Question 1

Suppose the price elasticity of demand for a product is 0.5. If a supplier wants to increase revenue, what change should it make to price, if any?

Accepted Answer

The answer of Suppose the price elasticity of demand for...

Question 2

Suppose the point (Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear demand curve. Then

Accepted Answer

A)  a decrease in price from $18 to $16 will increase total revenue. 
B)  a decrease in price from $24 to $22 will decrease total revenue. 
C)  a decrease in the price from $21 to $19 will decrease total revenue. 
D)  the maximum value of total revenue is $68,000. 
A)  a decrease in price from $18 to $16 will increase total revenue. 
B)  a decrease in price from $24 to $22 will decrease total revenue. 
C)  a decrease in the price from $21 to $19 will decrease total revenue. 
D)  the maximum value of total revenue is $68,000.

Question 3

A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

Accepted Answer

A)  infinity. 
B)  zero. 
C)  one. 
D)  negative one. 
A)  infinity. 
B)  zero. 
C)  one. 
D)  negative one.

Question 4

Table 5-11  
-Refer to Table 5-11. Which scenario describes the market for oil in the short run in comparison to the long run?

Accepted Answer

A)  Scenario A describes both the short run and the long run. 
B)  Scenario D describes both the short run and the long run. 
C)  Scenario D describes the short run, whereas scenario A describes the long run. 
D)  Scenario C describes the short run, whereas scenario B describes the long run. 
A)  Scenario A describes both the short run and the long run. 
B)  Scenario D describes both the short run and the long run. 
C)  Scenario D describes the short run, whereas scenario A describes the long run. 
D)  Scenario C describes the short run, whereas scenario B describes the long run.

Question 5

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

Accepted Answer

A)  mint-flavored toothpaste 
B)  toothpaste 
C)  Colgate mint-flavored toothpaste 
D)  a generic mint-flavored toothpaste 
A)  mint-flavored toothpaste 
B)  toothpaste 
C)  Colgate mint-flavored toothpaste 
D)  a generic mint-flavored toothpaste

Question 6

A perfectly inelastic demand implies that buyers

Accepted Answer

A)  decrease their purchases when the price rises. 
B)  purchase the same amount as before when the price rises or falls. 
C)  increase their purchases only slightly when the price falls. 
D)  respond substantially to an increase in price. 
A)  decrease their purchases when the price rises. 
B)  purchase the same amount as before when the price rises or falls. 
C)  increase their purchases only slightly when the price falls. 
D)  respond substantially to an increase in price.

Question 7

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 8

If the income elasticity of demand for a good is -1.40, is the good a normal or inferior good?

Accepted Answer

The good i

Question 9

Figure 5-3  
-Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve

Accepted Answer

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

Question 10

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 11

If the price of milk rises, when is the price elasticity of demand likely to be the lowest?

Accepted Answer

A)  immediately after the price increase 
B)  one month after the price increase 
C)  three months after the price increase 
D)  one year after the price increase 
A)  immediately after the price increase 
B)  one month after the price increase 
C)  three months after the price increase 
D)  one year after the price increase

Question 12

Which of the following statements is correct?

Accepted Answer

A)  The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. 
B)  The demand for grandfather clocks is more elastic than the demand for clocks in general. 
C)  The demand for cardboard is more elastic over a long period of time than over a short period of time. 
D)  All of the above are correct. 
A)  The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. 
B)  The demand for grandfather clocks is more elastic than the demand for clocks in general. 
C)  The demand for cardboard is more elastic over a long period of time than over a short period of time. 
D)  All of the above are correct.

Question 13

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Figure 5-9  
-Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point A and point B is

Accepted Answer

A)  0.33. 
B)  0.5. 
C)  2.0. 
D)  3.0. 
A)  0.33. 
B)  0.5. 
C)  2.0. 
D)  3.0.

Question 16

Figure 5-15  
-Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points D and G?

Accepted Answer

A)  1.26 
B)  1.89 
C)  0.53 
D)  0.34 
A)  1.26 
B)  1.89 
C)  0.53 
D)  0.34

Question 17

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 18

A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Accepted Answer

A)  0.45. 
B)  2.0. 
C)  2.2. 
D)  200. 
A)  0.45. 
B)  2.0. 
C)  2.2. 
D)  200.

Question 19

On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50). Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A)  0.22. 
B)  0.53. 
C)  1.00. 
D)  1.89. 
A)  0.22. 
B)  0.53. 
C)  1.00. 
D)  1.89.

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 1 2 1 2 $20. 
C)  P1 > $20. 
D)  None of the above is correct. 
A)  0 1 2 1 2 $20. 
C)  P1 > $20. 
D)  None of the above is correct.

Exam 5: Elasticity and Its Application

Suppose the price elasticity of demand for a product is 0.5. If a supplier wants to increase revenue, what change should it make to price, if any?

Suppose the point (Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear demand curve. Then

A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

Table 5-11 -Refer to Table 5-11. Which scenario describes the market for oil in the short run in comparison to the long run?

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

A perfectly inelastic demand implies that buyers

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 income elasticity of demand for a good is -1.40, is the good a normal or inferior good?

Figure 5-3 -Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve

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 of milk rises, when is the price elasticity of demand likely to be the lowest?

Which of the following statements is correct?

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

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

Figure 5-9 -Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point A and point B is

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points D and G?

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?

A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50). Using the midpoint method, the price elasticity of supply is about

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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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