Question 1

Demand is inelastic if the price elasticity of demand is

Accepted Answer

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

Question 2

Holding all other forces constant, if increasing 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 increase always leads to an decrease in total revenue. 
A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price increase always leads to an decrease in total revenue.

Question 3

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the price elasticity of demand for tortilla chips in the given price range is

Accepted Answer

A)  0.33. 
B)  0.45. 
C)  2.20. 
D)  3.00. 
A)  0.33. 
B)  0.45. 
C)  2.20. 
D)  3.00.

Question 4

Suppose demand is given by the equation:   Using the midpoint method, what is the price elasticity of demand between $1 and $2?

Accepted Answer

The price

Question 5

The price elasticity of demand measures how much

Accepted Answer

A)  quantity demanded responds to a change in price. 
B)  quantity demanded responds to a change in income. 
C)  price responds to a change in demand. 
D)  demand responds to a change in supply. 
A)  quantity demanded responds to a change in price. 
B)  quantity demanded responds to a change in income. 
C)  price responds to a change in demand. 
D)  demand responds to a change in supply.

Question 6

If two goods are complements, their cross-price elasticity will be

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  equal to the difference between the income elasticities of demand for the two goods. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  equal to the difference between the income elasticities of demand for the two goods.

Question 7

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

A) True 
 B)False

Question 8

Figure 5-20  
-Refer to Figure 5-20. Which supply curve is most likely relevant over a very long period of time?

Accepted Answer

A)  S1 
B)  S2 
C)  S3 
D)  All of the above are equally likely to be relevant over a very long period of time. 
A)  S1 
B)  S2 
C)  S3 
D)  All of the above are equally likely to be relevant over a very long period of time.

Question 9

An increase in price causes an increase in total revenue when demand is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  All of the above are possible. 
A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  All of the above are possible.

Question 10

If the price elasticity of demand is equal to 1, then demand is unit elastic.

Accepted Answer

A) True 
 B)False

Question 11

Figure 5-12  
-Refer to Figure 5-12. If the price decreased from $36 to $12, total revenue would

Accepted Answer

A)  increase by $4,800, and demand is elastic between points X and Z. 
B)  increase by $7,200, and demand is elastic between points X and Z. 
C)  decrease by $4,800, and demand is inelastic between points X and Z. 
D)  decrease by $7,200, and demand is inelastic between points X and Z. 
A)  increase by $4,800, and demand is elastic between points X and Z. 
B)  increase by $7,200, and demand is elastic between points X and Z. 
C)  decrease by $4,800, and demand is inelastic between points X and Z. 
D)  decrease by $7,200, and demand is inelastic between points X and Z.

Question 12

When demand is inelastic, a decrease 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 13

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

Accepted Answer

A)  raises prices and total revenue in the drug market. 
B)  can increase drug-related crime. 
C)  shifts the demand curve for drugs to the left. 
D)  shifts the supply curve of drugs to the left. 
A)  raises prices and total revenue in the drug market. 
B)  can increase drug-related crime. 
C)  shifts the demand curve for drugs to the left. 
D)  shifts the supply curve of drugs to the left.

Question 14

For a good that is a necessity,

Accepted Answer

A)  quantity demanded tends to respond substantially to a change in price. 
B)  demand tends to be inelastic. 
C)  the law of demand does not apply. 
D)  All of the above are correct. 
A)  quantity demanded tends to respond substantially to a change in price. 
B)  demand tends to be inelastic. 
C)  the law of demand does not apply. 
D)  All of the above are correct.

Question 15

If a supply curve is perfectly horizontal, what is the value of the price elasticity of supply?

Accepted Answer

The answer of If a supply curve is perfectly horizontal,...

Question 16

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 17

The price elasticity of supply measures how much

Accepted Answer

A)  the quantity supplied responds to changes in input prices. 
B)  the quantity supplied responds to changes in the price of the good. 
C)  the price of the good responds to changes in supply. 
D)  sellers respond to changes in technology. 
A)  the quantity supplied responds to changes in input prices. 
B)  the quantity supplied responds to changes in the price of the good. 
C)  the price of the good responds to changes in supply. 
D)  sellers respond to changes in technology.

Question 18

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.

Question 19

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 20

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is

Accepted Answer

A)  elastic, and the price elasticity of supply is 1.74. 
B)  elastic, and the price elasticity of supply is 0.57. 
C)  inelastic, and the price elasticity of supply is 1.74. 
D)  inelastic, and the price elasticity of supply is 0.57. 
A)  elastic, and the price elasticity of supply is 1.74. 
B)  elastic, and the price elasticity of supply is 0.57. 
C)  inelastic, and the price elasticity of supply is 1.74. 
D)  inelastic, and the price elasticity of supply is 0.57.

Exam 5: Elasticity and Its Application

Demand is inelastic if the price elasticity of demand is

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

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the price elasticity of demand for tortilla chips in the given price range is

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $1 and $2?

The price elasticity of demand measures how much

If two goods are complements, their cross-price elasticity will be

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

Figure 5-20 -Refer to Figure 5-20. Which supply curve is most likely relevant over a very long period of time?

An increase in price causes an increase in total revenue when demand is

If the price elasticity of demand is equal to 1, then demand is unit elastic.

Figure 5-12 -Refer to Figure 5-12. If the price decreased from $36 to $12, total revenue would

When demand is inelastic, a decrease in price will cause

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

For a good that is a necessity,

If a supply curve is perfectly horizontal, what is the value of the price elasticity of supply?

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

The price elasticity of supply measures how much

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

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply 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

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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