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Exam 5: Elasticity and Its Application

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Question 181

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Which of the following statements is correct?

A) The demand for flat-screen computer monitors is more elastic than the demand for monitors in general.
B) The demand for grandfather clocks is more elastic than the demand for clocks in general.
C) The demand for cardboard is more elastic over a long period of time than over a short period of time.
D) All of the above are correct.

E) All of the above
F) None of the above

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Question 182

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If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

A) 0.2 percent decrease in the quantity demanded.
B) 5 percent decrease in the quantity demanded.
C) 20 percent decrease in the quantity demanded.
D) 40 percent decrease in the quantity demanded.

E) A) and D)
F) A) and C)

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Question 183

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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 quantity will be

Suppose the price elasticity of demand for a product is 0.5. If a supplier wants to increase revenue, what change should it make to price, if any?

If the price of milk rises, when is the price elasticity of demand likely to be the lowest?

Figure 5-3 -Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve

If the income elasticity of demand for a good is -1.40, is the good a normal or inferior good?

A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

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?

A perfectly inelastic demand implies that buyers

Table 5-11 -Refer to Table 5-11. Which scenario describes the market for oil in the short run in comparison to the long run?

On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50) . Using the midpoint method, the price elasticity of supply is about

A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

Figure 5-11 -Refer to Figure 5-11. Suppose this demand curve is a straight, downward-sloping line all the way from the horizontal intercept to the vertical intercept. We choose two prices, P1 and P2, and the corresponding quantities demanded, Q1 and Q2, for the purpose of calculating the price elasticity of demand. Also suppose P2 > P1. In which of the following cases could we possibly find that (i) demand is elastic and (ii) a decrease in price from P1 to P2 causes an decrease in total revenue?

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points D and G?

Suppose the point (Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear demand curve. Then

Figure 5-9 -Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point A and point B is

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