Question 1

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is

Accepted Answer

A)  inelastic and equal to 6. 
B)  elastic and equal to 6. 
C)  inelastic and equal to 0.17. 
D)  elastic and equal to 0.17. 
A)  inelastic and equal to 6. 
B)  elastic and equal to 6. 
C)  inelastic and equal to 0.17. 
D)  elastic and equal to 0.17.

Question 2

Which of the following is not possible?

Accepted Answer

A)  Demand is elastic, and a decrease in price causes an increase in revenue. 
B)  Demand is unit elastic, and a decrease in price causes an increase in revenue. 
C)  Demand is inelastic, and an increase in price causes an increase in revenue. 
D)  Demand is perfectly inelastic, and an increase in price causes an increase in revenue. 
A)  Demand is elastic, and a decrease in price causes an increase in revenue. 
B)  Demand is unit elastic, and a decrease in price causes an increase in revenue. 
C)  Demand is inelastic, and an increase in price causes an increase in revenue. 
D)  Demand is perfectly inelastic, and an increase in price causes an increase in revenue.

Question 3

If sellers do not adjust their quantities supplied at all in response to a change in price,

Accepted Answer

A)  advances in technology must be prevalent. 
B)  the time period under consideration must be very long. 
C)  supply is perfectly elastic. 
D)  supply is perfectly inelastic. 
A)  advances in technology must be prevalent. 
B)  the time period under consideration must be very long. 
C)  supply is perfectly elastic. 
D)  supply is perfectly inelastic.

Question 4

The price elasticity of demand measures the

Accepted Answer

A)  magnitude of the response in quantity demanded to a change in price. 
B)  direction of the shift in the demand curve in response to a market event. 
C)  size of the shortage created by the increase in demand. 
D)  responsiveness of quantity demanded to a change in income. 
A)  magnitude of the response in quantity demanded to a change in price. 
B)  direction of the shift in the demand curve in response to a market event. 
C)  size of the shortage created by the increase in demand. 
D)  responsiveness of quantity demanded to a change in income.

Question 5

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Accepted Answer

A)  negative, and the good is an inferior good. 
B)  negative, and the good is a normal good. 
C)  positive, and the good is an inferior good. 
D)  positive, and the good is a normal good. 
A)  negative, and the good is an inferior good. 
B)  negative, and the good is a normal good. 
C)  positive, and the good is an inferior good. 
D)  positive, and the good is a normal good.

Question 6

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?

Accepted Answer

A)  0.8 
B)  1 
C)  1.8 
D)  2.4 
A)  0.8 
B)  1 
C)  1.8 
D)  2.4

Question 7

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

Accepted Answer

A)  the relevant time period is short rather than long. 
B)  the relevant time period is long rather than short. 
C)  supply is inelastic. 
D)  the firm is experiencing capacity problems. 
A)  the relevant time period is short rather than long. 
B)  the relevant time period is long rather than short. 
C)  supply is inelastic. 
D)  the firm is experiencing capacity problems.

Question 8

Figure 5-19  
-Refer to Figure 5-19. Which of the following statements is not correct?

Accepted Answer

A)  Supply curve A is perfectly inelastic. 
B)  Supply curve B is perfectly elastic. 
C)  Supply curve C is unit elastic. 
D)  Supply curve D is more elastic than supply curve C. 
A)  Supply curve A is perfectly inelastic. 
B)  Supply curve B is perfectly elastic. 
C)  Supply curve C is unit elastic. 
D)  Supply curve D is more elastic than supply curve C.

Question 9

If a change in the price of a good results in no change in total revenue, then

Accepted Answer

A)  the demand for the good must be elastic. 
B)  the demand for the good must be inelastic. 
C)  the demand for the good must be unit elastic. 
D)  buyers must not respond very much to a change in price. 
A)  the demand for the good must be elastic. 
B)  the demand for the good must be inelastic. 
C)  the demand for the good must be unit elastic. 
D)  buyers must not respond very much to a change in price.

Question 10

Demand is said to be unit elastic if quantity demanded

Accepted Answer

A)  changes by the same percent as the price. 
B)  changes by a larger percent than the price. 
C)  changes by a smaller percent than the price. 
D)  does not respond to a change in price. 
A)  changes by the same percent as the price. 
B)  changes by a larger percent than the price. 
C)  changes by a smaller percent than the price. 
D)  does not respond to a change in price.

Question 11

An advance in farm technology that results in an increased market supply is

Accepted Answer

A)  good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food. 
B)  bad for farmers because total revenue will fall but good for consumers because prices for food will fall. 
C)  good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption. 
D)  bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue. 
A)  good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food. 
B)  bad for farmers because total revenue will fall but good for consumers because prices for food will fall. 
C)  good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption. 
D)  bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue.

