Question 1

If the cross-price elasticity of demand for two goods is negative,then the two goods are complements.

Accepted Answer

A) True 
 B)False

Question 2

The greater the price elasticity of demand,the

Accepted Answer

A)  more likely the product is a necessity. 
B)  smaller the responsiveness of quantity demanded to a change in price. 
C)  greater the percentage change in price over the percentage change in quantity demanded. 
D)  greater the responsiveness of quantity demanded to a change in price. 
A)  more likely the product is a necessity. 
B)  smaller the responsiveness of quantity demanded to a change in price. 
C)  greater the percentage change in price over the percentage change in quantity demanded. 
D)  greater the responsiveness of quantity demanded to a change in price.

Question 3

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each.At a price of $0.80,the bakery would be willing to supply 1,100 bagels.Using the midpoint method,the price elasticity of supply for bagels is about

Accepted Answer

A)  0.62. 
B)  0.77. 
C)  1.24. 
D)  1.63. 
A)  0.62. 
B)  0.77. 
C)  1.24. 
D)  1.63.

Question 4

Table 5-5
The following table shows a portion of the demand schedule for a particular good at various levels of income.
  
-Refer to Table 5-5.Using the midpoint method,when income equals $7,500,what is the price elasticity of demand between $16 and $20?

Accepted Answer

A)  0.56 
B)  0.75 
C)  1.33 
D)  1.80 
A)  0.56 
B)  0.75 
C)  1.33 
D)  1.80

Question 5

Figure 5-6  
-Refer to Figure 5-6.If the price decreased from $18 to $6,total revenue would

Accepted Answer

A)  increase by $1,200,and demand is elastic between points A and C. 
B)  increase by $800,and demand is elastic between points A and C. 
C)  decrease by $1,200,and demand is inelastic between points A and C. 
D)  decrease by $800,and demand is inelastic between points A and C. 
A)  increase by $1,200,and demand is elastic between points A and C. 
B)  increase by $800,and demand is elastic between points A and C. 
C)  decrease by $1,200,and demand is inelastic between points A and C. 
D)  decrease by $800,and demand is inelastic between points A and C.

Question 6

In the early 1970s,OPEC's goal was to

Accepted Answer

A)  decrease the world-wide price of oil so that the quantity demanded increased,thus raising total revenues for OPEC members. 
B)  increase the world-wide price of oil by reducing the quantity of oil supplied. 
C)  increase the world-wide price of oil by increasing the quantity of oil supplied,thus raising total revenues for OPEC members. 
D)  decrease the world-wide price of oil so that quantity demanded increased. 
A)  decrease the world-wide price of oil so that the quantity demanded increased,thus raising total revenues for OPEC members. 
B)  increase the world-wide price of oil by reducing the quantity of oil supplied. 
C)  increase the world-wide price of oil by increasing the quantity of oil supplied,thus raising total revenues for OPEC members. 
D)  decrease the world-wide price of oil so that quantity demanded increased.

Question 7

Table 5-3
The following table shows the demand schedule for a particular good.
  
-Refer to Table 5-3.Using the midpoint method,what is the price elasticity of demand when price rises from $9 to $12?

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 8

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

Accepted Answer

A)  the quantity of the good demanded 
B)  the price of the good 
C)  income 
D)  All of the above should be held constant. 
A)  the quantity of the good demanded 
B)  the price of the good 
C)  income 
D)  All of the above should be held constant.

Question 9

When supply is perfectly elastic,the value of the price elasticity of supply is

Accepted Answer

A) greater than 0 and less than 1. 
B) 0. 
C) 1. 
D)  infinity. 
A) greater than 0 and less than 1. 
B) 0. 
C) 1. 
D)  infinity.

Question 10

Demand is said to have unit elasticity if the price elasticity of demand is

Accepted Answer

A)  less than 1. 
B)  greater than 1. 
C)  equal to 1. 
D)  equal to 0. 
A)  less than 1. 
B)  greater than 1. 
C)  equal to 1. 
D)  equal to 0.

Question 11

When demand is inelastic,the price elasticity of demand is

Accepted Answer

A)  less than 1,and price and total revenue will move in the same direction. 
B)  less than 1,and price and total revenue will move in opposite directions. 
C)  greater than 1,and price and total revenue will move in the same direction. 
D)  greater than 1,and price and total revenue will move in opposite directions. 
A)  less than 1,and price and total revenue will move in the same direction. 
B)  less than 1,and price and total revenue will move in opposite directions. 
C)  greater than 1,and price and total revenue will move in the same direction. 
D)  greater than 1,and price and total revenue will move in opposite directions.

Question 12

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

Accepted Answer

A)  The elasticity of supply approaches infinity. 
B)  The supply curve is vertical. 
C)  At a price below $4,quantity supplied is infinite. 
D)  At a price above $4,quantity supplied is zero. 
A)  The elasticity of supply approaches infinity. 
B)  The supply curve is vertical. 
C)  At a price below $4,quantity supplied is infinite. 
D)  At a price above $4,quantity supplied is zero.

Question 13

Demand is said to be inelastic if the

Accepted Answer

A)  quantity demanded changes proportionately more than price. 
B)  price changes proportionately more than income. 
C)  quantity demanded changes proportionately less than price. 
D)  quantity demanded changes proportionately the same as price. 
A)  quantity demanded changes proportionately more than price. 
B)  price changes proportionately more than income. 
C)  quantity demanded changes proportionately less than price. 
D)  quantity demanded changes proportionately the same as price.

