Exam 5: Elasticity and Its Application

In January the price of widgets was $1.00, and Wendy's Widgets produced 80 widgets. In February the price of widgets was $1.50, and Wendy's Widgets produced 110 widgets. In March the price of widgets was $2.00, and Wendy's Widgets produced 140 widgets. The price elasticity of supply of Wendy's Widgets was about

Which of the following is an illustration of the market for original paintings by deceased artist Vincent Van Gogh?

The supply of oil is likely to be

Farm programs that pay farmers not to plant crops on all their land

Suppose a farmer knows that he will be able to harvest and sell 3,000 bushels of wheat. Would he prefer a market in which conditions are favorable and most farmers harvest large crops or a market in which conditions are unfavorable and many farmers harvest small crops? Why?

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the

Whether a good is a luxury or necessity depends on the

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 $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

For a particular good, a 10 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Recently, in Smalltown, the price of Twinkies fell from $0.80 to $0.70. As a result, the quantity demanded of Ho- Ho's decreased from 120 to 100. What would be the appropriate elasticity to compute? Using the midpoint method, compute this elasticity. What does your answer tell you?

Scenario 5-5 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-5. The equilibrium price will

Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

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

On a certain supply curve, one point is quantity supplied = 200, price = $4.00) and another point is quantity supplied = 250, price = $4.50). Using the midpoint method, the price elasticity of supply is about

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

The price elasticity of supply measures how much

Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, what is the price elasticity of demand when price rises from $12 to $16?

Figure 5-8 -Refer to Figure 5-8. When the price is $15, total revenue is

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

If the demand for textbooks is inelastic, then an increase in the price of textbooks will