Question 1

Figure 5-15  
-Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between $6 and $8?

Accepted Answer

A)  0.86 
B)  1.00 
C)  1.17 
D)  1.25 
A)  0.86 
B)  1.00 
C)  1.17 
D)  1.25

Question 2

Fiona's Fish Emporium increased its total monthly revenue from $1,500 to $1,800 when it raised the price of tropical fish from $5 to $9.The price elasticity of demand for Fiona's Fish Emporium is

Accepted Answer

A)  0.57. 
B)  0.70. 
C)  1.43. 
D)  2.20. 
A)  0.57. 
B)  0.70. 
C)  1.43. 
D)  2.20.

Question 3

A manufacturer produces 400 units when the market price of $10 per unit and produces 600 units when the market price is $12 per unit.Using the midpoint method,for this range of prices,the price elasticity of supply is about

Accepted Answer

A)  0.45. 
B)  2.0. 
C)  2.2. 
D)  200. 
A)  0.45. 
B)  2.0. 
C)  2.2. 
D)  200.

Question 4

Which of the following should be held constant when calculating an income elasticity of demand?

Accepted Answer

A)  the price of the good 
B)  prices of related goods 
C)  tastes 
D)  All of the above should be held constant. 
A)  the price of the good 
B)  prices of related goods 
C)  tastes 
D)  All of the above should be held constant.

Question 5

Table 5-6
  
-Refer to Table 5-6.Using the midpoint method,the income elasticity of demand for good Y is

Accepted Answer

A)  2.33,and good Y is a normal good. 
B)  -2.33,and good Y is an inferior good. 
C)  -0.43,and good Y is a normal good. 
D)  -0.43,and good Y is an inferior good. 
A)  2.33,and good Y is a normal good. 
B)  -2.33,and good Y is an inferior good. 
C)  -0.43,and good Y is a normal good. 
D)  -0.43,and good Y is an inferior good.

Question 6

The cross-price elasticity of demand can tell us whether goods are

Accepted Answer

A)  normal or inferior. 
B)  elastic or inelastic. 
C)  luxuries or necessities. 
D)  complements or substitutes. 
A)  normal or inferior. 
B)  elastic or inelastic. 
C)  luxuries or necessities. 
D)  complements or substitutes.

Question 7

Suppose that gasoline prices increase dramatically this month.Lola commutes 100 miles to work each weekday.Over the next few months,Lola drives less on the weekends to try to save money.Within the year,she sells her home and purchases one only 10 miles from her place of employment.These examples illustrate the importance of

Accepted Answer

A)  the availability of substitutes in determining the price elasticity of demand. 
B)  a necessity versus a luxury in determining the price elasticity of demand. 
C)  the definition of a market in determining the price elasticity of demand. 
D)  the time horizon in determining the price elasticity of demand. 
A)  the availability of substitutes in determining the price elasticity of demand. 
B)  a necessity versus a luxury in determining the price elasticity of demand. 
C)  the definition of a market in determining the price elasticity of demand. 
D)  the time horizon in determining the price elasticity of demand.

Question 8

Suppose good X has a positive income elasticity of demand.This implies that good X could be (i)a normal good.
(ii)a necessity.
(iii)an inferior good.
(iv)
A luxury.

Accepted Answer

A)  (i)only 
B)  (i)and (ii)only 
C)  (i),(ii),and (iv)only 
D)  (iii)only 
A)  (i)only 
B)  (i)and (ii)only 
C)  (i),(ii),and (iv)only 
D)  (iii)only

Question 9

As the price elasticity of supply approaches infinity,very small changes in price lead to

Accepted Answer

A)  very large changes in quantity supplied. 
B)  very small changes in quantity supplied. 
C)  no change in quantity supplied. 
D)  None of the above is correct. 
A)  very large changes in quantity supplied. 
B)  very small changes in quantity supplied. 
C)  no change in quantity supplied. 
D)  None of the above is correct.

Question 10

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Accepted Answer

A)  About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars. 
B)  About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars. 
C)  About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars. 
D)  Because gasoline is a necessity,consumers do not decrease their quantity demanded in either the short run or the long run. 
A)  About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars. 
B)  About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars. 
C)  About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars. 
D)  Because gasoline is a necessity,consumers do not decrease their quantity demanded in either the short run or the long run.

Question 11

Figure 5-11  
-Refer to Figure 5-11.If the price falls from point A to point B,total revenue

Accepted Answer

A)  increases,and demand is price elastic. 
B)  decreases,and demand is price elastic. 
C)  increases,and demand is price inelastic. 
D)  decreases,and demand is price inelastic. 
A)  increases,and demand is price elastic. 
B)  decreases,and demand is price elastic. 
C)  increases,and demand is price inelastic. 
D)  decreases,and demand is price inelastic.

Question 12

The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price.If the owner is only interested in increasing revenue,she should

Accepted Answer

A)  lower the price of the cinnamon rolls. 
B)  leave the price of the cinnamon rolls unchanged. 
C)  raise the price of the cinnamon rolls. 
D)  reduce costs. 
A)  lower the price of the cinnamon rolls. 
B)  leave the price of the cinnamon rolls unchanged. 
C)  raise the price of the cinnamon rolls. 
D)  reduce costs.

