Question 1

Figure 5-13  
-Refer to Figure 5-13. 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 2

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is

Accepted Answer

A)  0.75. 
B)  1.25. 
C)  1.33. 
D)  1.60. 
A)  0.75. 
B)  1.25. 
C)  1.33. 
D)  1.60.

Question 3

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Accepted Answer

A) True 
 B)False

Question 4

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

Accepted Answer

A)  the availability of close 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 close 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 5

A linear, upward-sloping supply curve has

Accepted Answer

A)  a constant slope and a changing price elasticity of supply. 
B)  a changing slope and a constant price elasticity of supply. 
C)  both a constant slope and a constant price elasticity of supply. 
D)  both a changing slope and a changing price elasticity of supply. 
A)  a constant slope and a changing price elasticity of supply. 
B)  a changing slope and a constant price elasticity of supply. 
C)  both a constant slope and a constant price elasticity of supply. 
D)  both a changing slope and a changing price elasticity of supply.

Question 6

Elasticity is

Accepted Answer

A)  a measure of how much buyers and sellers respond to changes in market conditions. 
B)  the study of how the allocation of resources affects economic well-being. 
C)  the maximum amount that a buyer will pay for a good. 
D)  the value of everything a seller must give up to produce a good. 
A)  a measure of how much buyers and sellers respond to changes in market conditions. 
B)  the study of how the allocation of resources affects economic well-being. 
C)  the maximum amount that a buyer will pay for a good. 
D)  the value of everything a seller must give up to produce a good.

Question 7

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. Considering the income elasticity, what type of good is mobile telephone service?

Accepted Answer

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

Question 8

Cross-price elasticity is used to determine whether goods are substitutes or complements.

Accepted Answer

A) True 
 B)False

Question 9

When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about

Accepted Answer

A)  0.55. 
B)  1.83. 
C)  2. 
D)  10. 
A)  0.55. 
B)  1.83. 
C)  2. 
D)  10.

Question 10

When studying how some event or policy affects a market, elasticity provides information on the

Accepted Answer

A)  equity effects on the market by identifying the winners and losers. 
B)  magnitude of the effect on the market. 
C)  speed of adjustment of the market in response to the event or policy. 
D)  number of market participants who are directly affected by the event or policy. 
A)  equity effects on the market by identifying the winners and losers. 
B)  magnitude of the effect on the market. 
C)  speed of adjustment of the market in response to the event or policy. 
D)  number of market participants who are directly affected by the event or policy.

Question 11

Figure 5-2  
-Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

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 12

If sellers do not adjust their quantities supplied at all in response to a change in price,

Accepted Answer

A)  advances in technology must be prevalent. 
B)  the time period under consideration must be very long. 
C)  supply is perfectly elastic. 
D)  supply is perfectly inelastic. 
A)  advances in technology must be prevalent. 
B)  the time period under consideration must be very long. 
C)  supply is perfectly elastic. 
D)  supply is perfectly inelastic.

Question 13

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Accepted Answer

A) True 
 B)False

Question 14

For which of the following goods would demand be most price elastic: a car, a sedan, a Honda sedan, a Honda Accord, a black Honda Accord?

Accepted Answer

a black Ho

Question 15

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

Accepted Answer

A)  The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve. 
B)  The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve. 
C)  Given two prices with which to calculate the price elasticity of supply, that elasticity would be the same for both curves. 
D)  A decrease in demand will increase total revenue if the steeper supply curve is relevant, while a decrease in demand will decrease total revenue if the flatter supply cure is relevant. 
A)  The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve. 
B)  The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve. 
C)  Given two prices with which to calculate the price elasticity of supply, that elasticity would be the same for both curves. 
D)  A decrease in demand will increase total revenue if the steeper supply curve is relevant, while a decrease in demand will decrease total revenue if the flatter supply cure is relevant.

Question 16

The demand for Godiva mint chocolates is likely quite elastic because

Accepted Answer

A)  there are many close substitutes. 
B)  this particular type of chocolate is viewed as a luxury by many chocolate lovers. 
C)  the market is narrowly defined. 
D)  All of the above are correct. 
A)  there are many close substitutes. 
B)  this particular type of chocolate is viewed as a luxury by many chocolate lovers. 
C)  the market is narrowly defined. 
D)  All of the above are correct.

Question 17

How did the farm population in the United States change between 1950 and today?

Accepted Answer

A)  It dropped from 10 million to fewer than 3 million people. 
B)  It dropped from 20 million to fewer than 5 million people. 
C)  It dropped from 30 million to just over 6 million people. 
D)  It increased from 10 million to almost 13 million people. 
A)  It dropped from 10 million to fewer than 3 million people. 
B)  It dropped from 20 million to fewer than 5 million people. 
C)  It dropped from 30 million to just over 6 million people. 
D)  It increased from 10 million to almost 13 million people.

Question 18

If the price elasticity of demand for a good is 0.8, then a 12 percent increase in the quantity demanded must be the result of

Accepted Answer

A)  a 0.06 percent decrease in the price. 
B)  a 1.5 percent decrease in the price. 
C)  a 9.6 percent decrease in the price. 
D)  a 15 percent decrease in the price. 
A)  a 0.06 percent decrease in the price. 
B)  a 1.5 percent decrease in the price. 
C)  a 9.6 percent decrease in the price. 
D)  a 15 percent decrease in the price.

Question 19

Figure 5-4  
-Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is

Accepted Answer

A)  less than 1 but greater than zero. 
B)  equal to 1. 
C)  greater than 1. 
D)  equal to zero. 
A)  less than 1 but greater than zero. 
B)  equal to 1. 
C)  greater than 1. 
D)  equal to zero.

Question 20

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

Accepted Answer

A)  0.4. 
B)  1. 
C)  2. 
D)  2.5. 
A)  0.4. 
B)  1. 
C)  2. 
D)  2.5.

Exam 5: Elasticity and Its Application

Figure 5-13 -Refer to Figure 5-13. Between point A and point B on the graph, demand is

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

A linear, upward-sloping supply curve has

Elasticity is

Cross-price elasticity is used to determine whether goods are substitutes or complements.

When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about

When studying how some event or policy affects a market, elasticity provides information on the

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

If sellers do not adjust their quantities supplied at all in response to a change in price,

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

For which of the following goods would demand be most price elastic: a car, a sedan, a Honda sedan, a Honda Accord, a black Honda Accord?

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

The demand for Godiva mint chocolates is likely quite elastic because

How did the farm population in the United States change between 1950 and today?

If the price elasticity of demand for a good is 0.8, then a 12 percent increase in the quantity demanded must be the result of

Figure 5-4 -Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is

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

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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