Question 1

Frequently, in the short run, the quantity supplied of a good is

Accepted Answer

A)   impossible, or nearly impossible, to measure.
B)   not very responsive to price changes.
C)   determined by the quantity demanded of the good.
D)   determined by psychological forces and other non-economic forces.E) All of the above
F) B) and C)

Question 2

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

Accepted Answer

A)   immediately after the price increase
B)   one month after the price increase
C)   three months after the price increase
D)   one year after the price increaseE) A) and B)
F) B) and C)

Question 3

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

Accepted Answer

A) True 
 B)False

Question 4

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

Question 5

If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about

Accepted Answer

A)   0.2%.
B)   0.5%.
C)   2.0%.
D)   4.5%.E) C) and D)
F) All of the above

Question 6

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Accepted Answer

A)   a 7.5 increase in the price of the good
B)   a 13.33 percent increase in the price of the good
C)   an increase in the price of the good from $7.50 to $10
D)   an increase in the price of the good from $10 to $17.50E) B) and C)
F) A) and C)

Question 7

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

Accepted Answer

A) True 
 B)False

Question 8

Figure 5-9 
-Refer to Figure 5-9. If the price falls from point A to point B, 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) A) and B)
F) C) and D)

Question 9

When quantity demanded responds strongly to changes in price, demand is said to be

Accepted Answer

A)   fluid.
B)   elastic.
C)   dynamic.
D)   highly variable.E) A) and B)
F) None of the above

Question 10

Figure 5-8 
-Refer to Figure 5-8. An increase in price from $10 to $15 would

Accepted Answer

A)   increase total revenue by $1,000.
B)   decrease total revenue by $1,000.
C)   increase total revenue by $500.
D)   decrease total revenue by $500.E) A) and C)
F) B) and C)

Question 11

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

Accepted Answer

A)   white chocolate chip with macadamia nut cookies
B)   Mrs. Field's chocolate chip cookies
C)   milk chocolate chip cookies
D)   cookiesE) A) and B)
F) A) and C)

Question 12

Suppose that demand is inelastic within a certain price range. For that price range,

Accepted Answer

A)   an increase in price would increase total revenue because the decrease in quantity demanded is proportionately less than the increase in price.
B)   an increase in price would decrease total revenue because the decrease in quantity demanded is proportionately greater than the increase in price.
C)   a decrease in price would increase total revenue because the increase in quantity demanded is proportionately smaller than the decrease in price.
D)   a decrease in price would not affect total revenue.E) B) and C)
F) None of the above

Question 13

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

Accepted Answer

A)   the mayor thinks demand is elastic, and the city manager thinks demand is inelastic.
B)   both the mayor and the city manager think that demand is elastic.
C)   both the mayor and the city manager think that demand is inelastic.
D)   the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.E) B) and C)
F) B) and D)

Question 14

Farm programs that pay farmers not to plant crops on all their land

Accepted Answer

A)   hurt farmers by lowering their total revenue and hurt consumers by causing shortages of some food items.
B)   help farmers by cutting costs, which helps consumers by lowering food prices.
C)   help farmers by increasing total revenue in the market but hurt consumers by raising food prices.
D)   help farmers directly since they receive government payments but have no real effects on consumers.E) B) and D)
F) All of the above

Question 15

If the cross-price elasticity of demand for two goods is negative, then the two goods are substitutes.

Accepted Answer

A) True 
 B)False

Question 16

Necessities such as food and clothing tend to have

Accepted Answer

A)   high price elasticities of demand and high income elasticities of demand.
B)   high price elasticities of demand and low income elasticities of demand.
C)   low price elasticities of demand and high income elasticities of demand.
D)   low price elasticities of demand and low income elasticities of demand.E) B) and C)
F) None of the above

Question 17

Table 5-9 
-Refer to Table 5-9. Which of the three supply curves represents the least elastic supply?

Accepted Answer

A)   supply curve A
B)   supply curve B
C)   supply curve C
D)   There is no difference in the elasticity of the three supply curves.E) None of the above
F) B) and D)

Question 18

Suppose that good X is a luxury and that good Y is a necessity. Which good would you expect to have more price inelastic demand?

Accepted Answer

The answer of Suppose that good X is a luxury...

Question 19

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) A) and C)

Question 20

Figure 5-11 
-Refer to Figure 5-11. A decrease in price from $20 to $10 leads to a

Accepted Answer

A)   decrease in total revenue of $200, so the price elasticity of demand is greater than 1 in this price range.
B)   decrease in total revenue of $200, so the price elasticity of demand is less than 1 in this price range.
C)   decrease in total revenue of $120, so the price elasticity of demand is less than 1 in this price range.
D)   decrease in total revenue of $120, so demand is elastic in this price range.E) A) and B)
F) All of the above

Exam 5: Elasticity and Its Application

Frequently, in the short run, the quantity supplied of a good is

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Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

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Farm programs that pay farmers not to plant crops on all their land

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

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Demand is said to be inelastic if

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Figure 5-11 -Refer to Figure 5-11. A decrease in price from $20 to $10 leads to a

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Suppose that demand is inelastic within a certain price range. For that price range,

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An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

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Suppose that good X is a luxury and that good Y is a necessity. Which good would you expect to have more price inelastic demand?

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Necessities such as food and clothing tend to have

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Figure 5-9 -Refer to Figure 5-9. If the price falls from point A to point B, total revenue

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You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

Correct AnswerverifiedShow Answer

Figure 5-8 -Refer to Figure 5-8. An increase in price from $10 to $15 would

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If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

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If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about

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Table 5-9 -Refer to Table 5-9. Which of the three supply curves represents the least elastic supply?

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If the cross-price elasticity of demand for two goods is negative, then the two goods are substitutes.

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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 A and B, we can expect total revenue to

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When quantity demanded responds strongly to changes in price, demand is said to be

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If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

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