Question 12

Figure 5-17  
-Refer to Figure 5-17. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  The effect on total revenue cannot be determined from the given information. 
A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  The effect on total revenue cannot be determined from the given information.

Question 13

The smaller the price elasticity of demand, the

Accepted Answer

A)  more likely the product is a luxury. 
B)  smaller the responsiveness of quantity demanded to a change in price. 
C)  more substitutes the product has. 
D)  greater the responsiveness of quantity demanded to a change in price. 
A)  more likely the product is a luxury. 
B)  smaller the responsiveness of quantity demanded to a change in price. 
C)  more substitutes the product has. 
D)  greater the responsiveness of quantity demanded to a change in price.

Question 14

When the Shaffers had a monthly income of $4,000, they usually ate out 8 times a month. Now that the couple makes $4,500 a month, they eat out 10 times a month. Compute the couple's income elasticity of demand using the midpoint method. Explain your answer. Is a restaurant meal a normal or inferior good to the couple?

Accepted Answer

The income elasticity of deman

Question 15

Figure 5-12  
-Refer to Figure 5-12. Which of the following price changes would result in no change in sellers' total revenue?

Accepted Answer

A)  The price increases from $15 to $21. 
B)  The price increases from $18 to $21. 
C)  The price decreases from $24 to $18. 
D)  The price decreases from $27 to $24. 
A)  The price increases from $15 to $21. 
B)  The price increases from $18 to $21. 
C)  The price decreases from $24 to $18. 
D)  The price decreases from $27 to $24.

Question 16

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni

Accepted Answer

A)  and soy-burgers are both normal goods with income elasticities equal to 1. 
B)  is an inferior good and soy-burgers are normal goods; both have income elasticities of 1. 
C)  is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1. 
D)  and soy-burgers are both inferior goods with income elasticities equal to -1. 
A)  and soy-burgers are both normal goods with income elasticities equal to 1. 
B)  is an inferior good and soy-burgers are normal goods; both have income elasticities of 1. 
C)  is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1. 
D)  and soy-burgers are both inferior goods with income elasticities equal to -1.

Question 17

The price elasticity of demand measures

Accepted Answer

A)  buyers' responsiveness to a change in the price of a good. 
B)  the extent to which demand increases as additional buyers enter the market. 
C)  how much more of a good consumers will demand when incomes rise. 
D)  the movement along a supply curve when there is a change in demand. 
A)  buyers' responsiveness to a change in the price of a good. 
B)  the extent to which demand increases as additional buyers enter the market. 
C)  how much more of a good consumers will demand when incomes rise. 
D)  the movement along a supply curve when there is a change in demand.

Question 18

Scenario 5-3
Suppose that 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 5-3. The price elasticity of supply for bread could be

Accepted Answer

A)  -1. 
B)  0. 
C)  0.5. 
D)  1.5. 
A)  -1. 
B)  0. 
C)  0.5. 
D)  1.5.

Question 19

Figure 5-10  
-Refer to Figure 5-10. If rectangle D is larger than rectangle A, then

Accepted Answer

A)  demand is elastic between prices P1 and P2. 
B)  a decrease in price from P2 to P1 will cause an increase in total revenue. 
C)  the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded. 
D)  All of the above are correct. 
A)  demand is elastic between prices P1 and P2. 
B)  a decrease in price from P2 to P1 will cause an increase in total revenue. 
C)  the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded. 
D)  All of the above are correct.

Question 20

If the price elasticity of demand for a good is 4, then a 12 percent decrease in price results in a

Accepted Answer

A)  0.33 percent increase in the quantity demanded. 
B)  3 percent increase in the quantity demanded. 
C)  30 percent increase in the quantity demanded. 
D)  48 percent increase in the quantity demanded. 
A)  0.33 percent increase in the quantity demanded. 
B)  3 percent increase in the quantity demanded. 
C)  30 percent increase in the quantity demanded. 
D)  48 percent increase in the quantity demanded.

Exam 5: Elasticity and Its Application

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is

Which of the following is not possible?

If sellers do not adjust their quantities supplied at all in response to a change in price,

The price elasticity of demand measures the

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

Figure 5-19 -Refer to Figure 5-19. Which of the following statements is not correct?

If a change in the price of a good results in no change in total revenue, then

Demand is said to be unit elastic if quantity demanded

An advance in farm technology that results in an increased market supply is

Figure 5-17 -Refer to Figure 5-17. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

The smaller the price elasticity of demand, the

Figure 5-12 -Refer to Figure 5-12. Which of the following price changes would result in no change in sellers' total revenue?

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni

The price elasticity of demand measures

Figure 5-10 -Refer to Figure 5-10. If rectangle D is larger than rectangle A, then

If the price elasticity of demand for a good is 4, then a 12 percent decrease in price results in a

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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