Question 1

Holding all other forces constant,if increasing the price of a good leads to an increase in total revenue,then the demand for the good must be

Accepted Answer

A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price increase always leads to an increase in total revenue. 
A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price increase always leads to an increase in total revenue.

Question 2

Figure 5-15  
-Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between $4 and $6?

Accepted Answer

A)  0.75 
B)  1.00 
C)  1.20 
D)  1.25 
A)  0.75 
B)  1.00 
C)  1.20 
D)  1.25

Question 3

Table 5-4
  
-Refer to Table 5-4.Demand is unit elastic when quantity demanded changes from

Accepted Answer

A)  10 to 9. 
B)  9 to 8. 
C)  8 to 7. 
D)  There is not enough information given to determine the correct answer. 
A)  10 to 9. 
B)  9 to 8. 
C)  8 to 7. 
D)  There is not enough information given to determine the correct answer.

Question 4

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

Accepted Answer

A)  all inferior goods 
B)  all normal goods 
C)  goods for which there are many complements 
D)  luxuries 
A)  all inferior goods 
B)  all normal goods 
C)  goods for which there are many complements 
D)  luxuries

Question 5

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

Accepted Answer

A)  0.29. 
B)  0.54. 
C)  1.86. 
D)  2.0. 
A)  0.29. 
B)  0.54. 
C)  1.86. 
D)  2.0.

Question 6

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts,the price elasticity of supply approaches

Accepted Answer

A)  zero,and the supply curve is horizontal. 
B)  zero,and the supply curve is vertical. 
C)  infinity,and the supply curve is horizontal. 
D)  infinity,and the supply curve is vertical. 
A)  zero,and the supply curve is horizontal. 
B)  zero,and the supply curve is vertical. 
C)  infinity,and the supply curve is horizontal. 
D)  infinity,and the supply curve is vertical.

Question 7

Holding all other forces constant,if decreasing the price of a good leads to a decrease in total revenue,then the demand for the good must be

Accepted Answer

A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price increase always leads to an increase in total revenue. 
A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price increase always leads to an increase in total revenue.

Question 8

The production of methamphetamine (meth)is a social problem in the Midwest.Iowa is considering two potential programs: Operation Methbust would increase the number of sheriffs' deputies to search out and destroy methamphetamine labs.Operation Say No to Meth would increase the training required of public school teachers so that they could better educate students about the health risks of using meth.Assuming that each program were successful,which of the following statements is correct?

Accepted Answer

A)  Both Operation Methbust and Say No would reduce the equilibrium quantity and increase the equilibrium price of meth. 
B)  Both Operation Methbust and Say No would increase the equilibrium quantity and reduce the equilibrium price of meth. 
C)  Both Operation Methbust and Say No would reduce the equilibrium quantity of meth; Operation Methbust would increase the equilibrium price,whereas Say No would reduce the equilibrium price of meth. 
D)  Both Operation Methbust and Say No would reduce the equilibrium price of meth; Operation Methbust would reduce the equilibrium quantity,whereas Say No would increase the equilibrium quantity of meth. 
A)  Both Operation Methbust and Say No would reduce the equilibrium quantity and increase the equilibrium price of meth. 
B)  Both Operation Methbust and Say No would increase the equilibrium quantity and reduce the equilibrium price of meth. 
C)  Both Operation Methbust and Say No would reduce the equilibrium quantity of meth; Operation Methbust would increase the equilibrium price,whereas Say No would reduce the equilibrium price of meth. 
D)  Both Operation Methbust and Say No would reduce the equilibrium price of meth; Operation Methbust would reduce the equilibrium quantity,whereas Say No would increase the equilibrium quantity of meth.

Question 9

Table 5-5
  
-Refer to Table 5-5.Which of the three supply curves represents the most elastic supply?

Accepted Answer

A)  supply curve A 
B)  supply curve B 
C)  supply curve C 
D)  There is no difference in the elasticity of the three supply curves. 
A)  supply curve A 
B)  supply curve B 
C)  supply curve C 
D)  There is no difference in the elasticity of the three supply curves.

Question 10

Moving downward and to the right along a linear demand curve,we know that total revenue

Accepted Answer

A)  first increases,then decreases. 
B)  first decreases,then increases. 
C)  always increases. 
D)  always decreases. 
A)  first increases,then decreases. 
B)  first decreases,then increases. 
C)  always increases. 
D)  always decreases.

Question 11

A perfectly inelastic demand implies that buyers

Accepted Answer

A)  decrease their purchases when the price rises. 
B)  purchase the same amount as before when the price rises or falls. 
C)  increase their purchases only slightly when the price falls. 
D)  respond substantially to an increase in price. 
A)  decrease their purchases when the price rises. 
B)  purchase the same amount as before when the price rises or falls. 
C)  increase their purchases only slightly when the price falls. 
D)  respond substantially to an increase in price.

Question 12

Using the midpoint method,compute the elasticity of demand between points A and B.Is demand along this portion of the curve elastic or inelastic? Interpret your answer with regard to price and quantity demanded.Now compute the elasticity of demand between points B and C.Is demand along this portion of the curve elastic or inelastic?

Accepted Answer

In the section of the demand curve from

Question 13

Figure 5-4  
-Refer to Figure 5-4.If the price increases in the region of the demand curve between points A and B,we can expect total revenue to

Accepted Answer

A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first increase,then decrease until total revenue is maximized. 
A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first increase,then decrease until total revenue is maximized.

