Question 1

If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

Accepted Answer

A)  a 0.1 percent decrease in the price. 
B)  a 1 percent decrease in the price. 
C)  a 10 percent decrease in the price. 
D)  a 19.6 percent decrease in the price. 
A)  a 0.1 percent decrease in the price. 
B)  a 1 percent decrease in the price. 
C)  a 10 percent decrease in the price. 
D)  a 19.6 percent decrease in the price.

Question 2

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A)  0.63, and supply is elastic. 
B)  0.63, and supply is inelastic. 
C)  1.60, and supply is elastic. 
D)  1.60, and supply is inelastic. 
A)  0.63, and supply is elastic. 
B)  0.63, and supply is inelastic. 
C)  1.60, and supply is elastic. 
D)  1.60, and supply is inelastic.

Question 3

As the price elasticity of supply approaches infinity, very small changes in price lead to

Accepted Answer

A)  very large changes in quantity supplied. 
B)  very small changes in quantity supplied. 
C)  no change in quantity supplied. 
D)  None of the above is correct. 
A)  very large changes in quantity supplied. 
B)  very small changes in quantity supplied. 
C)  no change in quantity supplied. 
D)  None of the above is correct.

Question 4

If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

Accepted Answer

A)  a 20 percent increase in the quantity demanded. 
B)  an 18 percent increase in the quantity demanded. 
C)  a 2 percent increase in the quantity demanded. 
D)  a 1.8 percent increase in the quantity demanded. 
A)  a 20 percent increase in the quantity demanded. 
B)  an 18 percent increase in the quantity demanded. 
C)  a 2 percent increase in the quantity demanded. 
D)  a 1.8 percent increase in the quantity demanded.

Question 5

If the quantity supplied is the same regardless of price, then supply is

Accepted Answer

A)  elastic. 
B)  perfectly elastic. 
C)  perfectly inelastic. 
D)  inelastic. 
A)  elastic. 
B)  perfectly elastic. 
C)  perfectly inelastic. 
D)  inelastic.

Question 6

A key determinant of the price elasticity of supply is the

Accepted Answer

A)  time horizon. 
B)  income of consumers. 
C)  price elasticity of demand. 
D)  importance of the good in a consumer's budget. 
A)  time horizon. 
B)  income of consumers. 
C)  price elasticity of demand. 
D)  importance of the good in a consumer's budget.

Question 7

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

Accepted Answer

A)  scissors 
B)  fruit 
C)  music downloads 
D)  toothpaste 
A)  scissors 
B)  fruit 
C)  music downloads 
D)  toothpaste

Question 8

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  the quantity of the good demanded 
B)  the price of the good 
C)  income 
D)  All of the above should be held constant. 
A)  the quantity of the good demanded 
B)  the price of the good 
C)  income 
D)  All of the above should be held constant.

Question 10

Tyler purchases 5 pounds of hot dogs per month when his monthly income is $2,000 and 4 pounds of hot dogs per month when his monthly income is $2,200. Tyler's income elasticity of demand for hot dogs is

Accepted Answer

A)  2.33, and hot dogs are a normal good. 
B)  -2.33, and hot dogs are an inferior good. 
C)  0.43, and hot dogs are a normal good. 
D)  -0.43, and hot dogs are an inferior good. 
A)  2.33, and hot dogs are a normal good. 
B)  -2.33, and hot dogs are an inferior good. 
C)  0.43, and hot dogs are a normal good. 
D)  -0.43, and hot dogs are an inferior good.

Question 11

Figure 5-15  
-Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points A and B?

Accepted Answer

A)  1.0 
B)  2.33 
C)  0.43 
D)  0.1 
A)  1.0 
B)  2.33 
C)  0.43 
D)  0.1

Question 12

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Accepted Answer

A) True 
 B)False

Question 13

Suppose a freeze in Florida significantly reduces the supply of oranges this year. As a result, would you expect the total revenue from the sale of orange juice to rise or fall? Explain.

Accepted Answer

Since oranges are an input into the prod

Question 14

Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

Accepted Answer

A) True 
 B)False

Question 15

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 laundry detergent and B is Tide. 
B)  A is Diet Pepsi and B is soda. 
C)  A is food and B is a yacht. 
D)  A is toilet paper and B is candles. 
A)  A is laundry detergent and B is Tide. 
B)  A is Diet Pepsi and B is soda. 
C)  A is food and B is a yacht. 
D)  A is toilet paper and B is candles.

Question 16

When demand is elastic, 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 17

When demand is unit elastic, price elasticity of demand equals

Accepted Answer

A)  1, and total revenue and price move in the same direction. 
B)  1, and total revenue and price move in opposite directions. 
C)  1, and total revenue does not change when price changes. 
D)  0, and total revenue does not change when price changes. 
A)  1, and total revenue and price move in the same direction. 
B)  1, and total revenue and price move in opposite directions. 
C)  1, and total revenue does not change when price changes. 
D)  0, and total revenue does not change when price changes.

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 aged cheddar cheese 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

Table 5-5  
-Refer to Table 5-5. When price is between $5 and $9, demand is

Accepted Answer

A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  There is not enough information given to determine whether demand is elastic, unit elastic, or inelastic. 
A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  There is not enough information given to determine whether demand is elastic, unit elastic, or inelastic.

Question 20

Table 5-13
Consider the following demand schedule.  
-Refer to Table 5-13. Using the midpoint method, between which two prices is price elasticity of demand most inelastic?

Accepted Answer

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

Exam 5: Elasticity and Its Application

If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about

As the price elasticity of supply approaches infinity, very small changes in price lead to

If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

If the quantity supplied is the same regardless of price, then supply is

A key determinant of the price elasticity of supply is the

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

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

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

Tyler purchases 5 pounds of hot dogs per month when his monthly income is $2,000 and 4 pounds of hot dogs per month when his monthly income is $2,200. Tyler's income elasticity of demand for hot dogs is

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points A and B?

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Suppose a freeze in Florida significantly reduces the supply of oranges this year. As a result, would you expect the total revenue from the sale of orange juice to rise or fall? Explain.

Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

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

When demand is elastic, a decrease in price will cause

When demand is unit elastic, price elasticity of demand equals

Table 5-5 -Refer to Table 5-5. When price is between $5 and $9, demand is

Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, between which two prices is price elasticity of demand most inelastic?

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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