Question 1

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

Accepted Answer

A)  natural gas 
B)  doctor's visits 
C)  hamburgers 
D)  boats 
A)  natural gas 
B)  doctor's visits 
C)  hamburgers 
D)  boats

Question 2

Table 5-2
  
-Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is

Accepted Answer

A)  0.31. 
B)  0.46. 
C)  1.25. 
D)  2.17 
A)  0.31. 
B)  0.46. 
C)  1.25. 
D)  2.17

Question 3

-Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $2 and $4?

Accepted Answer

The price

Question 4

Suppose that 300 bottles of soda are demanded at a particular price. If the price of a bottle of soda rises from that price by 6 percent, the number of bottles of soda demanded falls to 275. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Accepted Answer

A)  demand for bottles of soda in this price range is perfectly elastic. 
B)  price increase will increase the total revenue of soda sellers. 
C)  price elasticity of demand for bottles of soda in this price range is about 0.69. 
D)  price elasticity of demand for bottles of soda in this price range is about 1.45. 
A)  demand for bottles of soda in this price range is perfectly elastic. 
B)  price increase will increase the total revenue of soda sellers. 
C)  price elasticity of demand for bottles of soda in this price range is about 0.69. 
D)  price elasticity of demand for bottles of soda in this price range is about 1.45.

Question 5

At price of $1.25, a paper manufacturer is willing to supply 150 spiral notebooks per day. At a price of $1.50, the paper manufacturer is willing to supply 175 spiral notebooks per day. Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A)  1.18. 
B)  1.00. 
C)  0.85. 
D)  0.25. 
A)  1.18. 
B)  1.00. 
C)  0.85. 
D)  0.25.

Question 6

The price elasticity of supply measures how responsive

Accepted Answer

A)  equilibrium price is to equilibrium quantity. 
B)  sellers are to a change in buyers' income. 
C)  sellers are to a change in price. 
D)  consumers are to the number of substitutes. 
A)  equilibrium price is to equilibrium quantity. 
B)  sellers are to a change in buyers' income. 
C)  sellers are to a change in price. 
D)  consumers are to the number of substitutes.

Question 7

In general, demand curves for necessities tend to be price elastic.

Accepted Answer

A) True 
 B)False

Question 8

Using the midpoint method, compute the elasticity of demand between points A and B. Is demand along this portion of the curve elastic or inelastic? Interpret your answer with regard to price and quantity demanded. Now compute the elasticity of demand between points B and C. Is demand along this portion of the curve elastic or inelastic?

Accepted Answer

In the section of the demand curve from

Question 9

If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

Accepted Answer

A) True 
 B)False

Question 10

Suppose demand is given by the equation:   Using the midpoint method, what is the price elasticity of demand between $7 and $8?

Accepted Answer

The price

Question 11

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

Accepted Answer

A) True 
 B)False

Question 12

Figure 5-4  
-Refer to Figure 5-4. If the price increases in the region of the demand curve between points A and B, we can expect total revenue to

Accepted Answer

A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first increase, then decrease until total revenue is maximized. 
A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first increase, then decrease until total revenue is maximized.

Question 13

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  unit elastic. 
D)  quite sensitive to changes in income. 
A)  inelastic. 
B)  elastic. 
C)  unit elastic. 
D)  quite sensitive to changes in income.

Question 14

Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain.

Accepted Answer

If demand is inelastic, then r

Question 15

If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result, then the price elasticity of demand is 3.

Accepted Answer

A) True 
 B)False

Question 16

If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by

Accepted Answer

A)  1.92%, and apples sellers' total revenue will increase as a result. 
B)  1.92%, and apples sellers' total revenue will decrease as a result. 
C)  3%, and apples sellers' total revenue will increase as a result. 
D)  3%, and apples sellers' total revenue will decrease as a result. 
A)  1.92%, and apples sellers' total revenue will increase as a result. 
B)  1.92%, and apples sellers' total revenue will decrease as a result. 
C)  3%, and apples sellers' total revenue will increase as a result. 
D)  3%, and apples sellers' total revenue will decrease as a result.

Question 17

If a firm is facing inelastic demand, then the firm should decrease price to increase revenue.

Accepted Answer

A) True 
 B)False

Question 18

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

Accepted Answer

A)  positive, so Joan considers hamburger to be an inferior good. 
B)  positive, so Joan considers hamburger to be a normal good and a necessity. 
C)  negative, so Joan considers hamburger to be an inferior good. 
D)  negative, so Joan considers hamburger to be a normal good but not a necessity. 
A)  positive, so Joan considers hamburger to be an inferior good. 
B)  positive, so Joan considers hamburger to be a normal good and a necessity. 
C)  negative, so Joan considers hamburger to be an inferior good. 
D)  negative, so Joan considers hamburger to be a normal good but not a necessity.

Question 19

Suppose the point Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear demand curve. Then

Accepted Answer

A)  a decrease in price from $18 to $16 will increase total revenue. 
B)  a decrease in price from $24 to $22 will decrease total revenue. 
C)  a decrease in the price from $21 to $19 will decrease total revenue. 
D)  the maximum value of total revenue is $68,000. 
A)  a decrease in price from $18 to $16 will increase total revenue. 
B)  a decrease in price from $24 to $22 will decrease total revenue. 
C)  a decrease in the price from $21 to $19 will decrease total revenue. 
D)  the maximum value of total revenue is $68,000.

Question 20

When demand is perfectly inelastic, the price elasticity of demand

Accepted Answer

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

Exam 5: Elasticity and Its Application

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

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is

-Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $2 and $4?

Suppose that 300 bottles of soda are demanded at a particular price. If the price of a bottle of soda rises from that price by 6 percent, the number of bottles of soda demanded falls to 275. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

At price of $1.25, a paper manufacturer is willing to supply 150 spiral notebooks per day. At a price of $1.50, the paper manufacturer is willing to supply 175 spiral notebooks per day. Using the midpoint method, the price elasticity of supply is about

The price elasticity of supply measures how responsive

In general, demand curves for necessities tend to be price elastic.

If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $7 and $8?

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

Figure 5-4 -Refer to Figure 5-4. If the price increases in the region of the demand curve between points A and B, we can expect total revenue to

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain.

If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result, then the price elasticity of demand is 3.

If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by

If a firm is facing inelastic demand, then the firm should decrease price to increase revenue.

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

Suppose the point Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear demand curve. Then

When demand is perfectly inelastic, the price elasticity of demand

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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