Question 1

Figure 5-21  
-Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $5 and $15?

Accepted Answer

The price

Question 2

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  unit elastic. 
D)  quite sensitive to changes in income. 
A)  inelastic. 
B)  elastic. 
C)  unit elastic. 
D)  quite sensitive to changes in income.

Question 3

Table 5-1
  
-Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Accepted Answer

A)  A is laundry detergent and B is Tide. 
B)  A is Diet Pepsi and B is soda. 
C)  A is food and B is a yacht. 
D)  A is toilet paper and B is candles. 
A)  A is laundry detergent and B is Tide. 
B)  A is Diet Pepsi and B is soda. 
C)  A is food and B is a yacht. 
D)  A is toilet paper and B is candles.

Question 4

Table 5-5
  
-Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A)  0.09. 
B)  0.58. 
C)  0.65. 
D)  1.53. 
A)  0.09. 
B)  0.58. 
C)  0.65. 
D)  1.53.

Question 5

An advance in farm technology that results in an increased market supply is

Accepted Answer

A)  good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food. 
B)  bad for farmers because total revenue will fall but good for consumers because prices for food will fall. 
C)  good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption. 
D)  bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue. 
A)  good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food. 
B)  bad for farmers because total revenue will fall but good for consumers because prices for food will fall. 
C)  good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption. 
D)  bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue.

Question 6

Figure 5-12  
-Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point Y and point Z is

Accepted Answer

A)  0.5. 
B)  0.75. 
C)  1.0. 
D)  1.3. 
A)  0.5. 
B)  0.75. 
C)  1.0. 
D)  1.3.

Question 7

The flatter the demand curve through a given point, the

Accepted Answer

A)  greater the price elasticity of demand at that point. 
B)  smaller the price elasticity of demand at that point. 
C)  closer the price elasticity of demand will be to the slope of the curve. 
D)  greater the absolute value of the change in total revenue when there is a movement from that point upward and to the left along the demand curve. 
A)  greater the price elasticity of demand at that point. 
B)  smaller the price elasticity of demand at that point. 
C)  closer the price elasticity of demand will be to the slope of the curve. 
D)  greater the absolute value of the change in total revenue when there is a movement from that point upward and to the left along the demand curve.

Question 8

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 9

Suppose the price elasticity of demand for a product is 0.5. If a supplier wants to increase revenue, what change should it make to price, if any?

Accepted Answer

The answer of Suppose the price elasticity of demand for...

Question 10

If two goods are complements, 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 11

If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

Accepted Answer

A)  a 0.1 percent decrease in the price. 
B)  a 1 percent decrease in the price. 
C)  a 10 percent decrease in the price. 
D)  a 19.6 percent decrease in the price. 
A)  a 0.1 percent decrease in the price. 
B)  a 1 percent decrease in the price. 
C)  a 10 percent decrease in the price. 
D)  a 19.6 percent decrease in the price.

Question 12

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

Accepted Answer

A)  scissors 
B)  fruit 
C)  music downloads 
D)  toothpaste 
A)  scissors 
B)  fruit 
C)  music downloads 
D)  toothpaste

Question 13

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

Accepted Answer

The goods

Question 14

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.

Question 15

When demand is perfectly inelastic, the demand curve will be

Accepted Answer

A)  negatively sloped, because buyers decrease their purchases when the price rises. 
B)  vertical, because buyers purchase the same amount as before whenever the price rises or falls. 
C)  positively sloped, because buyers increase their purchases when price rises. 
D)  positively sloped, because buyers increase their total expenditures when price rises. 
A)  negatively sloped, because buyers decrease their purchases when the price rises. 
B)  vertical, because buyers purchase the same amount as before whenever the price rises or falls. 
C)  positively sloped, because buyers increase their purchases when price rises. 
D)  positively sloped, because buyers increase their total expenditures when price rises.

Question 16

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

Accepted Answer

A)  increase by 4%. 
B)  increase by 6.25%. 
C)  decrease by 4%. 
D)  decrease by 6.25%. 
A)  increase by 4%. 
B)  increase by 6.25%. 
C)  decrease by 4%. 
D)  decrease by 6.25%.

Question 17

Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8. You should

Accepted Answer

A)  increase the price of ice cream. 
B)  decrease the price of ice cream. 
C)  decrease the cost of operating the ice cream shop. 
D)  increase the price of bottled water also sold at the ice cream shop because its price elasticity of demand is 1.2. 
A)  increase the price of ice cream. 
B)  decrease the price of ice cream. 
C)  decrease the cost of operating the ice cream shop. 
D)  increase the price of bottled water also sold at the ice cream shop because its price elasticity of demand is 1.2.

Question 18

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Accepted Answer

A) True 
 B)False

Question 19

Figure 5-9  
-Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point A and point B is

Accepted Answer

A)  0.33. 
B)  0.5. 
C)  2.0. 
D)  3.0. 
A)  0.33. 
B)  0.5. 
C)  2.0. 
D)  3.0.

Question 20

Figure 5-15  
-Refer to Figure 5-15. Along which of these segments of the supply curve is supply most elastic?

Accepted Answer

A)  AB 
B)  CD 
C)  DH 
D)  GH 
A)  AB 
B)  CD 
C)  DH 
D)  GH

Exam 5: Elasticity and Its Application

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $5 and $15?

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

Table 5-1 -Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Table 5-5 -Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

An advance in farm technology that results in an increased market supply is

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point Y and point Z is

The flatter the demand curve through a given point, the

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?

Suppose the price elasticity of demand for a product is 0.5. If a supplier wants to increase revenue, what change should it make to price, if any?

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

If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

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

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

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

When demand is perfectly inelastic, the demand curve will be

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8. You should

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Figure 5-9 -Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point A and point B is

Figure 5-15 -Refer to Figure 5-15. Along which of these segments of the supply curve is supply most elastic?

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

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

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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