Question 1

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

Accepted Answer

A)   lattés
B)   filet mignon
C)   Grey Goose® vodka
D)   milkE) None of the above
F) All of the above

Question 2

Table 5-5
 
-Refer to Table 5-5. As price rises from $5 to $6, the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A)   0.07.
B)   0.18.
C)   0.41.
D)   2.45.E) C) and D)
F) B) and D)

Question 3

Figure 5-20 
-Refer to Figure 5-20. Which supply curve is most likely relevant over a very long period of time?

Accepted Answer

A)   S1
B)   S2
C)   S3
D)   All of the above are equally likely to be relevant over a very long period of time.E) C) and D)
F) None of the above

Question 4

Other things equal, the demand for a good tends to be more inelastic, the

Accepted Answer

A)   fewer the available substitutes.
B)   longer the time period considered.
C)   more the good is considered a luxury good.
D)   more narrowly defined is the market for the good.E) A) and B)
F) A) and C)

Question 5

Table 5-3
Consider the following demand schedule.
 
-Refer to Table 5-3. Using the midpoint method, in which range is demand most elastic?

Accepted Answer

A)   $0 to $3
B)   $3 to $6
C)   $9 to 12
D)   $12 to $15E) C) and D)
F) B) and C)

Question 6

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%,
then ice cream is an inferior good.

Accepted Answer

A) True 
 B)False

Question 7

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.E) B) and D)
F) All of the above

Question 8

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. Using the midpoint method, what is the income elasticity of demand for pizza and what does the value indicate about the demand for pizza?

Accepted Answer

A)   The income elasticity is 0.18 so pizza is a normal good.
B)   The income elasticity is -1 so pizza is an inferior good.
C)   The income elasticity is 1 so pizza is unitary elastic.
D)   The income elasticity is 1 so pizza is a normal good.E) A) and D)
F) All of the above

Question 9

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

Accepted Answer

A)   0.32, and Tess regards handbags as inferior goods.
B)   0.32, and Tess regards handbags as normal goods.
C)   3.17, and Tess regards handbags as inferior goods.
D)   3.17, and Tess regards handbags as normal goods.E) All of the above
F) None of the above

Question 10

The cross-price elasticity of demand can tell us whether goods are

Accepted Answer

A)   normal or inferior.
B)   elastic or inelastic.
C)   luxuries or necessities.
D)   complements or substitutes.E) A) and B)
F) A) and C)

Question 11

Figure 5-20 
-Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

Accepted Answer

A)   S1
B)   S2
C)   S3
D)   None of the supply curves is perfectly inelastid.E) A) and B)
F) A) and C)

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

If the demand curve is linear and downward sloping, which of the following statements is not correct?

Accepted Answer

A)   Demand is more elastic on the lower part of the demand curve than on the upper part.
B)   Different pairs of points on the demand curve can result in different values of the price elasticity of demand.
C)   Different pairs of points on the demand curve result in identical values of the slope of the demand curve.
D)   Starting from a point on the upper part of the demand curve, an increase in price leads to a decrease in total revenue.E) All of the above
F) B) and D)

Question 14

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) None of the above
F) A) and D)

Question 15

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

Accepted Answer

A)   1.26
B)   1.89
C)   0.53
D)   0.34E) A) and B)
F) None of the above

Question 16

Adam and Barb go to the store to purchase some lottery tickets. Without looking at the price, Adam says "I'll take 10 lottery tickets," and Barb says "I'll take $10 worth of lottery tickets." What is each person's price elasticity of demand for lottery tickets?

Accepted Answer

Since Adam wants 10 tickets regardless o...

