Question 1

If the price elasticity of demand for tuna is 0.7,then a 1.5% increase in the price of tuna will decrease the quantity demanded of tuna by

Accepted Answer

A)  1.05%,and tuna sellers' total revenue will increase as a result. 
B)  1.05%,and tuna sellers' total revenue will decrease as a result. 
C)  2.14%,and tuna sellers' total revenue will increase as a result. 
D)  2.14%,and tuna sellers' total revenue will decrease as a result. 
A)  1.05%,and tuna sellers' total revenue will increase as a result. 
B)  1.05%,and tuna sellers' total revenue will decrease as a result. 
C)  2.14%,and tuna sellers' total revenue will increase as a result. 
D)  2.14%,and tuna sellers' total revenue will decrease as a result.

Question 2

Generally,a firm is more willing and able to increase quantity supplied in response to a price change when

Accepted Answer

A)  the relevant time period is short rather than long. 
B)  the relevant time period is long rather than short. 
C)  supply is inelastic. 
D)  the firm is experiencing capacity problems. 
A)  the relevant time period is short rather than long. 
B)  the relevant time period is long rather than short. 
C)  supply is inelastic. 
D)  the firm is experiencing capacity problems.

Question 3

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds.Using the midpoint method,what is the approximate value of the price elasticity of supply?

Accepted Answer

A)  0.67 
B)  0.89 
C)  1.00 
D)  1.13 
A)  0.67 
B)  0.89 
C)  1.00 
D)  1.13

Question 4

If the price elasticity of demand for a good is 10.0,then a 4 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 5

If sellers do not adjust their quantity supplied at all in response to a change in price,the price elasticity of supply is

Accepted Answer

A)  zero,and the supply curve is horizontal. 
B)  zero,and the supply curve is vertical. 
C)  infinity,and the supply curve is horizontal. 
D)  infinity,and the supply curve is vertical. 
A)  zero,and the supply curve is horizontal. 
B)  zero,and the supply curve is vertical. 
C)  infinity,and the supply curve is horizontal. 
D)  infinity,and the supply curve is vertical.

Question 6

Price elasticity of demand along a linear,downward-sloping demand curve decreases as price falls.

Accepted Answer

A) True 
 B)False

Question 7

If the cross-price elasticity of demand for two goods is 1.25,then

Accepted Answer

A)  the two goods are luxuries. 
B)  the two goods are substitutes. 
C)  one of the goods is normal and the other good is inferior. 
D)  the demand for one of the goods conforms to the law of demand,but the demand for the other good violates the law of demand. 
A)  the two goods are luxuries. 
B)  the two goods are substitutes. 
C)  one of the goods is normal and the other good is inferior. 
D)  the demand for one of the goods conforms to the law of demand,but the demand for the other good violates the law of demand.

Question 8

If the price of walnuts rises,many people would switch from consuming walnuts to consuming pecans.But if the price of salt rises,people would have difficulty purchasing something to use in its place.These examples illustrate the importance of

Accepted Answer

A)  the availability of close 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 close 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 9

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.Total consumer spending on aged cheddar cheese will

Accepted Answer

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

Question 10

The flatter the demand curve that passes through a given point,the more elastic the demand.

Accepted Answer

A) True 
 B)False

Question 11

If the price elasticity of demand for a good is 4,then a 12 percent decrease in price results in a

Accepted Answer

A)  0.33 percent increase in the quantity demanded. 
B)  3 percent increase in the quantity demanded. 
C)  30 percent increase in the quantity demanded. 
D)  48 percent increase in the quantity demanded. 
A)  0.33 percent increase in the quantity demanded. 
B)  3 percent increase in the quantity demanded. 
C)  30 percent increase in the quantity demanded. 
D)  48 percent increase in the quantity demanded.

