Question 1

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 2

Figure 5-21  
-Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $15 and $25?

Accepted Answer

The price

Question 3

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 4

The price elasticity of demand for mobile phones

Accepted Answer

A)  will be higher if there is an improvement in the production technology. 
B)  will be lower if consumers perceive mobile phones to be a necessity. 
C)  is computed as the percentage change in the price of mobile phones divided by the percentage change in quantity of mobile phones. 
D)  All of the above are correct. 
A)  will be higher if there is an improvement in the production technology. 
B)  will be lower if consumers perceive mobile phones to be a necessity. 
C)  is computed as the percentage change in the price of mobile phones divided by the percentage change in quantity of mobile phones. 
D)  All of the above are correct.

Question 5

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

Accepted Answer

A)  the relevant time period is short rather than long. 
B)  the relevant time period is long rather than short. 
C)  supply is inelastic. 
D)  the firm is experiencing capacity problems. 
A)  the relevant time period is short rather than long. 
B)  the relevant time period is long rather than short. 
C)  supply is inelastic. 
D)  the firm is experiencing capacity problems.

Question 6

Figure 5-10  
-Refer to Figure 5-10. Total revenue when the price is P1 is represented by the areas)

Accepted Answer

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

Question 7

Figure 5-4  
-Refer to Figure 5-4. If the price decreases in the region of the demand curve between points A and B, we can expect total revenue to

Accepted Answer

A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first decrease, then increase until total revenue is maximized. 
A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first decrease, then increase until total revenue is maximized.

Question 8

When the Shaffers had a monthly income of $4,000, they usually ate out 8 times a month. Now that the couple makes $4,500 a month, they eat out 10 times a month. Compute the couple's income elasticity of demand using the midpoint method. Explain your answer. Is a restaurant meal a normal or inferior good to the couple?

Accepted Answer

The income elasticity of deman

Question 9

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is

Accepted Answer

A)  zero, and the supply curve is horizontal. 
B)  zero, and the supply curve is vertical. 
C)  infinity, and the supply curve is horizontal. 
D)  infinity, and the supply curve is vertical. 
A)  zero, and the supply curve is horizontal. 
B)  zero, and the supply curve is vertical. 
C)  infinity, and the supply curve is horizontal. 
D)  infinity, and the supply curve is vertical.

Question 10

Figure 5-4  
-Refer to Figure 5-4. If the price increases in the region of the demand curve between points A and B, we can expect total revenue to

Accepted Answer

A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first increase, then decrease until total revenue is maximized. 
A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first increase, then decrease until total revenue is maximized.

Question 11

Figure 5-4  
-Refer to Figure 5-4. The section of the demand curve at point B represents the

Accepted Answer

A)  elastic section of the demand curve. 
B)  inelastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  perfectly elastic section of the demand curve. 
A)  elastic section of the demand curve. 
B)  inelastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  perfectly elastic section of the demand curve.

Question 12

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.

Question 13

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 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

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. Using the midpoint method, what is the cross price elasticity of demand for landline and mobile service?

Accepted Answer

The answer of Scenario 5-8
Consider the markets for mobile and...

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

A 10 percent increase in gasoline prices reduces gasoline consumption by about

Accepted Answer

A)  6 percent after one year and 2.5 percent after five years. 
B)  2.5 percent after one year and 6 percent after five years. 
C)  10 percent after one year and 20 percent after five years. 
D)  0 percent after one year and 1 percent after five years. 
A)  6 percent after one year and 2.5 percent after five years. 
B)  2.5 percent after one year and 6 percent after five years. 
C)  10 percent after one year and 20 percent after five years. 
D)  0 percent after one year and 1 percent after five years.

Question 18

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 19

Figure 5-13  
-Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

Accepted Answer

A)  0.71. 
B)  0.85. 
C)  1.18. 
D)  1.40. 
A)  0.71. 
B)  0.85. 
C)  1.18. 
D)  1.40.

Question 20

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Accepted Answer

A)  cross-price elasticity of demand is negative. 
B)  price elasticity of demand is elastic. 
C)  income elasticity of demand is negative. 
D)  income elasticity of demand is positive. 
A)  cross-price elasticity of demand is negative. 
B)  price elasticity of demand is elastic. 
C)  income elasticity of demand is negative. 
D)  income elasticity of demand is positive.

Exam 5: Elasticity and Its Application

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

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $15 and $25?

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

The price elasticity of demand for mobile phones

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P1 is represented by the areas)

Figure 5-4 -Refer to Figure 5-4. If the price decreases in the region of the demand curve between points A and B, we can expect total revenue to

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is

Figure 5-4 -Refer to Figure 5-4. If the price increases in the region of the demand curve between points A and B, we can expect total revenue to

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve at point B represents the

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

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

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

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?

A 10 percent increase in gasoline prices reduces gasoline consumption by about

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

Figure 5-13 -Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

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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