Question 17

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

Accepted Answer

A)   increase the price of every loaf of bread in the store.
B)   look for ways to cut costs and increase profit for the bakery.
C)   determine the price elasticity of demand for the bakery's products.
D)   determine the price elasticity of supply for the bakery's products.E) None of the above
F) All of the above

Question 18

In the early 1970s, OPEC's goal was to

Accepted Answer

A)   decrease the world-wide price of oil so that the quantity demanded increased, thus raising total revenues for OPEC members.
B)   increase the world-wide price of oil by reducing the quantity of oil supplied.
C)   increase the world-wide price of oil by increasing the quantity of oil supplied, thus raising total revenues for OPEC members.
D)   decrease the world-wide price of oil so that quantity demanded increased.E) A) and B)
F) None of the above

Question 19

Figure 5-4 
-Refer to Figure 5-4. The section of the demand curve from A to B represents the

Accepted Answer

A)   elastic section of the demand curve.
B)   inelastic section of the demand curve.
C)   unit elastic section of the demand curve.
D)   perfectly elastic section of the demand curve.E) A) and B)
F) All of the above

Question 20

Suppose the price elasticity of demand for good A is 1.25. If the price of good A increases by 20%, what will be the resulting percentage change in quantity demanded for good A?

Accepted Answer

Quantity d...

Exam 5: Elasticity and Its Application

Figure 5-20 -Refer to Figure 5-20. Which supply curve is most likely relevant over a very long period of time?

Correct Answer
verified

Adam and Barb go to the store to purchase some lottery tickets. Without looking at the price, Adam says "I'll take 10 lottery tickets," and Barb says "I'll take $10 worth of lottery tickets." What is each person's price elasticity of demand for lottery tickets?

Correct Answer
verified
Since Adam wants 10 tickets regardless o...
View Answer

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

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from A to B represents the

Correct Answer
verified

Correct Answer
verified

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%, then ice cream is an inferior good.

Correct Answer
verified

Table 5-5 -Refer to Table 5-5. As price rises from $5 to $6, the price elasticity of demand using the midpoint method is approximately

Correct Answer
verified

If the demand curve is linear and downward sloping, which of the following statements is not correct?

Correct Answer
verified

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

Correct Answer
verified

In the early 1970s, OPEC's goal was to

Correct Answer
verified

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

Correct Answer
verified

A key determinant of the price elasticity of supply is the

Correct Answer
verified

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

Correct Answer
verified

The cross-price elasticity of demand can tell us whether goods are

Correct Answer
verified

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

Correct Answer
verified

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

Correct Answer
verified

Suppose the price elasticity of demand for good A is 1.25. If the price of good A increases by 20%, what will be the resulting percentage change in quantity demanded for good A?

Correct Answer
verified
Quantity d...
View Answer

Table 5-3 Consider the following demand schedule. -Refer to Table 5-3. Using the midpoint method, in which range is demand most elastic?

Correct Answer
verified

Figure 5-20 -Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

Correct Answer
verified

Other things equal, the demand for a good tends to be more inelastic, the

Correct Answer
verified

Exam 5: Elasticity and Its Application

Figure 5-20 -Refer to Figure 5-20. Which supply curve is most likely relevant over a very long period of time?

Correct AnswerverifiedShow Answer

Adam and Barb go to the store to purchase some lottery tickets. Without looking at the price, Adam says "I'll take 10 lottery tickets," and Barb says "I'll take $10 worth of lottery tickets." What is each person's price elasticity of demand for lottery tickets?

Correct AnswerverifiedSince Adam wants 10 tickets regardless o...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from A to B represents the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%, then ice cream is an inferior good.

Correct AnswerverifiedShow Answer

Table 5-5 -Refer to Table 5-5. As price rises from $5 to $6, the price elasticity of demand using the midpoint method is approximately

Correct AnswerverifiedShow Answer

If the demand curve is linear and downward sloping, which of the following statements is not correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the early 1970s, OPEC's goal was to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A key determinant of the price elasticity of supply is the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The cross-price elasticity of demand can tell us whether goods are

Correct AnswerverifiedShow Answer

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

Correct AnswerverifiedShow Answer

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

Correct AnswerverifiedShow Answer

Suppose the price elasticity of demand for good A is 1.25. If the price of good A increases by 20%, what will be the resulting percentage change in quantity demanded for good A?

Correct AnswerverifiedQuantity d...View AnswerShow Answer

Table 5-3 Consider the following demand schedule. -Refer to Table 5-3. Using the midpoint method, in which range is demand most elastic?

Correct AnswerverifiedShow Answer

Figure 5-20 -Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

Correct AnswerverifiedShow Answer

Other things equal, the demand for a good tends to be more inelastic, the

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Since Adam wants 10 tickets regardless o...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Quantity d...
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Correct Answer
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Correct Answer
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Correct Answer
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