Question 1

Figure 5-12  
-Refer to Figure 5-12.If rectangle D is larger than rectangle A,then

Accepted Answer

A)  demand is elastic between prices P1 and P2. 
B)  a decrease in price from P2 to P1 will cause an increase in total revenue. 
C)  the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded. 
D)  All of the above are correct. 
A)  demand is elastic between prices P1 and P2. 
B)  a decrease in price from P2 to P1 will cause an increase in total revenue. 
C)  the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded. 
D)  All of the above are correct.

Question 2

Studies indicate that the price elasticity of demand for cigarettes is about 0.4.A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6.According to the midpoint method,the government policy should have reduced smoking by

Accepted Answer

A)  30%. 
B)  40%. 
C)  80%. 
D)  250%. 
A)  30%. 
B)  40%. 
C)  80%. 
D)  250%.

Question 3

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

Accepted Answer

A)  mint-flavored toothpaste 
B)  toothpaste 
C)  Colgate mint-flavored toothpaste 
D)  a generic mint-flavored toothpaste 
A)  mint-flavored toothpaste 
B)  toothpaste 
C)  Colgate mint-flavored toothpaste 
D)  a generic mint-flavored toothpaste

Question 4

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

Accepted Answer

A)  strawberry-banana milk shakes 
B)  gasoline in the short run 
C)  diamond earrings 
D)  box seats at a major league baseball game 
A)  strawberry-banana milk shakes 
B)  gasoline in the short run 
C)  diamond earrings 
D)  box seats at a major league baseball game

Question 5

If the price elasticity of supply is zero,then

Accepted Answer

A)  supply is more elastic than it is in any other case. 
B)  the supply curve is horizontal. 
C)  the quantity supplied is the same,regardless of price. 
D)  a change in demand will cause a relatively small change in the equilibrium price. 
A)  supply is more elastic than it is in any other case. 
B)  the supply curve is horizontal. 
C)  the quantity supplied is the same,regardless of price. 
D)  a change in demand will cause a relatively small change in the equilibrium price.

Question 6

The demand for Godiva pumpkin truffles is likely quite elastic because

Accepted Answer

A)  truffles melt easily. 
B)  this particular type of chocolate is viewed as a necessity by many chocolate lovers. 
C)  the market is broadly defined. 
D)  other types of chocolate are good substitutes for this particular flavor. 
A)  truffles melt easily. 
B)  this particular type of chocolate is viewed as a necessity by many chocolate lovers. 
C)  the market is broadly defined. 
D)  other types of chocolate are good substitutes for this particular flavor.

Question 7

Figure 5-17        
-Refer to Figure 5-17.Which of the following statements is not correct?

Accepted Answer

A)  Supply curve A is perfectly inelastic. 
B)  Supply curve B is perfectly elastic. 
C)  Supply curve C is unit elastic. 
D)  Supply curve D is more elastic than supply curve C. 
A)  Supply curve A is perfectly inelastic. 
B)  Supply curve B is perfectly elastic. 
C)  Supply curve C is unit elastic. 
D)  Supply curve D is more elastic than supply curve C.

Question 8

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Accepted Answer

A) True 
 B)False

Question 9

Holding all other factors constant and using the midpoint method,if a calculator manufacturer increases production from 40 to 50 units when price increases by 20 percent,then supply is

Accepted Answer

A)  inelastic,since the price elasticity of supply is equal to .91. 
B)  inelastic,since the price elasticity of supply is equal to 1.1. 
C)  elastic,since the price elasticity of supply is equal to 0.91. 
D)  elastic,since the price elasticity of supply is equal to 1.1. 
A)  inelastic,since the price elasticity of supply is equal to .91. 
B)  inelastic,since the price elasticity of supply is equal to 1.1. 
C)  elastic,since the price elasticity of supply is equal to 0.91. 
D)  elastic,since the price elasticity of supply is equal to 1.1.

Question 10

Frequently,in the short run,the quantity supplied of a good is

Accepted Answer

A)  impossible,or nearly impossible,to measure. 
B)  not very responsive to price changes. 
C)  determined by the quantity demanded of the good. 
D)  determined by psychological forces and other non-economic forces. 
A)  impossible,or nearly impossible,to measure. 
B)  not very responsive to price changes. 
C)  determined by the quantity demanded of the good. 
D)  determined by psychological forces and other non-economic forces.

Question 11

The price elasticity of demand for eggs

Accepted Answer

A)  is computed as the percentage change in quantity demanded of eggs divided by the percentage change in price of eggs. 
B)  will be lower if there is a new invention that is a close substitute for eggs. 
C)  will be higher if consumers consider eggs to be a necessity. 
D)  All of the above are correct. 
A)  is computed as the percentage change in quantity demanded of eggs divided by the percentage change in price of eggs. 
B)  will be lower if there is a new invention that is a close substitute for eggs. 
C)  will be higher if consumers consider eggs to be a necessity. 
D)  All of the above are correct.

Question 12

Elasticity of demand is closely related to the slope of the demand curve.The less responsive buyers are to a change in price,the

Accepted Answer

A)  steeper the demand curve will be. 
B)  flatter the demand curve will be. 
C)  further to the right the demand curve will sit. 
D)  closer to the vertical axis the demand curve will sit. 
A)  steeper the demand curve will be. 
B)  flatter the demand curve will be. 
C)  further to the right the demand curve will sit. 
D)  closer to the vertical axis the demand curve will sit.

