Question 1

Figure 5-11
 
-Refer to Figure 5-11.If the price falls from point A to point B,total revenue

Accepted Answer

A)   increases, and demand is price elastic.
B)   decreases, and demand is price elastic.
C)   increases, and demand is price inelastic.
D)   decreases, and demand is price inelastic.E) A) and B)
F) B) and C)

Question 2

For a particular good,a 5 percent increase in price causes a 15 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A)   There are many 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 short.E) B) and C)
F) A) and C)

Question 3

If demand is perfectly elastic,the demand curve is horizontal,and the price elasticity of demand equals 1.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Scenario 5-2
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 5-2.The equilibrium price will

Accepted Answer

A)   increase in both the aged cheddar cheese and bread markets.
B)   increase in the aged cheddar cheese market and decrease in the bread market.
C)   decrease in the aged cheddar cheese market and increase in the bread market.
D)   decrease in both the aged cheddar cheese and bread markets.E) B) and D)
F) A) and C)

Question 6

Total revenue will be at its largest value on a linear demand curve at the

Accepted Answer

A)   top of the curve, where prices are highest.
B)   midpoint of the curve.
C)   low end of the curve, where quantity demanded is highest.
D)   None of the above is correct.E) None of the above
F) B) and C)

Question 7

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.E) A) and B)
F) A) and C)

Question 8

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

Accepted Answer

A) True 
 B)False

Question 9

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Accepted Answer

A) True 
 B)False

Question 10

Table 5-5
The following table shows a portion of the demand schedule for a particular good at various levels of income.
 
-Refer to Table 5-5.Using the midpoint method,at a price of $12,what is the income elasticity of demand when income rises from $5,000 to $10,000?

Accepted Answer

A)   0.00
B)   0.41
C)   1.00
D)   2.45E) B) and D)
F) A) and B)

Question 11

Economists compute the price elasticity of demand as the

Accepted Answer

A)   percentage change in price divided by the percentage change in quantity demanded.
B)   change in quantity demanded divided by the change in the price.
C)   percentage change in quantity demanded divided by the percentage change in price.
D)   percentage change in quantity demanded divided by the percentage change in income.E) B) and D)
F) A) and B)

Question 12

When small changes in price lead to infinite changes in quantity demanded,demand is perfectly

Accepted Answer

A)   elastic, and the demand curve will be horizontal.
B)   inelastic, and the demand curve will be horizontal.
C)   elastic, and the demand curve will be vertical.
D)   inelastic, and the demand curve will be vertical.E) B) and C)
F) A) and B)

Question 13

If demand is price inelastic,then when price rises,total revenue

Accepted Answer

A)   will fall.
B)   will rise.
C)   will remain unchanged.
D)   may rise, fall, or remain unchanged. More information is need to determine the change in total revenue with certainty.E) A) and D)
F) A) and B)

Question 14

Suppose that 50 hot dogs are demanded at a particular price.If the price of hot dogs rises from that price by 5 percent,the number of hot dogs demanded falls to 48.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Accepted Answer

A)   demand for hot dogs in this price range is unit elastic.
B)   price increase will decrease the total revenue of hot dog sellers.
C)   price elasticity of demand for hot dogs in this price range is about 1.22.
D)   price elasticity of demand for hot dogs in this price range is about 0.82.E) All of the above
F) A) and B)

Question 15

Last month,sellers of good Y took in $100 in total revenue on sales of 50 units of good Y.This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y.At the same time,the price of good X stayed the same,but sales of good X increased from 20 units to 40 units.We can conclude that goods X and Y are

Accepted Answer

A)   substitutes, and have a cross-price elasticity of 0.60.
B)   complements, and have a cross-price elasticity of 0.60.
C)   substitutes, and have a cross-price elasticity of 1.67.
D)   complements, and have a cross-price elasticity of 1.67.E) A) and B)
F) A) and C)

Question 16

Kevin tunes pianos.If the demand for piano-tuning services is elastic,Kevin could increase his total revenue by

