Question 1

The price elasticity of demand changes as we move along a

Accepted Answer

A)  horizontal demand curve. 
B)  vertical demand curve. 
C)  linear, downward-sloping demand curve. 
D)  All of the above are correct. 
A)  horizontal demand curve. 
B)  vertical demand curve. 
C)  linear, downward-sloping demand curve. 
D)  All of the above are correct.

Question 2

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Accepted Answer

A) True 
 B)False

Question 3

When supply is perfectly elastic, the value of the price elasticity of supply is

Accepted Answer

A)  0. 
B)  1. 
C)  greater than 0 and less than 1. 
D)  infinity. 
A)  0. 
B)  1. 
C)  greater than 0 and less than 1. 
D)  infinity.

Question 4

Table 5-3
Consider the following demand schedule.
  
-Refer to Table 5-3. Using the midpoint method, in which range is demand most elastic?

Accepted Answer

A)  $0 to $3 
B)  $3 to $6 
C)  $9 to 12 
D)  $12 to $15 
A)  $0 to $3 
B)  $3 to $6 
C)  $9 to 12 
D)  $12 to $15

Question 5

Table 5-9
  
-Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?

Accepted Answer

A)  supply curve A 
B)  supply curve B 
C)  supply curve C 
D)  There is no difference in the elasticity of the three supply curves. 
A)  supply curve A 
B)  supply curve B 
C)  supply curve C 
D)  There is no difference in the elasticity of the three supply curves.

Question 6

If a 6% decrease in price for a good results in a 2% increase in quantity demanded, the price elasticity of demand is

Accepted Answer

A)  0.02. 
B)  0.33. 
C)  3. 
D)  4. 
A)  0.02. 
B)  0.33. 
C)  3. 
D)  4.

Question 7

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about

Accepted Answer

A)  0.67%. 
B)  0.83%. 
C)  1.20%. 
D)  2.70%. 
A)  0.67%. 
B)  0.83%. 
C)  1.20%. 
D)  2.70%.

Question 8

Table 5-8
  
-Refer to Table 5-8. Using the midpoint method, the income elasticity of demand for good Y is

Accepted Answer

A)  2.33, and good Y is a normal good. 
B)  -2.33, and good Y is an inferior good. 
C)  -0.43, and good Y is a normal good. 
D)  -0.43, and good Y is an inferior good. 
A)  2.33, and good Y is a normal good. 
B)  -2.33, and good Y is an inferior good. 
C)  -0.43, and good Y is a normal good. 
D)  -0.43, and good Y is an inferior good.

Question 9

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

Accepted Answer

A)  lattés 
B)  doctor's visits 
C)  eggs 
D)  natural gas 
A)  lattés 
B)  doctor's visits 
C)  eggs 
D)  natural gas

Question 10

Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to

Accepted Answer

A)  increase by 2.5%, and X is an inferior good. 
B)  decrease by 2.5% and X is a normal good. 
C)  increase by 10% and X is an inferior good. 
D)  decrease by 10% and X is a normal good. 
A)  increase by 2.5%, and X is an inferior good. 
B)  decrease by 2.5% and X is a normal good. 
C)  increase by 10% and X is an inferior good. 
D)  decrease by 10% and X is a normal good.

Question 11

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

Accepted Answer

A) True 
 B)False

Question 12

When demand is inelastic, an increase in price will cause

Accepted Answer

A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded. 
A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded.

Question 13

Table 5-11
  
-Refer to Table 5-11. Which scenario describes the market for oil in the short run?

Accepted Answer

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

Question 14

Figure 5-16  
-Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $4 and $6?

Accepted Answer

A)  0.75 
B)  1.00 
C)  1.20 
D)  1.25 
A)  0.75 
B)  1.00 
C)  1.20 
D)  1.25

Question 15

Figure 5-5  
-Refer to Figure 5-5. At a price of $70 per unit, sellers' total revenue equals

Accepted Answer

A)  $700. 
B)  $1050. 
C)  $1250. 
D)  $1400. 
A)  $700. 
B)  $1050. 
C)  $1250. 
D)  $1400.

Question 16

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should

Accepted Answer

A)  increase the price charged to vacationers and decrease the price charged to business travelers. 
B)  decrease the price charged to vacationers and increase the price charged to business travelers. 
C)  decrease the price to both groups of customers. 
D)  increase the price for both groups of customers. 
A)  increase the price charged to vacationers and decrease the price charged to business travelers. 
B)  decrease the price charged to vacationers and increase the price charged to business travelers. 
C)  decrease the price to both groups of customers. 
D)  increase the price for both groups of customers.

Question 17

Goods with many close substitutes tend to have

Accepted Answer

A)  more elastic demands. 
B)  less elastic demands. 
C)  price elasticities of demand that are unit elastic. 
D)  income elasticities of demand that are negative. 
A)  more elastic demands. 
B)  less elastic demands. 
C)  price elasticities of demand that are unit elastic. 
D)  income elasticities of demand that are negative.

Question 18

Income elasticity of demand measures how

Accepted Answer

A)  the quantity demanded changes as consumer income changes. 
B)  consumer purchasing power is affected by a change in the price of a good. 
C)  the price of a good is affected when there is a change in consumer income. 
D)  many units of a good a consumer can buy given a certain income level. 
A)  the quantity demanded changes as consumer income changes. 
B)  consumer purchasing power is affected by a change in the price of a good. 
C)  the price of a good is affected when there is a change in consumer income. 
D)  many units of a good a consumer can buy given a certain income level.

Question 19

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is

Accepted Answer

A)  0.11. 
B)  0.47. 
C)  1.12. 
D)  2.11. 
A)  0.11. 
B)  0.47. 
C)  1.12. 
D)  2.11.

Question 20

Figure 5-3  
-Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve

Accepted Answer

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

Exam 5: Elasticity and Its Application

The price elasticity of demand changes as we move along a

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

When supply is perfectly elastic, the value of the price elasticity of supply is

Table 5-3 Consider the following demand schedule. -Refer to Table 5-3. Using the midpoint method, in which range is demand most elastic?

Table 5-9 -Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?

If a 6% decrease in price for a good results in a 2% increase in quantity demanded, the price elasticity of demand is

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about

Table 5-8 -Refer to Table 5-8. Using the midpoint method, the income elasticity of demand for good Y is

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

Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

When demand is inelastic, an increase in price will cause

Table 5-11 -Refer to Table 5-11. Which scenario describes the market for oil in the short run?

Figure 5-16 -Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $4 and $6?

Figure 5-5 -Refer to Figure 5-5. At a price of $70 per unit, sellers' total revenue equals

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should

Goods with many close substitutes tend to have

Income elasticity of demand measures how

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is

Figure 5-3 -Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve

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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