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Exam 5: Elasticity and Its Application

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Question 31

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Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

A) True
B) False

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Question 32

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Figure 5-8 ​ -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $25 and $35?

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The price ...

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Question 33

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Scenario 5-2 Milk has an inelastic demand, and steak has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-2. The equilibrium quantity will

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

With regard to elasticity, if a firm has a longer time to adjust to a price increase, supply will be more

Suppose that when the price of good X increases from $600 to $720, the quantity demanded of good Y decreases from 67 to 15. Using the midpoint method, the cross-price elasticity of demand is about

If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

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

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

Table 5-4 ​ ​ -Refer to Table 5-4. Using the midpoint method, which of the three supply curves represents the least elastic supply?

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

A government program that reduces land under cultivation hurts farmers but helps consumers.

A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

Scenario 5-4 ​ 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 5-6. Considering the income elasticity, what type of good is mobile telephone service?

Demand is said to be inelastic if

If the cross-price elasticity of demand between two goods is negative, what is the relationship between the two goods?

Scenario 5-2 Milk has an inelastic demand, and steak has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-2. The change in equilibrium quantity will be

Demand is said to be price elastic if

A government program that reduces land under cultivation can help farmers by raising prices but hurts consumers.

Table 5-5 ​ ​ $\begin{array} { | c | c | } \hline \text { Price } & \text { Quantity Demanded } \\\hline \$ 0 & 50 \\\hline \$ 2 & 40 \\\hline \$ 4 & 30 \\\hline \$ 6 & 20 \\\hline 48 & 10 \\\hline\end{array}$ -Refer to Table 5-5. Between which two quantities listed is demand most inelastic?