Question 1

Table 5-6
  
-Refer to Table 5-6. As price rises from $10 to $15, the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A)  0.40. 
B)  0.56. 
C)  1.80. 
D)  2.50. 
A)  0.40. 
B)  0.56. 
C)  1.80. 
D)  2.50.

Question 2

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 change in equilibrium quantity will be

Accepted Answer

A)  greater in the milk market than in the beef market. 
B)  greater in the beef market than in the milk market. 
C)  the same in the milk and beef markets. 
D)  Any of the above could be correct. 
A)  greater in the milk market than in the beef market. 
B)  greater in the beef market than in the milk market. 
C)  the same in the milk and beef markets. 
D)  Any of the above could be correct.

Question 3

If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result, then the price elasticity of demand is 3.

Accepted Answer

A) True 
 B)False

Question 4

If the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Accepted Answer

A)  1.66%, and aluminum foil sellers' total revenue will increase as a result. 
B)  1.66%, and aluminum foil sellers' total revenue will decrease as a result. 
C)  3.48%, and aluminum foil sellers' total revenue will increase as a result. 
D)  3.48%, and aluminum foil sellers' total revenue will decrease as a result. 
A)  1.66%, and aluminum foil sellers' total revenue will increase as a result. 
B)  1.66%, and aluminum foil sellers' total revenue will decrease as a result. 
C)  3.48%, and aluminum foil sellers' total revenue will increase as a result. 
D)  3.48%, and aluminum foil sellers' total revenue will decrease as a result.

Question 5

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

Accepted Answer

A) True 
 B)False

Question 6

A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

Accepted Answer

A)  raise the price, reduce the quantity, decrease total revenues, and decrease crime. 
B)  lower the price, increase the quantity, increase total revenues, and increase crime. 
C)  raise the price, increase the quantity, decrease total revenues, and increase crime. 
D)  raise the price, reduce the quantity, increase total revenues, and increase crime. 
A)  raise the price, reduce the quantity, decrease total revenues, and decrease crime. 
B)  lower the price, increase the quantity, increase total revenues, and increase crime. 
C)  raise the price, increase the quantity, decrease total revenues, and increase crime. 
D)  raise the price, reduce the quantity, increase total revenues, and increase crime.

Question 7

Table 5-5
  
-Refer to Table 5-5. As price rises from $5 to $6, the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A)  0.07. 
B)  0.18. 
C)  0.41. 
D)  2.45. 
A)  0.07. 
B)  0.18. 
C)  0.41. 
D)  2.45.

Question 8

Suppose that corn farmers want to increase their total revenue. Knowing that the demand for corn is inelastic, corn farmers should

Accepted Answer

A)  plant more corn so that they would be able to sell more each year. 
B)  increase spending on fertilizer in an attempt to produce more corn on the acres they farm. 
C)  reduce the number of acres on which they plant corn. 
D)  contribute to a fund that promotes technological advances in corn production. 
A)  plant more corn so that they would be able to sell more each year. 
B)  increase spending on fertilizer in an attempt to produce more corn on the acres they farm. 
C)  reduce the number of acres on which they plant corn. 
D)  contribute to a fund that promotes technological advances in corn production.

Question 9

Figure 5-9  
-Refer to Figure 5-9. If the price rises from point D to point C, total revenue

Accepted Answer

A)  increases, and demand is price elastic. 
B)  decreases, and demand is price elastic. 
C)  increases, and demand is price inelastic. 
D)  decreases, and demand is price inelastic. 
A)  increases, and demand is price elastic. 
B)  decreases, and demand is price elastic. 
C)  increases, and demand is price inelastic. 
D)  decreases, and demand is price inelastic.

Question 10

When a supply curve is relatively flat, the

Accepted Answer

A)  sellers are not at all responsive to a change in price. 
B)  equilibrium price changes substantially when the demand for the good changes. 
C)  supply is relatively elastic. 
D)  supply is relatively inelastic. 
A)  sellers are not at all responsive to a change in price. 
B)  equilibrium price changes substantially when the demand for the good changes. 
C)  supply is relatively elastic. 
D)  supply is relatively inelastic.

