Question 1

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is

Accepted Answer

A)  inelastic and equal to 6. 
B)  elastic and equal to 6. 
C)  inelastic and equal to 0.17. 
D)  elastic and equal to 0.17. 
A)  inelastic and equal to 6. 
B)  elastic and equal to 6. 
C)  inelastic and equal to 0.17. 
D)  elastic and equal to 0.17.

Question 2

If the price elasticity of demand for a good is 1, then a 3 percent decrease in price results in a

Accepted Answer

A)  0.1 percent increase in the quantity demanded. 
B)  1 percent increase in the quantity demanded. 
C)  3 percent increase in the quantity demanded. 
D)  4 percent increase in the quantity demanded. 
A)  0.1 percent increase in the quantity demanded. 
B)  1 percent increase in the quantity demanded. 
C)  3 percent increase in the quantity demanded. 
D)  4 percent increase in the quantity demanded.

Question 3

Table 5-5
  
-Refer to Table 5-5. Demand is unit elastic when quantity demanded changes from

Accepted Answer

A)  9 to 8. 
B)  10 to 9. 
C)  10 to 11. 
D)  There is not enough information given to determine the correct answer. 
A)  9 to 8. 
B)  10 to 9. 
C)  10 to 11. 
D)  There is not enough information given to determine the correct answer.

Question 4

If soybean farmers know that the demand for soybeans is inelastic, in order to increase their total revenues they should

Accepted Answer

A)  use more fertilizers and weed killers to increase their yields. 
B)  plant additional acres to increase their output. 
C)  reduce the number of acres they plant to decrease their output. 
D)  Both a and b are correct. 
A)  use more fertilizers and weed killers to increase their yields. 
B)  plant additional acres to increase their output. 
C)  reduce the number of acres they plant to decrease their output. 
D)  Both a and b are correct.

Question 5

A good will have a more inelastic demand, the

Accepted Answer

A)  greater the availability of close substitutes. 
B)  broader the definition of the market. 
C)  longer the period of time. 
D)  more it is regarded as a luxury. 
A)  greater the availability of close substitutes. 
B)  broader the definition of the market. 
C)  longer the period of time. 
D)  more it is regarded as a luxury.

Question 6

If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

Accepted Answer

A)  0.24%. 
B)  4.2%. 
C)  6%. 
D)  6.2%. 
A)  0.24%. 
B)  4.2%. 
C)  6%. 
D)  6.2%.

Question 7

On a downward-sloping linear demand curve, total revenue reaches its maximum value at the

Accepted Answer

A)  midpoint of the demand curve. 
B)  lower end of the demand curve. 
C)  upper end of the demand curve. 
D)  It is impossible to tell without knowing prices and quantities demanded. 
A)  midpoint of the demand curve. 
B)  lower end of the demand curve. 
C)  upper end of the demand curve. 
D)  It is impossible to tell without knowing prices and quantities demanded.

Question 8

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 9

Figure 5-5  
-Refer to Figure 5-5. At a price of $10 per unit, sellers' total revenue equals

Accepted Answer

A)  $100. 
B)  $450 
C)  $500. 
D)  $1250. 
A)  $100. 
B)  $450 
C)  $500. 
D)  $1250.

Question 10

Suppose that gasoline prices increase dramatically this month. Lola commutes 100 miles to work each weekday. Over the next few months, Lola drives less on the weekends to try to save money. Within the year, she sells her home and purchases one only 10 miles from her place of employment. These examples illustrate the importance of

Accepted Answer

A)  the availability of substitutes in determining the price elasticity of demand. 
B)  a necessity versus a luxury in determining the price elasticity of demand. 
C)  the definition of a market in determining the price elasticity of demand. 
D)  the time horizon in determining the price elasticity of demand. 
A)  the availability of substitutes in determining the price elasticity of demand. 
B)  a necessity versus a luxury in determining the price elasticity of demand. 
C)  the definition of a market in determining the price elasticity of demand. 
D)  the time horizon in determining the price elasticity of demand.

