Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

A good will have a more inelastic demand,the

Accepted Answer

A)  greater the availability of close substitutes. 
B)  broader the definition of the market. 
C)  longer the period of time. 
D)  more it is regarded as a luxury. 
A)  greater the availability of close substitutes. 
B)  broader the definition of the market. 
C)  longer the period of time. 
D)  more it is regarded as a luxury.

Question 3

If the price of gasoline rises,when is the price elasticity of demand likely to be the highest?

Accepted Answer

A)  immediately after the price increases 
B)  one month after the price increase 
C)  three months after the price increase 
D)  one year after the price increase 
A)  immediately after the price increases 
B)  one month after the price increase 
C)  three months after the price increase 
D)  one year after the price increase

Question 4

Last year,Carolyn bought 6 pairs of earrings when her income was $40,000.This year,her income is $52,000,and she purchased 7 pairs of earrings.Holding other factors constant,it follows that Carolyn's income elasticity of demand is about

Accepted Answer

A)  0.59,and Carolyn regards earrings as an inferior good. 
B)  0.59,and Carolyn regards earrings as a normal good. 
C)  1.7,and Carolyn regards earrings as an inferior good. 
D)  1.7,and Carolyn regards earrings as a normal good. 
A)  0.59,and Carolyn regards earrings as an inferior good. 
B)  0.59,and Carolyn regards earrings as a normal good. 
C)  1.7,and Carolyn regards earrings as an inferior good. 
D)  1.7,and Carolyn regards earrings as a normal good.

Question 5

Figure 5-3  
-Refer to Figure 5-3.The demand curve representing the demand for a luxury good with several close substitutes is

Accepted Answer

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

Question 6

How did the farm population in the United States change between 1950 and today?

Accepted Answer

A)  It dropped from 10 million to fewer than 3 million people. 
B)  It dropped from 20 million to fewer than 5 million people. 
C)  It dropped from 30 million to just over 6 million people. 
D)  It increased from 10 million to almost 13 million people. 
A)  It dropped from 10 million to fewer than 3 million people. 
B)  It dropped from 20 million to fewer than 5 million people. 
C)  It dropped from 30 million to just over 6 million people. 
D)  It increased from 10 million to almost 13 million people.

Question 7

If the price elasticity of supply is 0.8,and price increased by 5%,quantity supplied would

Accepted Answer

A)  increase by 4%. 
B)  increase by 6.25%. 
C)  decrease by 4%. 
D)  decrease by 6.25%. 
A)  increase by 4%. 
B)  increase by 6.25%. 
C)  decrease by 4%. 
D)  decrease by 6.25%.

Question 8

Table 5-4
  
-Refer to Table 5-4.When price is between $10 and $14,demand is

Accepted Answer

A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  There is not enough information given to determine whether demand is elastic,unit elastic,or inelastic. 
A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  There is not enough information given to determine whether demand is elastic,unit elastic,or inelastic.

Question 9

If the demand for textbooks is inelastic,then a decrease in the price of textbooks will

Accepted Answer

A)  increase total revenue of textbook sellers. 
B)  decrease total revenue of textbook sellers. 
C)  not change total revenue of textbook sellers. 
D)  There is not enough information to answer this question. 
A)  increase total revenue of textbook sellers. 
B)  decrease total revenue of textbook sellers. 
C)  not change total revenue of textbook sellers. 
D)  There is not enough information to answer this question.

Question 10

If the price elasticity of demand for a good is 4.0,then a 10 percent increase in price results in a

Accepted Answer

A)  0.4 percent decrease in the quantity demanded. 
B)  2.5 percent decrease in the quantity demanded. 
C)  4 percent decrease in the quantity demanded. 
D)  40 percent decrease in the quantity demanded. 
A)  0.4 percent decrease in the quantity demanded. 
B)  2.5 percent decrease in the quantity demanded. 
C)  4 percent decrease in the quantity demanded. 
D)  40 percent decrease in the quantity demanded.

