Question 1

Figure 5-8  
-Refer to Figure 5-8. When price falls from $25 to $20, demand is

Accepted Answer

A)  inelastic, since total revenue decreases from $4,000 to $2,500. 
B)  inelastic, since total revenue increases from $2,500 to $4,000. 
C)  elastic, since total revenue increases from $2,500 to $4,000. 
D)  unit elastic, since total revenue does not change. 
A)  inelastic, since total revenue decreases from $4,000 to $2,500. 
B)  inelastic, since total revenue increases from $2,500 to $4,000. 
C)  elastic, since total revenue increases from $2,500 to $4,000. 
D)  unit elastic, since total revenue does not change.

Question 2

The federal government is concerned about the negative effects of cigarette smoking in the United States. Suppose Congress is considering two plans. One plan would limit the production of cigarettes. The other would require manufacturers to include graphic photos on cigarette packages of people suffering cancer's effects. Which of the following statements is true?

Accepted Answer

A)  Both programs would increase the price of cigarettes. 
B)  Both programs would reduce the quantity of cigarettes sold. 
C)  Both programs would decrease revenues for cigarette manufacturers. 
D)  All of the above are correct. 
A)  Both programs would increase the price of cigarettes. 
B)  Both programs would reduce the quantity of cigarettes sold. 
C)  Both programs would decrease revenues for cigarette manufacturers. 
D)  All of the above are correct.

Question 3

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 quantity 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 4

Table 5-1  
-Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Accepted Answer

A)  A is pens and B is pencils. 
B)  A is a Snickers bar and B is a Milky Way bar. 
C)  A is an airline ticket from Chicago to New York demanded by a vacationer and B is an airline ticket from Chicago to New York demanded by a business traveler. 
D)  A is a bottle of water demanded by a tourist in a desert and B is a bottle of water demanded by a tourist in a rain forest. 
A)  A is pens and B is pencils. 
B)  A is a Snickers bar and B is a Milky Way bar. 
C)  A is an airline ticket from Chicago to New York demanded by a vacationer and B is an airline ticket from Chicago to New York demanded by a business traveler. 
D)  A is a bottle of water demanded by a tourist in a desert and B is a bottle of water demanded by a tourist in a rain forest.

Question 5

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 6

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Accepted Answer

A)  About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars. 
B)  About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars. 
C)  About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars. 
D)  Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run. 
A)  About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars. 
B)  About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars. 
C)  About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars. 
D)  Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.

Question 8

Figure 5-4  
-Refer to Figure 5-4. If the price increases in the region of the demand curve between points B and C, we can expect total revenue to

Accepted Answer

A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first decrease, then increase until total revenue is maximized. 
A)  increase. 
B)  stay the same. 
C)  decrease. 
D)  first decrease, then increase until total revenue is maximized.

Question 9

Danita rescues dogs from her local animal shelter. When Danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. For Danita, the income elasticity of demand for dog biscuits is

Accepted Answer

A)  negative, and dog biscuits are a normal good. 
B)  negative, and dog biscuits are an inferior good. 
C)  positive, and dog biscuits are an inferior good. 
D)  positive, and dog biscuits are a normal good. 
A)  negative, and dog biscuits are a normal good. 
B)  negative, and dog biscuits are an inferior good. 
C)  positive, and dog biscuits are an inferior good. 
D)  positive, and dog biscuits are a normal good.

Question 10

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should

Accepted Answer

A)  increase the price charged to vacationers and decrease the price charged to business travelers. 
B)  decrease the price charged to vacationers and increase the price charged to business travelers. 
C)  decrease the price to both groups of customers. 
D)  increase the price for both groups of customers. 
A)  increase the price charged to vacationers and decrease the price charged to business travelers. 
B)  decrease the price charged to vacationers and increase the price charged to business travelers. 
C)  decrease the price to both groups of customers. 
D)  increase the price for both groups of customers.

Question 11

Suppose the price elasticity of demand for a product is 1. If a supplier wants to increase revenue, what change should it make to price, if any?

