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Exam 5: Elasticity and Its Application

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Question 121

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Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

A) increased from $6 to $9.
B) increased from $33 to $36.
C) decreased from $15 to $12.
D) All of the above are correct.

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

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Question 122

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Figure 5-6 -Refer to Figure 5-6. For prices above $8, demand is price

A) elastic, and total revenue will rise as price rises.
B) inelastic, and total revenue will rise as price rises.
C) elastic, and total revenue will fall as price rises.
D) inelastic, and total revenue will fall as price rises.

E) C) and D)
F) None of the above

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Question 123

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A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about

If the cross-price elasticity of two goods is negative, then the two goods are

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

Which of the following could be the price elasticity of demand for a good for which an increase in price would decrease revenue?

With regard to elasticity, as a firm nears its production capacity, supply becomes more

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

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

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

Figure 5-14 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between $100 and $220?

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

When demand is inelastic, a decrease in price increases total revenue.

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

At price of $1.20, a local pencil manufacturer is willing to supply 150 boxes per day. At a price of $1.40, the manufacturer is willing to supply 170 boxes per day. Using the midpoint method, the price elasticity of supply is about

Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

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?

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $2 and $4?

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

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?