Question 1

Elasticity of demand is closely related to the slope of the demand curve.The more responsive buyers are to a change in price,the

Accepted Answer

A)  steeper the demand curve will be. 
B)  flatter the demand curve will be. 
C)  further to the right the demand curve will sit. 
D)  closer to the vertical axis the demand curve will sit.

Question 2

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

Accepted Answer

A)  mint-flavored toothpaste 
B)  toothpaste 
C)  Colgate mint-flavored toothpaste 
D)  a generic mint-flavored toothpaste

Question 3

Cross-price elasticity of demand measures how

Accepted Answer

A)  the price of one good changes in response to a change in the price of another good. 
B)  the quantity demanded of one good changes in response to a change in the quantity demanded of another good. 
C)  the quantity demanded of one good changes in response to a change in the price of another good. 
D)  strongly normal or inferior a good is.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Suppose that when the price rises by 10% for a particular good,the quantity demanded of that good falls by 20%.The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Question 6

Frequently,in the short run,the quantity supplied of a good is

Accepted Answer

A)  impossible,or nearly impossible,to measure. 
B)  not very responsive to price changes. 
C)  determined by the quantity demanded of the good. 
D)  determined by psychological forces and other non-economic forces.

Question 7

Table 5-1
 
-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.

Question 8

Suppose demand is perfectly elastic,and the supply of the good in question decreases.As a result,

Accepted Answer

A)  the equilibrium quantity decreases,and the equilibrium price is unchanged. 
B)  the equilibrium price increases,and the equilibrium quantity is unchanged. 
C)  the equilibrium quantity and the equilibrium price both are unchanged. 
D)  buyers' total expenditure on the good is unchanged.

Question 9

The income elasticity of demand for caviar tends to be

Accepted Answer

A)  high because caviar is relatively expensive. 
B)  low because caviar is packaged in small containers. 
C)  high because buyers generally feel that they can do without it. 
D)  low because it is almost always in short supply.

Question 10

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each.At a price of $0.80,the bakery would be willing to supply 1,100 bagels.Using the midpoint method,the price elasticity of supply for bagels is

Accepted Answer

A)  0.62,and supply is elastic. 
B)  0.62,and supply is inelastic. 
C)  1.63,and supply is elastic. 
D)  1.63,and supply is inelastic.

Question 11

When demand is unit elastic,price elasticity of demand

Accepted Answer

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

Question 12

Suppose you are in charge of setting prices at a local sandwich shop.The business needs to increase its total revenue and your job is on the line.If the demand for sandwiches is elastic,you

Accepted Answer

A)  should increase the price of sandwiches. 
B)  should decrease the price of sandwiches. 
C)  should not change the price of sandwiches. 
D)  could not determine what to do with price until you determine whether supply is elastic or inelastic.

Question 13

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 14

If,for two goods,the cross-price elasticity of demand is 1.25,then

Accepted Answer

A)  the two goods are luxuries. 
B)  the two goods are substitutes. 
C)  one of the goods is normal and the other good is inferior. 
D)  the demand for one of the goods conforms to the law of demand,but the demand for the other good violates the law of demand.

Question 15

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)  0.5 
B)  1 
C)  1.5 
D)  All of the above could be correct.

Question 16

The midpoint method is used to compute elasticity because it

Accepted Answer

A)  automatically computes a positive number instead of a negative number. 
B)  results in an elasticity that is the same as the slope of the demand curve. 
C)  gives the same answer regardless of the direction of change. 
D)  automatically rounds quantities to the nearest whole unit.

Question 17

Barb's Bakery earned $200 in total revenue last month when it sold 100 loaves of bread.This month it earned $300 in total revenue when it sold 60 loaves of bread.The price elasticity of demand for Barb's bread is

Accepted Answer

A)  0.27. 
B)  0.58. 
C)  1.25. 
D)  1.71.

Question 18

If the price elasticity of demand is equal to 0,then demand is unit elastic.

Accepted Answer

A) True 
 B)False

Question 19

Given the market for illegal drugs,when the government is successful in reducing the flow of drugs into the United States,

Accepted Answer

A)  supply decreases,demand is unaffected,and price increases. 
B)  demand decreases,supply is unaffected,and price decreases. 
C)  demand and supply both decrease,leaving price essentially unchanged. 
D)  supply decreases,demand increases,and price increases substantially as a result.

Question 20

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

Elasticity of demand is closely related to the slope of the demand curve.The more responsive buyers are to a change in price,the

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

Cross-price elasticity of demand measures how

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

Suppose that when the price rises by 10% for a particular good,the quantity demanded of that good falls by 20%.The price elasticity of demand for this good is equal to 2.0.

Frequently,in the short run,the quantity supplied of a good is

Table 5-1 -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

Suppose demand is perfectly elastic,and the supply of the good in question decreases.As a result,

The income elasticity of demand for caviar tends to be

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each.At a price of $0.80,the bakery would be willing to supply 1,100 bagels.Using the midpoint method,the price elasticity of supply for bagels is

When demand is unit elastic,price elasticity of demand

Suppose you are in charge of setting prices at a local sandwich shop.The business needs to increase its total revenue and your job is on the line.If the demand for sandwiches is elastic,you

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

If,for two goods,the cross-price elasticity of demand is 1.25,then

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

The midpoint method is used to compute elasticity because it

Barb's Bakery earned $200 in total revenue last month when it sold 100 loaves of bread.This month it earned $300 in total revenue when it sold 60 loaves of bread.The price elasticity of demand for Barb's bread is

If the price elasticity of demand is equal to 0,then demand is unit elastic.

Given the market for illegal drugs,when the government is successful in reducing the flow of drugs into the United States,

A government program that reduces land under cultivation hurts farmers but helps consumers.