Question 1

Table 5-5
 
-Refer to Table 5-5. When price is between $5 and $9, demand is

Accepted Answer

A)   elastic.
B)   unit elastic.
C)   inelastic.
D)   There is not enough information given to determine whether demand is elastic, unit elastic, or inelastic.E) B) and C)
F) B) and D)

Question 2

Scenario 5-5
Milk has an inelastic demand, and beef 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 5-5. The change in equilibrium price will be

Accepted Answer

A)   greater in the milk market than in the beef market.
B)   greater in the beef market than in the milk market.
C)   the same in the milk and beef markets.
D)   Any of the above could be correct.E) C) and D)
F) A) and B)

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

There are fewer farmers in the United States today than 200 years ago because of

Accepted Answer

A)   improvements in farm technology.
B)   increased government regulations in farming.
C)   an elastic demand for food.
D)   environmental programs designed to reduce soil erosion.E) C) and D)
F) A) and B)

Question 5

Demand is said to be unit elastic if quantity demanded

Accepted Answer

A)   changes by the same percent as the price.
B)   changes by a larger percent than the price.
C)   changes by a smaller percent than the price.
D)   does not respond to a change in price.E) C) and D)
F) All of the above

Question 6

Scenario 5-4
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-4. The equilibrium price will

Accepted Answer

A)   increase in both the aged cheddar cheese and bread markets.
B)   increase in the aged cheddar cheese market and decrease in the bread market.
C)   decrease in the aged cheddar cheese market and increase in the bread market.
D)   decrease in both the aged cheddar cheese and bread markets.E) B) and D)
F) A) and D)

Question 7

Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

Accepted Answer

The price elasticity...

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) B) and C)
F) A) and B)

Question 9

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

Accepted Answer

A)   0.6
B)   0.9
C)   1
D)   2.6E) A) and D)
F) B) and C)

Question 10

If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a

Accepted Answer

A)   0.1 percent decrease in the quantity demanded.
B)   1 percent decrease in the quantity demanded.
C)   2.5 percent decrease in the quantity demanded.
D)   10 percent decrease in the quantity demanded.E) A) and D)
F) None of the above

Question 11

In general, demand curves for luxuries tend to be price elastic.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)   clothing
B)   blue jeans
C)   Tommy Hilfiger jeans
D)   All three would have the same elasticity of demand because they are all related.E) B) and C)
F) All of the above

Question 13

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Accepted Answer

A) True 
 B)False

Question 14

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

Accepted Answer

A)   a 0.8 percent increase in the price of the good
B)   a 2.4 percent increase in the price of the good
C)   a 5 percent increase in the price of the good
D)   a 8 percent increase in the price of the goodE) All of the above
F) A) and D)

Question 15

When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.

Accepted Answer

A) True 
 B)False

Question 16

If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is

Accepted Answer

A)   0.50.
B)   1.
C)   1.5.
D)   2.E) B) and D)
F) C) and D)

Question 17

When demand is perfectly inelastic, the price elasticity of demand

Accepted Answer

A)   is zero, and the demand curve is vertical.
B)   is zero, and the demand curve is horizontal.
C)   approaches infinity, and the demand curve is vertical.
D)   approaches infinity, and the demand curve is horizontal.E) A) and B)
F) B) and C)

Question 18

Why was OPEC unable to maintain high oil prices in the long run?

Accepted Answer

A)   Demand and supply are both elastic in the long run compared to the short run.
B)   Demand and supply are both inelastic in the long run compared to the short run.
C)   Demand is elastic and supply is inelastic in the long run compared to the short run.
D)   Demand is inelastic and supply is elastic in the long run compared to the short run.E) None of the above
F) A) and C)

Question 19

Figure 5-1 
-Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

Accepted Answer

A)   0.33.
B)   0.67.
C)   1.5
D)   2.67.E) None of the above
F) All of the above

Question 20

Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she needs. Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. If you know that the demand for lemonade is elastic, what is your advice to her?

Accepted Answer

A)   Leave the price at 25 cents and be patient.
B)   Raise the price to increase total revenue.
C)   Lower the price to increase total revenue.
D)   There isn't enough information given to answer this question.E) None of the above
F) A) and B)

Exam 5: Elasticity and Its Application

Correct Answer
verified

In general, demand curves for luxuries tend to be price elastic.

Correct Answer
verified

Why was OPEC unable to maintain high oil prices in the long run?

Correct Answer
verified

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

Correct Answer
verified

When demand is perfectly inelastic, the price elasticity of demand

Correct Answer
verified

Scenario 5-5 Milk has an inelastic demand, and beef 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 5-5. The change in equilibrium price will be

Correct Answer
verified

Demand is said to be unit elastic if quantity demanded

Correct Answer
verified

Table 5-5 -Refer to Table 5-5. When price is between $5 and $9, demand is

Correct Answer
verified

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Correct Answer
verified

If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is

Correct Answer
verified

Correct Answer
verified

Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

Correct Answer
verified
The price elasticity...
View Answer

When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.

Correct Answer
verified

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

Correct Answer
verified

If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a

Correct Answer
verified

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

There are fewer farmers in the United States today than 200 years ago because of

Correct Answer
verified

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

Correct Answer
verified

Exam 5: Elasticity and Its Application

Correct AnswerverifiedShow Answer

In general, demand curves for luxuries tend to be price elastic.

Correct AnswerverifiedShow Answer

Why was OPEC unable to maintain high oil prices in the long run?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When demand is perfectly inelastic, the price elasticity of demand

Correct AnswerverifiedShow Answer

Scenario 5-5 Milk has an inelastic demand, and beef 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 5-5. The change in equilibrium price will be

Correct AnswerverifiedShow Answer

Demand is said to be unit elastic if quantity demanded

Correct AnswerverifiedShow Answer

Table 5-5 -Refer to Table 5-5. When price is between $5 and $9, demand is

Correct AnswerverifiedShow Answer

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Correct AnswerverifiedShow Answer

If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

Correct AnswerverifiedThe price elasticity...View AnswerShow Answer

When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

There are fewer farmers in the United States today than 200 years ago because of

Correct AnswerverifiedShow Answer

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

Correct AnswerverifiedShow Answer

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The price elasticity...
View Answer

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Correct Answer
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