Question 1

Figure 5-16  
-Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $4 and $6?

Accepted Answer

A)  0.75 
B)  1.00 
C)  1.20 
D)  1.25 
A)  0.75 
B)  1.00 
C)  1.20 
D)  1.25

Question 2

Figure 5-10  
-Refer to Figure 5-10. Total revenue when the price is P2 is represented by the areas)

Accepted Answer

A)  B + D. 
B)  A + B. 
C)  C + D. 
D)  D. 
A)  B + D. 
B)  A + B. 
C)  C + D. 
D)  D.

Question 3

The difference between slope and elasticity is that slope

Accepted Answer

A)  is a ratio of two changes, and elasticity is a ratio of two percentage changes. 
B)  is a ratio of two percentage changes, and elasticity is a ratio of two changes. 
C)  measures changes in quantity demanded more accurately than elasticity. 
D)  None of the above is correct; there is no difference between slope and elasticity. 
A)  is a ratio of two changes, and elasticity is a ratio of two percentage changes. 
B)  is a ratio of two percentage changes, and elasticity is a ratio of two changes. 
C)  measures changes in quantity demanded more accurately than elasticity. 
D)  None of the above is correct; there is no difference between slope and elasticity.

Question 4

Table 5-4
The following table shows the demand schedule for a particular good.
  
-Refer to Table 5-4. Using the midpoint method, when price falls from $8 to $4, the price elasticity of demand is

Accepted Answer

A)  0.43 
B)  0.67 
C)  1 
D)  2.33 
A)  0.43 
B)  0.67 
C)  1 
D)  2.33

Question 5

When demand is elastic, an increase in price will cause

Accepted Answer

A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded. 
A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded.

Question 6

Good news for farming can be bad news for farmers because the

Accepted Answer

A)  supply curve for an individual farmer is usually perfectly elastic. 
B)  supply curve for an individual farmer is usually perfectly inelastic. 
C)  demand for basic foodstuffs is usually inelastic, meaning that factors that shift supply to the right decrease total revenues to sellers. 
D)  demand for basic foodstuffs is usually elastic, meaning that factors that shift supply to the right increase total revenues to sellers. 
A)  supply curve for an individual farmer is usually perfectly elastic. 
B)  supply curve for an individual farmer is usually perfectly inelastic. 
C)  demand for basic foodstuffs is usually inelastic, meaning that factors that shift supply to the right decrease total revenues to sellers. 
D)  demand for basic foodstuffs is usually elastic, meaning that factors that shift supply to the right increase total revenues to sellers.

Question 7

If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A)  1.33, and supply is elastic. 
B)  1.33, and supply is inelastic. 
C)  0.75, and supply is elastic. 
D)  0.75, and supply is inelastic. 
A)  1.33, and supply is elastic. 
B)  1.33, and supply is inelastic. 
C)  0.75, and supply is elastic. 
D)  0.75, and supply is inelastic.

Question 8

-Refer to Table 5-12. Between which two quantities listed is demand most elastic?

Accepted Answer

The answer of  
-Refer to Table 5-12. Between which...

Question 9

Suppose that demand is inelastic within a certain price range. For that price range,

Accepted Answer

A)  an increase in price would increase total revenue because the decrease in quantity demanded is proportionately less than the increase in price. 
B)  an increase in price would decrease total revenue because the decrease in quantity demanded is proportionately greater than the increase in price. 
C)  a decrease in price would increase total revenue because the increase in quantity demanded is proportionately smaller than the decrease in price. 
D)  a decrease in price would not affect total revenue. 
A)  an increase in price would increase total revenue because the decrease in quantity demanded is proportionately less than the increase in price. 
B)  an increase in price would decrease total revenue because the decrease in quantity demanded is proportionately greater than the increase in price. 
C)  a decrease in price would increase total revenue because the increase in quantity demanded is proportionately smaller than the decrease in price. 
D)  a decrease in price would not affect total revenue.

Question 10

Figure 5-5  
-Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

Accepted Answer

A)  $20 and $40. 
B)  $40 and$50. 
C)  $40 and$60. 
D)  $50 and$70. 
A)  $20 and $40. 
B)  $40 and$50. 
C)  $40 and$60. 
D)  $50 and$70.

Question 11

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)  the mayor 
B)  the city manager 
C)  The answer depends on the price elasticity of demand. 
D)  The answer depends on the costs of construction of the new municipal swimming pool. 
A)  the mayor 
B)  the city manager 
C)  The answer depends on the price elasticity of demand. 
D)  The answer depends on the costs of construction of the new municipal swimming pool.