Accepted Answer

A)   increasing the price of his piano-tuning services.
B)   decreasing the price of his piano-tuning services.
C)   leaving the price of his piano-tuning services unchanged.
D)   None of the above is correct.E) None of the above
F) B) and C)

Question 17

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)   luxuriesE) C) and D)
F) All of the above

Question 18

Demand is said to have unit elasticity if the price elasticity of demand is

Accepted Answer

A)   less than 1.
B)   greater than 1.
C)   equal to 1.
D)   equal to 0.E) All of the above
F) C) and D)

Question 19

Figure 5-12
 
-Refer to Figure 5-12.Total revenue when the price is P₂ is represented by the area(s)

Accepted Answer

A)   B + D.
B)   A + B.
C)   C + D.
D)   D.E) A) and C)
F) All of the above

Question 20

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.E) A) and B)
F) A) and C)

Exam 5: Elasticity and Its Application

If demand is price inelastic,then when price rises,total revenue

Correct Answer
verified

When demand is elastic,a decrease in price will cause

Correct Answer
verified

When small changes in price lead to infinite changes in quantity demanded,demand is perfectly

Correct Answer
verified

Figure 5-11 -Refer to Figure 5-11.If the price falls from point A to point B,total revenue

Correct Answer
verified

Kevin tunes pianos.If the demand for piano-tuning services is elastic,Kevin could increase his total revenue by

Correct Answer
verified

Suppose that 50 hot dogs are demanded at a particular price.If the price of hot dogs rises from that price by 5 percent,the number of hot dogs demanded falls to 48.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Correct Answer
verified

Correct Answer
verified

If demand is perfectly elastic,the demand curve is horizontal,and the price elasticity of demand equals 1.

Correct Answer
verified

Table 5-5 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-5.Using the midpoint method,at a price of $12,what is the income elasticity of demand when income rises from $5,000 to $10,000?

Correct Answer
verified

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

Correct Answer
verified

Total revenue will be at its largest value on a linear demand curve at the

Correct Answer
verified

For a particular good,a 5 percent increase in price causes a 15 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Correct Answer
verified

Correct Answer
verified

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Correct Answer
verified

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

Correct Answer
verified

Economists compute the price elasticity of demand as the

Correct Answer
verified

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

Correct Answer
verified

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

Correct Answer
verified

Figure 5-12 -Refer to Figure 5-12.Total revenue when the price is P₂ is represented by the area(s)

Correct Answer
verified

Demand is said to have unit elasticity if the price elasticity of demand is

Correct Answer
verified

Exam 5: Elasticity and Its Application

If demand is price inelastic,then when price rises,total revenue

Correct AnswerverifiedShow Answer

When demand is elastic,a decrease in price will cause

Correct AnswerverifiedShow Answer

When small changes in price lead to infinite changes in quantity demanded,demand is perfectly

Correct AnswerverifiedShow Answer

Figure 5-11 -Refer to Figure 5-11.If the price falls from point A to point B,total revenue

Correct AnswerverifiedShow Answer

Kevin tunes pianos.If the demand for piano-tuning services is elastic,Kevin could increase his total revenue by

Correct AnswerverifiedShow Answer

Suppose that 50 hot dogs are demanded at a particular price.If the price of hot dogs rises from that price by 5 percent,the number of hot dogs demanded falls to 48.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If demand is perfectly elastic,the demand curve is horizontal,and the price elasticity of demand equals 1.

Correct AnswerverifiedShow Answer

Table 5-5 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-5.Using the midpoint method,at a price of $12,what is the income elasticity of demand when income rises from $5,000 to $10,000?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Total revenue will be at its largest value on a linear demand curve at the

Correct AnswerverifiedShow Answer

For a particular good,a 5 percent increase in price causes a 15 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Economists compute the price elasticity of demand as the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

Correct AnswerverifiedShow Answer

Figure 5-12 -Refer to Figure 5-12.Total revenue when the price is P₂ is represented by the area(s)

Correct AnswerverifiedShow Answer

Demand is said to have unit elasticity if the price elasticity of demand is

Correct AnswerverifiedShow Answer

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