Question 1

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

Accepted Answer

A)  zero. 
B)  inelastic. 
C)  unit elastic. 
D)  elastic. 
A)  zero. 
B)  inelastic. 
C)  unit elastic. 
D)  elastic.

Question 2

While in college, Marty and Laura each buy 15 bus tickets per month. After they graduate and have full-time jobs, Marty buys 0 bus tickets per month and Laura buys 28 bus tickets per month. Comparing income elasticity of demand for bus tickets, Marty's

Accepted Answer

A)  is negative, and Laura's is positive. 
B)  is positive, and Laura's is negative. 
C)  is zero, and Laura's is positive. 
D)  is zero, and Laura's is negative. 
A)  is negative, and Laura's is positive. 
B)  is positive, and Laura's is negative. 
C)  is zero, and Laura's is positive. 
D)  is zero, and Laura's is negative.

Question 3

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?

Accepted Answer

A)  the mayor 
B)  the city manager 
C)  The answer depends on the price elasticity of demand. 
D)  The answer depends on the costs of construction of the new municipal swimming pool. 
A)  the mayor 
B)  the city manager 
C)  The answer depends on the price elasticity of demand. 
D)  The answer depends on the costs of construction of the new municipal swimming pool.

Question 4

In which of the following situations would supply be the most elastic?

Accepted Answer

A)  An auto parts manufacturer is operating at capacity. 
B)  A real estate developer in Boston is looking to build condos on the waterfront. 
C)  A furniture manufacturer is operating its factory 8 hours per day. 
D)  A hotel has all of its rooms booked for each night of the next 3 months. 
A)  An auto parts manufacturer is operating at capacity. 
B)  A real estate developer in Boston is looking to build condos on the waterfront. 
C)  A furniture manufacturer is operating its factory 8 hours per day. 
D)  A hotel has all of its rooms booked for each night of the next 3 months.

Question 5

When studying how some event or policy affects a market, elasticity provides information on the

Accepted Answer

A)  change in the costs of production. 
B)  tradeoff between equality and efficiency. 
C)  effect on the budget deficit or surplus. 
D)  direction and magnitude of the effect. 
A)  change in the costs of production. 
B)  tradeoff between equality and efficiency. 
C)  effect on the budget deficit or surplus. 
D)  direction and magnitude of the effect.

Question 6

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)  The demand for illegal drugs is inelastic. 
B)  Interdiction results in drug addicts having a greater need for quick cash. 
C)  Interdiction results in an increase in the amount of money needed to buy the same amount of drugs. 
D)  Government drug programs are more lenient now with drug offenders than they were in the 1980s. 
A)  The demand for illegal drugs is inelastic. 
B)  Interdiction results in drug addicts having a greater need for quick cash. 
C)  Interdiction results in an increase in the amount of money needed to buy the same amount of drugs. 
D)  Government drug programs are more lenient now with drug offenders than they were in the 1980s.

Question 7

Figure 5-5  
-Refer to Figure 5-5. Using the midpoint method, between prices of $70 and $80, price elasticity of demand is

Accepted Answer

A)  0.33. 
B)  0.4. 
C)  1.33. 
D)  3. 
A)  0.33. 
B)  0.4. 
C)  1.33. 
D)  3.

Question 8

If the income elasticity of demand for a good is negative, then the good must be an inferior good.

Accepted Answer

A) True 
 B)False

Question 9

The price elasticity of demand for a good measures the willingness of

Accepted Answer

A)  consumers to buy less of the good as price rises. 
B)  consumers to avoid monopolistic markets in favor of competitive markets. 
C)  firms to produce more of a good as price rises. 
D)  firms to respond to the tastes of consumers. 
A)  consumers to buy less of the good as price rises. 
B)  consumers to avoid monopolistic markets in favor of competitive markets. 
C)  firms to produce more of a good as price rises. 
D)  firms to respond to the tastes of consumers.

Question 10

Suppose a market has the demand function Qd=20-0.5P. Between which of the following price ranges is demand most inelastic?

