Question 1

Moving downward and to the right along a linear demand curve, we know that total revenue

Accepted Answer

A)  first increases, then decreases. 
B)  first decreases, then increases. 
C)  always increases. 
D)  always decreases. 
A)  first increases, then decreases. 
B)  first decreases, then increases. 
C)  always increases. 
D)  always decreases.

Question 2

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

Accepted Answer

A)  all inferior goods 
B)  all normal goods 
C)  goods for which there are many complements 
D)  luxuries 
A)  all inferior goods 
B)  all normal goods 
C)  goods for which there are many complements 
D)  luxuries

Question 3

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

Accepted Answer

A)  positive, so Joan considers hamburger to be an inferior good. 
B)  positive, so Joan considers hamburger to be a normal good and a necessity. 
C)  negative, so Joan considers hamburger to be an inferior good. 
D)  negative, so Joan considers hamburger to be a normal good but not a necessity. 
A)  positive, so Joan considers hamburger to be an inferior good. 
B)  positive, so Joan considers hamburger to be a normal good and a necessity. 
C)  negative, so Joan considers hamburger to be an inferior good. 
D)  negative, so Joan considers hamburger to be a normal good but not a necessity.

Question 4

Table 5-10  
-Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most elastic price elasticity of supply?

Accepted Answer

A)  Supply curve X 
B)  Supply curve Y 
C)  Supply curve Z 
D)  There is no difference in the elasticity of the three supply curves. 
A)  Supply curve X 
B)  Supply curve Y 
C)  Supply curve Z 
D)  There is no difference in the elasticity of the three supply curves.

Question 5

Figure 5-18  
-Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $5 and $6?

Accepted Answer

A)  0.60 
B)  0.64 
C)  1.57 
D)  1.67 
A)  0.60 
B)  0.64 
C)  1.57 
D)  1.67

Question 6

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

Accepted Answer

A)  raise both price and total revenues. 
B)  lower both price and total revenues. 
C)  raise price and lower total revenues. 
D)  lower price and raise total revenues. 
A)  raise both price and total revenues. 
B)  lower both price and total revenues. 
C)  raise price and lower total revenues. 
D)  lower price and raise total revenues.

Question 7

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about

Accepted Answer

A)  0.67%. 
B)  0.83%. 
C)  1.20%. 
D)  2.70%. 
A)  0.67%. 
B)  0.83%. 
C)  1.20%. 
D)  2.70%.

Question 8

Figure 5-5  
-Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of

Accepted Answer

A)  $20. 
B)  $50. 
C)  $70 
D)  $100. 
A)  $20. 
B)  $50. 
C)  $70 
D)  $100.

Question 9

When studying how some event or policy affects a market, elasticity provides information on the

Accepted Answer

A)  equity effects on the market by identifying the winners and losers. 
B)  magnitude of the effect on the market. 
C)  speed of adjustment of the market in response to the event or policy. 
D)  number of market participants who are directly affected by the event or policy. 
A)  equity effects on the market by identifying the winners and losers. 
B)  magnitude of the effect on the market. 
C)  speed of adjustment of the market in response to the event or policy. 
D)  number of market participants who are directly affected by the event or policy.

Question 10

Suppose the price elasticity of demand for a product is 1.3. If a supplier wants to increase revenue, what change should it make to price, if any?

Accepted Answer

The answer of Suppose the price elasticity of demand for...

Question 11

In general, demand curves for luxuries tend to be price elastic.

Accepted Answer

A) True 
 B)False

Question 12

A linear, downward-sloping demand curve has a constant elasticity but a changing slope.

Accepted Answer

A) True 
 B)False

Question 13

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

Accepted Answer

A) True 
 B)False

Question 14

Scenario 5-1
Suppose that when the average college student's income is $10,000 per year, the annual quantity demanded of Patty's Pizza is 50 and the annual quantity demanded of Sue's Subs is 80. Suppose that when the price of Patty's Pizza increases from $8 to $10 per pie, the quantity demanded of Sue's Subs increases from 80 to 100. Suppose also that when the average student's income increases to $12,000 per year, the annual quantity demanded of Patty's Pizza increases from 50 to 60.
-Refer to Scenario 5-1. What can you deduce about the type of good Patty's Pizza is and about the relationship between Patty's Pizza and Sue's Subs?

Accepted Answer

A)  Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are substitutes. 
B)  Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are complements. 
C)  Patty's Pizza is an inferior good and Patty's Pizza and Sue's Subs are substitutes. 
D)  Patty's Pizza is an inferior good and Patty's Pizza and Sue's Subs are complements. 
A)  Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are substitutes. 
B)  Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are complements. 
C)  Patty's Pizza is an inferior good and Patty's Pizza and Sue's Subs are substitutes. 
D)  Patty's Pizza is an inferior good and Patty's Pizza and Sue's Subs are complements.

Question 15

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

Accepted Answer

A)  white chocolate chip with macadamia nut cookies 
B)  hardback novels 
C)  salt 
D)  box seats at a major league baseball game 
A)  white chocolate chip with macadamia nut cookies 
B)  hardback novels 
C)  salt 
D)  box seats at a major league baseball game

Question 16

At a price of $1.20, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.40, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A)  0.15 
B)  2.5 
C)  0.375 
D)  2.60 
A)  0.15 
B)  2.5 
C)  0.375 
D)  2.60

Question 17

Figure 5-14  
-Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between $16 and $40?

Accepted Answer

A)  0.125 
B)  0.86 
C)  1.0 
D)  2.5 
A)  0.125 
B)  0.86 
C)  1.0 
D)  2.5

Question 18

Figure 5-14  
-Refer to Figure 5-14. Over which range is the supply curve in this figure the least elastic?

Accepted Answer

A)  $16 to $40 
B)  $40 to $100 
C)  $100 to $220 
D)  $220 to $430 
A)  $16 to $40 
B)  $40 to $100 
C)  $100 to $220 
D)  $220 to $430

Question 19

Supply tends to be more elastic in the short run and more inelastic in the long run.

Accepted Answer

A) True 
 B)False

Question 20

For a particular good, an 8 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A)  There are no close substitutes for this good. 
B)  The good is a necessity. 
C)  The market for the good is broadly defined. 
D)  The relevant time horizon is long. 
A)  There are no close substitutes for this good. 
B)  The good is a necessity. 
C)  The market for the good is broadly defined. 
D)  The relevant time horizon is long.

Exam 5: Elasticity and Its Application

Moving downward and to the right along a linear demand curve, we know that total revenue

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

Table 5-10 -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most elastic price elasticity of supply?

Figure 5-18 -Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $5 and $6?

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about

Figure 5-5 -Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of

When studying how some event or policy affects a market, elasticity provides information on the

Suppose the price elasticity of demand for a product is 1.3. If a supplier wants to increase revenue, what change should it make to price, if any?

In general, demand curves for luxuries tend to be price elastic.

A linear, downward-sloping demand curve has a constant elasticity but a changing slope.

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

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

At a price of $1.20, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.40, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

Figure 5-14 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between $16 and $40?

Figure 5-14 -Refer to Figure 5-14. Over which range is the supply curve in this figure the least elastic?

Supply tends to be more elastic in the short run and more inelastic in the long run.

For a particular good, an 8 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

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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