Question 1

Suppose that quantity demand falls by 30% as a result of a 5% increase in price.The price elasticity of demand for this good is

Accepted Answer

A)  inelastic and equal to 6. 
B)  elastic and equal to 6. 
C)  inelastic and equal to 0.17. 
D)  elastic and equal to 0.17. 
A)  inelastic and equal to 6. 
B)  elastic and equal to 6. 
C)  inelastic and equal to 0.17. 
D)  elastic and equal to 0.17.

Question 2

Figure 5-14  
-Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points D and G?

Accepted Answer

A)  1.89 
B)  1.26 
C)  0.53 
D)  0.34 
A)  1.89 
B)  1.26 
C)  0.53 
D)  0.34

Question 3

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

Accepted Answer

A)  subscriptions to premium movie channels through the local cable television provider 
B)  hi-definition DVD players 
C)  champagne 
D)  housing 
A)  subscriptions to premium movie channels through the local cable television provider 
B)  hi-definition DVD players 
C)  champagne 
D)  housing

Question 4

Scenario 5-3
Milk has an inelastic demand,and beef has an elastic demand.Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-3.The equilibrium quantity will

Accepted Answer

A)  increase in both the milk and beef markets. 
B)  increase in the milk market and decrease in the beef market. 
C)  decrease in the milk market and increase in the beef market. 
D)  decrease in both the milk and beef markets. 
A)  increase in both the milk and beef markets. 
B)  increase in the milk market and decrease in the beef market. 
C)  decrease in the milk market and increase in the beef market. 
D)  decrease in both the milk and beef markets.

Question 5

When demand is elastic,an increase in price will cause

Accepted Answer

A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded. 
A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded.

Question 6

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)  the mayor 
B)  the city manager 
C)  The answer depends on the price elasticity of demand. 
D)  The answer depends on the costs of construction of the new municipal swimming pool. 
A)  the mayor 
B)  the city manager 
C)  The answer depends on the price elasticity of demand. 
D)  The answer depends on the costs of construction of the new municipal swimming pool.

Question 7

Scenario 5-3
Milk has an inelastic demand,and beef has an elastic demand.Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-3.Total consumer spending on milk will

Accepted Answer

A)  increase,and total consumer spending on beef will increase. 
B)  increase,and total consumer spending on beef will decrease. 
C)  decrease,and total consumer spending on beef will increase. 
D)  decrease,and total consumer spending on beef will decrease. 
A)  increase,and total consumer spending on beef will increase. 
B)  increase,and total consumer spending on beef will decrease. 
C)  decrease,and total consumer spending on beef will increase. 
D)  decrease,and total consumer spending on beef will decrease.

Question 8

Melvin's Magnets earned $200 in total revenue last month when it sold 100 souvenir magnets.This month it earned $300 in total revenue when it sold 60 souvenir magnets.The price elasticity of demand for Marvin's Magnets is

Accepted Answer

A)  0.27. 
B)  0.58. 
C)  1.25. 
D)  1.71. 
A)  0.27. 
B)  0.58. 
C)  1.25. 
D)  1.71.

Question 9

Suppose goods A and B are substitutes for each other.We would expect the cross-price elasticity between these two goods to be

Accepted Answer

A)  positive. 
B)  negative. 
C)  either positive or negative.It depends whether A and B are normal goods or inferior goods. 
D)  either positive or negative.It depends whether the current price level is on the elastic or inelastic portion of the demand curve. 
A)  positive. 
B)  negative. 
C)  either positive or negative.It depends whether A and B are normal goods or inferior goods. 
D)  either positive or negative.It depends whether the current price level is on the elastic or inelastic portion of the demand curve.

Question 10

Between 1950 and today there was a

Accepted Answer

A)  20 percent drop in the number of farmers,but farm output more than tripled. 
B)  30 percent drop in the number of farmers,but farm output more than tripled. 
C)  50 percent drop in the number of farmers,but farm output more than doubled. 
D)  70 percent drop in the number of farmers,but farm output more than doubled. 
A)  20 percent drop in the number of farmers,but farm output more than tripled. 
B)  30 percent drop in the number of farmers,but farm output more than tripled. 
C)  50 percent drop in the number of farmers,but farm output more than doubled. 
D)  70 percent drop in the number of farmers,but farm output more than doubled.

Question 11

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%,then the price must have decreased by 3%.

