Question 1

When demand is inelastic,a decrease in price increases total revenue.

Accepted Answer

A) True 
 B)False

Question 2

Last year,Shelley bought 6 pairs of designer jeans when her income was $40,000.This year,her income is $50,000,and she purchased 10 pairs of designer jeans.Holding other factors constant,it follows that Shelley

Accepted Answer

A)  considers designer jeans to be a necessity. 
B)  considers designer jeans to be an inferior good. 
C)  considers designer jeans to be a normal good. 
D)  has a low price elasticity of demand for jeans. 
A)  considers designer jeans to be a necessity. 
B)  considers designer jeans to be an inferior good. 
C)  considers designer jeans to be a normal good. 
D)  has a low price elasticity of demand for jeans.

Question 3

You and your college roommate eat three packages of Ramen noodles each week.After graduation last month,both of you were hired at several times your college income.You still enjoy Ramen noodles very much and buy even more,but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more.When looking at income elasticity of demand for Ramen noodles,yours would

Accepted Answer

A)  be negative,and your roommate's would be positive. 
B)  be positive,and your roommate's would be negative. 
C)  be zero,and your roommate's would approach infinity. 
D)  approach infinity,and your roommate's would be zero. 
A)  be negative,and your roommate's would be positive. 
B)  be positive,and your roommate's would be negative. 
C)  be zero,and your roommate's would approach infinity. 
D)  approach infinity,and your roommate's would be zero.

Question 4

Kevin tunes pianos.If the demand for piano-tuning services is elastic,Kevin could increase his total revenue by

Accepted Answer

A)  increasing the price of his piano-tuning services. 
B)  decreasing the price of his piano-tuning services. 
C)  leaving the price of his piano-tuning services unchanged. 
D)  None of the above is correct. 
A)  increasing the price of his piano-tuning services. 
B)  decreasing the price of his piano-tuning services. 
C)  leaving the price of his piano-tuning services unchanged. 
D)  None of the above is correct.

Question 5

Figure 5-4  
-Refer to Figure 5-4.If the price decreases in the region of the demand curve between points B and C,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 6

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

Accepted Answer

A)  dental floss 
B)  milk 
C)  salt 
D)  diamond earrings 
A)  dental floss 
B)  milk 
C)  salt 
D)  diamond earrings

Question 7

If a firm is facing inelastic demand,then the firm should decrease price to increase revenue.

Accepted Answer

A) True 
 B)False

Question 8

Sandra purchases 5 pounds of coffee and 10 gallons of milk per month when the price of coffee is $10 per pound.She purchases 6 pounds of coffee and 12 gallons of milk per month when the price of coffee is $8 per pound.Sandra's cross-price elasticity of demand for coffee and milk is

Accepted Answer

A)  0.82,and they are substitutes. 
B)  -0.82,and they are complements. 
C)  1.22,and they are substitutes. 
D)  -1.22,and they are complements. 
A)  0.82,and they are substitutes. 
B)  -0.82,and they are complements. 
C)  1.22,and they are substitutes. 
D)  -1.22,and they are complements.

Question 9

Figure 5-9  
-Refer to Figure 5-9.If price increases from $10 to $15,total revenue will

Accepted Answer

A)  increase by $20,so demand must be inelastic in this price range. 
B)  increase by $5,so demand must be inelastic in this price range. 
C)  decrease by $20,so demand must be elastic in this price range. 
D)  decrease by $10,so demand must be elastic in this price range. 
A)  increase by $20,so demand must be inelastic in this price range. 
B)  increase by $5,so demand must be inelastic in this price range. 
C)  decrease by $20,so demand must be elastic in this price range. 
D)  decrease by $10,so demand must be elastic in this price range.

Question 10

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

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

Question 12

If the quantity supplied is the same regardless of price,then supply is

Accepted Answer

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

Question 13

When the price of a bracelet was $25 each,the jewelry shop sold 20 per month.When it raised the price to $35 each,it sold 14 per month.Using the midpoint method,the price elasticity of demand for bracelets is about

Accepted Answer

A)  1.66. 
B)  1.06. 
C)  0.94. 
D)  0.60. 
A)  1.66. 
B)  1.06. 
C)  0.94. 
D)  0.60.

