Question 1

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is

Accepted Answer

A)  inelastic and equal to 6. 
B)  elastic and equal to 6. 
C)  inelastic and equal to 0.17. 
D)  elastic and equal to 0.17. 
A)  inelastic and equal to 6. 
B)  elastic and equal to 6. 
C)  inelastic and equal to 0.17. 
D)  elastic and equal to 0.17.

Question 2

Suppose that good X is a luxury and that good Y is a necessity. Which good would you expect to have more price elastic demand?

Accepted Answer

The answer of Suppose that good X is a luxury...

Question 3

With regard to elasticity, as a firm nears its production capacity, supply becomes more

Accepted Answer

The answer of With regard to elasticity, as a firm...

Question 4

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 quantity will

Accepted Answer

A)  increase in both the milk and beef markets. 
B)  increase in the milk market and decrease in the beef market. 
C)  decrease in the milk market and increase in the beef market. 
D)  decrease in both the milk and beef markets. 
A)  increase in both the milk and beef markets. 
B)  increase in the milk market and decrease in the beef market. 
C)  decrease in the milk market and increase in the beef market. 
D)  decrease in both the milk and beef markets.

Question 5

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?

Accepted Answer

A)  Both the mayor and city manager would be correct if demand were price elastic. 
B)  Both the mayor and city manager would be correct if demand were price inelastic. 
C)  The mayor would be correct if demand were price elastic; the city manager would be correct if demand were price inelastic. 
D)  The mayor would be correct if demand were price inelastic; the city manager would be correct if demand were price elastic. 
A)  Both the mayor and city manager would be correct if demand were price elastic. 
B)  Both the mayor and city manager would be correct if demand were price inelastic. 
C)  The mayor would be correct if demand were price elastic; the city manager would be correct if demand were price inelastic. 
D)  The mayor would be correct if demand were price inelastic; the city manager would be correct if demand were price elastic.

Question 6

Holding all other forces constant, if decreasing the price of a good leads to an increase 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 decrease never leads to an increase in total revenue. 
A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price decrease never leads to an increase in total revenue.

Question 7

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would

Accepted Answer

A)  be negative, and your roommate's would be positive. 
B)  be positive, and your roommate's would be negative. 
C)  be zero, and your roommate's would approach infinity. 
D)  approach infinity, and your roommate's would be zero. 
A)  be negative, and your roommate's would be positive. 
B)  be positive, and your roommate's would be negative. 
C)  be zero, and your roommate's would approach infinity. 
D)  approach infinity, and your roommate's would be zero.

Question 8

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Accepted Answer

A)  a 0.2 percent increase in the price. 
B)  a 2.5 percent increase in the price. 
C)  a 5 percent increase in the price. 
D)  a 20 percent increase in the price. 
A)  a 0.2 percent increase in the price. 
B)  a 2.5 percent increase in the price. 
C)  a 5 percent increase in the price. 
D)  a 20 percent increase in the price.

Question 9

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

Accepted Answer

A)  the equilibrium quantity decreases, and the equilibrium price is unchanged. 
B)  the equilibrium price increases, and the equilibrium quantity is unchanged. 
C)  the equilibrium quantity and the equilibrium price both are unchanged. 
D)  buyers' total expenditure on the good is unchanged. 
A)  the equilibrium quantity decreases, and the equilibrium price is unchanged. 
B)  the equilibrium price increases, and the equilibrium quantity is unchanged. 
C)  the equilibrium quantity and the equilibrium price both are unchanged. 
D)  buyers' total expenditure on the good is unchanged.

Question 10

In the market for oil in the short run, demand

Accepted Answer

A)  and supply are both elastic. 
B)  and supply are both inelastic. 
C)  is elastic and supply is inelastic. 
D)  is inelastic and supply is elastic. 
A)  and supply are both elastic. 
B)  and supply are both inelastic. 
C)  is elastic and supply is inelastic. 
D)  is inelastic and supply is elastic.

Question 11

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Accepted Answer

A)  0.2 percent decrease in the quantity demanded. 
B)  5 percent decrease in the quantity demanded. 
C)  20 percent decrease in the quantity demanded. 
D)  40 percent decrease in the quantity demanded. 
A)  0.2 percent decrease in the quantity demanded. 
B)  5 percent decrease in the quantity demanded. 
C)  20 percent decrease in the quantity demanded. 
D)  40 percent decrease in the quantity demanded.

