Question 1

Which of the following expressions represents a cross-price elasticity of demand?

Accepted Answer

A)  percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread 
B)  percentage change in quantity demanded of bread divided by percentage change in price of butter 
C)  percentage change in price of bread divided by percentage change in quantity demanded of bread 
D)  percentage change in quantity demanded of bread divided by percentage change in income 
A)  percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread 
B)  percentage change in quantity demanded of bread divided by percentage change in price of butter 
C)  percentage change in price of bread divided by percentage change in quantity demanded of bread 
D)  percentage change in quantity demanded of bread divided by percentage change in income

Question 2

Figure 5-19  
-Refer to Figure 5-19. Which of the following statements is not correct?

Accepted Answer

A)  Supply curve A is perfectly inelastic. 
B)  Supply curve B is perfectly elastic. 
C)  Supply curve C is unit elastic. 
D)  Supply curve D is more elastic than supply curve C. 
A)  Supply curve A is perfectly inelastic. 
B)  Supply curve B is perfectly elastic. 
C)  Supply curve C is unit elastic. 
D)  Supply curve D is more elastic than supply curve C.

Question 3

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would

Accepted Answer

A)  be negative, and your roommate's would be positive. 
B)  be positive, and your roommate's would be negative. 
C)  be zero, and your roommate's would approach infinity. 
D)  approach infinity, and your roommate's would be zero. 
A)  be negative, and your roommate's would be positive. 
B)  be positive, and your roommate's would be negative. 
C)  be zero, and your roommate's would approach infinity. 
D)  approach infinity, and your roommate's would be zero.

Question 4

Which of the following expressions can be used to compute the price elasticity of demand?

Accepted Answer

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

Question 5

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A)  There are many close substitutes for this good. 
B)  The good is a luxury. 
C)  The market for the good is broadly defined. 
D)  The relevant time horizon is long. 
A)  There are many close substitutes for this good. 
B)  The good is a luxury. 
C)  The market for the good is broadly defined. 
D)  The relevant time horizon is long.

Question 6

With regard to elasticity, if a firm has a longer time to adjust to a price increase, supply will be more

Accepted Answer

The answer of With regard to elasticity, if a firm...

Question 7

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni

Accepted Answer

A)  and soy-burgers are both normal goods with income elasticities equal to 1. 
B)  is an inferior good and soy-burgers are normal goods; both have income elasticities of 1. 
C)  is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1. 
D)  and soy-burgers are both inferior goods with income elasticities equal to -1. 
A)  and soy-burgers are both normal goods with income elasticities equal to 1. 
B)  is an inferior good and soy-burgers are normal goods; both have income elasticities of 1. 
C)  is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1. 
D)  and soy-burgers are both inferior goods with income elasticities equal to -1.

Question 8

A decrease in supply will cause the largest increase in price when

Accepted Answer

A)  both supply and demand are inelastic. 
B)  both supply and demand are elastic. 
C)  demand is elastic and supply is inelastic. 
D)  demand is inelastic and supply is elastic. 
A)  both supply and demand are inelastic. 
B)  both supply and demand are elastic. 
C)  demand is elastic and supply is inelastic. 
D)  demand is inelastic and supply is elastic.

Question 9

When a supply curve is relatively flat,

Accepted Answer

A)  sellers are not very responsive to changes in price. 
B)  supply is relatively inelastic. 
C)  supply is relatively elastic. 
D)  Both a and b are correct. 
A)  sellers are not very responsive to changes in price. 
B)  supply is relatively inelastic. 
C)  supply is relatively elastic. 
D)  Both a and b are correct.

Question 10

Scenario 5-8
Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000.
-Refer to Scenario 5-8. Considering the cross price elasticity of demand for mobile and landline telephone service, is the cross price elasticity of demand positive or negative and do the consumers of Plainville regard these goods as substitutes or complements?

Accepted Answer

The cross price elas

Question 11

What is the price elasticity of demand at any point on a perfectly inelastic demand curve?

Accepted Answer

The price

Question 12

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought. Which of the following best describes the effect on corn farmers in Minnesota, where sufficient rainfall occurred?

Accepted Answer

A)  Their revenue increases because price increases and demand is elastic. 
B)  Their revenue increases because price increases and demand is inelastic. 
C)  Their revenue decreases because price decreases and demand is inelastic. 
D)  Their revenue decreases because price increases and demand is elastic. 
A)  Their revenue increases because price increases and demand is elastic. 
B)  Their revenue increases because price increases and demand is inelastic. 
C)  Their revenue decreases because price decreases and demand is inelastic. 
D)  Their revenue decreases because price increases and demand is elastic.

Question 13

Figure 5-5  
-Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

Accepted Answer

A)  $20 and $40. 
B)  $40 and$50. 
C)  $40 and$60. 
D)  $50 and$70. 
A)  $20 and $40. 
B)  $40 and$50. 
C)  $40 and$60. 
D)  $50 and$70.

Question 14

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

Accepted Answer

A) True 
 B)False

Question 15

For which of the following goods is the price elasticity of demand most inelastic?

Accepted Answer

A)  pizza 
B)  large pizza 
C)  large pepperoni pizza 
D)  Domino's large pepperoni pizza 
A)  pizza 
B)  large pizza 
C)  large pepperoni pizza 
D)  Domino's large pepperoni pizza

Question 16

If the cross-price elasticity of demand between two goods is positive, what is the relationship between the two goods?

Accepted Answer

The goods

Question 17

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%,
then ice cream is an inferior good.

Accepted Answer

A) True 
 B)False

Question 18

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Accepted Answer

A) True 
 B)False

Question 19

The price elasticity of supply measures how responsive

Accepted Answer

A)  sellers are to a change in price. 
B)  sellers are to a change in buyers' income. 
C)  buyers are to a change in production costs. 
D)  equilibrium price is to a change in supply. 
A)  sellers are to a change in price. 
B)  sellers are to a change in buyers' income. 
C)  buyers are to a change in production costs. 
D)  equilibrium price is to a change in supply.

Question 20

As we move downward and to the right along a linear, downward-sloping demand curve,

Accepted Answer

A)  both slope and elasticity remain constant. 
B)  slope changes but elasticity remains constant. 
C)  both slope and elasticity change. 
D)  slope remains constant but elasticity changes. 
A)  both slope and elasticity remain constant. 
B)  slope changes but elasticity remains constant. 
C)  both slope and elasticity change. 
D)  slope remains constant but elasticity changes.

Exam 5: Elasticity and Its Application

Which of the following expressions represents a cross-price elasticity of demand?

Figure 5-19 -Refer to Figure 5-19. Which of the following statements is not correct?

Which of the following expressions can be used to compute the price elasticity of demand?

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

With regard to elasticity, if a firm has a longer time to adjust to a price increase, supply will be more

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni

A decrease in supply will cause the largest increase in price when

When a supply curve is relatively flat,

What is the price elasticity of demand at any point on a perfectly inelastic demand curve?

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought. Which of the following best describes the effect on corn farmers in Minnesota, where sufficient rainfall occurred?

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

For which of the following goods is the price elasticity of demand most inelastic?

If the cross-price elasticity of demand between two goods is positive, what is the relationship between the two goods?

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%, then ice cream is an inferior good.

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

The price elasticity of supply measures how responsive

As we move downward and to the right along a linear, downward-sloping 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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