Question 1

Figure 5-20  
-Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

Accepted Answer

A)  S1 
B)  S2 
C)  S3 
D)  None of the supply curves is perfectly inelastic. 
A)  S1 
B)  S2 
C)  S3 
D)  None of the supply curves is perfectly inelastic.

Question 2

Figure 5-8  
-Refer to Figure 5-8. When price falls from $25 to $20, demand is

Accepted Answer

A)  inelastic, since total revenue decreases from $4,000 to $2,500. 
B)  inelastic, since total revenue increases from $2,500 to $4,000. 
C)  elastic, since total revenue increases from $2,500 to $4,000. 
D)  unit elastic, since total revenue does not change. 
A)  inelastic, since total revenue decreases from $4,000 to $2,500. 
B)  inelastic, since total revenue increases from $2,500 to $4,000. 
C)  elastic, since total revenue increases from $2,500 to $4,000. 
D)  unit elastic, since total revenue does not change.

Question 3

Figure 5-5  
-Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of

Accepted Answer

A)  $20. 
B)  $50. 
C)  $70 
D)  $100. 
A)  $20. 
B)  $50. 
C)  $70 
D)  $100.

Question 4

Scenario 5-7
Suppose the demand function for good X is given by:   where   is the quantity demanded of good X,   is the price of good X, and   is the price of good Y, which is related to good X.
-Refer to Scenario 5-7. Using the midpoint method, if the price of good X is $10 and the price of good Y increases from $8 to $10, the cross price elasticity of demand is about

Accepted Answer

The answer of Scenario 5-7
Suppose the demand function for good...

Question 5

If a 15% change in price results in a 20% 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 6

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Accepted Answer

A)  cross-price elasticity of demand is negative. 
B)  price elasticity of demand is elastic. 
C)  income elasticity of demand is negative. 
D)  income elasticity of demand is positive. 
A)  cross-price elasticity of demand is negative. 
B)  price elasticity of demand is elastic. 
C)  income elasticity of demand is negative. 
D)  income elasticity of demand is positive.

Question 7

Figure 5-4  
-Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is

Accepted Answer

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

Question 8

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. Total consumer spending on milk will

Accepted Answer

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

Question 9

Which of the following is an illustration of the market for original paintings by deceased artist Vincent Van Gogh? 
a.  
b.  
c.  
d.

Accepted Answer

A) A 
B)  B 
C) C 
D) D 
A) A 
B)  B 
C) C 
D) D

Question 10

Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she needs. Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. If you know that the demand for lemonade is elastic, what is your advice to her?

Accepted Answer

A)  Leave the price at 25 cents and be patient. 
B)  Raise the price to increase total revenue. 
C)  Lower the price to increase total revenue. 
D)  There isn't enough information given to answer this question. 
A)  Leave the price at 25 cents and be patient. 
B)  Raise the price to increase total revenue. 
C)  Lower the price to increase total revenue. 
D)  There isn't enough information given to answer this question.

Question 11

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

Accepted Answer

A)  1.50, and an increase in price will result in an increase in total revenue for good A. 
B)  1.50, and an increase in price will result in a decrease in total revenue for good A. 
C)  0.67, and an increase in price will result in an increase in total revenue for good A. 
D)  0.67, and an increase in price will result in a decrease in total revenue for good A. 
A)  1.50, and an increase in price will result in an increase in total revenue for good A. 
B)  1.50, and an increase in price will result in a decrease in total revenue for good A. 
C)  0.67, and an increase in price will result in an increase in total revenue for good A. 
D)  0.67, and an increase in price will result in a decrease in total revenue for good A.

Question 12

Holding all other factors constant and using the midpoint method, if a tractor manufacturer increases production from 80 to 100 units when price increases by 15 percent, then supply is

Accepted Answer

A)  inelastic, since the price elasticity of supply is equal to 0.68. 
B)  inelastic, since the price elasticity of supply is equal to 1.48. 
C)  elastic, since the price elasticity of supply is equal to 0.68. 
D)  elastic, since the price elasticity of supply is equal to 1.48. 
A)  inelastic, since the price elasticity of supply is equal to 0.68. 
B)  inelastic, since the price elasticity of supply is equal to 1.48. 
C)  elastic, since the price elasticity of supply is equal to 0.68. 
D)  elastic, since the price elasticity of supply is equal to 1.48.

Question 13

Holding all other forces constant, if decreasing 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 decrease never leads to an increase in total revenue. 
A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price decrease never leads to an increase in total revenue.

Question 14

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is

Accepted Answer

A)  0.82, and basketball tickets are a normal good. 
B)  0.82, and basketball tickets are an inferior good. 
C)  1.22, and basketball tickets are a normal good. 
D)  1.22, and basketball tickets are an inferior good. 
A)  0.82, and basketball tickets are a normal good. 
B)  0.82, and basketball tickets are an inferior good. 
C)  1.22, and basketball tickets are a normal good. 
D)  1.22, and basketball tickets are an inferior good.

Question 15

Figure 5-2  
-Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

Accepted Answer

A)  D1 
B)  D2 
C)  D3 
D)  All of the above are equally elastic. 
A)  D1 
B)  D2 
C)  D3 
D)  All of the above are equally elastic.

Question 16

Figure 5-7  
-Refer to Figure 5-7. For prices below $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 17

Figure 5-15  
-Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points D and G?

Accepted Answer

A)  1.89 
B)  1.26 
C)  0.53 
D)  0.34 
A)  1.89 
B)  1.26 
C)  0.53 
D)  0.34

Question 18

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

Accepted Answer

A)  increase the price of every loaf of bread in the store. 
B)  look for ways to cut costs and increase profit for the bakery. 
C)  determine the price elasticity of demand for the bakery's products. 
D)  determine the price elasticity of supply for the bakery's products. 
A)  increase the price of every loaf of bread in the store. 
B)  look for ways to cut costs and increase profit for the bakery. 
C)  determine the price elasticity of demand for the bakery's products. 
D)  determine the price elasticity of supply for the bakery's products.

Question 19

Figure 5-13  
-Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

Accepted Answer

A)  0.71. 
B)  0.85. 
C)  1.18. 
D)  1.40. 
A)  0.71. 
B)  0.85. 
C)  1.18. 
D)  1.40.

Question 20

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is

Accepted Answer

A)  0.75. 
B)  1.25. 
C)  1.33. 
D)  1.60. 
A)  0.75. 
B)  1.25. 
C)  1.33. 
D)  1.60.

Exam 5: Elasticity and Its Application

Figure 5-20 -Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

Figure 5-8 -Refer to Figure 5-8. When price falls from $25 to $20, demand is

Figure 5-5 -Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of

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

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Figure 5-4 -Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is

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. Total consumer spending on milk will

Which of the following is an illustration of the market for original paintings by deceased artist Vincent Van Gogh? a. b. c. d.

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

Holding all other factors constant and using the midpoint method, if a tractor manufacturer increases production from 80 to 100 units when price increases by 15 percent, then supply is

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

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

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

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points D and G?

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

Figure 5-13 -Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is

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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