Question 13

If a supply curve is horizontal,then supply is said to be perfectly elastic,and the price elasticity of supply approaches infinity.

Accepted Answer

A) True 
 B)False

Question 14

Table 5-5
  
-Refer to Table 5-5.Which of the three supply curves represents the least 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 15

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

Accepted Answer

A) True 
 B)False

Question 16

If the price elasticity of demand for aluminum foil is 1.45,then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Accepted Answer

A)  1.66%,and aluminum foil sellers' total revenue will increase as a result. 
B)  1.66%,and aluminum foil sellers' total revenue will decrease as a result. 
C)  3.48%,and aluminum foil sellers' total revenue will increase as a result. 
D)  3.48%,and aluminum foil sellers' total revenue will decrease as a result. 
A)  1.66%,and aluminum foil sellers' total revenue will increase as a result. 
B)  1.66%,and aluminum foil sellers' total revenue will decrease as a result. 
C)  3.48%,and aluminum foil sellers' total revenue will increase as a result. 
D)  3.48%,and aluminum foil sellers' total revenue will decrease as a result.

Question 17

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for minivans causes the price of minivans to increase by 5%,then the quantity supplied of minivans will increase by about

Accepted Answer

A)  1.5% in the short run and 6% in the long run. 
B)  6% in the short run and 1.5% in the long run. 
C)  16.7% in the short run and 4.2% in the long run. 
D)  4.2% in the short run and 16.7% in the long run. 
A)  1.5% in the short run and 6% in the long run. 
B)  6% in the short run and 1.5% in the long run. 
C)  16.7% in the short run and 4.2% in the long run. 
D)  4.2% in the short run and 16.7% in the long run.

Question 18

Which of the following statements is not valid when the market supply curve is vertical?

Accepted Answer

A)  Market quantity supplied does not change when the price changes. 
B)  Supply is perfectly inelastic. 
C)  An increase in market demand will increase the equilibrium quantity. 
D)  An increase in market demand will increase the equilibrium price. 
A)  Market quantity supplied does not change when the price changes. 
B)  Supply is perfectly inelastic. 
C)  An increase in market demand will increase the equilibrium quantity. 
D)  An increase in market demand will increase the equilibrium price.

Question 19

Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for soccer balls causes the price of soccer balls to increase by 20%,then the quantity supplied of soccer balls will increase by about

Accepted Answer

A)  0.67% in the short run and 0.17% in the long run. 
B)  3% in the short run and 1.2% in the long run. 
C)  6% in the short run and 24% in the long run. 
D)  66.7% in the short run and 16.7% in the long run. 
A)  0.67% in the short run and 0.17% in the long run. 
B)  3% in the short run and 1.2% in the long run. 
C)  6% in the short run and 24% in the long run. 
D)  66.7% in the short run and 16.7% in the long run.

Question 20

Figure 5-9  
-Refer to Figure 5-9.A decrease in price from $15 to $10 leads to a

Accepted Answer

A)  decrease in total revenue of $10,so the price elasticity of demand is greater than 1 in this price range. 
B)  decrease in total revenue of $10,so the price elasticity of demand is less than 1 in this price range. 
C)  decrease in total revenue of $20,so the price elasticity of demand is less than 1 in this price range. 
D)  decrease in total revenue of $20,so demand is elastic in this price range. 
A)  decrease in total revenue of $10,so the price elasticity of demand is greater than 1 in this price range. 
B)  decrease in total revenue of $10,so the price elasticity of demand is less than 1 in this price range. 
C)  decrease in total revenue of $20,so the price elasticity of demand is less than 1 in this price range. 
D)  decrease in total revenue of $20,so demand is elastic in this price range.

Exam 5: Elasticity and Its Application

Figure 5-12 -Refer to Figure 5-12.If rectangle D is larger than rectangle A,then

Studies indicate that the price elasticity of demand for cigarettes is about 0.4.A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6.According to the midpoint method,the government policy should have reduced smoking by

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

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

If the price elasticity of supply is zero,then

The demand for Godiva pumpkin truffles is likely quite elastic because

Figure 5-17 -Refer to Figure 5-17.Which of the following statements is not correct?

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Holding all other factors constant and using the midpoint method,if a calculator manufacturer increases production from 40 to 50 units when price increases by 20 percent,then supply is

Frequently,in the short run,the quantity supplied of a good is

The price elasticity of demand for eggs

Elasticity of demand is closely related to the slope of the demand curve.The less responsive buyers are to a change in price,the

If a supply curve is horizontal,then supply is said to be perfectly elastic,and the price elasticity of supply approaches infinity.

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

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

If the price elasticity of demand for aluminum foil is 1.45,then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for minivans causes the price of minivans to increase by 5%,then the quantity supplied of minivans will increase by about

Which of the following statements is not valid when the market supply curve is vertical?

Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for soccer balls causes the price of soccer balls to increase by 20%,then the quantity supplied of soccer balls will increase by about

Figure 5-9 -Refer to Figure 5-9.A decrease in price from $15 to $10 leads to 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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