Question 1

To determine whether a good is considered normal or inferior, one could examine the value of the

Accepted Answer

A)   income elasticity of demand for that good.
B)   price elasticity of demand for that good.
C)   price elasticity of supply for that good.
D)   cross-price elasticity of demand for that good.E) None of the above
F) All of the above

Question 2

Which of the following should be held constant when calculating an income elasticity of demand?

Accepted Answer

A)   the price of the good
B)   prices of related goods
C)   tastes
D)   All of the above should be held constant.E) C) and D)
F) None of the above

Question 3

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is

Accepted Answer

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

Question 4

Figure 5-4 
-Refer to Figure 5-4. If the price increases in the region of the demand curve between points B and C, 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 5

The price elasticity of supply measures how responsive

Accepted Answer

A)   equilibrium price is to equilibrium quantity.
B)   sellers are to a change in buyers' income.
C)   sellers are to a change in price.
D)   consumers are to the number of substitutes.E) B) and D)
F) B) and C)

Question 6

If the income elasticity of demand for a good is negative, then the good must be an inferior good.

Accepted Answer

A) True 
 B)False

Question 7

The price elasticity of demand measures how much

Accepted Answer

A)   quantity demanded responds to a change in price.
B)   quantity demanded responds to a change in income.
C)   price responds to a change in demand.
D)   demand responds to a change in supply.E) A) and D)
F) A) and C)

Question 8

Demand is said to be inelastic if

Accepted Answer

A)   buyers respond substantially to changes in the price of the good.
B)   demand shifts only slightly when the price of the good changes.
C)   the quantity demanded changes only slightly when the price of the good changes.
D)   the price of the good responds only slightly to changes in demand.E) B) and C)
F) A) and B)

Question 9

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

Accepted Answer

A)   0.71, and they are substitutes.
B)   -0.71, and they are complements.
C)   1.4, and they are substitutes.
D)   -1.4, and they are complements.E) B) and C)
F) A) and D)

Question 10

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Accepted Answer

A)   unit elastic.
B)   inelastic.
C)   elastic.
D)   None of the above is correct because a price increase always leads to an decrease in total revenue.E) B) and C)
F) A) and C)

Question 11

Goods with many close substitutes tend to have

Accepted Answer

A)   more elastic demands.
B)   less elastic demands.
C)   price elasticities of demand that are unit elastic.
D)   income elasticities of demand that are negative.E) A) and B)
F) B) and D)

Question 12

An increase in price causes an increase in total revenue when demand is

Accepted Answer

A)   elastic.
B)   inelastic.
C)   unit elastic.
D)   All of the above are possible.E) B) and D)
F) None of the above

Question 13

The federal government is concerned about the negative effects of cigarette smoking in the United States. Suppose Congress is considering two plans. One plan would limit the production of cigarettes. The other would require manufacturers to include graphic photos on cigarette packages of people suffering cancer's effects. Which of the following statements is true?

Accepted Answer

A)   Both programs would increase the price of cigarettes.
B)   Both programs would reduce the quantity of cigarettes sold.
C)   Both programs would decrease revenues for cigarette manufacturers.
D)   All of the above are correct.E) A) and D)
F) None of the above

Question 14

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

Accepted Answer

A)   0.35.
B)   0.43.
C)   2.33.
D)   2.89.E) A) and B)
F) C) and D)

Question 15

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

Accepted Answer

The answer of Suppose that good X has few close...

Question 16

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Accepted Answer

A)   negative, and the good is an inferior good.
B)   negative, and the good is a normal good.
C)   positive, and the good is a normal good.
D)   positive, and the good is an inferior good.E) A) and B)
F) A) and C)

Question 17

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the price elasticity of demand for tortilla chips in the given price range is

Accepted Answer

A)   0.33.
B)   0.45.
C)   2.20.
D)   3.00.E) A) and D)
F) A) and C)

Question 18

Table 5-11
 
-Refer to Table 5-11. Which scenario describes the market for oil in the short run?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) A) and C)
F) All of the above

Question 19

Figure 5-2 
-Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

Accepted Answer

A)   D1
B)   D2
C)   D3
D)   All of the above are equally elastic.E) A) and D)
F) A) and B)

Question 20

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

Exam 5: Elasticity and Its Application

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

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

Correct Answer
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Demand is said to be inelastic if

Correct Answer
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When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is

Correct Answer
verified

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Correct Answer
verified

The price elasticity of demand measures how much

Correct Answer
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Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

Correct Answer
verified

Correct Answer
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Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

Correct Answer
verified

The price elasticity of supply measures how responsive

Correct Answer
verified

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

Correct Answer
verified

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Correct Answer
verified

Which of the following should be held constant when calculating an income elasticity of demand?

Correct Answer
verified

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the price elasticity of demand for tortilla chips in the given price range is

Correct Answer
verified

Table 5-11 -Refer to Table 5-11. Which scenario describes the market for oil in the short run?

Correct Answer
verified

To determine whether a good is considered normal or inferior, one could examine the value of the

Correct Answer
verified

Goods with many close substitutes tend to have

Correct Answer
verified

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

Correct Answer
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If the income elasticity of demand for a good is negative, then the good must be an inferior good.

Correct Answer
verified

An increase in price causes an increase in total revenue when demand is

Correct Answer
verified

Exam 5: Elasticity and Its Application

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Demand is said to be inelastic if

Correct AnswerverifiedShow Answer

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is

Correct AnswerverifiedShow Answer

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Correct AnswerverifiedShow Answer

The price elasticity of demand measures how much

Correct AnswerverifiedShow Answer

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

Correct AnswerverifiedShow Answer

The price elasticity of supply measures how responsive

Correct AnswerverifiedShow Answer

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

Correct AnswerverifiedShow Answer

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Correct AnswerverifiedShow Answer

Which of the following should be held constant when calculating an income elasticity of demand?

Correct AnswerverifiedShow Answer

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the price elasticity of demand for tortilla chips in the given price range is

Correct AnswerverifiedShow Answer

Table 5-11 -Refer to Table 5-11. Which scenario describes the market for oil in the short run?

Correct AnswerverifiedShow Answer

To determine whether a good is considered normal or inferior, one could examine the value of the

Correct AnswerverifiedShow Answer

Goods with many close substitutes tend to have

Correct AnswerverifiedShow Answer

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

Correct AnswerverifiedShow Answer

If the income elasticity of demand for a good is negative, then the good must be an inferior good.

Correct AnswerverifiedShow Answer

An increase in price causes an increase in total revenue when demand is

Correct AnswerverifiedShow Answer

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