Question 1

Table 5-1
Suppose a coffee shop faces the following demand schedule for coffee. $\begin{array}{|c|c|}
\hline \text { Price per coffee (\$) } & \text { Quantity demanded } \
\hline 4.00 & 200 \
\hline 3.00 & 600 \
\hline 2.50 & 800 \
\hline 2.00 & 1000 \
\hline 1.50 & 1200 \
\hline 1.00 & 1400 \
\hline
\end{array}$
-Refer to Table 5-1.Notice that if the price is lowered from $2.00 to $1.50, total revenue falls from $2000 to $1800.This means that over this price range, the demand for coffee must be:

Accepted Answer

A) price elastic 
B) price inelastic 
C) price unit elastic 
D) income elastic

Question 2

A good experiences a shift of the demand curve so that it is now flatter than before.Suppose that the market price and quantity demanded does not change.This means that the good has now become inelastic.

Accepted Answer

A) True 
 B)False

Question 3

Drug interdiction, which reduces the supply of drugs, may increase drug-related crime because the demand for drugs is inelastic.

Accepted Answer

A) True 
 B)False

Question 4

A linear demand curve always has the same elasticity over its entire length.

Accepted Answer

A) True 
 B)False

Question 5

If a person has very little concern for her health, her demand for healthcare would tend to be:

Accepted Answer

A) elastic 
B) inelastic 
C) unit elastic 
D) horizontal

Question 6

Graph 5-4
-Refer to Graph 5-4.The total revenue at P₁ is represented by area(s):

Accepted Answer

A) B + D 
B) A + B 
C) C + D 
D) D

Question 7

At the midpoint of a downward-sloping linear demand curve, elasticity would be:

Accepted Answer

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

Question 8

If the price elasticity of demand is elastic, reduced demand for a good will create a greater fall in revenue than the increase in revenue created by the increase in price.

Accepted Answer

A) True 
 B)False

Question 9

Demand is perfectly inelastic if elasticity is:

Accepted Answer

A) less than one 
B) equal to one 
C) greater than one 
D) equal to zero

Question 10

Price elasticity over any range of a demand curve is measured by the slope of the demand curve over that range.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that the slope of the demand curve becomes flatter at a given price.This means that the price elasticity of demand at this point will:

Accepted Answer

A) increase 
B) decrease 
C) not change 
D) be zero

Question 12

The demand for basic foodstuffs such as wheat is usually elastic.

Accepted Answer

A) True 
 B)False

Question 13

The demand for rare butterflies tends to be income:

Accepted Answer

A) elastic because they are relatively expensive 
B) inelastic because butterflies are small animals 
C) elastic because most buyers feel that they can do without it 
D) inelastic because butterflies are difficult to breed

Question 14

Table 5-2
Quantities urchased
 $\begin{array}{|c|c|c|}
\hline \text { Income(\$) } & \text { Good X } & \text { Good Y } \
\hline 30000 & 2 & 20 \
\hline 50000 & 5 & 10 \
\hline
\end{array}$
-Refer to Table 5-2.Good X is:

Accepted Answer

A) a normal good 
B) an inferior good 
C) underpriced 
D) very price elastic

Question 15

A demand curve that is horizontal is perfectly inelastic.This means the elasticity is equal to one.

Accepted Answer

A) True 
 B)False

Question 16

The demand for a good is inelastic if the quantity demanded decreases only a small amount after a small increase in the price.

Accepted Answer

A) True 
 B)False

Question 17

A perfectly inelastic demand implies that buyers:

Accepted Answer

A) enjoy paying more for the good 
B) increase their quantity demanded of the good when the price rises 
C) will continue to buy the good no matter how big the change in price 
D) purchase none of the good when the price rises

Question 18

When demand is inelastic, 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 
D) there is insufficient information to answer this question

Question 19

Graph 5-3  
-In Graph 5-3, as price falls from PA to PB, which demand curve is most elastic?

Accepted Answer

A) D₁ 
B) D2 
C) D3 
D) all of the above are equally elastic

Question 20

In general, a firm will be able to generate the greatest response to a price increase:

Accepted Answer

A) just after the change 
B) after three years 
C) in the months following the change 
D) around one week after the change

Exam 5: Elasticity and Its Application

A good experiences a shift of the demand curve so that it is now flatter than before.Suppose that the market price and quantity demanded does not change.This means that the good has now become inelastic.

Drug interdiction, which reduces the supply of drugs, may increase drug-related crime because the demand for drugs is inelastic.

A linear demand curve always has the same elasticity over its entire length.

If a person has very little concern for her health, her demand for healthcare would tend to be:

Graph 5-4 -Refer to Graph 5-4.The total revenue at P₁ is represented by area(s) :

At the midpoint of a downward-sloping linear demand curve, elasticity would be:

If the price elasticity of demand is elastic, reduced demand for a good will create a greater fall in revenue than the increase in revenue created by the increase in price.

Demand is perfectly inelastic if elasticity is:

Price elasticity over any range of a demand curve is measured by the slope of the demand curve over that range.

Suppose that the slope of the demand curve becomes flatter at a given price.This means that the price elasticity of demand at this point will:

The demand for basic foodstuffs such as wheat is usually elastic.

The demand for rare butterflies tends to be income:

Table 5-2 Quantities urchased $\begin{array}{|c|c|c|}\hline \text { Income(\$) } & \text { Good X } & \text { Good Y } \\\hline 30000 & 2 & 20 \\\hline 50000 & 5 & 10 \\\hline\end{array}$ -Refer to Table 5-2.Good X is:

A demand curve that is horizontal is perfectly inelastic.This means the elasticity is equal to one.

The demand for a good is inelastic if the quantity demanded decreases only a small amount after a small increase in the price.

A perfectly inelastic demand implies that buyers:

When demand is inelastic, a decrease in price will cause:

Graph 5-3 -In Graph 5-3, as price falls from P_A to P_B, which demand curve is most elastic?

In general, a firm will be able to generate the greatest response to a price increase:

Exam 5: Elasticity and Its Application

A good experiences a shift of the demand curve so that it is now flatter than before.Suppose that the market price and quantity demanded does not change.This means that the good has now become inelastic.

Drug interdiction, which reduces the supply of drugs, may increase drug-related crime because the demand for drugs is inelastic.

A linear demand curve always has the same elasticity over its entire length.

If a person has very little concern for her health, her demand for healthcare would tend to be:

Graph 5-4 -Refer to Graph 5-4.The total revenue at P₁ is represented by area(s) :

At the midpoint of a downward-sloping linear demand curve, elasticity would be:

If the price elasticity of demand is elastic, reduced demand for a good will create a greater fall in revenue than the increase in revenue created by the increase in price.

Demand is perfectly inelastic if elasticity is:

Price elasticity over any range of a demand curve is measured by the slope of the demand curve over that range.

Suppose that the slope of the demand curve becomes flatter at a given price.This means that the price elasticity of demand at this point will:

The demand for basic foodstuffs such as wheat is usually elastic.

The demand for rare butterflies tends to be income:

A demand curve that is horizontal is perfectly inelastic.This means the elasticity is equal to one.

The demand for a good is inelastic if the quantity demanded decreases only a small amount after a small increase in the price.

A perfectly inelastic demand implies that buyers:

When demand is inelastic, a decrease in price will cause:

Graph 5-3 -In Graph 5-3, as price falls from PA to PB, which demand curve is most elastic?

In general, a firm will be able to generate the greatest response to a price increase:

Graph 5-3 -In Graph 5-3, as price falls from P_A to P_B, which demand curve is most elastic?