Exam 5: Elasticity and Its Application

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

If demand is price inelastic, then

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

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Figure 5-4 -Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is

Figure 5-5 -Refer to Figure 5-5. At a price of $50 per unit, sellers' total revenue equals

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

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

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

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

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought. Which of the following best describes the effect on corn farmers in Minnesota, where sufficient rainfall occurred?

Suppose a farmer knows that he will be able to harvest and sell 3,000 bushels of wheat. Would he prefer a market in which conditions are favorable and most farmers harvest large crops or a market in which conditions are unfavorable and many farmers harvest small crops? Why?

Table 5-8 -Refer to Table 5-8. Using the midpoint method, what is the income elasticity of demand for good X?

When demand is inelastic, an increase in price will cause

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

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. Your roommate still enjoys Ramen noodles very much and buys even more, but you plan to buy fewer Ramen noodles in favor of foods you prefer more. When looking at income elasticity of demand for Ramen noodles, yours would

If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

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

When a supply curve is relatively flat, the