Question 1

Table 5-9
  
-Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?

Accepted Answer

A)  supply curve A 
B)  supply curve B 
C)  supply curve C 
D)  There is no difference in the elasticity of the three supply curves. 
A)  supply curve A 
B)  supply curve B 
C)  supply curve C 
D)  There is no difference in the elasticity of the three supply curves.

Question 2

Holding all other forces constant, if decreasing 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 decrease never leads to an decrease 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 decrease in total revenue.

Question 3

A key determinant of the price elasticity of supply is

Accepted Answer

A)  the ability of sellers to change the price of the good they produce. 
B)  the ability of sellers to change the amount of the good they produce. 
C)  how responsive buyers are to changes in sellers' prices. 
D)  the slope of the demand curve. 
A)  the ability of sellers to change the price of the good they produce. 
B)  the ability of sellers to change the amount of the good they produce. 
C)  how responsive buyers are to changes in sellers' prices. 
D)  the slope of the demand curve.

Question 4

Demand is inelastic if the price elasticity of demand is greater than 1.

Accepted Answer

A) True 
 B)False

Question 5

If we observe that when the price of ice cream rises by 10%, ice cream manufacturers increase the quantity supplied of ice cream by 20%, then the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 6

Suppose the price of gas increases by 20%. Will demand be more elastic if consumers have 3 weeks or 3 years to adjust to this price change?

Accepted Answer

The answer of Suppose the price of gas increases by...

Question 7

Demand is said to have unit elasticity if the price elasticity of demand is

Accepted Answer

A)  less than 1. 
B)  greater than 1. 
C)  equal to 1. 
D)  equal to 0. 
A)  less than 1. 
B)  greater than 1. 
C)  equal to 1. 
D)  equal to 0.

Question 8

Scenario 5-3
Suppose that the supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-3. The price elasticity of supply for aged cheddar cheese could be

Accepted Answer

A)  -1. 
B)  0. 
C)  0.5. 
D)  1.5. 
A)  -1. 
B)  0. 
C)  0.5. 
D)  1.5.

Question 9

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

Accepted Answer

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

Question 10

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about

Accepted Answer

A)  0.62. 
B)  0.77. 
C)  1.24. 
D)  1.63. 
A)  0.62. 
B)  0.77. 
C)  1.24. 
D)  1.63.

Question 11

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by

Accepted Answer

A)  0.4% in the short run and 4.6% in the long run. 
B)  1.7% in the short run and 0.7% in the long run. 
C)  9% in the short run and 21% in the long run. 
D)  25% in the short run and 10.7% in the long run. 
A)  0.4% in the short run and 4.6% in the long run. 
B)  1.7% in the short run and 0.7% in the long run. 
C)  9% in the short run and 21% in the long run. 
D)  25% in the short run and 10.7% in the long run.

Question 12

Refer to Figure 5-5. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

Accepted Answer

A)  0.33. 
B)  0.4. 
C)  1.33. 
D)  3. 
A)  0.33. 
B)  0.4. 
C)  1.33. 
D)  3.

Question 13

Refer to Figure 5-5. At a price of $70 per unit, sellers' total revenue equals

Accepted Answer

A)  $700. 
B)  $1050. 
C)  $1250. 
D)  $1400. 
A)  $700. 
B)  $1050. 
C)  $1250. 
D)  $1400.

Question 14

If the cross-price elasticity of demand for two goods is -4.5, then

Accepted Answer

A)  the two goods are substitutes. 
B)  the two goods are complements. 
C)  one of the goods is normal while the other good is inferior. 
D)  one of the goods is a luxury while the other good is a necessity. 
A)  the two goods are substitutes. 
B)  the two goods are complements. 
C)  one of the goods is normal while the other good is inferior. 
D)  one of the goods is a luxury while the other good is a necessity.

Question 15

When consumers face rising gasoline prices, they typically

Accepted Answer

A)  reduce their quantity demanded more in the long run than in the short run. 
B)  reduce their quantity demanded more in the short run than in the long run. 
C)  do not reduce their quantity demanded in the short run or the long run. 
D)  increase their quantity demanded in the short run but reduce their quantity demanded in the long run. 
A)  reduce their quantity demanded more in the long run than in the short run. 
B)  reduce their quantity demanded more in the short run than in the long run. 
C)  do not reduce their quantity demanded in the short run or the long run. 
D)  increase their quantity demanded in the short run but reduce their quantity demanded in the long run.

Question 16

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 inelastic demand?

Accepted Answer

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

Question 17

Which of the following is not a determinant of the price elasticity of demand for a good?

Accepted Answer

A)  the time horizon 
B)  the steepness or flatness of the supply curve for the good 
C)  the definition of the market for the good 
D)  the availability of substitutes for the good 
A)  the time horizon 
B)  the steepness or flatness of the supply curve for the good 
C)  the definition of the market for the good 
D)  the availability of substitutes for the good

Question 18

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

Accepted Answer

A)  first becomes smaller, then larger. 
B)  always becomes larger. 
C)  always becomes smaller. 
D)  first becomes larger, then smaller. 
A)  first becomes smaller, then larger. 
B)  always becomes larger. 
C)  always becomes smaller. 
D)  first becomes larger, then smaller.

Question 19

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

Accepted Answer

A)  subscriptions to premium movie channels through the local cable television provider 
B)  hi-definition DVD players 
C)  champagne 
D)  housing 
A)  subscriptions to premium movie channels through the local cable television provider 
B)  hi-definition DVD players 
C)  champagne 
D)  housing

Question 20

When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea lattés is

Accepted Answer

A)  elastic, and her demand curve would be relatively flat. 
B)  elastic, and her demand curve would be relatively steep. 
C)  inelastic, and her demand curve would be relatively flat. 
D)  inelastic, and her demand curve would be relatively steep. 
A)  elastic, and her demand curve would be relatively flat. 
B)  elastic, and her demand curve would be relatively steep. 
C)  inelastic, and her demand curve would be relatively flat. 
D)  inelastic, and her demand curve would be relatively steep.

Exam 5: Elasticity and Its Application

Table 5-9 -Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?

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

A key determinant of the price elasticity of supply is

Demand is inelastic if the price elasticity of demand is greater than 1.

If we observe that when the price of ice cream rises by 10%, ice cream manufacturers increase the quantity supplied of ice cream by 20%, then the price elasticity of supply is 2.

Suppose the price of gas increases by 20%. Will demand be more elastic if consumers have 3 weeks or 3 years to adjust to this price change?

Demand is said to have unit elasticity if the price elasticity of demand is

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

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by

Refer to Figure 5-5. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

Refer to Figure 5-5. At a price of $70 per unit, sellers' total revenue equals

If the cross-price elasticity of demand for two goods is -4.5, then

When consumers face rising gasoline prices, they typically

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 inelastic demand?

Which of the following is not a determinant of the price elasticity of demand for a good?

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

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

When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea lattés 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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