Question 1

For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A)  There are many substitutes for this good.
B)  The good is a necessity.
C)  The market for the good is narrowly defined.
D)  The relevant time horizon is long.E) A) and D)
F) A) and C)

Question 2

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

Accepted Answer

A)  White chocolate chip with macadamia nut cookies
B)  Cookies
C)  Mrs.Field's chocolate chip cookies
D)  Milk chocolate chip cookiesE) B) and C)
F) All of the above

Question 3

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

Accepted Answer

A)  0.9
B)  0.0
C)  1
D)  2.5E) B) and D)
F) All of the above

Question 4

Figure 5-4
 1 is represented by A) areas B + D. B) areas A + B. C) areas C + D. D) area D." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 5-4. Total revenue when the price is P1 is represented by

Accepted Answer

A)  areas B + D.
B)  areas A + B.
C)  areas C + D.
D)  area D.E) All of the above
F) A) and D)

Question 5

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

Question 6

Figure 5-3
  ​
-Refer to Figure 5-3. At a price of $60 per unit, sellers' total revenue equals

Accepted Answer

A)  $1,000.
B)  $1,200.
C)  $1,400.
D)  $1,160.E) A) and D)
F) A) and B)

Question 7

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 price will

Accepted Answer

A)  decrease in both the milk and steak markets.
B)  increase in the milk market and decrease in the steak market.
C)  decrease in the milk market and increase in the steak market.
D)  increase in both the milk and steak markets.E) All of the above
F) B) and D)

Question 8

OPEC failed to maintain a high price of oil in the long run, partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 9

Demand is elastic if the price elasticity of demand is greater than 1.

Accepted Answer

A) True 
 B)False

Question 10

If marijuana were legalized, it is likely that there would be an increase in the demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana is perfectly elastic, this will result in

Accepted Answer

A)  higher prices and higher total revenue from marijuana sales.
B)  higher prices but lower total revenue from marijuana sales.
C)  the same price and higher total revenue from marijuana sales.
D)  the same price but lower total revenue from marijuana sales.E) A) and B)
F) A) and C)

Question 11

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

Accepted Answer

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

Question 12

Figure 5-4
 1 and P2. B) A decrease in price from P2 to P1 will cause an increase in total revenue. C) The magnitude of the percentage change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded. D) An increase in price from P1 to P2 will cause an increase in total revenue." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 5-4. If rectangle D is larger than rectangle A, then which of the following is not correct?

Accepted Answer

A)  Demand is elastic between prices P1 and P2.
B)  A decrease in price from P2 to P1 will cause an increase in total revenue.
C)  The magnitude of the percentage change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded.
D)  An increase in price from P1 to P2 will cause an increase in total revenue.E) A) and B)
F) C) and D)

Question 13

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

Accepted Answer

A)  1.50, and an increase in price will result in an increase in total revenue for good A.
B)  1.50, and an increase in price will result in a decrease in total revenue for good A.
C)  0.67, and an increase in price will result in an increase in total revenue for good A.
D)  0.67, and an increase in price will result in a decrease in total revenue for good A.E) None of the above
F) A) and B)

Question 14

The supply of a good will be more elastic, the

Accepted Answer

A)  more the good is considered a luxury.
B)  broader is the definition of the market for the good.
C)  larger the number of close substitutes for the good.
D)  longer the time period being considered.E) None of the above
F) A) and B)

Question 15

Suppose the price of gas increases by 20%. Will demand be more elastic if consumers have 3 weeks or 3 years to adjust to this price change?

Accepted Answer

The answer of Suppose the price of gas increases by...

Question 16

Last year, Damaris bought 8 burgers when her income was $43,000. This year, her income is $54,000, and she purchased 9 burgers. Holding other factors constant and using the midpoint method, it follows that Damaris's income elasticity of demand is about

Accepted Answer

A)  1.93, and Damaris regards burgers as inferior goods.
B)  1.93, and Damaris regards burgers as normal goods.
C)  0.52, and Damaris regards burgers as inferior goods.
D)  0.52, and Damaris regards burgers as normal goods.E) None of the above
F) A) and B)

Question 17

Figure 5-2
  ​
-Refer to Figure 5-2. If the price decreases in the region of the demand curve between points B to A, we can expect total revenue to

Accepted Answer

A)  decrease.
B)  stay the same.
C)  increase.
D)  first decrease, then increase until total revenue is maximized.E) A) and C)
F) None of the above

Question 18

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. Total consumer spending on milk will

Accepted Answer

A)  increase, and total consumer spending on steak will increase.
B)  decrease, and total consumer spending on steak will decrease.
C)  decrease, and total consumer spending on steak will increase.
D)  increase, and total consumer spending on steak will decrease.E) A) and B)
F) B) and D)

Question 19

The flatter the demand curve that passes through a given point, the more inelastic the demand.

Accepted Answer

A) True 
 B)False

Question 20

Figure 5-8
  ​
-Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $15 and $25?

Accepted Answer

The price ...

Exam 5: Elasticity and Its Application

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

Correct AnswerverifiedShow Answer

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 price will

Correct AnswerverifiedShow Answer

The supply of a good will be more elastic, the

Correct AnswerverifiedShow Answer

If marijuana were legalized, it is likely that there would be an increase in the demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana is perfectly elastic, this will result in

Correct AnswerverifiedShow Answer

The flatter the demand curve that passes through a given point, the more inelastic the demand.

Correct AnswerverifiedShow Answer

Figure 5-3 ​ -Refer to Figure 5-3. At a price of $60 per unit, sellers' total revenue equals

Correct AnswerverifiedShow Answer

Last year, Damaris bought 8 burgers when her income was $43,000. This year, her income is $54,000, and she purchased 9 burgers. Holding other factors constant and using the midpoint method, it follows that Damaris's income elasticity of demand is about

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. If rectangle D is larger than rectangle A, then which of the following is not correct?

Correct AnswerverifiedShow Answer

Demand is elastic if the price elasticity of demand is greater than 1.

Correct AnswerverifiedShow Answer

OPEC failed to maintain a high price of oil in the long run, partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

Correct AnswerverifiedShow Answer

Suppose the price of gas increases by 20%. Will demand be more elastic if consumers have 3 weeks or 3 years to adjust to this price change?

Correct AnswerverifiedShow Answer

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. Total consumer spending on milk will

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

Correct AnswerverifiedShow Answer

Figure 5-8 ​ -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $15 and $25?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Figure 5-4 -Refer to Figure 5-4. Total revenue when the price is P1 is represented by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-2 ​ -Refer to Figure 5-2. If the price decreases in the region of the demand curve between points B to A, we can expect total revenue to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Figure 5-3 -Refer to Figure 5-3. At a price of $60 per unit, sellers' total revenue equals

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Figure 5-8 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $15 and $25?

Correct Answer
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The price ...
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Figure 5-4 -Refer to Figure 5-4. Total revenue when the price is P₁ is represented by

Correct Answer
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Figure 5-2 -Refer to Figure 5-2. If the price decreases in the region of the demand curve between points B to A, we can expect total revenue to

Correct Answer
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Correct Answer
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