Question 1

Suppose that corn farmers want to increase their total revenue. Knowing that the demand for corn is inelastic, corn farmers should

Accepted Answer

A)   plant more corn so that they would be able to sell more each year.
B)   increase spending on fertilizer in an attempt to produce more corn on the acres they farm.
C)   reduce the number of acres on which they plant corn.
D)   contribute to a fund that promotes technological advances in corn production.E) A) and B)
F) A) and C)

Question 2

A good will have a more inelastic demand, the

Accepted Answer

A)   greater the availability of close substitutes.
B)   broader the definition of the market.
C)   longer the period of time.
D)   more it is regarded as a luxury.E) A) and B)
F) A) and C)

Question 3

For a particular good, an 8 percent increase in price causes a 4 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A)   There are many close substitutes for this good.
B)   The good is a luxury.
C)   The market for the good is broadly defined.
D)   The relevant time horizon is long.E) A) and D)
F) None of the above

Question 4

Which of the following statements is correct?

Accepted Answer

A)   The demand for natural gas is more elastic over a short period of time than over a long period of time.
B)   The demand for smoke alarms is more elastic than the demand for Persian rugs.
C)   The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 5

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 6

For which of the following goods is the income elasticity of demand likely highest?

Accepted Answer

A)   water
B)   diamonds
C)   hamburgers
D)   housingE) C) and D)
F) A) and B)

Question 7

Figure 5-4 
-Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 1,000, P= $40)  and (Q = 1,500, P = $30) . Then which of the following scenarios is possible?

Accepted Answer

A)   Both of these points lie on the section of the demand curve from B to C.
B)   The vertical intercept of the demand curve is the point (Q = 0, P = $60) .
C)   The horizontal intercept of the demand curve is the point (Q = 1,800, P = $0) .
D)   Any of these scenarios is possible.E) C) and D)
F) A) and B)

Question 8

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

Accepted Answer

A)   0.71, and they are substitutes.
B)   -0.71, and they are complements.
C)   1.4, and they are substitutes.
D)   -1.4, and they are complements.E) All of the above
F) A) and D)

Question 9

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

Accepted Answer

The goods ...

Question 10

The price elasticity of supply along a typical supply curve is

Accepted Answer

A)   constant.
B)   equal to zero.
C)   higher at low levels of quantity supplied and lower at high levels of quantity supplied.
D)   lower at low levels of quantity supplied and higher at high levels of quantity supplied.E) C) and D)
F) All of the above

Question 11

For which pairs of goods is the cross-price elasticity most likely to be positive?

Accepted Answer

A)   peanut butter and jelly
B)   bicycle frames and bicycle tires
C)   pens and pencils
D)   college textbooks and iPodsE) A) and B)
F) B) and D)

Question 12

Suppose demand is given by the equation:  Using the midpoint method, what is the price elasticity of demand between $7 and $8?

Accepted Answer

The price ...

Question 13

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

Accepted Answer

A)   increase total revenue of textbook sellers.
B)   decrease total revenue of textbook sellers.
C)   not change total revenue of textbook sellers.
D)   There is not enough information to answer this question.E) None of the above
F) C) and D)

Question 14

If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a

Accepted Answer

A)   0.015 percent increase in the quantity demanded.
B)   0.6 percent increase in the quantity demanded.
C)   6 percent increase in the quantity demanded.
D)   66 percent increase in the quantity demanded.E) B) and D)
F) A) and C)

Question 15

For which of the following goods would demand be most price elastic: a car, a sedan, a Honda sedan, a Honda Accord, a black Honda Accord?

Accepted Answer

a black Ho...

