Question 1

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

Accepted Answer

A)  first becomes smaller, then larger. 
B)  always becomes larger. 
C)  always becomes smaller. 
D)  first becomes larger, then smaller. 
A)  first becomes smaller, then larger. 
B)  always becomes larger. 
C)  always becomes smaller. 
D)  first becomes larger, then smaller.

Question 2

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

Accepted Answer

A)  0.22. 
B)  0.67. 
C)  1.33. 
D)  1.50. 
A)  0.22. 
B)  0.67. 
C)  1.33. 
D)  1.50.

Question 3

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

Accepted Answer

A)  zero. 
B)  inelastic. 
C)  unit elastic. 
D)  elastic. 
A)  zero. 
B)  inelastic. 
C)  unit elastic. 
D)  elastic.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by

Accepted Answer

A)  1.92%, and apples sellers' total revenue will increase as a result. 
B)  1.92%, and apples sellers' total revenue will decrease as a result. 
C)  3%, and apples sellers' total revenue will increase as a result. 
D)  3%, and apples sellers' total revenue will decrease as a result. 
A)  1.92%, and apples sellers' total revenue will increase as a result. 
B)  1.92%, and apples sellers' total revenue will decrease as a result. 
C)  3%, and apples sellers' total revenue will increase as a result. 
D)  3%, and apples sellers' total revenue will decrease as a result.

Question 6

Which of the following should be held constant when calculating an income elasticity of demand?

Accepted Answer

A)  the price of the good 
B)  prices of related goods 
C)  tastes 
D)  All of the above should be held constant. 
A)  the price of the good 
B)  prices of related goods 
C)  tastes 
D)  All of the above should be held constant.

Question 7

Scenario 5-8
Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000.
-Refer to Scenario 5-8. Using the midpoint method, what is the income elasticity of demand for mobile service?

Accepted Answer

The answer of Scenario 5-8
Consider the markets for mobile and...

Question 8

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 9

The smaller the price elasticity of demand, the

Accepted Answer

A)  steeper the demand curve will be through a given point. 
B)  flatter the demand curve will be through a given point. 
C)  more strongly buyers respond to a change in price between any two prices P1 and P2. 
D)  smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2. 
A)  steeper the demand curve will be through a given point. 
B)  flatter the demand curve will be through a given point. 
C)  more strongly buyers respond to a change in price between any two prices P1 and P2. 
D)  smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2.

Question 10

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 11

While in college, Marty and Laura each buy 15 bus tickets per month. After they graduate and have full-time jobs, Marty buys 0 bus tickets per month and Laura buys 28 bus tickets per month. Comparing income elasticity of demand for bus tickets, Marty's

Accepted Answer

A)  is negative, and Laura's is positive. 
B)  is positive, and Laura's is negative. 
C)  is zero, and Laura's is positive. 
D)  is zero, and Laura's is negative. 
A)  is negative, and Laura's is positive. 
B)  is positive, and Laura's is negative. 
C)  is zero, and Laura's is positive. 
D)  is zero, and Laura's is negative.

Question 12

Figure 5-1  
-Refer to Figure 5-1. Between point A and point B on the graph, demand is

Accepted Answer

A)  perfectly elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  elastic, but not perfectly elastic. 
A)  perfectly elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  elastic, but not perfectly elastic.

Question 13

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 equilibrium price will

Accepted Answer

A)  increase in both the milk and beef markets. 
B)  increase in the milk market and decrease in the beef market. 
C)  decrease in the milk market and increase in the beef market. 
D)  decrease in both the milk and beef markets. 
A)  increase in both the milk and beef markets. 
B)  increase in the milk market and decrease in the beef market. 
C)  decrease in the milk market and increase in the beef market. 
D)  decrease in both the milk and beef markets.

Question 14

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

Accepted Answer

A)  increase the total revenue of wheat farmers. 
B)  decrease the total revenue of wheat farmers. 
C)  decrease the demand for wheat. 
D)  decrease the supply of wheat. 
A)  increase the total revenue of wheat farmers. 
B)  decrease the total revenue of wheat farmers. 
C)  decrease the demand for wheat. 
D)  decrease the supply of wheat.

Question 15

Demand is said to have unit elasticity if the price elasticity of demand is

Accepted Answer

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

Question 16

If we observe that when the price of ice cream rises by 10%, ice cream manufacturers increase the quantity supplied of ice cream by 20%, then the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following expressions represents a cross-price elasticity of demand?

Accepted Answer

A)  percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread 
B)  percentage change in quantity demanded of bread divided by percentage change in price of butter 
C)  percentage change in price of bread divided by percentage change in quantity demanded of bread 
D)  percentage change in quantity demanded of bread divided by percentage change in income 
A)  percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread 
B)  percentage change in quantity demanded of bread divided by percentage change in price of butter 
C)  percentage change in price of bread divided by percentage change in quantity demanded of bread 
D)  percentage change in quantity demanded of bread divided by percentage change in income

Question 18

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Accepted Answer

A) True 
 B)False

Question 19

Figure 5-1  
-Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

Accepted Answer

A)  0.33. 
B)  0.67. 
C)  1.5 
D)  2.67. 
A)  0.33. 
B)  0.67. 
C)  1.5 
D)  2.67.

Question 20

If the price elasticity of supply is zero, then

Accepted Answer

A)  supply is more elastic than it is in any other case. 
B)  the supply curve is horizontal. 
C)  the quantity supplied is the same, regardless of price. 
D)  a change in demand will cause a relatively small change in the equilibrium price. 
A)  supply is more elastic than it is in any other case. 
B)  the supply curve is horizontal. 
C)  the quantity supplied is the same, regardless of price. 
D)  a change in demand will cause a relatively small change in the equilibrium price.

Exam 5: Elasticity and Its Application

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

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

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

If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by

Which of the following should be held constant when calculating an income elasticity of demand?

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

The smaller the price elasticity of demand, the

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.

While in college, Marty and Laura each buy 15 bus tickets per month. After they graduate and have full-time jobs, Marty buys 0 bus tickets per month and Laura buys 28 bus tickets per month. Comparing income elasticity of demand for bus tickets, Marty's

Figure 5-1 -Refer to Figure 5-1. Between point A and point B on the graph, demand is

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 equilibrium price will

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

Demand is said to have unit elasticity if the price elasticity of demand is

If we observe that when the price of ice cream rises by 10%, ice cream manufacturers increase the quantity supplied of ice cream by 20%, then the price elasticity of supply is 2.

Which of the following expressions represents a cross-price elasticity of demand?

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

If the price elasticity of supply is zero, then

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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