Question 1

Table 5-5
 
-Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A)   0.09.
B)   0.58.
C)   0.65.
D)   1.53.E) B) and C)
F) None of the above

Question 2

Figure 5-12 
-Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point Y and point Z is

Accepted Answer

A)   0.5.
B)   0.75.
C)   1.0.
D)   1.3.E) B) and D)
F) A) and B)

Question 3

If the cross-price elasticity of demand between two goods is negative, what is the relationship between the two goods?

Accepted Answer

The goods ...

Question 4

Figure 5-15 
-Refer to Figure 5-15. Along which of these segments of the supply curve is supply most elastic?

Accepted Answer

A)   AB
B)   CD
C)   DH
D)   GHE) A) and B)
F) C) and D)

Question 5

If two goods are complements, their cross-price elasticity will be

Accepted Answer

A)   positive.
B)   negative.
C)   zero.
D)   equal to the difference between the income elasticities of demand for the two goods.E) None of the above
F) All of the above

Question 6

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

Accepted Answer

A)   increase by 4%.
B)   increase by 6.25%.
C)   decrease by 4%.
D)   decrease by 6.25%.E) A) and D)
F) B) and C)

Question 7

An advance in farm technology that results in an increased market supply is

Accepted Answer

A)   good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food.
B)   bad for farmers because total revenue will fall but good for consumers because prices for food will fall.
C)   good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption.
D)   bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue.E) C) and D)
F) A) and C)

Question 8

Figure 5-9 
-Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point A and point B is

Accepted Answer

A)   0.33.
B)   0.5.
C)   2.0.
D)   3.0.E) A) and B)
F) None of the above

Question 9

If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

Accepted Answer

A)   a 0.1 percent decrease in the price.
B)   a 1 percent decrease in the price.
C)   a 10 percent decrease in the price.
D)   a 19.6 percent decrease in the price.E) All of the above
F) C) and D)

Question 10

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

Accepted Answer

A)   inelastic.
B)   elastic.
C)   unit elastic.
D)   quite sensitive to changes in income.E) B) and C)
F) All of the above

Question 11

Table 5-1
 
-Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Accepted Answer

A)   A is laundry detergent and B is Tide.
B)   A is Diet Pepsi and B is soda.
C)   A is food and B is a yacht.
D)   A is toilet paper and B is candles.E) A) and B)
F) B) and C)

Question 12

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

Accepted Answer

A)   scissors
B)   fruit
C)   music downloads
D)   toothpasteE) None of the above
F) B) and D)

Question 13

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A)   There are many close substitutes for this good.
B)   The good is a luxury.
C)   The market for the good is broadly defined.
D)   The relevant time horizon is long.E) All of the above
F) B) and C)

Question 14

Figure 5-21 
-Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $5 and $15?

Accepted Answer

The price ...

Question 15

Figure 5-3 
-Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve

Accepted Answer

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

Question 16

Suppose the price elasticity of demand for a product is 0.5. 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 17

The flatter the demand curve through a given point, the

Accepted Answer

A)   greater the price elasticity of demand at that point.
B)   smaller the price elasticity of demand at that point.
C)   closer the price elasticity of demand will be to the slope of the curve.
D)   greater the absolute value of the change in total revenue when there is a movement from that point upward and to the left along the demand curve.E) B) and C)
F) A) and D)

Question 18

When demand is perfectly inelastic, the demand curve will be

Accepted Answer

A)   negatively sloped, because buyers decrease their purchases when the price rises.
B)   vertical, because buyers purchase the same amount as before whenever the price rises or falls.
C)   positively sloped, because buyers increase their purchases when price rises.
D)   positively sloped, because buyers increase their total expenditures when price rises.E) A) and B)
F) A) and C)

Question 19

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Accepted Answer

A) True 
 B)False

Question 20

Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8. You should

Accepted Answer

A)   increase the price of ice cream.
B)   decrease the price of ice cream.
C)   decrease the cost of operating the ice cream shop.
D)   increase the price of bottled water also sold at the ice cream shop because its price elasticity of demand is 1.2.E) All of the above
F) B) and D)

Exam 5: Elasticity and Its Application

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

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Figure 5-15 -Refer to Figure 5-15. Along which of these segments of the supply curve is supply most elastic?

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Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8. You should

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Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point Y and point Z is

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Table 5-1 -Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

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If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

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The flatter the demand curve through a given point, the

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Figure 5-3 -Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve

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When demand is perfectly inelastic, the demand curve will be

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If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

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If the cross-price elasticity of demand between two goods is negative, what is the relationship between the two goods?

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Suppose the price elasticity of demand for a product is 0.5. If a supplier wants to increase revenue, what change should it make to price, if any?

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If two goods are complements, their cross-price elasticity will be

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Table 5-5 -Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

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An advance in farm technology that results in an increased market supply is

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If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

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Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $5 and $15?

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

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For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

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Figure 5-9 -Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point A and point B is

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The price ...
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