Question 11

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Accepted Answer

A) True 
 B)False

Question 12

A city wants to raise revenues to build a new municipal swimming pool next year.The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues.The city manager suggests that the city lower the price of admission to raise revenues.Who is correct?

Accepted Answer

A)  Both the mayor and city manager would be correct if demand were price elastic. 
B)  Both the mayor and city manager would be correct if demand were price inelastic. 
C)  The mayor would be correct if demand were price elastic; the city manager would be correct if demand were price inelastic. 
D)  The mayor would be correct if demand were price inelastic; the city manager would be correct if demand were price elastic. 
A)  Both the mayor and city manager would be correct if demand were price elastic. 
B)  Both the mayor and city manager would be correct if demand were price inelastic. 
C)  The mayor would be correct if demand were price elastic; the city manager would be correct if demand were price inelastic. 
D)  The mayor would be correct if demand were price inelastic; the city manager would be correct if demand were price elastic.

Question 13

If a 25% change in price results in a 40% change in quantity supplied,then the price elasticity of supply is about

Accepted Answer

A)  0.63,and supply is elastic. 
B)  0.63,and supply is inelastic. 
C)  1.60,and supply is elastic. 
D)  1.60,and supply is inelastic. 
A)  0.63,and supply is elastic. 
B)  0.63,and supply is inelastic. 
C)  1.60,and supply is elastic. 
D)  1.60,and supply is inelastic.

Question 14

Your younger sister needs $50 to buy a new bike.She has opened a lemonade stand to make the money she needs.Your mother is paying for all of the ingredients.She currently is charging 25 cents per cup,but she wants to adjust her price to earn the $50 faster.If you know that the demand for lemonade is elastic,what is your advice to her?

Accepted Answer

A)  Leave the price at 25 cents and be patient. 
B)  Raise the price to increase total revenue. 
C)  Lower the price to increase total revenue. 
D)  There isn't enough information given to answer this question. 
A)  Leave the price at 25 cents and be patient. 
B)  Raise the price to increase total revenue. 
C)  Lower the price to increase total revenue. 
D)  There isn't enough information given to answer this question.

Question 15

Figure 5-1  
-Refer to Figure 5-1.Between point A and point B,price elasticity of demand is equal to

Accepted Answer

A)  0.33. 
B)  0.67. 
C)  1.5 
D)  2.67. 
A)  0.33. 
B)  0.67. 
C)  1.5 
D)  2.67.

Question 16

Scenario 5-2
The supply of aged cheddar cheese is inelastic,and the supply of bread is elastic.Both goods are considered to be normal goods by a majority of consumers.Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-2.The change in equilibrium price will be

Accepted Answer

A)  greater in the aged cheddar cheese market than in the bread market. 
B)  greater in the bread market than in the aged cheddar cheese market. 
C)  the same in the aged cheddar cheese and bread markets. 
D)  Any of the above could be correct. 
A)  greater in the aged cheddar cheese market than in the bread market. 
B)  greater in the bread market than in the aged cheddar cheese market. 
C)  the same in the aged cheddar cheese and bread markets. 
D)  Any of the above could be correct.

Question 17

If the income elasticity of demand for a good is negative,then the good must be an inferior good.

Accepted Answer

A) True 
 B)False

Question 18

A 10 percent increase in gasoline prices reduces gasoline consumption by about

Accepted Answer

A)  6 percent after one year and 2.5 percent after five years. 
B)  2.5 percent after one year and 6 percent after five years. 
C)  10 percent after one year and 20 percent after five years. 
D)  0 percent after one year and 1 percent after five years. 
A)  6 percent after one year and 2.5 percent after five years. 
B)  2.5 percent after one year and 6 percent after five years. 
C)  10 percent after one year and 20 percent after five years. 
D)  0 percent after one year and 1 percent after five years.