Question 16

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Accepted Answer

A)   unit elastic.
B)   inelastic.
C)   elastic.
D)   None of the above is correct because a price increase always leads to an increase in total revenue.E) All of the above
F) B) and C)

Question 17

Figure 5-5 
-Refer to Figure 5-5. At a price of $70 per unit, sellers' total revenue equals

Accepted Answer

A)   $700.
B)   $1050.
C)   $1250.
D)   $1400.E) None of the above
F) A) and B)

Question 18

Scenario 5-2
Suppose the demand function for good X is given by:  where  is the quantity demanded of good X,  is the price of good X, and  is the price of good Y, which is related to good X.
-Refer to Scenario 5-2. Using the midpoint method, if the price of good X is constant at $10 and the price of good Y decreases from $10 to $8, the cross price elasticity of demand is about

Accepted Answer

A)   0.57, and X and Y are substitutes.
B)   -0.22, and X and Y are complements.
C)   -0.80, and X and Y are complements.
D)   -2.57, and X and Y are complements.E) A) and B)
F) A) and C)

Question 19

The income elasticity of demand for caviar tends to be

Accepted Answer

A)   high because caviar is relatively expensive.
B)   low because caviar is packaged in small containers.
C)   high because buyers generally feel that they can do without it.
D)   low because it is almost always in short supply.E) None of the above
F) A) and D)

Question 20

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to

Accepted Answer

A)   an inelastic demand for oil and a reduction in the amount of oil supplied.
B)   a reduction in the amount of oil supplied and a world-wide oil embargo.
C)   a world-wide oil embargo and an elastic demand for oil.
D)   a reduction in the amount of oil supplied and an elastic demand for oil.E) C) and D)
F) A) and B)

Exam 5: Elasticity and Its Application

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

Correct Answer
verified
The goods ...
View Answer

The price elasticity of supply along a typical supply curve is

Correct Answer
verified

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to

Correct Answer
verified

Suppose that corn farmers want to increase their total revenue. Knowing that the demand for corn is inelastic, corn farmers should

Correct Answer
verified

Correct Answer
verified

For which of the following goods is the income elasticity of demand likely highest?

Correct Answer
verified

For a particular good, an 8 percent increase in price causes a 4 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct Answer
verified

A good will have a more inelastic demand, the

Correct Answer
verified

The income elasticity of demand for caviar tends to be

Correct Answer
verified

For which pairs of goods is the cross-price elasticity most likely to be positive?

Correct Answer
verified

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 Answer
verified

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $7 and $8?

Correct Answer
verified
The price ...
View Answer

For which of the following goods would demand be most price elastic: a car, a sedan, a Honda sedan, a Honda Accord, a black Honda Accord?

Correct Answer
verified
a black Ho...
View Answer

Which of the following statements is correct?

Correct Answer
verified

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

Correct Answer
verified

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Correct Answer
verified

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

Correct Answer
verified

Figure 5-5 -Refer to Figure 5-5. At a price of $70 per unit, sellers' total revenue equals

Correct Answer
verified

If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 1,000, P= $40) and (Q = 1,500, P = $30) . Then which of the following scenarios is possible?

Correct Answer
verified

Exam 5: Elasticity and Its Application

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

Correct AnswerverifiedThe goods ...View AnswerShow Answer

The price elasticity of supply along a typical supply curve is

Correct AnswerverifiedShow Answer

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to

Correct AnswerverifiedShow Answer

Suppose that corn farmers want to increase their total revenue. Knowing that the demand for corn is inelastic, corn farmers should

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For which of the following goods is the income elasticity of demand likely highest?

Correct AnswerverifiedShow Answer

For a particular good, an 8 percent increase in price causes a 4 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

A good will have a more inelastic demand, the

Correct AnswerverifiedShow Answer

The income elasticity of demand for caviar tends to be

Correct AnswerverifiedShow Answer

For which pairs of goods is the cross-price elasticity most likely to be positive?

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 demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $7 and $8?

Correct AnswerverifiedThe price ...View AnswerShow Answer

For which of the following goods would demand be most price elastic: a car, a sedan, a Honda sedan, a Honda Accord, a black Honda Accord?

Correct Answerverifieda black Ho...View AnswerShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

Correct AnswerverifiedShow Answer

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Correct AnswerverifiedShow Answer

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5. At a price of $70 per unit, sellers' total revenue equals

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 1,000, P= $40) and (Q = 1,500, P = $30) . Then which of the following scenarios is possible?

Correct AnswerverifiedShow Answer

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The goods ...
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The price ...
View Answer

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a black Ho...
View Answer

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Correct Answer
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