Question 12

Last year, Max bought 6 pairs of athletic shoes when his income was $35,000. This year, his income is $42,000, and he purchased 8 pairs of athletic shoes. Holding other factors constant, it follows that Max

Accepted Answer

A)  considers athletic shoes to be necessities. 
B)  considers athletic shoes to be inferior goods. 
C)  considers athletic shoes to be normal goods. 
D)  has a low price elasticity of demand for athletic shoes. 
A)  considers athletic shoes to be necessities. 
B)  considers athletic shoes to be inferior goods. 
C)  considers athletic shoes to be normal goods. 
D)  has a low price elasticity of demand for athletic shoes.

Question 13

Suppose that when the price rises by 20% for a particular good, the quantity demanded of that good falls by 10%.
The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?

Accepted Answer

A)  0.8 
B)  1 
C)  1.8 
D)  2.4 
A)  0.8 
B)  1 
C)  1.8 
D)  2.4

Question 15

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Accepted Answer

A) True 
 B)False

Question 16

For which of the following goods is the income elasticity of demand likely highest?

Accepted Answer

A)  natural gas 
B)  doctor's visits 
C)  hamburgers 
D)  boats 
A)  natural gas 
B)  doctor's visits 
C)  hamburgers 
D)  boats

Question 17

Scenario 5-1
Suppose that when the average college student's income is $10,000 per year, the annual quantity demanded of Patty's Pizza is 50 and the annual quantity demanded of Sue's Subs is 80. Suppose that when the price of Patty's Pizza increases from $8 to $10 per pie, the quantity demanded of Sue's Subs increases from 80 to 100. Suppose also that when the average student's income increases to $12,000 per year, the annual quantity demanded of Patty's Pizza increases from 50 to 60.
-Refer to Scenario 5-1. Using the midpoint method, the cross price elasticity of demand is

Accepted Answer

A)  about 0.22, and the two goods are substitutes. 
B)  about -0.005, and the two goods are complements. 
C)  1, and the two goods are substitutes. 
D)  1, and the two goods are unitary elastic. 
A)  about 0.22, and the two goods are substitutes. 
B)  about -0.005, and the two goods are complements. 
C)  1, and the two goods are substitutes. 
D)  1, and the two goods are unitary elastic.

Question 18

The demand for soap is more elastic than the demand for Dove soap.

Accepted Answer

A) True 
 B)False

Question 19

If the price elasticity of demand for a good is 4, then a 12 percent decrease in price results in a

Accepted Answer

A)  0.33 percent increase in the quantity demanded. 
B)  3 percent increase in the quantity demanded. 
C)  30 percent increase in the quantity demanded. 
D)  48 percent increase in the quantity demanded. 
A)  0.33 percent increase in the quantity demanded. 
B)  3 percent increase in the quantity demanded. 
C)  30 percent increase in the quantity demanded. 
D)  48 percent increase in the quantity demanded.

Question 20

For a good that is a luxury, demand

Accepted Answer

A)  tends to be inelastic. 
B)  tends to be elastic. 
C)  has unit elasticity. 
D)  cannot be represented by a demand curve in the usual way. 
A)  tends to be inelastic. 
B)  tends to be elastic. 
C)  has unit elasticity. 
D)  cannot be represented by a demand curve in the usual way.

Exam 5: Elasticity and Its Application

Figure 5-16 -Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $4 and $6?

Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P2 is represented by the areas)

The difference between slope and elasticity is that slope

Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, when price falls from $8 to $4, the price elasticity of demand is

When demand is elastic, an increase in price will cause

Good news for farming can be bad news for farmers because the

If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of supply is about

-Refer to Table 5-12. Between which two quantities listed is demand most elastic?

Suppose that demand is inelastic within a certain price range. For that price range,

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

Last year, Max bought 6 pairs of athletic shoes when his income was $35,000. This year, his income is $42,000, and he purchased 8 pairs of athletic shoes. Holding other factors constant, it follows that Max

Suppose that when the price rises by 20% for a particular good, the quantity demanded of that good falls by 10%. The price elasticity of demand for this good is equal to 2.0.

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

For which of the following goods is the income elasticity of demand likely highest?

The demand for soap is more elastic than the demand for Dove soap.

If the price elasticity of demand for a good is 4, then a 12 percent decrease in price results in a

For a good that is a luxury, demand

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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