Question 19

Suppose demand is perfectly inelastic,and the supply of the good in question decreases.As a result,

Accepted Answer

A)  the equilibrium quantity decreases,and the equilibrium price is unchanged. 
B)  the equilibrium price increases,and the equilibrium quantity is unchanged. 
C)  the equilibrium quantity and the equilibrium price both are unchanged. 
D)  buyers' total expenditure on the good is unchanged. 
A)  the equilibrium quantity decreases,and the equilibrium price is unchanged. 
B)  the equilibrium price increases,and the equilibrium quantity is unchanged. 
C)  the equilibrium quantity and the equilibrium price both are unchanged. 
D)  buyers' total expenditure on the good is unchanged.

Question 20

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 demand for meth. 
B)  Both Operation Methbust and Say No would reduce the supply of meth. 
C)  Operation Methbust would reduce the demand for meth; Operation Say No would reduce the supply of meth. 
D)  Operation Methbust would reduce the supply of meth; Operation Say No would reduce the demand for meth. 
A)  Both Operation Methbust and Say No would reduce the demand for meth. 
B)  Both Operation Methbust and Say No would reduce the supply of meth. 
C)  Operation Methbust would reduce the demand for meth; Operation Say No would reduce the supply of meth. 
D)  Operation Methbust would reduce the supply of meth; Operation Say No would reduce the demand for meth.

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

A good will have a more inelastic demand,the

If the price of gasoline rises,when is the price elasticity of demand likely to be the highest?

Last year,Carolyn bought 6 pairs of earrings when her income was $40,000.This year,her income is $52,000,and she purchased 7 pairs of earrings.Holding other factors constant,it follows that Carolyn's income elasticity of demand is about

Figure 5-3 -Refer to Figure 5-3.The demand curve representing the demand for a luxury good with several close substitutes is

How did the farm population in the United States change between 1950 and today?

If the price elasticity of supply is 0.8,and price increased by 5%,quantity supplied would

Table 5-4 -Refer to Table 5-4.When price is between $10 and $14,demand is

If the demand for textbooks is inelastic,then a decrease in the price of textbooks will

If the price elasticity of demand for a good is 4.0,then a 10 percent increase in price results in a

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

If a 25% change in price results in a 40% change in quantity supplied,then the price elasticity of supply is about

Figure 5-1 -Refer to Figure 5-1.Between point A and point B,price elasticity of demand is equal to

If the income elasticity of demand for a good is negative,then the good must be an inferior good.

A 10 percent increase in gasoline prices reduces gasoline consumption by about

Suppose demand is perfectly inelastic,and the supply of the good in question decreases.As a result,

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

Exam 5: Elasticity and Its Application

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

A good will have a more inelastic demand,the

If the price of gasoline rises,when is the price elasticity of demand likely to be the highest?

Last year,Carolyn bought 6 pairs of earrings when her income was $40,000.This year,her income is $52,000,and she purchased 7 pairs of earrings.Holding other factors constant,it follows that Carolyn's income elasticity of demand is about

Figure 5-3 -Refer to Figure 5-3.The demand curve representing the demand for a luxury good with several close substitutes is

How did the farm population in the United States change between 1950 and today?

If the price elasticity of supply is 0.8,and price increased by 5%,quantity supplied would

Table 5-4 -Refer to Table 5-4.When price is between $10 and $14,demand is

If the demand for textbooks is inelastic,then a decrease in the price of textbooks will

If the price elasticity of demand for a good is 4.0,then a 10 percent increase in price results in a

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

If a 25% change in price results in a 40% change in quantity supplied,then the price elasticity of supply is about

Figure 5-1 -Refer to Figure 5-1.Between point A and point B,price elasticity of demand is equal to

If the income elasticity of demand for a good is negative,then the good must be an inferior good.

A 10 percent increase in gasoline prices reduces gasoline consumption by about

Suppose demand is perfectly inelastic,and the supply of the good in question decreases.As a result,

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