Question 1

The price elasticity of demand for a good measures the willingness of

Accepted Answer

A)   consumers to buy less of the good as price rises.
B)   consumers to avoid monopolistic markets in favor of competitive markets.
C)   firms to produce more of a good as price rises.
D)   firms to respond to the tastes of consumers.E) All of the above
F) None of the above

Question 2

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. Your roommate still enjoys Ramen noodles very much and buys even more, but you plan to buy fewer Ramen noodles in favor of foods you prefer more. When looking at income elasticity of demand for Ramen noodles, yours would

Accepted Answer

A)   be negative and your roommate's would be positive.
B)   be positive and your roommate's would be negative.
C)   be zero and your roommate's would approach infinity.
D)   approach infinity and your roommate's would be zero.E) B) and D)
F) B) and C)

Question 3

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Accepted Answer

A)   0
B)   0.2
C)   1.4
D)   -1.3E) B) and D)
F) B) and C)

Question 4

Suppose a farmer knows that he will be able to harvest and sell 3,000 bushels of wheat. Would he prefer a market in which conditions are favorable and most farmers harvest large crops or a market in which conditions are unfavorable and many farmers harvest small crops? Why?

Accepted Answer

The farmer prefers a market in...

Question 5

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

Accepted Answer

A) True 
 B)False

Question 6

Figure 5-5 
-Refer to Figure 5-5. At a price of $50 per unit, sellers' total revenue equals

Accepted Answer

A)   $500.
B)   $750.
C)   $1000.
D)   $1250.E) A) and B)
F) All of the above

Question 7

If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

Accepted Answer

A) True 
 B)False

Question 8

When supply is perfectly elastic, the value of the price elasticity of supply is

Accepted Answer

A)   0.
B)   1.
C)   greater than 0 and less than 1.
D)   infinity.E) A) and D)
F) B) and C)

Question 9

Figure 5-4 
-Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is

Accepted Answer

A)   less than 1 but greater than zero.
B)   equal to 1.
C)   greater than 1.
D)   equal to zero.E) C) and D)
F) A) and D)

Question 10

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

Question 11

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) C) and D)
F) B) and D)

Question 12

Figure 5-5 
-Refer to Figure 5-5. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

Accepted Answer

A)   0.33.
B)   0.4.
C)   1.33.
D)   3.E) B) and C)
F) A) and D)

Question 13

If a supply curve is perfectly vertical, what is the value of the price elasticity of supply?

Accepted Answer

The answer of If a supply curve is perfectly vertical,...

Question 14

When demand is inelastic, an increase in price will cause

Accepted Answer

A)   an increase in total revenue.
B)   a decrease in total revenue.
C)   no change in total revenue but an increase in quantity demanded.
D)   no change in total revenue but a decrease in quantity demanded.E) B) and D)
F) B) and C)

Question 15

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought. Which of the following best describes the effect on corn farmers in Minnesota, where sufficient rainfall occurred?

Accepted Answer

A)   Their revenue increases because price increases and demand is elastic.
B)   Their revenue increases because price increases and demand is inelastic.
C)   Their revenue decreases because price decreases and demand is inelastic.
D)   Their revenue decreases because price increases and demand is elastic.E) None of the above
F) C) and D)

Question 16

When a supply curve is relatively flat, the

Accepted Answer

A)   sellers are not at all responsive to a change in price.
B)   equilibrium price changes substantially when the demand for the good changes.
C)   supply is relatively elastic.
D)   supply is relatively inelastic.E) C) and D)
F) B) and D)

Question 17

Figure 5-5 
-Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

Accepted Answer

A)   $20 and $40.
B)   $40 and$50.
C)   $40 and$60.
D)   $50 and$70.E) B) and C)
F) B) and D)

Question 18

Table 5-8 
-Refer to Table 5-8. Using the midpoint method, what is the income elasticity of demand for good X?

Accepted Answer

A)   -3.5
B)   3.5
C)   0.29
D)   -0.29E) A) and B)
F) A) and D)

Question 19

If demand is price inelastic, then

Accepted Answer

A)   buyers do not respond much to a change in price.
B)   buyers respond substantially to a change in price, but the response is very slow.
C)   buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes.
D)   the demand curve is very flat.E) None of the above
F) A) and C)

Question 20

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

Accepted Answer

A)   chocolate
B)   Godiva chocolate
C)   Hershey's chocolate
D)   All three would have the same elasticity of demand because they are all related.E) B) and C)
F) All of the above

Exam 5: Elasticity and Its Application

Figure 5-4 -Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is

Correct Answer
verified

When a supply curve is relatively flat, the

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

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

Correct Answer
verified

The price elasticity of demand for a good measures the willingness of

Correct Answer
verified

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

Correct Answer
verified

Suppose a farmer knows that he will be able to harvest and sell 3,000 bushels of wheat. Would he prefer a market in which conditions are favorable and most farmers harvest large crops or a market in which conditions are unfavorable and many farmers harvest small crops? Why?

Correct Answer
verified
The farmer prefers a market in...
View Answer

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

Correct Answer
verified

Table 5-8 -Refer to Table 5-8. Using the midpoint method, what is the income elasticity of demand for good X?

Correct Answer
verified

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

Correct Answer
verified

If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

Correct Answer
verified

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Correct Answer
verified

When demand is inelastic, an increase in price will cause

Correct Answer
verified

Figure 5-5 -Refer to Figure 5-5. At a price of $50 per unit, sellers' total revenue equals

Correct Answer
verified

Correct Answer
verified

When supply is perfectly elastic, the value of the price elasticity of supply is

Correct Answer
verified

If a supply curve is perfectly vertical, what is the value of the price elasticity of supply?

Correct Answer
verified

If demand is price inelastic, then

Correct Answer
verified

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

Correct Answer
verified

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought. Which of the following best describes the effect on corn farmers in Minnesota, where sufficient rainfall occurred?

Correct Answer
verified

Exam 5: Elasticity and Its Application

Figure 5-4 -Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is

Correct AnswerverifiedShow Answer

When a supply curve is relatively flat, the

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

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

Correct AnswerverifiedShow Answer

The price elasticity of demand for a good measures the willingness of

Correct AnswerverifiedShow Answer

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

Correct AnswerverifiedShow Answer

Suppose a farmer knows that he will be able to harvest and sell 3,000 bushels of wheat. Would he prefer a market in which conditions are favorable and most farmers harvest large crops or a market in which conditions are unfavorable and many farmers harvest small crops? Why?

Correct AnswerverifiedThe farmer prefers a market in...View AnswerShow Answer

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

Correct AnswerverifiedShow Answer

Table 5-8 -Refer to Table 5-8. Using the midpoint method, what is the income elasticity of demand for good X?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

Correct AnswerverifiedShow Answer

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Correct AnswerverifiedShow Answer

When demand is inelastic, an increase in price will cause

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5. At a price of $50 per unit, sellers' total revenue equals

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When supply is perfectly elastic, the value of the price elasticity of supply is

Correct AnswerverifiedShow Answer

If a supply curve is perfectly vertical, what is the value of the price elasticity of supply?

Correct AnswerverifiedShow Answer

If demand is price inelastic, then

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

Correct AnswerverifiedShow Answer

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought. Which of the following best describes the effect on corn farmers in Minnesota, where sufficient rainfall occurred?

Correct AnswerverifiedShow Answer

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The farmer prefers a market in...
View Answer

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