Question 1

Figure 5-7  
-Refer to Figure 5-7. For prices below $5, demand is price

Accepted Answer

A)  elastic, and raising price will increase total revenue. 
B)  inelastic, and raising price will increase total revenue. 
C)  elastic, and lowering price will increase total revenue. 
D)  inelastic, and lowering price will increase total revenue. 
A)  elastic, and raising price will increase total revenue. 
B)  inelastic, and raising price will increase total revenue. 
C)  elastic, and lowering price will increase total revenue. 
D)  inelastic, and lowering price will increase total revenue.

Question 2

The price elasticity of demand changes as we move along a

Accepted Answer

A)  horizontal demand curve. 
B)  vertical demand curve. 
C)  linear, downward-sloping demand curve. 
D)  All of the above are correct. 
A)  horizontal demand curve. 
B)  vertical demand curve. 
C)  linear, downward-sloping demand curve. 
D)  All of the above are correct.

Question 3

When supply is perfectly elastic, the value of the price elasticity of supply is

Accepted Answer

A)  0. 
B)  1. 
C)  greater than 0 and less than 1. 
D)  infinity. 
A)  0. 
B)  1. 
C)  greater than 0 and less than 1. 
D)  infinity.

Question 4

In which of these instances is demand said to be perfectly inelastic?

Accepted Answer

A)  An increase in price of 2% causes a decrease in quantity demanded of 2%. 
B)  A decrease in price of 2% causes an increase in quantity demanded of 0%. 
C)  A decrease in price of 2% causes a decrease in total revenue of 0%. 
D)  An increase in price of 2% causes a decrease in quantity demanded of 1/2%. 
A)  An increase in price of 2% causes a decrease in quantity demanded of 2%. 
B)  A decrease in price of 2% causes an increase in quantity demanded of 0%. 
C)  A decrease in price of 2% causes a decrease in total revenue of 0%. 
D)  An increase in price of 2% causes a decrease in quantity demanded of 1/2%.

Question 5

Table 5-2
  
-Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is

Accepted Answer

A)  0.31. 
B)  0.46. 
C)  1.25. 
D)  2.17 
A)  0.31. 
B)  0.46. 
C)  1.25. 
D)  2.17

Question 6

Demand is elastic if the price elasticity of demand is

Accepted Answer

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

Question 7

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

A) True 
 B)False

Question 8

The price elasticity of demand for a good measures the willingness of

Accepted Answer

A)  consumers to buy less of the good as price rises. 
B)  consumers to avoid monopolistic markets in favor of competitive markets. 
C)  firms to produce more of a good as price rises. 
D)  firms to respond to the tastes of consumers. 
A)  consumers to buy less of the good as price rises. 
B)  consumers to avoid monopolistic markets in favor of competitive markets. 
C)  firms to produce more of a good as price rises. 
D)  firms to respond to the tastes of consumers.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Accepted Answer

A) True 
 B)False

Question 11

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. Total consumer spending on aged cheddar cheese will

Accepted Answer

A)  increase, and total consumer spending on bread will increase. 
B)  increase, and total consumer spending on bread will decrease. 
C)  decrease, and total consumer spending on bread will increase. 
D)  decrease, and total consumer spending on bread will decrease. 
A)  increase, and total consumer spending on bread will increase. 
B)  increase, and total consumer spending on bread will decrease. 
C)  decrease, and total consumer spending on bread will increase. 
D)  decrease, and total consumer spending on bread will decrease.

Question 12

Which of the following is likely to have the most price inelastic demand?

Accepted Answer

A)  tablet computers 
B)  leather boots 
C)  lightbulbs 
D)  optional textbooks 
A)  tablet computers 
B)  leather boots 
C)  lightbulbs 
D)  optional textbooks

Question 13

Suppose demand is given by the equation:   Using the midpoint method, what is the price elasticity of demand between $7 and $8?

Accepted Answer

The price

Question 14

Table 5-1
  
-Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Accepted Answer

A)  A is pens and B is pencils. 
B)  A is a Snickers bar and B is a Milky Way bar. 
C)  A is an airline ticket from Chicago to New York demanded by a vacationer and B is an airline ticket from Chicago to New York demanded by a business traveler. 
D)  A is a bottle of water demanded by a tourist in a desert and B is a bottle of water demanded by a tourist in a rain forest. 
A)  A is pens and B is pencils. 
B)  A is a Snickers bar and B is a Milky Way bar. 
C)  A is an airline ticket from Chicago to New York demanded by a vacationer and B is an airline ticket from Chicago to New York demanded by a business traveler. 
D)  A is a bottle of water demanded by a tourist in a desert and B is a bottle of water demanded by a tourist in a rain forest.

Question 15

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

Accepted Answer

A)  increased from $12 to $15. 
B)  decreased from $39 to $36. 
C)  decreased from $27 to $24. 
D)  All of the above are correct. 
A)  increased from $12 to $15. 
B)  decreased from $39 to $36. 
C)  decreased from $27 to $24. 
D)  All of the above are correct.

Question 16

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

Accepted Answer

A) True 
 B)False

Question 17

Demand is said to be price elastic if

Accepted Answer

A)  the price of the good responds substantially to changes in demand. 
B)  demand shifts substantially when income or the expected future price of the good changes. 
C)  buyers do not respond much to changes in the price of the good. 
D)  buyers respond substantially to changes in the price of the good. 
A)  the price of the good responds substantially to changes in demand. 
B)  demand shifts substantially when income or the expected future price of the good changes. 
C)  buyers do not respond much to changes in the price of the good. 
D)  buyers respond substantially to changes in the price of the good.

Question 18

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 19

If the cross-price elasticity of demand for two goods is 1.25, then

Accepted Answer

A)  the two goods are luxuries. 
B)  the two goods are substitutes. 
C)  one of the goods is normal and the other good is inferior. 
D)  the demand for one of the goods conforms to the law of demand, but the demand for the other good violates the law of demand. 
A)  the two goods are luxuries. 
B)  the two goods are substitutes. 
C)  one of the goods is normal and the other good is inferior. 
D)  the demand for one of the goods conforms to the law of demand, but the demand for the other good violates the law of demand.

Question 20

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

Figure 5-7 -Refer to Figure 5-7. For prices below $5, demand is price

The price elasticity of demand changes as we move along a

When supply is perfectly elastic, the value of the price elasticity of supply is

In which of these instances is demand said to be perfectly inelastic?

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is

Demand is elastic if the price elasticity of demand is

A government program that reduces land under cultivation hurts farmers but helps consumers.

The price elasticity of demand for a good measures the willingness of

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

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Which of the following is likely to have the most price inelastic demand?

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $7 and $8?

Table 5-1 -Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

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

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

Demand is said to be price elastic if

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

If the cross-price elasticity of demand for two goods is 1.25, then

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

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