Question 1

For a good that is a necessity,

Accepted Answer

A)  quantity demanded tends to respond substantially to a change in price. 
B)  demand tends to be inelastic. 
C)  the law of demand does not apply. 
D)  All of the above are correct. 
A)  quantity demanded tends to respond substantially to a change in price. 
B)  demand tends to be inelastic. 
C)  the law of demand does not apply. 
D)  All of the above are correct.

Question 2

When the price of good A is $50,the quantity demanded of good A is 500 units.When the price of good A rises to $70,the quantity demanded of good A falls to 400 units.Using the midpoint method,the price elasticity of demand for good A is

Accepted Answer

A)  1.50,and an increase in price will result in an increase in total revenue for good A. 
B)  1.50,and an increase in price will result in a decrease in total revenue for good A. 
C)  0.67,and an increase in price will result in an increase in total revenue for good A. 
D)  0.67,and an increase in price will result in a decrease in total revenue for good A. 
A)  1.50,and an increase in price will result in an increase in total revenue for good A. 
B)  1.50,and an increase in price will result in a decrease in total revenue for good A. 
C)  0.67,and an increase in price will result in an increase in total revenue for good A. 
D)  0.67,and an increase in price will result in a decrease in total revenue for good A.

Question 3

Figure 5-5  
-Refer to Figure 5-5.At a price of $12 per unit,sellers' total revenue equals

Accepted Answer

A)  $150. 
B)  $200. 
C)  $288. 
D)  $364. 
A)  $150. 
B)  $200. 
C)  $288. 
D)  $364.

Question 4

To determine whether a good is considered normal or inferior,one could examine the value of the

Accepted Answer

A)  income elasticity of demand for that good. 
B)  price elasticity of demand for that good. 
C)  price elasticity of supply for that good. 
D)  cross-price elasticity of demand for that good. 
A)  income elasticity of demand for that good. 
B)  price elasticity of demand for that good. 
C)  price elasticity of supply for that good. 
D)  cross-price elasticity of demand for that good.

Question 5

If the price elasticity of supply is 1.5,and a price increase led to a 1.8% increase in quantity supplied,then the price increase is about

Accepted Answer

A)  0.67%. 
B)  0.83%. 
C)  1.20%. 
D)  2.70%. 
A)  0.67%. 
B)  0.83%. 
C)  1.20%. 
D)  2.70%.

Question 6

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

Accepted Answer

A)  1.67 
B)  1.19 
C)  0.84 
D)  0.61 
A)  1.67 
B)  1.19 
C)  0.84 
D)  0.61

Question 7

If the price elasticity of demand is equal to 0,then demand is unit elastic.

Accepted Answer

A) True 
 B)False

Question 8

If the price elasticity of demand for a good is 0.4,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 9

Figure 5-4  
-Refer to Figure 5-4.Assume the section of the demand curve from A to B corresponds to prices between $8 and $16.Then,when the price changes between $9 and $10,

Accepted Answer

A)  quantity demanded changes proportionately less than the price. 
B)  quantity demanded changes proportionately more than the price. 
C)  quantity demanded changes the same amount proportionately as price. 
D)  the price elasticity of demand equals 1. 
A)  quantity demanded changes proportionately less than the price. 
B)  quantity demanded changes proportionately more than the price. 
C)  quantity demanded changes the same amount proportionately as price. 
D)  the price elasticity of demand equals 1.

Question 10

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

Accepted Answer

A)  laptop computers 
B)  iPod shuffles 
C)  designer jeans 
D)  college tuition for a junior or senior 
A)  laptop computers 
B)  iPod shuffles 
C)  designer jeans 
D)  college tuition for a junior or senior

Question 11

OPEC successfully raised the world price of oil in the 1970s and early 1980s,primarily due to

Accepted Answer

A)  an inelastic demand for oil and a reduction in the amount of oil supplied. 
B)  a reduction in the amount of oil supplied and a world-wide oil embargo. 
C)  a world-wide oil embargo and an elastic demand for oil. 
D)  a reduction in the amount of oil supplied and an elastic demand for oil. 
A)  an inelastic demand for oil and a reduction in the amount of oil supplied. 
B)  a reduction in the amount of oil supplied and a world-wide oil embargo. 
C)  a world-wide oil embargo and an elastic demand for oil. 
D)  a reduction in the amount of oil supplied and an elastic demand for oil.

