Question 1

Price elasticity of demand along a linear,downward-sloping demand curve increases as price falls.

Accepted Answer

A) True 
 B)False

Question 2

Table 5-2
  
-Refer to Table 5-2.Using the midpoint method,if the price falls from $60 to $40,the price elasticity of demand is

Accepted Answer

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

Question 3

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 4

If the price elasticity of demand for a good is 6,then a 3 percent decrease in price results in

Accepted Answer

A)  a 20 percent increase in the quantity demanded. 
B)  an 18 percent increase in the quantity demanded. 
C)  a 2 percent increase in the quantity demanded. 
D)  a 1.8 percent increase in the quantity demanded. 
A)  a 20 percent increase in the quantity demanded. 
B)  an 18 percent increase in the quantity demanded. 
C)  a 2 percent increase in the quantity demanded. 
D)  a 1.8 percent increase in the quantity demanded.

Question 5

For which pairs of goods is the cross-price elasticity most likely to be positive?

Accepted Answer

A)  peanut butter and jelly 
B)  bicycle frames and bicycle tires 
C)  pens and pencils 
D)  college textbooks and iPods 
A)  peanut butter and jelly 
B)  bicycle frames and bicycle tires 
C)  pens and pencils 
D)  college textbooks and iPods

Question 6

Figure 5-3  
-Refer to Figure 5-3.Which demand curve is perfectly elastic?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 7

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

Accepted Answer

A)  natural gas 
B)  doctor's visits 
C)  hamburgers 
D)  boats 
A)  natural gas 
B)  doctor's visits 
C)  hamburgers 
D)  boats

Question 8

How does total revenue change as one moves downward and to the right along a linear demand curve?

Accepted Answer

A)  It always increases. 
B)  It always decreases. 
C)  It first increases,then decreases. 
D)  It is unaffected by a movement along the demand curve. 
A)  It always increases. 
B)  It always decreases. 
C)  It first increases,then decreases. 
D)  It is unaffected by a movement along the demand curve.

Question 9

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

Accepted Answer

A)  0.58 
B)  0.71 
C)  1.06 
D)  1.4 
A)  0.58 
B)  0.71 
C)  1.06 
D)  1.4

Question 10

If the cross-price elasticity of demand for two goods is negative,then the two goods are substitutes.

Accepted Answer

A) True 
 B)False

Question 11

Figure 5-16  
-Refer to Figure 5-16.If,holding the supply curve fixed,there were an increase in demand that caused the equilibrium price to increase from $6 to $8,then sellers' total revenue would

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  The effect on total revenue cannot be determined from the given information. 
A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  The effect on total revenue cannot be determined from the given information.

Question 12

The value of the price elasticity of demand for a good will be relatively large when

Accepted Answer

A)  there are no good substitutes available for the good. 
B)  the time period in question is relatively short. 
C)  the good is a luxury rather than a necessity. 
D)  All of the above are correct. 
A)  there are no good substitutes available for the good. 
B)  the time period in question is relatively short. 
C)  the good is a luxury rather than a necessity. 
D)  All of the above are correct.

Question 13

At a price of $1.20,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.40,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)  0.15 
B)  0.375 
C)  2.5 
D)  2.60 
A)  0.15 
B)  0.375 
C)  2.5 
D)  2.60

Question 14

Figure 5-18  
-Refer to Figure 5-18.Which supply curve is most likely relevant over a very long period of time?

Accepted Answer

A)  S1 
B)  S2 
C)  S3 
D)  All of the above are equally likely to be relevant over a very long period of time. 
A)  S1 
B)  S2 
C)  S3 
D)  All of the above are equally likely to be relevant over a very long period of time.

Question 15

If the cross-price elasticity of two goods is negative,then the two goods are

Accepted Answer

A)  necessities. 
B)  complements. 
C)  normal goods. 
D)  inferior goods. 
A)  necessities. 
B)  complements. 
C)  normal goods. 
D)  inferior goods.

Question 16

Figure 5-5  
-Refer to Figure 5-5.Using the midpoint method,between prices of $48 and $54,price elasticity of demand is about

Accepted Answer

A)  0.92. 
B)  3.89. 
C)  4.33. 
D)  5.67. 
A)  0.92. 
B)  3.89. 
C)  4.33. 
D)  5.67.

Question 17

Along the elastic portion of a linear demand curve,total revenue rises as price rises.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that when the price rises by 20% for a particular good,the quantity demanded of that good falls by 10%.The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Question 19

If a 15% change in price results in a 20% change in quantity supplied,then the price elasticity of supply is about

Accepted Answer

A)  1.33,and supply is elastic. 
B)  1.33,and supply is inelastic. 
C)  0.75,and supply is elastic. 
D)  0.75,and supply is inelastic. 
A)  1.33,and supply is elastic. 
B)  1.33,and supply is inelastic. 
C)  0.75,and supply is elastic. 
D)  0.75,and supply is inelastic.

Question 20

Drug interdiction,which reduces the supply of drugs,may decrease drug-related crime because the demand for drugs is inelastic.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

Price elasticity of demand along a linear,downward-sloping demand curve increases as price falls.

Table 5-2 -Refer to Table 5-2.Using the midpoint method,if the price falls from $60 to $40,the price elasticity of demand is

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

If the price elasticity of demand for a good is 6,then a 3 percent decrease in price results in

For which pairs of goods is the cross-price elasticity most likely to be positive?

Figure 5-3 -Refer to Figure 5-3.Which demand curve is perfectly elastic?

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

How does total revenue change as one moves downward and to the right along a linear demand curve?

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

If the cross-price elasticity of demand for two goods is negative,then the two goods are substitutes.

Figure 5-16 -Refer to Figure 5-16.If,holding the supply curve fixed,there were an increase in demand that caused the equilibrium price to increase from $6 to $8,then sellers' total revenue would

The value of the price elasticity of demand for a good will be relatively large when

At a price of $1.20,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.40,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is about

Figure 5-18 -Refer to Figure 5-18.Which supply curve is most likely relevant over a very long period of time?

If the cross-price elasticity of two goods is negative,then the two goods are

Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,between prices of $48 and $54,price elasticity of demand is about

Along the elastic portion of a linear demand curve,total revenue rises as price rises.

Suppose that when the price rises by 20% for a particular good,the quantity demanded of that good falls by 10%.The price elasticity of demand for this good is equal to 2.0.

If a 15% change in price results in a 20% change in quantity supplied,then the price elasticity of supply is about

Drug interdiction,which reduces the supply of drugs,may decrease drug-related crime because the demand for drugs is inelastic.

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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