Question 1

Which of the following was not a reason OPEC failed to keep the price of oil high?

Accepted Answer

A)  Over the long run, producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity. 
B)  Consumers responded to higher prices with greater conservation. 
C)  Consumers replaced old inefficient cars with newer efficient ones. 
D)  The agreement OPEC members signed allowed each country to produce as much oil as each wanted. 
A)  Over the long run, producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity. 
B)  Consumers responded to higher prices with greater conservation. 
C)  Consumers replaced old inefficient cars with newer efficient ones. 
D)  The agreement OPEC members signed allowed each country to produce as much oil as each wanted.

Question 2

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

Accepted Answer

A) True 
 B)False

Question 3

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 4

The price elasticity of demand measures

Accepted Answer

A)  buyers' responsiveness to a change in the price of a good. 
B)  the extent to which demand increases as additional buyers enter the market. 
C)  how much more of a good consumers will demand when incomes rise. 
D)  the movement along a supply curve when there is a change in demand. 
A)  buyers' responsiveness to a change in the price of a good. 
B)  the extent to which demand increases as additional buyers enter the market. 
C)  how much more of a good consumers will demand when incomes rise. 
D)  the movement along a supply curve when there is a change in demand.

Question 5

For which pairs of goods is the cross-price elasticity most likely to be negative?

Accepted Answer

A)  peanut butter and jelly 
B)  automobile tires and coffee 
C)  pens and pencils 
D)  paperback novels and electronic books for e-readers 
A)  peanut butter and jelly 
B)  automobile tires and coffee 
C)  pens and pencils 
D)  paperback novels and electronic books for e-readers

Question 6

Figure 5-4  
-Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $8 and $16. Then, when the price changes between $9 and $10,

Accepted Answer

A)  quantity demanded changes proportionately less than the price. 
B)  quantity demanded changes proportionately more than the price. 
C)  quantity demanded changes the same amount proportionately as price. 
D)  the price elasticity of demand equals 1. 
A)  quantity demanded changes proportionately less than the price. 
B)  quantity demanded changes proportionately more than the price. 
C)  quantity demanded changes the same amount proportionately as price. 
D)  the price elasticity of demand equals 1.

Question 7

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the

Accepted Answer

A)  steeper the demand curve will be. 
B)  flatter the demand curve will be. 
C)  further to the right the demand curve will sit. 
D)  closer to the vertical axis the demand curve will sit. 
A)  steeper the demand curve will be. 
B)  flatter the demand curve will be. 
C)  further to the right the demand curve will sit. 
D)  closer to the vertical axis the demand curve will sit.

Question 8

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts, the price elasticity of supply approaches

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 9

Table 5-13
Consider the following demand schedule.
  
-Refer to Table 5-13. Using the midpoint method, demand is unit elastic when price changes from

Accepted Answer

The answer of Table 5-13
Consider the following demand schedule.
 ...

Question 10

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

Accepted Answer

The price

Question 11

Suppose that gasoline prices increase dramatically this month. Lola commutes 100 miles to work each weekday. Over the next few months, Lola drives less on the weekends to try to save money. Within the year, she sells her home and purchases one only 10 miles from her place of employment. These examples illustrate the importance of

Accepted Answer

A)  the availability of substitutes in determining the price elasticity of demand. 
B)  a necessity versus a luxury in determining the price elasticity of demand. 
C)  the definition of a market in determining the price elasticity of demand. 
D)  the time horizon in determining the price elasticity of demand. 
A)  the availability of substitutes in determining the price elasticity of demand. 
B)  a necessity versus a luxury in determining the price elasticity of demand. 
C)  the definition of a market in determining the price elasticity of demand. 
D)  the time horizon in determining the price elasticity of demand.

Question 12

Suppose a market has the demand function Qd=20-0.5P. Using the midpoint method, what is the price elasticity of demand between $30 and $40?

Accepted Answer

The answer of Suppose a market has the demand function...