Question 13

Suppose the price of potato chips decreases from $1.45 to $1.25 and,as a result,the quantity of potato chips demanded increases from 2,000 to 2,200.Using the midpoint method,the price elasticity of demand for potato chips in the given price range is

Accepted Answer

A)  2.00. 
B)  1.55. 
C)  1.00. 
D)  0.64. 
A)  2.00. 
B)  1.55. 
C)  1.00. 
D)  0.64.

Question 14

Farm programs that pay farmers not to plant crops on all their land

Accepted Answer

A)  hurt farmers by lowering their total revenue and hurt consumers by causing shortages of some food items. 
B)  help farmers by cutting costs,which helps consumers by lowering food prices. 
C)  help farmers by increasing total revenue in the market but hurt consumers by raising food prices. 
D)  help farmers directly since they receive government payments but have no real effects on consumers. 
A)  hurt farmers by lowering their total revenue and hurt consumers by causing shortages of some food items. 
B)  help farmers by cutting costs,which helps consumers by lowering food prices. 
C)  help farmers by increasing total revenue in the market but hurt consumers by raising food prices. 
D)  help farmers directly since they receive government payments but have no real effects on consumers.

Question 15

Figure 5-3  
-Refer to Figure 5-3.Mark says he would buy one Mt.Dew per day regardless of the price.If this is true,then Mark's demand for Mt.Dew is represented by demand curve

Accepted Answer

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

Question 16

Figure 5-5  
-Refer to Figure 5-5.The maximum value of total revenue corresponds to a price of

Accepted Answer

A)  $18. 
B)  $30. 
C)  $42. 
D)  $48. 
A)  $18. 
B)  $30. 
C)  $42. 
D)  $48.

Question 17

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

Accepted Answer

A)  0.2 
B)  1 
C)  1.5 
D)  All of the above could be correct. 
A)  0.2 
B)  1 
C)  1.5 
D)  All of the above could be correct.

Question 18

A linear,downward-sloping demand curve has a constant elasticity but a changing slope.

Accepted Answer

A) True 
 B)False

Question 19

Suppose that quantity demand rises by 10% as a result of a 15% decrease in price.The price elasticity of demand for this good is

Accepted Answer

A)  inelastic and equal to 0.67. 
B)  elastic and equal to 0.67. 
C)  inelastic and equal to 1.50. 
D)  elastic and equal to 1.50. 
A)  inelastic and equal to 0.67. 
B)  elastic and equal to 0.67. 
C)  inelastic and equal to 1.50. 
D)  elastic and equal to 1.50.

Question 20

Total revenue will be at its largest value on a linear demand curve at the

Accepted Answer

A)  top of the curve,where prices are highest. 
B)  midpoint of the curve. 
C)  low end of the curve,where quantity demanded is highest. 
D)  None of the above is correct. 
A)  top of the curve,where prices are highest. 
B)  midpoint of the curve. 
C)  low end of the curve,where quantity demanded is highest. 
D)  None of the above is correct.

Exam 5: Elasticity and Its Application

Figure 5-15 -Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between $6 and $8?

Fiona's Fish Emporium increased its total monthly revenue from $1,500 to $1,800 when it raised the price of tropical fish from $5 to $9.The price elasticity of demand for Fiona's Fish Emporium is

A manufacturer produces 400 units when the market price of $10 per unit and produces 600 units when the market price is $12 per unit.Using the midpoint method,for this range of prices,the price elasticity of supply is about

Which of the following should be held constant when calculating an income elasticity of demand?

Table 5-6 -Refer to Table 5-6.Using the midpoint method,the income elasticity of demand for good Y is

The cross-price elasticity of demand can tell us whether goods are

Suppose good X has a positive income elasticity of demand.This implies that good X could be (i)a normal good. (ii)a necessity. (iii)an inferior good. (iv) A luxury.

As the price elasticity of supply approaches infinity,very small changes in price lead to

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Figure 5-11 -Refer to Figure 5-11.If the price falls from point A to point B,total revenue

The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price.If the owner is only interested in increasing revenue,she should

Suppose the price of potato chips decreases from $1.45 to $1.25 and,as a result,the quantity of potato chips demanded increases from 2,000 to 2,200.Using the midpoint method,the price elasticity of demand for potato chips in the given price range is

Farm programs that pay farmers not to plant crops on all their land

Figure 5-3 -Refer to Figure 5-3.Mark says he would buy one Mt.Dew per day regardless of the price.If this is true,then Mark's demand for Mt.Dew is represented by demand curve

Figure 5-5 -Refer to Figure 5-5.The maximum value of total revenue corresponds to a price of

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

A linear,downward-sloping demand curve has a constant elasticity but a changing slope.

Suppose that quantity demand rises by 10% as a result of a 15% decrease in price.The price elasticity of demand for this good is

Total revenue will be at its largest value on a linear demand curve at the

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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