Question 1

In which of the following situations will total revenue increase?

Accepted Answer

A)   Price elasticity of demand is 1.2, and the price of the good decreases.
B)   Price elasticity of demand is 0.5, and the price of the good increases.
C)   Price elasticity of demand is 3.0, and the price of the good decreases.
D)   All of the above are correct.E) B) and D)
F) A) and B)

Question 2

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 inelastic demand?

Accepted Answer

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

Question 3

The midpoint method for calculating elasticities is convenient in that it allows us to

Accepted Answer

A)   ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price.
B)   calculate the same value for the elasticity, regardless of whether the price increases or decreases.
C)   assume that sellers' total revenue stays constant when the price changes.
D)   restrict all elasticity values to between 0 and 1.E) All of the above
F) None of the above

Question 4

Table 5-9 
-Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

Accepted Answer

A)   along supply curve B only
B)   along supply curves B and C
C)   along all three supply curves
D)   None. Quantity supplied moves proportionately less than the price along all of the three supply curves.E) A) and B)
F) B) and C)

Question 5

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

Accepted Answer

A)   0.6 percent increase in the quantity demanded.
B)   1.5 percent increase in the quantity demanded.
C)   2 percent increase in the quantity demanded.
D)   6 percent increase in the quantity demanded.E) A) and B)
F) A) and C)

Question 6

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

Accepted Answer

A)   30%.
B)   40%.
C)   80%.
D)   250%.E) A) and B)
F) A) and C)

Question 7

Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

Accepted Answer

A) True 
 B)False

Question 8

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

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) All of the above
F) None of the above

Question 10

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is

Accepted Answer

A)   0.75.
B)   1.25.
C)   1.33.
D)   1.60.E) B) and D)
F) None of the above

Question 11

Figure 5-9 
-Refer to Figure 5-9. If the price rises from point D to point C, total revenue

Accepted Answer

A)   increases, and demand is price elastic.
B)   decreases, and demand is price elastic.
C)   increases, and demand is price inelastic.
D)   decreases, and demand is price inelastic.E) B) and C)
F) A) and D)

Question 12

Table 5-5 
-Refer to Table 5-5. Demand is unit elastic when quantity demanded changes from

Accepted Answer

A)   9 to 8.
B)   10 to 9.
C)   10 to 11.
D)   There is not enough information given to determine the correct answer.E) All of the above
F) A) and D)

Question 13

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

Question 14

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A)   0.5, and supply is elastic.
B)   0.5, and supply is inelastic.
C)   2, and supply is inelastic.
D)   2, and supply is elastic.E) A) and D)
F) A) and C)

Question 15

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

Accepted Answer

A)   The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve.
B)   The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve.
C)   Given two prices with which to calculate the price elasticity of supply, that elasticity would be the same for both curves.
D)   A decrease in demand will increase total revenue if the steeper supply curve is relevant, while a decrease in demand will decrease total revenue if the flatter supply cure is relevant.E) C) and D)
F) B) and C)

Question 16

The supply of oil is likely to be

Accepted Answer

A)   inelastic in both the short run and long run.
B)   elastic in both the short run and long run.
C)   elastic in the short run and inelastic in the long run.
D)   inelastic in the short run and elastic in the long run.E) All of the above
F) None of the above

Question 17

If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A)   1.33, and supply is elastic.
B)   1.33, and supply is inelastic.
C)   0.75, and supply is elastic.
D)   0.75, and supply is inelastic.E) A) and C)
F) B) and C)

Question 18

If the price elasticity of demand for a good is 0.8, then a 12 percent increase in the quantity demanded must be the result of

Accepted Answer

A)   a 0.06 percent decrease in the price.
B)   a 1.5 percent decrease in the price.
C)   a 9.6 percent decrease in the price.
D)   a 15 percent decrease in the price.E) C) and D)
F) B) and C)

Question 19

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

Accepted Answer

A) True 
 B)False

Question 20

Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result,

Accepted Answer

A)   the equilibrium quantity decreases, and the equilibrium price is unchanged.
B)   the equilibrium price increases, and the equilibrium quantity is unchanged.
C)   the equilibrium quantity and the equilibrium price both are unchanged.
D)   buyers' total expenditure on the good is unchanged.E) A) and D)
F) B) and C)

Exam 5: Elasticity and Its Application

The midpoint method for calculating elasticities is convenient in that it allows us to

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

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If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

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When demand is perfectly inelastic, the demand curve will be

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Figure 5-9 -Refer to Figure 5-9. If the price rises from point D to point C, total revenue

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If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about

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Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

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Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

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Table 5-9 -Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

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Table 5-5 -Refer to Table 5-5. Demand is unit elastic when quantity demanded changes from

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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 inelastic demand?

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The supply of oil is likely to be

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If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is

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The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

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Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

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If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of supply is about

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In which of the following situations will total revenue increase?

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Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result,

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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 AnswerverifiedShow Answer

If the price elasticity of demand for a good is 0.8, then a 12 percent increase in the quantity demanded must be the result of

Correct AnswerverifiedShow Answer

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