Question 14

Suppose that corn farmers want to increase their total revenue.Knowing that the demand for corn is inelastic,corn farmers should

Accepted Answer

A)  plant more corn so that they would be able to sell more each year. 
B)  increase spending on fertilizer in an attempt to produce more corn on the acres they farm. 
C)  reduce the number of acres on which they plant corn. 
D)  contribute to a fund that promotes technological advances in corn production. 
A)  plant more corn so that they would be able to sell more each year. 
B)  increase spending on fertilizer in an attempt to produce more corn on the acres they farm. 
C)  reduce the number of acres on which they plant corn. 
D)  contribute to a fund that promotes technological advances in corn production.

Question 15

The price elasticity of demand changes as we move along a

Accepted Answer

A)  horizontal demand curve. 
B)  vertical demand curve. 
C)  linear,downward-sloping demand curve. 
D)  All of the above are correct. 
A)  horizontal demand curve. 
B)  vertical demand curve. 
C)  linear,downward-sloping demand curve. 
D)  All of the above are correct.

Question 16

When quantity moves proportionately the same amount as price,demand is

Accepted Answer

A)  elastic,and the price elasticity of demand is 1. 
B)  perfectly elastic,and the price elasticity of demand is infinitely large. 
C)  perfectly inelastic,and the price elasticity of demand is 0. 
D)  unit elastic,and the price elasticity of demand is 1. 
A)  elastic,and the price elasticity of demand is 1. 
B)  perfectly elastic,and the price elasticity of demand is infinitely large. 
C)  perfectly inelastic,and the price elasticity of demand is 0. 
D)  unit elastic,and the price elasticity of demand is 1.

Question 17

The income 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 18

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

Accepted Answer

A)  A 
B)  B 
C)  D 
D)  None of the above. 
A)  A 
B)  B 
C)  D 
D)  None of the above.

Question 19

Suppose good X has a negative income elasticity of demand.This implies that good X is

Accepted Answer

A)  a normal good. 
B)  a necessity. 
C)  an inferior good. 
D)  a luxury. 
A)  a normal good. 
B)  a necessity. 
C)  an inferior good. 
D)  a luxury.

Question 20

If the price elasticity of demand for a good is 1.5,then a 3 percent decrease in price results in a

Accepted Answer

A)  0.5 percent increase in the quantity demanded. 
B)  2 percent increase in the quantity demanded. 
C)  4.5 percent increase in the quantity demanded. 
D)  5 percent increase in the quantity demanded. 
A)  0.5 percent increase in the quantity demanded. 
B)  2 percent increase in the quantity demanded. 
C)  4.5 percent increase in the quantity demanded. 
D)  5 percent increase in the quantity demanded.

Exam 5: Elasticity and Its Application

When demand is inelastic,a decrease in price increases total revenue.

Last year,Shelley bought 6 pairs of designer jeans when her income was $40,000.This year,her income is $50,000,and she purchased 10 pairs of designer jeans.Holding other factors constant,it follows that Shelley

Kevin tunes pianos.If the demand for piano-tuning services is elastic,Kevin could increase his total revenue by

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

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

If a firm is facing inelastic demand,then the firm should decrease price to increase revenue.

Sandra purchases 5 pounds of coffee and 10 gallons of milk per month when the price of coffee is $10 per pound.She purchases 6 pounds of coffee and 12 gallons of milk per month when the price of coffee is $8 per pound.Sandra's cross-price elasticity of demand for coffee and milk is

Figure 5-9 -Refer to Figure 5-9.If price increases from $10 to $15,total revenue will

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

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

If the quantity supplied is the same regardless of price,then supply is

When the price of a bracelet was $25 each,the jewelry shop sold 20 per month.When it raised the price to $35 each,it sold 14 per month.Using the midpoint method,the price elasticity of demand for bracelets is about

Suppose that corn farmers want to increase their total revenue.Knowing that the demand for corn is inelastic,corn farmers should

The price elasticity of demand changes as we move along a

When quantity moves proportionately the same amount as price,demand is

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

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

Suppose good X has a negative income elasticity of demand.This implies that good X is

If the price elasticity of demand for a good is 1.5,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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