Question 11

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

Accepted Answer

A)  elastic, and the demand curve will be horizontal. 
B)  inelastic, and the demand curve will be horizontal. 
C)  elastic, and the demand curve will be vertical. 
D)  inelastic, and the demand curve will be vertical. 
A)  elastic, and the demand curve will be horizontal. 
B)  inelastic, and the demand curve will be horizontal. 
C)  elastic, and the demand curve will be vertical. 
D)  inelastic, and the demand curve will be vertical.

Question 12

If the price elasticity of supply is 0.4, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

Accepted Answer

A)  0.25%. 
B)  1.2%. 
C)  2%. 
D)  12.5%. 
A)  0.25%. 
B)  1.2%. 
C)  2%. 
D)  12.5%.

Question 13

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

Accepted Answer

A)  0.6 percent increase in the quantity demanded. 
B)  1.5 percent increase in the quantity demanded. 
C)  2 percent increase in the quantity demanded. 
D)  6 percent increase in the quantity demanded. 
A)  0.6 percent increase in the quantity demanded. 
B)  1.5 percent increase in the quantity demanded. 
C)  2 percent increase in the quantity demanded. 
D)  6 percent increase in the quantity demanded.

Question 14

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

Accepted Answer

A)  chocolate 
B)  Godiva chocolate 
C)  Hershey's chocolate 
D)  All three would have the same elasticity of demand because they are all related. 
A)  chocolate 
B)  Godiva chocolate 
C)  Hershey's chocolate 
D)  All three would have the same elasticity of demand because they are all related.

Question 15

If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

Accepted Answer

A) True 
 B)False

Question 16

The demand for soap is more elastic than the demand for Dove soap.

Accepted Answer

A) True 
 B)False

Question 17

A key determinant of the price elasticity of supply is the

Accepted Answer

A)  time horizon. 
B)  income of consumers. 
C)  price elasticity of demand. 
D)  importance of the good in a consumer's budget. 
A)  time horizon. 
B)  income of consumers. 
C)  price elasticity of demand. 
D)  importance of the good in a consumer's budget.

Question 18

If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a

Accepted Answer

A)  0.1 percent decrease in the quantity demanded. 
B)  1 percent decrease in the quantity demanded. 
C)  2.5 percent decrease in the quantity demanded. 
D)  10 percent decrease in the quantity demanded. 
A)  0.1 percent decrease in the quantity demanded. 
B)  1 percent decrease in the quantity demanded. 
C)  2.5 percent decrease in the quantity demanded. 
D)  10 percent decrease in the quantity demanded.

Question 19

Suppose demand is given by the equation:   At what point along this demand curve will total revenue be maximized?

Accepted Answer

Total revenue is con

Question 20

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?

Accepted Answer

A)  0.8 
B)  1 
C)  1.8 
D)  2.4 
A)  0.8 
B)  1 
C)  1.8 
D)  2.4

Exam 5: Elasticity and Its Application

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is

If the price elasticity of demand for a good is 1, then a 3 percent decrease in price results in a

Table 5-5 -Refer to Table 5-5. Demand is unit elastic when quantity demanded changes from

If soybean farmers know that the demand for soybeans is inelastic, in order to increase their total revenues they should

A good will have a more inelastic demand, the

If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

On a downward-sloping linear demand curve, total revenue reaches its maximum value at the

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

Figure 5-5 -Refer to Figure 5-5. At a price of $10 per unit, sellers' total revenue equals

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

If the price elasticity of supply is 0.4, and a price increase led to a 5% increase in quantity supplied, then the price increase is about

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

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

If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

The demand for soap is more elastic than the demand for Dove soap.

A key determinant of the price elasticity of supply is the

If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a

Suppose demand is given by the equation: At what point along this demand curve will total revenue be maximized?

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?

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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