Accepted Answer

A)  $0 to $10 
B)  $10 to $20 
C)  $20 to $30 
D)  $30 to $40 
A)  $0 to $10 
B)  $10 to $20 
C)  $20 to $30 
D)  $30 to $40

Question 11

Total revenue

Accepted Answer

A)  always increases as price increases. 
B)  increases as price increases, as long as demand is elastic. 
C)  decreases as price increases, as long as demand is inelastic. 
D)  remains unchanged as price increases when demand is unit elastic. 
A)  always increases as price increases. 
B)  increases as price increases, as long as demand is elastic. 
C)  decreases as price increases, as long as demand is inelastic. 
D)  remains unchanged as price increases when demand is unit elastic.

Question 12

Figure 5-16  
-Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $6 and $8?

Accepted Answer

A)  0.86 
B)  1.00 
C)  1.17 
D)  1.25 
A)  0.86 
B)  1.00 
C)  1.17 
D)  1.25

Question 13

Suppose demand is given by the equation:   Using the midpoint method, what is the price elasticity of demand between $1 and $2?

Accepted Answer

The price

Question 14

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

A) True 
 B)False

Question 15

If two goods are substitutes, their cross-price elasticity will be

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  equal to the difference between the income elasticities of demand for the two goods. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  equal to the difference between the income elasticities of demand for the two goods.

Question 16

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.
  
-Refer to Table 5-7. Using the midpoint method, at a price of $12, what is the income elasticity of demand when income rises from $5,000 to $10,000?

Accepted Answer

A)  0.00 
B)  0.41 
C)  1.00 
D)  2.45 
A)  0.00 
B)  0.41 
C)  1.00 
D)  2.45

Question 17

Suppose demand is given by the equation:   Using the midpoint method, what is the price elasticity of demand between $2 and $4?

Accepted Answer

The price

Question 18

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is

Accepted Answer

A)  0. 
B)  1. 
C)  6. 
D)  36. 
A)  0. 
B)  1. 
C)  6. 
D)  36.

Question 19

Between 1950 and today there was a

Accepted Answer

A)  20 percent drop in the number of farmers, but farm output more than tripled. 
B)  30 percent drop in the number of farmers, but farm output more than tripled. 
C)  50 percent drop in the number of farmers, but farm output more than doubled. 
D)  70 percent drop in the number of farmers, but farm output more than doubled. 
A)  20 percent drop in the number of farmers, but farm output more than tripled. 
B)  30 percent drop in the number of farmers, but farm output more than tripled. 
C)  50 percent drop in the number of farmers, but farm output more than doubled. 
D)  70 percent drop in the number of farmers, but farm output more than doubled.

Question 20

Scenario 5-4
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-4. The change in equilibrium price will be

Accepted Answer

A)  greater in the aged cheddar cheese market than in the bread market. 
B)  greater in the bread market than in the aged cheddar cheese market. 
C)  the same in the aged cheddar cheese and bread markets. 
D)  Any of the above could be correct. 
A)  greater in the aged cheddar cheese market than in the bread market. 
B)  greater in the bread market than in the aged cheddar cheese market. 
C)  the same in the aged cheddar cheese and bread markets. 
D)  Any of the above could be correct.

Exam 5: Elasticity and Its Application

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

While in college, Marty and Laura each buy 15 bus tickets per month. After they graduate and have full-time jobs, Marty buys 0 bus tickets per month and Laura buys 28 bus tickets per month. Comparing income elasticity of demand for bus tickets, Marty's

In which of the following situations would supply be the most elastic?

When studying how some event or policy affects a market, elasticity provides information on the

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $70 and $80, price elasticity of demand is

If the income elasticity of demand for a good is negative, then the good must be an inferior good.

The price elasticity of demand for a good measures the willingness of

Suppose a market has the demand function Qd=20-0.5P. Between which of the following price ranges is demand most inelastic?

Total revenue

Figure 5-16 -Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $6 and $8?

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $1 and $2?

A government program that reduces land under cultivation hurts farmers but helps consumers.

If two goods are substitutes, their cross-price elasticity will be

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, at a price of $12, what is the income elasticity of demand when income rises from $5,000 to $10,000?

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $2 and $4?

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is

Between 1950 and today there was a

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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