Question 1

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Accepted Answer

A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price increase always leads to an increase in total revenue. 
A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price increase always leads to an increase in total revenue.

Question 2

Suppose the price elasticity of demand for a product is 0.5. If a supplier wants to increase revenue, what change should it make to price, if any?

Accepted Answer

The answer of Suppose the price elasticity of demand for...

Question 3

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 4

Scenario 5-5
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 5-5. The change in equilibrium quantity will be

Accepted Answer

A)  greater in the milk market than in the beef market. 
B)  greater in the beef market than in the milk market. 
C)  the same in the milk and beef markets. 
D)  Any of the above could be correct. 
A)  greater in the milk market than in the beef market. 
B)  greater in the beef market than in the milk market. 
C)  the same in the milk and beef markets. 
D)  Any of the above could be correct.

Question 5

In general, elasticity is a measure of

Accepted Answer

A)  the extent to which advances in technology are adopted by producers. 
B)  the extent to which a market is competitive. 
C)  how firms' profits respond to changes in market prices. 
D)  how much buyers and sellers respond to changes in market conditions. 
A)  the extent to which advances in technology are adopted by producers. 
B)  the extent to which a market is competitive. 
C)  how firms' profits respond to changes in market prices. 
D)  how much buyers and sellers respond to changes in market conditions.

Question 6

When a supply curve is relatively flat, the

Accepted Answer

A)  sellers are not at all responsive to a change in price. 
B)  equilibrium price changes substantially when the demand for the good changes. 
C)  supply is relatively elastic. 
D)  supply is relatively inelastic. 
A)  sellers are not at all responsive to a change in price. 
B)  equilibrium price changes substantially when the demand for the good changes. 
C)  supply is relatively elastic. 
D)  supply is relatively inelastic.

Question 7

The flatter the demand curve through a given point, the

Accepted Answer

A)  greater the price elasticity of demand at that point. 
B)  smaller the price elasticity of demand at that point. 
C)  closer the price elasticity of demand will be to the slope of the curve. 
D)  greater the absolute value of the change in total revenue when there is a movement from that point upward and to the left along the demand curve. 
A)  greater the price elasticity of demand at that point. 
B)  smaller the price elasticity of demand at that point. 
C)  closer the price elasticity of demand will be to the slope of the curve. 
D)  greater the absolute value of the change in total revenue when there is a movement from that point upward and to the left along the demand curve.

Question 8

Figure 5-12  
-Refer to Figure 5-12. Sellers' total revenue would increase if the price

Accepted Answer

A)  increased from $12 to $15. 
B)  decreased from $39 to $36. 
C)  decreased from $27 to $24. 
D)  All of the above are correct. 
A)  increased from $12 to $15. 
B)  decreased from $39 to $36. 
C)  decreased from $27 to $24. 
D)  All of the above are correct.

Question 9

Demand is inelastic if the price elasticity of demand is

Accepted Answer

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

Question 10

For a particular good, an 8 percent increase in price causes a 4 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 luxury. 
C)  The market for the good is broadly defined. 
D)  The relevant time horizon is long. 
A)  There are many close substitutes for this good. 
B)  The good is a luxury. 
C)  The market for the good is broadly defined. 
D)  The relevant time horizon is long.

Question 11

Adam and Barb go to the store to purchase some lottery tickets. Without looking at the price, Adam says "I'll take 10 lottery tickets," and Barb says "I'll take $10 worth of lottery tickets." What is each person's price elasticity of demand for lottery tickets?

Accepted Answer

Since Adam wants 10 tickets regardless o

Question 12

Table 5-10
  
-Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most inelastic price elasticity of supply?

Accepted Answer

A)  Supply curve X 
B)  Supply curve Y 
C)  Supply curve Z 
D)  There is no difference in the elasticities of the three supply curves. 
A)  Supply curve X 
B)  Supply curve Y 
C)  Supply curve Z 
D)  There is no difference in the elasticities of the three supply curves.

Question 13

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)  Häagen­Dazs® vanilla bean ice cream 
A)  ice cream 
B)  frozen yogurt 
C)  vanilla ice cream 
D)  Häagen­Dazs® vanilla bean ice cream

Question 14

Figure 5-7  
-Refer to Figure 5-7. For prices above $5, demand is price

Accepted Answer

A)  elastic, and raising price will increase total revenue. 
B)  inelastic, and raising price will increase total revenue. 
C)  elastic, and lowering price will increase total revenue. 
D)  inelastic, and lowering price will increase total revenue. 
A)  elastic, and raising price will increase total revenue. 
B)  inelastic, and raising price will increase total revenue. 
C)  elastic, and lowering price will increase total revenue. 
D)  inelastic, and lowering price will increase total revenue.

Question 15

Figure 5-19  
-Refer to Figure 5-19. Which of the following statements is correct?

Accepted Answer

A)  Supply curve A is perfectly elastic. 
B)  Supply curve B is perfectly inelastic. 
C)  Supply curve C is more inelastic than supply curve D. 
D)  Supply curve D is unit elastic. 
A)  Supply curve A is perfectly elastic. 
B)  Supply curve B is perfectly inelastic. 
C)  Supply curve C is more inelastic than supply curve D. 
D)  Supply curve D is unit elastic.

Question 16

When a university bookstore prices chemistry textbooks at $200 each, it generally sells 120 books per month. If it lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity of demand for chemistry books is about

Accepted Answer

A)  1.29, and a decrease in price from $200 to $160 results in an increase in total revenue. 
B)  1.29, and a decrease in price from $200 to $160 results in a decrease in total revenue. 
C)  0.78, and a decrease in price from $200 to $160 results in an increase in total revenue. 
D)  0.78, and a decrease in price from $200 to $160 results in a decrease in total revenue. 
A)  1.29, and a decrease in price from $200 to $160 results in an increase in total revenue. 
B)  1.29, and a decrease in price from $200 to $160 results in a decrease in total revenue. 
C)  0.78, and a decrease in price from $200 to $160 results in an increase in total revenue. 
D)  0.78, and a decrease in price from $200 to $160 results in a decrease in total revenue.

Question 17

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

Accepted Answer

A)  lattés 
B)  filet mignon 
C)  Grey Goose® vodka 
D)  milk 
A)  lattés 
B)  filet mignon 
C)  Grey Goose® vodka 
D)  milk

Question 18

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 19

Normal goods have negative income elasticities of demand, while inferior goods have positive income elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 5: Elasticity and Its Application

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Suppose the price elasticity of demand for a product is 0.5. If a supplier wants to increase revenue, what change should it make to price, if any?

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

Scenario 5-5 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 5-5. The change in equilibrium quantity will be

In general, elasticity is a measure of

When a supply curve is relatively flat, the

The flatter the demand curve through a given point, the

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

Demand is inelastic if the price elasticity of demand is

For a particular good, an 8 percent increase in price causes a 4 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Adam and Barb go to the store to purchase some lottery tickets. Without looking at the price, Adam says "I'll take 10 lottery tickets," and Barb says "I'll take $10 worth of lottery tickets." What is each person's price elasticity of demand for lottery tickets?

Table 5-10 -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most inelastic price elasticity of supply?

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

Figure 5-7 -Refer to Figure 5-7. For prices above $5, demand is price

Figure 5-19 -Refer to Figure 5-19. Which of the following statements is correct?

When a university bookstore prices chemistry textbooks at $200 each, it generally sells 120 books per month. If it lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity of demand for chemistry books is about

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

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

Normal goods have negative income elasticities of demand, while inferior goods have positive income elasticities of demand.

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

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