Accepted Answer

A) True 
 B)False

Question 12

Figure 5-4  
-Refer to Figure 5-4.Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00.Then,between prices of $4.99 and $5.01,the price elasticity of demand is

Accepted Answer

A)  less than 1 but greater than zero. 
B)  equal to 1. 
C)  greater than 1. 
D)  equal to zero. 
A)  less than 1 but greater than zero. 
B)  equal to 1. 
C)  greater than 1. 
D)  equal to zero.

Question 13

The price elasticity of supply measures how responsive

Accepted Answer

A)  sellers are to a change in price. 
B)  sellers are to a change in buyers' income. 
C)  buyers are to a change in production costs. 
D)  equilibrium price is to a change in supply. 
A)  sellers are to a change in price. 
B)  sellers are to a change in buyers' income. 
C)  buyers are to a change in production costs. 
D)  equilibrium price is to a change in supply.

Question 14

Table 5-3
The following table shows the demand schedule for a particular good.
  
-Refer to Table 5-3.Using the midpoint method,when price falls from $6 to $3,the price elasticity of demand is

Accepted Answer

A)  0.43 
B)  0.67 
C)  1.50 
D)  2.33 
A)  0.43 
B)  0.67 
C)  1.50 
D)  2.33

Question 15

In January the price of widgets was $1.00,and Wendy's Widgets produced 80 widgets.In February the price of widgets was $1.50,and Wendy's Widgets produced 110 widgets.In March the price of widgets was $2.00,and Wendy's Widgets produced 140 widgets.The price elasticity of supply of Wendy's Widgets was about

Accepted Answer

A)  0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00. 
B)  1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00. 
C)  0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00. 
D)  1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00. 
A)  0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00. 
B)  1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00. 
C)  0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00. 
D)  1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.

Question 16

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

Accepted Answer

A)  ice cream 
B)  frozen yogurt 
C)  vanilla ice cream 
D)  Häagen-Dazs® vanilla bean ice cream 
A)  ice cream 
B)  frozen yogurt 
C)  vanilla ice cream 
D)  Häagen-Dazs® vanilla bean ice cream

Question 17

If we observe that when the price of chocolate increases by 10%,quantity demanded falls by 5%,then the demand for chocolate is price inelastic.

Accepted Answer

A) True 
 B)False

Question 18

If two goods are complements,their cross-price elasticity will be

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  equal to the difference between the income elasticities of demand for the two goods. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  equal to the difference between the income elasticities of demand for the two goods.

Question 19

Which of the following is not a determinant of the price elasticity of demand for a good?

Accepted Answer

A)  the time horizon 
B)  the steepness or flatness of the supply curve for the good 
C)  the definition of the market for the good 
D)  the availability of substitutes for the good 
A)  the time horizon 
B)  the steepness or flatness of the supply curve for the good 
C)  the definition of the market for the good 
D)  the availability of substitutes for the good

Question 20

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

Suppose that quantity demand falls by 30% as a result of a 5% increase in price.The price elasticity of demand for this good is

Figure 5-14 -Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points D and G?

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

Scenario 5-3 Milk has an inelastic demand,and beef has an elastic demand.Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-3.The equilibrium quantity will

When demand is elastic,an increase in price will cause

Scenario 5-3 Milk has an inelastic demand,and beef has an elastic demand.Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-3.Total consumer spending on milk will

Melvin's Magnets earned $200 in total revenue last month when it sold 100 souvenir magnets.This month it earned $300 in total revenue when it sold 60 souvenir magnets.The price elasticity of demand for Marvin's Magnets is

Suppose goods A and B are substitutes for each other.We would expect the cross-price elasticity between these two goods to be

Between 1950 and today there was a

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%,then the price must have decreased by 3%.

Figure 5-4 -Refer to Figure 5-4.Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00.Then,between prices of $4.99 and $5.01,the price elasticity of demand is

The price elasticity of supply measures how responsive

Table 5-3 The following table shows the demand schedule for a particular good. -Refer to Table 5-3.Using the midpoint method,when price falls from $6 to $3,the price elasticity of demand is

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

If we observe that when the price of chocolate increases by 10%,quantity demanded falls by 5%,then the demand for chocolate is price inelastic.

If two goods are complements,their cross-price elasticity will be

Which of the following is not a determinant of the price elasticity of demand for a good?

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

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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