Question 14

A perfectly elastic demand implies that

Accepted Answer

A)  buyers will not respond to any change in price. 
B)  any rise in price above that represented by the demand curve will result in a quantity demanded of zero. 
C)  quantity demanded and price change by the same percent as we move along the demand curve. 
D)  price will rise by an infinite amount when there is a change in quantity demanded. 
A)  buyers will not respond to any change in price. 
B)  any rise in price above that represented by the demand curve will result in a quantity demanded of zero. 
C)  quantity demanded and price change by the same percent as we move along the demand curve. 
D)  price will rise by an infinite amount when there is a change in quantity demanded.

Question 15

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00.This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Accepted Answer

A)  fall by 200 percent. 
B)  fall by 40 percent. 
C)  rise by 200 percent. 
D)  rise by 40 percent. 
A)  fall by 200 percent. 
B)  fall by 40 percent. 
C)  rise by 200 percent. 
D)  rise by 40 percent.

Question 16

If the price elasticity of demand for a good is 0.2,then a 3 percent decrease in price results in a

Accepted Answer

A)  0.6 percent increase in the quantity demanded. 
B)  1.5 percent increase in the quantity demanded. 
C)  2 percent increase in the quantity demanded. 
D)  6 percent increase in the quantity demanded. 
A)  0.6 percent increase in the quantity demanded. 
B)  1.5 percent increase in the quantity demanded. 
C)  2 percent increase in the quantity demanded. 
D)  6 percent increase in the quantity demanded.

Question 17

For which of the following goods is the income elasticity of demand likely highest?

Accepted Answer

A)  water 
B)  diamonds 
C)  hamburgers 
D)  housing 
A)  water 
B)  diamonds 
C)  hamburgers 
D)  housing

Question 18

If the price elasticity of demand for a good is 1,then a 3 percent decrease in price results in a

Accepted Answer

A)  0.1 percent increase in the quantity demanded. 
B)  1 percent increase in the quantity demanded. 
C)  3 percent increase in the quantity demanded. 
D)  4 percent increase in the quantity demanded. 
A)  0.1 percent increase in the quantity demanded. 
B)  1 percent increase in the quantity demanded. 
C)  3 percent increase in the quantity demanded. 
D)  4 percent increase in the quantity demanded.

Question 19

Figure 5-9  
-Refer to Figure 5-9.Suppose this demand curve is a straight,downward-sloping line all the way from the horizontal intercept to the vertical intercept.We choose two prices,P1 and P2,and the corresponding quantities demanded,Q1 and Q2,for the purpose of calculating the price elasticity of demand.Also suppose P2 > P1.In which of the following cases could we possibly find that (i)demand is elastic and (ii)an increase in price from P1 to P2 causes an increase in total revenue?

Accepted Answer

A)  0 1 2 1 2 1 > $15. 
D)  None of the above is correct. 
A)  0 1 2 1 2 1 > $15. 
D)  None of the above is correct.

Question 20

In January the price of dark chocolate candy bars was $2.00,and Willy's Chocolate Factory produced 80 pounds.In February the price of dark chocolate candy bars was $2.50,and Willy's produced 110 pounds.In March the price of dark chocolate candy bars was $3.00,and Willy's produced 140 pounds.The price elasticity of supply of Willy's dark chocolate candy bars was about

Accepted Answer

A)  0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00. 
B)  0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00. 
C)  1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00. 
D)  1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00. 
A)  0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00. 
B)  0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00. 
C)  1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00. 
D)  1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00.

Holding all other forces constant,if increasing the price of a good leads to an increase in total revenue,then the demand for the good must be

Figure 5-15 -Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between $4 and $6?

Table 5-4 -Refer to Table 5-4.Demand is unit elastic when quantity demanded changes from

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

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

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts,the price elasticity of supply approaches

Holding all other forces constant,if decreasing the price of a good leads to a decrease in total revenue,then the demand for the good must be

Table 5-5 -Refer to Table 5-5.Which of the three supply curves represents the most elastic supply?

Moving downward and to the right along a linear demand curve,we know that total revenue

A perfectly inelastic demand implies that buyers

Figure 5-4 -Refer to Figure 5-4.If the price increases in the region of the demand curve between points A and B,we can expect total revenue to

A perfectly elastic demand implies that

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00.This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

If the price elasticity of demand for a good is 0.2,then a 3 percent decrease in price results in a

For which of the following goods is the income elasticity of demand likely highest?

If the price elasticity of demand for a good is 1,then a 3 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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Exam 5: Elasticity and Its Application

Holding all other forces constant,if increasing the price of a good leads to an increase in total revenue,then the demand for the good must be

Figure 5-15 -Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between $4 and $6?

Table 5-4 -Refer to Table 5-4.Demand is unit elastic when quantity demanded changes from

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

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

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts,the price elasticity of supply approaches

Holding all other forces constant,if decreasing the price of a good leads to a decrease in total revenue,then the demand for the good must be

Table 5-5 -Refer to Table 5-5.Which of the three supply curves represents the most elastic supply?

Moving downward and to the right along a linear demand curve,we know that total revenue

A perfectly inelastic demand implies that buyers

Figure 5-4 -Refer to Figure 5-4.If the price increases in the region of the demand curve between points A and B,we can expect total revenue to

A perfectly elastic demand implies that

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00.This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

If the price elasticity of demand for a good is 0.2,then a 3 percent decrease in price results in a

For which of the following goods is the income elasticity of demand likely highest?

If the price elasticity of demand for a good is 1,then a 3 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

Filters