Question 11

Figure 5-17  
-Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point B and point C?

Accepted Answer

A)  1.44 
B)  1.29 
C)  0.96 
D)  0.69 
A)  1.44 
B)  1.29 
C)  0.96 
D)  0.69

Question 12

Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's

Accepted Answer

A)  demand for cigarettes is perfectly inelastic. 
B)  price elasticity of demand for cigarettes is infinite. 
C)  income elasticity of demand for cigarettes is 0. 
D)  More than one of the above is correct. 
A)  demand for cigarettes is perfectly inelastic. 
B)  price elasticity of demand for cigarettes is infinite. 
C)  income elasticity of demand for cigarettes is 0. 
D)  More than one of the above is correct.

Question 13

Moving downward and to the right along a linear demand curve, we know that total revenue

Accepted Answer

A)  first increases, then decreases. 
B)  first decreases, then increases. 
C)  always increases. 
D)  always decreases. 
A)  first increases, then decreases. 
B)  first decreases, then increases. 
C)  always increases. 
D)  always decreases.

Question 14

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

Accepted Answer

A)  supply decreases, demand is unaffected, and price increases. 
B)  demand decreases, supply is unaffected, and price decreases. 
C)  demand and supply both decrease, leaving price essentially unchanged. 
D)  supply decreases, demand increases, and price increases substantially. 
A)  supply decreases, demand is unaffected, and price increases. 
B)  demand decreases, supply is unaffected, and price decreases. 
C)  demand and supply both decrease, leaving price essentially unchanged. 
D)  supply decreases, demand increases, and price increases substantially.

Question 15

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Accepted Answer

A)  fall by 8 percent. 
B)  fall by 50 percent. 
C)  rise by 8 percent. 
D)  rise by 50 percent. 
A)  fall by 8 percent. 
B)  fall by 50 percent. 
C)  rise by 8 percent. 
D)  rise by 50 percent.

Question 16

If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

Accepted Answer

A) True 
 B)False

Question 17

Scenario 5-4
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 5-4. The change in equilibrium price will be

Accepted Answer

A)  greater in the aged cheddar cheese market than in the bread market. 
B)  greater in the bread market than in the aged cheddar cheese market. 
C)  the same in the aged cheddar cheese and bread markets. 
D)  Any of the above could be correct. 
A)  greater in the aged cheddar cheese market than in the bread market. 
B)  greater in the bread market than in the aged cheddar cheese market. 
C)  the same in the aged cheddar cheese and bread markets. 
D)  Any of the above could be correct.

Question 18

Suppose that Juan Carlos is filling out a survey that he received in the mail. The survey asks him what he would do if the price of his favorite toothpaste increased. Juan Carlos reports that he would switch to a different brand. The survey asks what he would do if the price of all toothpastes increased. Juan Carlos reports that he must use toothpaste, so he would have to adjust his spending elsewhere. These examples illustrate the importance of

Accepted Answer

A)  changes in total revenue 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)  changes in total revenue 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 19

Table 5-2
  
-Refer to Table 5-2. Using the midpoint method, if the price falls from $150 to $100, the absolute value of the price elasticity of demand is

Accepted Answer

A)  0.4. 
B)  0.9. 
C)  1.1. 
D)  2. 
A)  0.4. 
B)  0.9. 
C)  1.1. 
D)  2.

Question 20

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

Table 5-6 -Refer to Table 5-6. As price rises from $10 to $15, the price elasticity of demand using the midpoint method is approximately

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 change in equilibrium quantity will be

If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result, then the price elasticity of demand is 3.

If the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

Table 5-5 -Refer to Table 5-5. As price rises from $5 to $6, the price elasticity of demand using the midpoint method is approximately

Suppose that corn farmers want to increase their total revenue. Knowing that the demand for corn is inelastic, corn farmers should

Figure 5-9 -Refer to Figure 5-9. If the price rises from point D to point C, total revenue

When a supply curve is relatively flat, the

Figure 5-17 -Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point B and point C?

Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's

Moving downward and to the right along a linear demand curve, we know that total revenue

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $150 to $100, the absolute value of the price elasticity of demand is

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

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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