Question 1

An increase in price causes an increase in total revenue when demand is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  All of the above are possible. 
A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  All of the above are possible.

Question 2

Figure 5-2  
-Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

Accepted Answer

A)  D1 
B)  D2 
C)  D3 
D)  All of the above are equally elastic. 
A)  D1 
B)  D2 
C)  D3 
D)  All of the above are equally elastic.

Question 3

Figure 5-4  
-Refer to Figure 5-4. If the price increases in the region of the demand curve between points B and C, 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 4

If the income elasticity of demand for a good is negative, then the good must be an inferior good.

Accepted Answer

A) True 
 B)False

Question 5

The price elasticity of demand measures how much

Accepted Answer

A)  quantity demanded responds to a change in price. 
B)  quantity demanded responds to a change in income. 
C)  price responds to a change in demand. 
D)  demand responds to a change in supply. 
A)  quantity demanded responds to a change in price. 
B)  quantity demanded responds to a change in income. 
C)  price responds to a change in demand. 
D)  demand responds to a change in supply.

Question 6

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Accepted Answer

A)  negative, and the good is an inferior good. 
B)  negative, and the good is a normal good. 
C)  positive, and the good is a normal good. 
D)  positive, and the good is an inferior good. 
A)  negative, and the good is an inferior good. 
B)  negative, and the good is a normal good. 
C)  positive, and the good is a normal good. 
D)  positive, and the good is an inferior good.

Question 7

Which of the following should be held constant when calculating an income elasticity of demand?

Accepted Answer

A)  the price of the good 
B)  prices of related goods 
C)  tastes 
D)  All of the above should be held constant. 
A)  the price of the good 
B)  prices of related goods 
C)  tastes 
D)  All of the above should be held constant.

Question 8

Figure 5-20  
-Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

Accepted Answer

A)  S1 
B)  S2 
C)  S3 
D)  None of the supply curves is perfectly inelastic. 
A)  S1 
B)  S2 
C)  S3 
D)  None of the supply curves is perfectly inelastic.

Question 9

The federal government is concerned about the negative effects of cigarette smoking in the United States. Suppose Congress is considering two plans. One plan would limit the production of cigarettes. The other would require manufacturers to include graphic photos on cigarette packages of people suffering cancer's effects. Which of the following statements is true?

Accepted Answer

A)  Both programs would increase the price of cigarettes. 
B)  Both programs would reduce the quantity of cigarettes sold. 
C)  Both programs would decrease revenues for cigarette manufacturers. 
D)  All of the above are correct. 
A)  Both programs would increase the price of cigarettes. 
B)  Both programs would reduce the quantity of cigarettes sold. 
C)  Both programs would decrease revenues for cigarette manufacturers. 
D)  All of the above are correct.

Question 10

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

Accepted Answer

The answer of Suppose that good X has few close...

Question 11

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Accepted Answer

A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price increase always leads to an decrease in total revenue. 
A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price increase always leads to an decrease in total revenue.

Question 12

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

Accepted Answer

A)  0.71, and they are substitutes. 
B)  -0.71, and they are complements. 
C)  1.4, and they are substitutes. 
D)  -1.4, and they are complements. 
A)  0.71, and they are substitutes. 
B)  -0.71, and they are complements. 
C)  1.4, and they are substitutes. 
D)  -1.4, and they are complements.

Question 13

The price elasticity of supply measures how responsive

Accepted Answer

A)  equilibrium price is to equilibrium quantity. 
B)  sellers are to a change in buyers' income. 
C)  sellers are to a change in price. 
D)  consumers are to the number of substitutes. 
A)  equilibrium price is to equilibrium quantity. 
B)  sellers are to a change in buyers' income. 
C)  sellers are to a change in price. 
D)  consumers are to the number of substitutes.

Question 14

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

Accepted Answer

A)  0.35. 
B)  0.43. 
C)  2.33. 
D)  2.89. 
A)  0.35. 
B)  0.43. 
C)  2.33. 
D)  2.89.

Question 15

Table 5-11
  
-Refer to Table 5-11. Which scenario describes the market for oil in the short run?

Accepted Answer

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

Question 16

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is

Accepted Answer

A)  inelastic. 
B)  elastic. 
C)  unit elastic. 
D)  perfectly inelastic. 
A)  inelastic. 
B)  elastic. 
C)  unit elastic. 
D)  perfectly inelastic.

Question 17

To determine whether a good is considered normal or inferior, one could examine the value of the

Accepted Answer

A)  income elasticity of demand for that good. 
B)  price elasticity of demand for that good. 
C)  price elasticity of supply for that good. 
D)  cross-price elasticity of demand for that good. 
A)  income elasticity of demand for that good. 
B)  price elasticity of demand for that good. 
C)  price elasticity of supply for that good. 
D)  cross-price elasticity of demand for that good.

Question 18

Demand is said to be inelastic if

Accepted Answer

A)  buyers respond substantially to changes in the price of the good. 
B)  demand shifts only slightly when the price of the good changes. 
C)  the quantity demanded changes only slightly when the price of the good changes. 
D)  the price of the good responds only slightly to changes in demand. 
A)  buyers respond substantially to changes in the price of the good. 
B)  demand shifts only slightly when the price of the good changes. 
C)  the quantity demanded changes only slightly when the price of the good changes. 
D)  the price of the good responds only slightly to changes in demand.

Question 19

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the price elasticity of demand for tortilla chips in the given price range is

Accepted Answer

A)  0.33. 
B)  0.45. 
C)  2.20. 
D)  3.00. 
A)  0.33. 
B)  0.45. 
C)  2.20. 
D)  3.00.

Question 20

Goods with many close substitutes tend to have

Accepted Answer

A)  more elastic demands. 
B)  less elastic demands. 
C)  price elasticities of demand that are unit elastic. 
D)  income elasticities of demand that are negative. 
A)  more elastic demands. 
B)  less elastic demands. 
C)  price elasticities of demand that are unit elastic. 
D)  income elasticities of demand that are negative.

Exam 5: Elasticity and Its Application

An increase in price causes an increase in total revenue when demand is

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

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

If the income elasticity of demand for a good is negative, then the good must be an inferior good.

The price elasticity of demand measures how much

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Which of the following should be held constant when calculating an income elasticity of demand?

Figure 5-20 -Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

The price elasticity of supply measures how responsive

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

Table 5-11 -Refer to Table 5-11. Which scenario describes the market for oil in the short run?

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is

To determine whether a good is considered normal or inferior, one could examine the value of the

Demand is said to be inelastic if

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the price elasticity of demand for tortilla chips in the given price range is

Goods with many close substitutes tend to have

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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