Question 14

For a particular good,a 10 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

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

Question 15

Suppose that when the price of wheat is $2 per bushel,farmers can sell 10 million bushels.When the price of wheat is $3 per bushel,farmers can sell 8 million bushels.Which of the following statements is true? The demand for wheat is

Accepted Answer

A)  income inelastic,so an increase in the price of wheat will increase the total revenue of wheat farmers. 
B)  income elastic,so an increase in the price of wheat will increase the total revenue of wheat farmers. 
C)  price inelastic,so an increase in the price of wheat will increase the total revenue of wheat farmers. 
D)  price elastic,so an increase in the price of wheat will increase the total revenue of wheat farmers. 
A)  income inelastic,so an increase in the price of wheat will increase the total revenue of wheat farmers. 
B)  income elastic,so an increase in the price of wheat will increase the total revenue of wheat farmers. 
C)  price inelastic,so an increase in the price of wheat will increase the total revenue of wheat farmers. 
D)  price elastic,so an increase in the price of wheat will increase the total revenue of wheat farmers.

Question 16

The difference between slope and elasticity is that slope

Accepted Answer

A)  is a ratio of two changes,and elasticity is a ratio of two percentage changes. 
B)  is a ratio of two percentage changes,and elasticity is a ratio of two changes. 
C)  measures changes in quantity demanded more accurately than elasticity. 
D)  none of the above; there is no difference between slope and elasticity. 
A)  is a ratio of two changes,and elasticity is a ratio of two percentage changes. 
B)  is a ratio of two percentage changes,and elasticity is a ratio of two changes. 
C)  measures changes in quantity demanded more accurately than elasticity. 
D)  none of the above; there is no difference between slope and elasticity.

Question 17

The federal government is concerned about obesity in the United States.Congress is considering two plans.One will ban the production and sale of "junk food." The other will increase nutrition-education programs and include substantial advertising campaigns to encourage healthy eating habits.The junk-food ban program

Accepted Answer

A)  and the education program will reduce the quantity of junk food sold and raise the price. 
B)  and the education program will reduce the quantity of junk food sold and lower the price. 
C)  will reduce the quantity of junk food sold and raise the price.The education program will reduce the quantity of junk food sold and lower the price. 
D)  will reduce the quantity of junk food sold and lower the price.The education program will reduce the quantity of junk food sold and raise the price. 
A)  and the education program will reduce the quantity of junk food sold and raise the price. 
B)  and the education program will reduce the quantity of junk food sold and lower the price. 
C)  will reduce the quantity of junk food sold and raise the price.The education program will reduce the quantity of junk food sold and lower the price. 
D)  will reduce the quantity of junk food sold and lower the price.The education program will reduce the quantity of junk food sold and raise the price.

Question 18

If a 40% change in price results in a 25% change in quantity supplied,then the price elasticity of supply is about

Accepted Answer

A)  0.63,and supply is elastic. 
B)  0.63,and supply is inelastic. 
C)  1.60,and supply is elastic. 
D)  1.60,and supply is inelastic. 
A)  0.63,and supply is elastic. 
B)  0.63,and supply is inelastic. 
C)  1.60,and supply is elastic. 
D)  1.60,and supply is inelastic.

Question 19

If we observe that when the price of chocolate decreases by 10%,quantity demanded increases by 25%,then the demand for chocolate is price elastic.

Accepted Answer

A) True 
 B)False

Question 20

If marijuana were legalized,it is likely that there would be an increase in the supply of marijuana.Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana.These advocates believe that the

Accepted Answer

A)  supply for marijuana is elastic. 
B)  demand for marijuana is elastic. 
C)  supply for marijuana is inelastic. 
D)  demand for marijuana is inelastic. 
A)  supply for marijuana is elastic. 
B)  demand for marijuana is elastic. 
C)  supply for marijuana is inelastic. 
D)  demand for marijuana is inelastic.

Exam 5: Elasticity and Its Application

If the cross-price elasticity of demand for two goods is negative,then the two goods are complements.

The greater the price elasticity of demand,the

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each.At a price of $0.80,the bakery would be willing to supply 1,100 bagels.Using the midpoint method,the price elasticity of supply for bagels is about

Table 5-5 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-5.Using the midpoint method,when income equals $7,500,what is the price elasticity of demand between $16 and $20?

Figure 5-6 -Refer to Figure 5-6.If the price decreased from $18 to $6,total revenue would

In the early 1970s,OPEC's goal was to

Table 5-3 The following table shows the demand schedule for a particular good. -Refer to Table 5-3.Using the midpoint method,what is the price elasticity of demand when price rises from $9 to $12?

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

When supply is perfectly elastic,the value of the price elasticity of supply is

Demand is said to have unit elasticity if the price elasticity of demand is

When demand is inelastic,the price elasticity of demand is

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

Demand is said to be inelastic if the

For a particular good,a 10 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Suppose that when the price of wheat is $2 per bushel,farmers can sell 10 million bushels.When the price of wheat is $3 per bushel,farmers can sell 8 million bushels.Which of the following statements is true? The demand for wheat is

The difference between slope and elasticity is that slope

If a 40% change in price results in a 25% change in quantity supplied,then the price elasticity of supply is about

If we observe that when the price of chocolate decreases by 10%,quantity demanded increases by 25%,then the demand for chocolate is price elastic.

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

Filters