Question 12

If a 20% change in price results in a 15% change in quantity supplied,then the price elasticity of supply is about

Accepted Answer

A)  1.33,and supply is elastic. 
B)  1.33,and supply is inelastic. 
C)  0.75,and supply is elastic. 
D)  0.75,and supply is inelastic. 
A)  1.33,and supply is elastic. 
B)  1.33,and supply is inelastic. 
C)  0.75,and supply is elastic. 
D)  0.75,and supply is inelastic.

Question 13

If demand is price inelastic,then when price rises,total revenue

Accepted Answer

A)  will fall. 
B)  will rise. 
C)  will remain unchanged. 
D)  may rise,fall,or remain unchanged.More information is need to determine the change in total revenue with certainty. 
A)  will fall. 
B)  will rise. 
C)  will remain unchanged. 
D)  may rise,fall,or remain unchanged.More information is need to determine the change in total revenue with certainty.

Question 14

For a particular good,a 5 percent increase in price causes a 15 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

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

Question 15

If the price elasticity of supply is 1.5,and a price increase led to a 3% increase in quantity supplied,then the price increase is about

Accepted Answer

A)  0.2%. 
B)  0.5%. 
C)  2.0%. 
D)  4.5%. 
A)  0.2%. 
B)  0.5%. 
C)  2.0%. 
D)  4.5%.

Question 16

If the demand for apples is elastic,then an increase in the price of apples will

Accepted Answer

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

Question 17

Recently,in Smalltown,the price of Twinkies fell from $0.80 to $0.70.As a result,the quantity demanded of Ho-Ho's decreased from 120 to 100.What would be the appropriate elasticity to compute? Using the midpoint method,compute this elasticity.What does your answer tell you?

Accepted Answer

The appropriate elasticity to compute wo

Question 18

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

Accepted Answer

A)  0.5 
B)  1 
C)  1.5 
D)  All of the above could be correct. 
A)  0.5 
B)  1 
C)  1.5 
D)  All of the above could be correct.

Question 19

A key determinant of the price elasticity of supply is the

Accepted Answer

A)  time horizon. 
B)  income of consumers. 
C)  price elasticity of demand. 
D)  importance of the good in a consumer's budget. 
A)  time horizon. 
B)  income of consumers. 
C)  price elasticity of demand. 
D)  importance of the good in a consumer's budget.

Question 20

If the demand for donuts is elastic,then a decrease in the price of donuts will

Accepted Answer

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

Exam 5: Elasticity and Its Application

If the price elasticity of demand for tuna is 0.7,then a 1.5% increase in the price of tuna will decrease the quantity demanded of tuna by

Generally,a firm is more willing and able to increase quantity supplied in response to a price change when

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds.Using the midpoint method,what is the approximate value of the price elasticity of supply?

If the price elasticity of demand for a good is 10.0,then a 4 percent increase in price results in a

If sellers do not adjust their quantity supplied at all in response to a change in price,the price elasticity of supply is

Price elasticity of demand along a linear,downward-sloping demand curve decreases as price falls.

If the cross-price elasticity of demand for two goods is 1.25,then

If the price of walnuts rises,many people would switch from consuming walnuts to consuming pecans.But if the price of salt rises,people would have difficulty purchasing something to use in its place.These examples illustrate the importance of

The flatter the demand curve that passes through a given point,the more elastic the demand.

If the price elasticity of demand for a good is 4,then a 12 percent decrease in price results in a

If a 20% change in price results in a 15% change in quantity supplied,then the price elasticity of supply is about

If demand is price inelastic,then when price rises,total revenue

For a particular good,a 5 percent increase in price causes a 15 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

If the price elasticity of supply is 1.5,and a price increase led to a 3% increase in quantity supplied,then the price increase is about

If the demand for apples is elastic,then an increase in the price of apples will

Recently,in Smalltown,the price of Twinkies fell from $0.80 to $0.70.As a result,the quantity demanded of Ho-Ho's decreased from 120 to 100.What would be the appropriate elasticity to compute? Using the midpoint method,compute this elasticity.What does your answer tell you?

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

A key determinant of the price elasticity of supply is the

If the demand for donuts is elastic,then a decrease in the price of donuts will

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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