 5-13  
-Refer to Figure 5-13.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 18

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)  The direct impact is on buyers,not sellers. 
B)  Successful drug interdiction policies reduce the demand for illegal drugs. 
C)  Drug addicts will have an even greater need for quick cash to support their habits. 
D)  In the short run,both equilibrium quantities and prices will fall in the markets for illegal drugs. 
A)  The direct impact is on buyers,not sellers. 
B)  Successful drug interdiction policies reduce the demand for illegal drugs. 
C)  Drug addicts will have an even greater need for quick cash to support their habits. 
D)  In the short run,both equilibrium quantities and prices will fall in the markets for illegal drugs.

Question 19

Suppose that Jane enjoys Diet Coke so much that she consumes one can every day.Although she enjoys gourmet cheese,she consumes it sporadically.If the price of Diet Coke rises,Jane decreases her consumption by only a very small amount.But if the price of gourmet cheese rises,Jane decreases her consumption by a lot.These examples illustrate the importance of

Accepted Answer

A)  the availability of close substitutes in determining the price elasticity of demand. 
B)  a necessity versus a luxury in determining the price elasticity of demand. 
C)  the definition of a market in determining the price elasticity of demand. 
D)  the time horizon in determining the price elasticity of demand. 
A)  the availability of close substitutes in determining the price elasticity of demand. 
B)  a necessity versus a luxury in determining the price elasticity of demand. 
C)  the definition of a market in determining the price elasticity of demand. 
D)  the time horizon in determining the price elasticity of demand.

Question 20

Table 5-5
The following table shows a portion of the demand schedule for a particular good at various levels of income.
  
-Refer to Table 5-5.Using the midpoint method,at a price of $16,what is the income elasticity of demand when income rises from $5,000 to $10,000?

Accepted Answer

A)  0.00 
B)  0.50 
C)  1.00 
D)  1.50 
A)  0.00 
B)  0.50 
C)  1.00 
D)  1.50

Exam 5: Elasticity and Its Application

Figure 5-12 -Refer to Figure 5-12.Total revenue when the price is P1 is represented by the area(s)

Which of the following could be the price elasticity of demand for a good for which an increase in price would decrease revenue?

When demand is inelastic,a decrease in price will cause

If demand is perfectly inelastic,the demand curve is vertical,and the price elasticity of demand equals 0.

Supply tends to be more elastic in the short run and more inelastic in the long run.

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

You are in charge of the local city-owned aquatic center.You need to increase the revenue generated by the aquatic center in order to meet expenses.The mayor advises you to increase the price of a day pass.The city manager recommends reducing the price of a day pass.You realize that

When the price of a good is $5,the quantity demanded is 100 units per month; when the price is $7,the quantity demanded is 80 units per month.Using the midpoint method,the price elasticity of demand is about

Tyler purchases 5 pounds of hot dogs per month when his monthly income is $2,000 and 4 pounds of hot dogs per month when his monthly income is $2,200.Tyler's income elasticity of demand for hot dogs is

The price elasticity of demand measures

The price elasticity of supply along a typical supply curve is

When the price of bubble gum is $0.50,the quantity demanded is 400 packs per day.When the price falls to $0.40,the quantity demanded increases to 600.Given this information and using the midpoint method,we know that the demand for bubble gum is

Figure 5-5 -Refer to Figure 5-5.At a price of $30 per unit,sellers' total revenue equals

Which of the following statements is not valid when supply is perfectly elastic?

For a good that is a luxury,demand

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

Figure 5-13 -Refer to Figure 5-13.Using the midpoint method,what is the price elasticity of supply between $100 and $220?

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Table 5-5 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-5.Using the midpoint method,at a price of $16,what is the income elasticity of demand when income rises from $5,000 to $10,000?

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

Figure 5-12 -Refer to Figure 5-12.Total revenue when the price is P₁ is represented by the area(s)