Question 13

Figure 5-6  
-Refer to Figure 5-6. For prices above $8, demand is price

Accepted Answer

A)  elastic, and total revenue will rise as price rises. 
B)  inelastic, and total revenue will rise as price rises. 
C)  elastic, and total revenue will fall as price rises. 
D)  inelastic, and total revenue will fall as price rises. 
A)  elastic, and total revenue will rise as price rises. 
B)  inelastic, and total revenue will rise as price rises. 
C)  elastic, and total revenue will fall as price rises. 
D)  inelastic, and total revenue will fall as price rises.

Question 14

When demand is inelastic, a decrease in price increases total revenue.

Accepted Answer

A) True 
 B)False

Question 15

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

Accepted Answer

A)  raise both price and total revenues. 
B)  lower both price and total revenues. 
C)  raise price and lower total revenues. 
D)  lower price and raise total revenues. 
A)  raise both price and total revenues. 
B)  lower both price and total revenues. 
C)  raise price and lower total revenues. 
D)  lower price and raise total revenues.

Question 16

The production of methamphetamine meth) is a social problem in the Midwest. Iowa is considering two potential programs: Operation Methbust would increase the number of sheriffs' deputies to search out and destroy methamphetamine labs. Operation Say No to Meth would increase the training required of public school teachers so that they could better educate students about the health risks of using meth. Assuming that each program were successful, which of the following statements is correct?

Accepted Answer

A)  Both Operation Methbust and Say No would reduce the demand for meth. 
B)  Both Operation Methbust and Say No would reduce the supply of meth. 
C)  Operation Methbust would reduce the demand for meth; Operation Say No would reduce the supply of meth. 
D)  Operation Methbust would reduce the supply of meth; Operation Say No would reduce the demand for meth. 
A)  Both Operation Methbust and Say No would reduce the demand for meth. 
B)  Both Operation Methbust and Say No would reduce the supply of meth. 
C)  Operation Methbust would reduce the demand for meth; Operation Say No would reduce the supply of meth. 
D)  Operation Methbust would reduce the supply of meth; Operation Say No would reduce the demand for meth.

Question 17

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 18

Figure 5-1  
-Refer to Figure 5-1. Between point A and point B on the graph, demand is

Accepted Answer

A)  perfectly elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  elastic, but not perfectly elastic. 
A)  perfectly elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  elastic, but not perfectly elastic.

Question 19

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A)  0.63, and supply is elastic. 
B)  0.63, and supply is inelastic. 
C)  1.60, and supply is elastic. 
D)  1.60, and supply is inelastic. 
A)  0.63, and supply is elastic. 
B)  0.63, and supply is inelastic. 
C)  1.60, and supply is elastic. 
D)  1.60, and supply is inelastic.

Question 20

Suppose good X has a positive income elasticity of demand. This implies that good X could be i) a normal good.
Ii) a necessity.
Iii) an inferior good.
Iv) a luxury.

Accepted Answer

A)  i) only 
B)  i) and ii) only 
C)  i), ii), and iv) only 
D)  iii) only 
A)  i) only 
B)  i) and ii) only 
C)  i), ii), and iv) only 
D)  iii) only

Exam 5: Elasticity and Its Application

Which of the following was not a reason OPEC failed to keep the price of oil high?

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

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

The price elasticity of demand measures

For which pairs of goods is the cross-price elasticity most likely to be negative?

Figure 5-4 -Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $8 and $16. Then, when the price changes between $9 and $10,

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts, the price elasticity of supply approaches

Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, demand is unit elastic when price changes from

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

Suppose a market has the demand function Qd=20-0.5P. Using the midpoint method, what is the price elasticity of demand between $30 and $40?

Figure 5-6 -Refer to Figure 5-6. For prices above $8, demand is price

When demand is inelastic, a decrease in price increases total revenue.

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

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

Figure 5-1 -Refer to Figure 5-1. Between point A and point B on the graph, demand is

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about

Suppose good X has a positive income elasticity of demand. This implies that good X could be i) a normal good. Ii) a necessity. Iii) an inferior good. Iv) a luxury.

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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