Question 1

The price elasticity of demand for mobile phones

Accepted Answer

A)   will be higher if there is an improvement in the production technology.
B)   will be lower if consumers perceive mobile phones to be a necessity.
C)   is computed as the percentage change in the price of mobile phones divided by the percentage change in quantity of mobile phones.
D)   All of the above are correct.E) All of the above
F) None of the above

Question 2

Figure 5-4 
-Refer to Figure 5-4. If the price decreases in the region of the demand curve between points A and B, we can expect total revenue to

Accepted Answer

A)   increase.
B)   stay the same.
C)   decrease.
D)   first decrease, then increase until total revenue is maximized.E) C) and D)
F) None of the above

Question 3

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is

Accepted Answer

A)   zero, and the supply curve is horizontal.
B)   zero, and the supply curve is vertical.
C)   infinity, and the supply curve is horizontal.
D)   infinity, and the supply curve is vertical.E) None of the above
F) B) and C)

Question 4

Figure 5-4 
-Refer to Figure 5-4. The section of the demand curve at point 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) All of the above
F) A) and D)

Question 5

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Accepted Answer

A)   cross-price elasticity of demand is negative.
B)   price elasticity of demand is elastic.
C)   income elasticity of demand is negative.
D)   income elasticity of demand is positive.E) B) and D)
F) B) and C)

Question 6

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.
 
-Refer to Table 5-7. 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 C)
F) A) and B)

Question 7

As we move downward and to the right along a linear, downward-sloping demand curve,

Accepted Answer

A)   both slope and elasticity remain constant.
B)   slope changes but elasticity remains constant.
C)   both slope and elasticity change.
D)   slope remains constant but elasticity changes.E) C) and D)
F) All of the above

Question 8

Figure 5-21 
-Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $15 and $25?

Accepted Answer

The price ...

Question 9

A 10 percent increase in gasoline prices reduces gasoline consumption by about

Accepted Answer

A)   6 percent after one year and 2.5 percent after five years.
B)   2.5 percent after one year and 6 percent after five years.
C)   10 percent after one year and 20 percent after five years.
D)   0 percent after one year and 1 percent after five years.E) B) and D)
F) All of the above

Question 10

Figure 5-4 
-Refer to Figure 5-4. If the price increases in the region of the demand curve between points A and B, we can expect total revenue to

Accepted Answer

A)   increase.
B)   stay the same.
C)   decrease.
D)   first increase, then decrease until total revenue is maximized.E) A) and D)
F) B) and C)

Question 11

Scenario 5-8
Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000.
-Refer to Scenario 5-8. Using the midpoint method, what is the cross price elasticity of demand for landline and mobile service?

Accepted Answer

The answer of Scenario 5-8
Consider the markets for mobile and...

Question 12

Suppose a market has the demand function Qd=20-0.5P. Between which of the following price ranges is demand most inelastic?

Accepted Answer

A)   $0 to $10
B)   $10 to $20
C)   $20 to $30
D)   $30 to $40E) A) and B)
F) A) and C)

Question 13

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) All of the above
F) A) and C)

Question 14

Figure 5-10 
-Refer to Figure 5-10. Total revenue when the price is P1 is represented by the areas)

Accepted Answer

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

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to

Accepted Answer

A)   increase by 2.5%, and X is an inferior good.
B)   decrease by 2.5% and X is a normal good.
C)   increase by 10% and X is an inferior good.
D)   decrease by 10% and X is a normal good.E) B) and C)
F) None of the above

Question 17

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) A) and B)
F) B) and C)

Question 18

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

Accepted Answer

A)   the relevant time period is short rather than long.
B)   the relevant time period is long rather than short.
C)   supply is inelastic.
D)   the firm is experiencing capacity problems.E) B) and C)
F) All of the above

Question 19

Figure 5-13 
-Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

Accepted Answer

A)   0.71.
B)   0.85.
C)   1.18.
D)   1.40.E) A) and D)
F) A) and B)

Question 20

When the Shaffers had a monthly income of $4,000, they usually ate out 8 times a month. Now that the couple makes $4,500 a month, they eat out 10 times a month. Compute the couple's income elasticity of demand using the midpoint method. Explain your answer. Is a restaurant meal a normal or inferior good to the couple?

Accepted Answer

The income elasticity of deman...

Exam 5: Elasticity and Its Application

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
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As we move downward and to the right along a linear, downward-sloping demand curve,

Correct Answer
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Figure 5-4 -Refer to Figure 5-4. If the price decreases in the region of the demand curve between points A and B, we can expect total revenue to

Correct Answer
verified

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. 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

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Correct Answer
verified

Correct Answer
verified
The income elasticity of deman...
View Answer

A 10 percent increase in gasoline prices reduces gasoline consumption by about

Correct Answer
verified

The price elasticity of demand for mobile phones

Correct Answer
verified

Figure 5-13 -Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

Correct Answer
verified

Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to

Correct Answer
verified

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve at point B represents the

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. If the price increases in the region of the demand curve between points A and B, we can expect total revenue to

Correct Answer
verified

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

Correct Answer
verified

Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P1 is represented by the areas)

Correct Answer
verified

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $15 and $25?

Correct Answer
verified
The price ...
View Answer

Suppose a market has the demand function Qd=20-0.5P. Between which of the following price ranges is demand most inelastic?

Correct Answer
verified

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

Correct Answer
verified

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

Correct Answer
verified

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is

Correct Answer
verified

Exam 5: Elasticity and Its Application

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

As we move downward and to the right along a linear, downward-sloping demand curve,

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. If the price decreases in the region of the demand curve between points A and B, we can expect total revenue to

Correct AnswerverifiedShow Answer

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. 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

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe income elasticity of deman...View AnswerShow Answer

A 10 percent increase in gasoline prices reduces gasoline consumption by about

Correct AnswerverifiedShow Answer

The price elasticity of demand for mobile phones

Correct AnswerverifiedShow Answer

Figure 5-13 -Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

Correct AnswerverifiedShow Answer

Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve at point B represents the

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. If the price increases in the region of the demand curve between points A and B, we can expect total revenue to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P1 is represented by the areas)

Correct AnswerverifiedShow Answer

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $15 and $25?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Suppose a market has the demand function Qd=20-0.5P. Between which of the following price ranges is demand most inelastic?

Correct AnswerverifiedShow Answer

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is

Correct AnswerverifiedShow Answer

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The income elasticity of deman...
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The price ...
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