Accepted Answer

No change,

Question 12

The federal government is concerned about obesity in the United States. Congress is considering two plans. One will ban the production and sale of "junk food." The other will increase nutrition­education programs and include substantial advertising campaigns to encourage healthy eating habits. The junk-food ban program

Accepted Answer

A)  and the education program will reduce the quantity of junk food sold and raise the price. 
B)  and the education program will reduce the quantity of junk food sold and lower the price. 
C)  will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price. 
D)  will reduce the quantity of junk food sold and lower the price. The education program will reduce the quantity of junk food sold and raise the price. 
A)  and the education program will reduce the quantity of junk food sold and raise the price. 
B)  and the education program will reduce the quantity of junk food sold and lower the price. 
C)  will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price. 
D)  will reduce the quantity of junk food sold and lower the price. The education program will reduce the quantity of junk food sold and raise the price.

Question 13

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

Accepted Answer

A) True 
 B)False

Question 14

For which of the following goods is the income elasticity of demand likely lowest?

Accepted Answer

A)  water 
B)  sapphire pendant necklaces 
C)  filet mignon steaks 
D)  fresh fruit 
A)  water 
B)  sapphire pendant necklaces 
C)  filet mignon steaks 
D)  fresh fruit

Question 15

Which of the following was not a reason OPEC failed to keep the price of oil high?

Accepted Answer

A)  Over the long run, producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity. 
B)  Consumers responded to higher prices with greater conservation. 
C)  Consumers replaced old inefficient cars with newer efficient ones. 
D)  The agreement OPEC members signed allowed each country to produce as much oil as each wanted. 
A)  Over the long run, producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity. 
B)  Consumers responded to higher prices with greater conservation. 
C)  Consumers replaced old inefficient cars with newer efficient ones. 
D)  The agreement OPEC members signed allowed each country to produce as much oil as each wanted.

Question 16

Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

A) True 
 B)False

Question 17

Table 5-13
Consider the following demand schedule.  
-Refer to Table 5-13. Using the midpoint method, what is the price elasticity of demand between $12 and $15?

Accepted Answer

The answer of Table 5-13
Consider the following demand schedule. ...

Question 18

Figure 5-12  
-Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Accepted Answer

A)  0.4. 
B)  1. 
C)  2. 
D)  2.5. 
A)  0.4. 
B)  1. 
C)  2. 
D)  2.5.

Question 19

When a university bookstore prices chemistry textbooks at $200 each, it generally sells 120 books per month. If it lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity of demand for chemistry books is about

Accepted Answer

A)  1.29, and a decrease in price from $200 to $160 results in an increase in total revenue. 
B)  1.29, and a decrease in price from $200 to $160 results in a decrease in total revenue. 
C)  0.78, and a decrease in price from $200 to $160 results in an increase in total revenue. 
D)  0.78, and a decrease in price from $200 to $160 results in a decrease in total revenue. 
A)  1.29, and a decrease in price from $200 to $160 results in an increase in total revenue. 
B)  1.29, and a decrease in price from $200 to $160 results in a decrease in total revenue. 
C)  0.78, and a decrease in price from $200 to $160 results in an increase in total revenue. 
D)  0.78, and a decrease in price from $200 to $160 results in a decrease in total revenue.

Question 20

For a horizontal demand curve,

Accepted Answer

A)  the slope is undefined, and the price elasticity of demand is equal to 0. 
B)  the slope is equal to 0, and the price elasticity of demand is undefined. 
C)  both the slope and price elasticity of demand are undefined. 
D)  both the slope and price elasticity of demand are equal to 0. 
A)  the slope is undefined, and the price elasticity of demand is equal to 0. 
B)  the slope is equal to 0, and the price elasticity of demand is undefined. 
C)  both the slope and price elasticity of demand are undefined. 
D)  both the slope and price elasticity of demand are equal to 0.

Exam 5: Elasticity and Its Application

Figure 5-8 -Refer to Figure 5-8. When price falls from $25 to $20, 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 quantity will

Table 5-1 -Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Figure 5-4 -Refer to Figure 5-4. If the price increases in the region of the demand curve between points B and C, we can expect total revenue to

Danita rescues dogs from her local animal shelter. When Danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. For Danita, the income elasticity of demand for dog biscuits is

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should

Suppose the price elasticity of demand for a product is 1. If a supplier wants to increase revenue, what change should it make to price, if any?

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

For which of the following goods is the income elasticity of demand likely lowest?

Which of the following was not a reason OPEC failed to keep the price of oil high?

Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, what is the price elasticity of demand between $12 and $15?

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

When a university bookstore prices chemistry textbooks at $200 each, it generally sells 120 books per month. If it lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity of demand for chemistry books is about

For a horizontal demand curve,

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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