Question 1

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 2

In which of these instances is demand said to be perfectly inelastic?

Accepted Answer

A)  An increase in price of 2% causes a decrease in quantity demanded of 2%. 
B)  A decrease in price of 2% causes an increase in quantity demanded of 0%. 
C)  A decrease in price of 2% causes a decrease in total revenue of 0%. 
D)  An increase in price of 2% causes a decrease in quantity demanded of 1/2%. 
A)  An increase in price of 2% causes a decrease in quantity demanded of 2%. 
B)  A decrease in price of 2% causes an increase in quantity demanded of 0%. 
C)  A decrease in price of 2% causes a decrease in total revenue of 0%. 
D)  An increase in price of 2% causes a decrease in quantity demanded of 1/2%.

Question 3

When demand is perfectly inelastic, the demand curve will be

Accepted Answer

A)  negatively sloped, because buyers decrease their purchases when the price rises. 
B)  vertical, because buyers purchase the same amount as before whenever the price rises or falls. 
C)  positively sloped, because buyers increase their purchases when price rises. 
D)  positively sloped, because buyers increase their total expenditures when price rises. 
A)  negatively sloped, because buyers decrease their purchases when the price rises. 
B)  vertical, because buyers purchase the same amount as before whenever the price rises or falls. 
C)  positively sloped, because buyers increase their purchases when price rises. 
D)  positively sloped, because buyers increase their total expenditures when price rises.

Question 4

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Accepted Answer

A)  negative, and the good is an inferior good. 
B)  negative, and the good is a normal good. 
C)  positive, and the good is an inferior good. 
D)  positive, and the good is a normal good. 
A)  negative, and the good is an inferior good. 
B)  negative, and the good is a normal good. 
C)  positive, and the good is an inferior good. 
D)  positive, and the good is a normal good.

Question 5

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

Accepted Answer

A) True 
 B)False

Question 6

Figure 5-9  
-Refer to Figure 5-9. If the price rises from point D to point C, total revenue

Accepted Answer

A)  increases, and demand is price elastic. 
B)  decreases, and demand is price elastic. 
C)  increases, and demand is price inelastic. 
D)  decreases, and demand is price inelastic. 
A)  increases, and demand is price elastic. 
B)  decreases, and demand is price elastic. 
C)  increases, and demand is price inelastic. 
D)  decreases, and demand is price inelastic.

Question 7

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Accepted Answer

A) True 
 B)False

Question 8

Suppose good X has a negative income elasticity of demand. This implies that good X is

Accepted Answer

A)  a normal good. 
B)  a necessity. 
C)  an inferior good. 
D)  a luxury. 
A)  a normal good. 
B)  a necessity. 
C)  an inferior good. 
D)  a luxury.

Question 9

The midpoint method is used to compute elasticity because it

Accepted Answer

A)  automatically computes a positive number instead of a negative number. 
B)  results in an elasticity that is the same as the slope of the demand curve. 
C)  gives the same answer regardless of the direction of change. 
D)  automatically rounds quantities to the nearest whole unit. 
A)  automatically computes a positive number instead of a negative number. 
B)  results in an elasticity that is the same as the slope of the demand curve. 
C)  gives the same answer regardless of the direction of change. 
D)  automatically rounds quantities to the nearest whole unit.

Question 10

Figure 5-15  
-Refer to Figure 5-15. Along which of these segments of the supply curve is supply least elastic?

Accepted Answer

A)  GH 
B)  CD 
C)  AC 
D)  AB 
A)  GH 
B)  CD 
C)  AC 
D)  AB

Question 11

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 12

If the cross-price elasticity of two goods is positive, then the two goods are

Accepted Answer

A)  substitutes. 
B)  complements. 
C)  normal goods. 
D)  inferior goods. 
A)  substitutes. 
B)  complements. 
C)  normal goods. 
D)  inferior goods.

Question 13

At a price of $1.20, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.40, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A)  0.15 
B)  0.375 
C)  2.5 
D)  2.60 
A)  0.15 
B)  0.375 
C)  2.5 
D)  2.60

Question 14

Table 5-3
Consider the following demand schedule.
  
-Refer to Table 5-3. Using the midpoint method, what is the price elasticity of demand between $0 and $3?

Accepted Answer

A)  0.11 
B)  0.22 
C)  0.40 
D)  2.00 
A)  0.11 
B)  0.22 
C)  0.40 
D)  2.00

Question 15

For which of the following goods would demand be most price elastic: a car, a sedan, a Honda sedan, a Honda Accord, a black Honda Accord?

Accepted Answer

a black Ho

Question 16

As price elasticity of supply increases, the supply curve

Accepted Answer

A)  becomes flatter. 
B)  becomes steeper. 
C)  becomes downward sloping. 
D)  shifts to the right. 
A)  becomes flatter. 
B)  becomes steeper. 
C)  becomes downward sloping. 
D)  shifts to the right.

Question 17

There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be

Accepted Answer

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

Question 18

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the

Accepted Answer

A)  steeper the demand curve will be. 
B)  flatter the demand curve will be. 
C)  further to the right the demand curve will sit. 
D)  closer to the vertical axis the demand curve will sit. 
A)  steeper the demand curve will be. 
B)  flatter the demand curve will be. 
C)  further to the right the demand curve will sit. 
D)  closer to the vertical axis the demand curve will sit.

Question 19

Which of the following statements is valid when the market supply curve is vertical?

Accepted Answer

A)  Market quantity supplied does not change when the price changes. 
B)  Supply is perfectly elastic. 
C)  An increase in market demand will increase the equilibrium quantity. 
D)  An increase in market demand will not increase the equilibrium price. 
A)  Market quantity supplied does not change when the price changes. 
B)  Supply is perfectly elastic. 
C)  An increase in market demand will increase the equilibrium quantity. 
D)  An increase in market demand will not increase the equilibrium price.

Question 20

In the long run, the quantity supplied of most goods

Accepted Answer

A)  will increase in almost all cases, regardless of what happens to price. 
B)  cannot respond at all to a change in price. 
C)  can respond to a change in price, but the change is almost always inconsequential. 
D)  can respond substantially to a change in price. 
A)  will increase in almost all cases, regardless of what happens to price. 
B)  cannot respond at all to a change in price. 
C)  can respond to a change in price, but the change is almost always inconsequential. 
D)  can respond substantially to a change in price.

Exam 5: Elasticity and Its Application

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

In which of these instances is demand said to be perfectly inelastic?

When demand is perfectly inelastic, the demand curve will be

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

Figure 5-9 -Refer to Figure 5-9. If the price rises from point D to point C, total revenue

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Suppose good X has a negative income elasticity of demand. This implies that good X is

The midpoint method is used to compute elasticity because it

Figure 5-15 -Refer to Figure 5-15. Along which of these segments of the supply curve is supply least elastic?

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

If the cross-price elasticity of two goods is positive, then the two goods are

At a price of $1.20, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.40, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

Table 5-3 Consider the following demand schedule. -Refer to Table 5-3. Using the midpoint method, what is the price elasticity of demand between $0 and $3?

For which of the following goods would demand be most price elastic: a car, a sedan, a Honda sedan, a Honda Accord, a black Honda Accord?

As price elasticity of supply increases, the supply curve

There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the

Which of the following statements is valid when the market supply curve is vertical?

In the long run, the quantity supplied of most goods

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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