Question 12

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is

Accepted Answer

A)  0.11. 
B)  0.47. 
C)  1.12. 
D)  2.11. 
A)  0.11. 
B)  0.47. 
C)  1.12. 
D)  2.11.

Question 13

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

Accepted Answer

A) True 
 B)False

Question 14

Figure 5-12  
-Refer to Figure 5-12. Sellers' total revenue would increase if the price

Accepted Answer

A)  increased from $6 to $9. 
B)  increased from $33 to $36. 
C)  decreased from $15 to $12. 
D)  All of the above are correct. 
A)  increased from $6 to $9. 
B)  increased from $33 to $36. 
C)  decreased from $15 to $12. 
D)  All of the above are correct.

Question 15

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

Accepted Answer

A)  increase total revenue of textbook sellers. 
B)  decrease total revenue of textbook sellers. 
C)  not change total revenue of textbook sellers. 
D)  There is not enough information to answer this question. 
A)  increase total revenue of textbook sellers. 
B)  decrease total revenue of textbook sellers. 
C)  not change total revenue of textbook sellers. 
D)  There is not enough information to answer this question.

Question 16

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Accepted Answer

A) True 
 B)False

Question 17

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

Accepted Answer

A)  0.32, and Tess regards handbags as inferior goods. 
B)  0.32, and Tess regards handbags as normal goods. 
C)  3.17, and Tess regards handbags as inferior goods. 
D)  3.17, and Tess regards handbags as normal goods. 
A)  0.32, and Tess regards handbags as inferior goods. 
B)  0.32, and Tess regards handbags as normal goods. 
C)  3.17, and Tess regards handbags as inferior goods. 
D)  3.17, and Tess regards handbags as normal goods.

Question 18

If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the elasticity, then demand is

Accepted Answer

A)  perfectly inelastic, and the demand curve is vertical. 
B)  elastic, and the demand curve is a straight, downward-sloping line. 
C)  perfectly elastic, and the demand curve is horizontal. 
D)  elastic, and the demand curve is something other than a straight, downward-sloping line. 
A)  perfectly inelastic, and the demand curve is vertical. 
B)  elastic, and the demand curve is a straight, downward-sloping line. 
C)  perfectly elastic, and the demand curve is horizontal. 
D)  elastic, and the demand curve is something other than a straight, downward-sloping line.

Question 19

Figure 5-10  
-Refer to Figure 5-10. If rectangle D is larger than rectangle A, then

Accepted Answer

A)  demand is elastic between prices P1 and P2. 
B)  a decrease in price from P2 to P1 will cause an increase in total revenue. 
C)  the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded. 
D)  All of the above are correct. 
A)  demand is elastic between prices P1 and P2. 
B)  a decrease in price from P2 to P1 will cause an increase in total revenue. 
C)  the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded. 
D)  All of the above are correct.

Question 20

Figure 5-11  
-Refer to Figure 5-11. Suppose this demand curve is a straight, downward-sloping line all the way from the horizontal intercept to the vertical intercept. We choose two prices, P1 and P2, and the corresponding quantities demanded, Q1 and Q2, for the purpose of calculating the price elasticity of demand. Also suppose P2 > P1. In which of the following cases could we possibly find that i) demand is elastic and ii) a decrease in price from P1 to P2 causes an decrease in total revenue?

Accepted Answer

A)  0  $20. 
D)  None of the above is correct. 
A)  0  $20. 
D)  None of the above is correct.

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is

Suppose that good X is a luxury and that good Y is a necessity. Which good would you expect to have more price elastic demand?

With regard to elasticity, as a firm nears its production capacity, supply becomes more

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 quantity will

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

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

In the market for oil in the short run, demand

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the elasticity, then demand is

Figure 5-10 -Refer to Figure 5-10. If rectangle D is larger than rectangle A, then

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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Exam 5: Elasticity and Its Application

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is

Suppose that good X is a luxury and that good Y is a necessity. Which good would you expect to have more price elastic demand?

With regard to elasticity, as a firm nears its production capacity, supply becomes more

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 quantity will

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

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

In the market for oil in the short run, demand

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the elasticity, then demand is

Figure 5-10 -Refer to Figure 5-10. If rectangle D is larger than rectangle A, then

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

Filters