Question 12

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

Accepted Answer

A) True 
 B)False

Question 13

If the price elasticity of supply for a good is equal to infinity,then the

Accepted Answer

A)  supply curve is vertical. 
B)  supply curve is horizontal. 
C)  supply curve also has a slope equal to infinity. 
D)  quantity supplied is constant regardless of the price. 
A)  supply curve is vertical. 
B)  supply curve is horizontal. 
C)  supply curve also has a slope equal to infinity. 
D)  quantity supplied is constant regardless of the price.

Question 14

For a particular good,a 10 percent increase in price causes a 5 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A)  There are many close substitutes for this good. 
B)  The good is a necessity. 
C)  The market for the good is narrowly defined. 
D)  The relevant time horizon is long. 
A)  There are many close substitutes for this good. 
B)  The good is a necessity. 
C)  The market for the good is narrowly defined. 
D)  The relevant time horizon is long.

Question 15

Table 5-6
  
-Refer to Table 5-6.Which scenario describes the market for oil in the long run?

Accepted Answer

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

Question 16

Income elasticity of demand measures how

Accepted Answer

A)  the quantity demanded changes as consumer income changes. 
B)  consumer purchasing power is affected by a change in the price of a good. 
C)  the price of a good is affected when there is a change in consumer income. 
D)  many units of a good a consumer can buy given a certain income level. 
A)  the quantity demanded changes as consumer income changes. 
B)  consumer purchasing power is affected by a change in the price of a good. 
C)  the price of a good is affected when there is a change in consumer income. 
D)  many units of a good a consumer can buy given a certain income level.

Question 17

Total revenue

Accepted Answer

A)  always increases as price increases. 
B)  increases as price increases,as long as demand is elastic. 
C)  decreases as price increases,as long as demand is inelastic. 
D)  remains unchanged as price increases when demand is unit elastic. 
A)  always increases as price increases. 
B)  increases as price increases,as long as demand is elastic. 
C)  decreases as price increases,as long as demand is inelastic. 
D)  remains unchanged as price increases when demand is unit elastic.

Question 18

Figure 5-6  
-Refer to Figure 5-6.Sellers' total revenue would increase if the price

Accepted Answer

A)  increased from $6 to $8. 
B)  decreased from $18 to $16. 
C)  decreased from $16 to $15. 
D)  All of the above are correct. 
A)  increased from $6 to $8. 
B)  decreased from $18 to $16. 
C)  decreased from $16 to $15. 
D)  All of the above are correct.

Question 19

Figure 5-4  
-Refer to Figure 5-4.The section of the demand curve from B to C represents the

Accepted Answer

A)  elastic section of the demand curve. 
B)  inelastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  perfectly elastic section of the demand curve. 
A)  elastic section of the demand curve. 
B)  inelastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  perfectly elastic section of the demand curve.

Question 20

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

Accepted Answer

A)  inelastic. 
B)  unit elastic. 
C)  elastic. 
D)  highly responsive to changes in income. 
A)  inelastic. 
B)  unit elastic. 
C)  elastic. 
D)  highly responsive to changes in income.

Exam 5: Elasticity and Its Application

For a good that is a necessity,

When the price of good A is $50,the quantity demanded of good A is 500 units.When the price of good A rises to $70,the quantity demanded of good A falls to 400 units.Using the midpoint method,the price elasticity of demand for good A is

Figure 5-5 -Refer to Figure 5-5.At a price of $12 per unit,sellers' total revenue equals

To determine whether a good is considered normal or inferior,one could examine the value of the

If the price elasticity of supply is 1.5,and a price increase led to a 1.8% increase in quantity supplied,then the price increase is about

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

If the price elasticity of demand is equal to 0,then demand is unit elastic.

If the price elasticity of demand for a good is 0.4,then a 10 percent increase in price results in a

Figure 5-4 -Refer to Figure 5-4.Assume the section of the demand curve from A to B corresponds to prices between $8 and $16.Then,when the price changes between $9 and $10,

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

OPEC successfully raised the world price of oil in the 1970s and early 1980s,primarily due to

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

If the price elasticity of supply for a good is equal to infinity,then the

For a particular good,a 10 percent increase in price causes a 5 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Table 5-6 -Refer to Table 5-6.Which scenario describes the market for oil in the long run?

Income elasticity of demand measures how

Total revenue

Figure 5-6 -Refer to Figure 5-6.Sellers' total revenue would increase if the price

Figure 5-4 -Refer to Figure 5-4.The section of the demand curve from B to C represents the

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

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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