Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

What is the price elasticity of demand at any point on a perfectly inelastic demand curve?

Accepted Answer

The price

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) 1.67 
B) 1.19 
C) 0.84 
D) 0.61 
A) 1.67 
B) 1.19 
C) 0.84 
D) 0.61

Question 5

Drug-interdiction policies that reduce the supply of illegal drugs may

Accepted Answer

A) be more effective in the long run than in the short run. 
B) be best coupled with drug-education programs designed to reduce demand. 
C) increase drug-related crimes. 
D) All of the above are correct. 
A) be more effective in the long run than in the short run. 
B) be best coupled with drug-education programs designed to reduce demand. 
C) increase drug-related crimes. 
D) All of the above are correct.

Question 6

Figure 5-4  
-Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is

Accepted Answer

A) less than 1 but greater than zero. 
B) equal to 1. 
C) greater than 1. 
D) equal to zero. 
A) less than 1 but greater than zero. 
B) equal to 1. 
C) greater than 1. 
D) equal to zero.

Question 7

For a particular good, a 5 percent increase in price causes a 2 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. 
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.

Question 8

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. 
A) $700. 
B) $1050. 
C) $1250. 
D) $1400.

Question 9

Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain.

Accepted Answer

If demand is inelastic, then r

Question 10

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Accepted Answer

A) a 0.2 percent increase in the price. 
B) a 2.5 percent increase in the price. 
C) a 5 percent increase in the price. 
D) a 20 percent increase in the price. 
A) a 0.2 percent increase in the price. 
B) a 2.5 percent increase in the price. 
C) a 5 percent increase in the price. 
D) a 20 percent increase in the price.

Question 11

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. 
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.

Question 12

At price of $1.25, a paper manufacturer is willing to supply 150 spiral notebooks per day. At a price of $1.50, the paper manufacturer is willing to supply 175 spiral notebooks per day. Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A) 1.18. 
B) 1.00. 
C) 0.85. 
D) 0.25. 
A) 1.18. 
B) 1.00. 
C) 0.85. 
D) 0.25.

Question 13

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 14

Figure 5-7  
-Refer to Figure 5-7. For prices above $5, demand is price

Accepted Answer

A) elastic, and raising price will increase total revenue. 
B) inelastic, and raising price will increase total revenue. 
C) elastic, and lowering price will increase total revenue. 
D) inelastic, and lowering price will increase total revenue. 
A) elastic, and raising price will increase total revenue. 
B) inelastic, and raising price will increase total revenue. 
C) elastic, and lowering price will increase total revenue. 
D) inelastic, and lowering price will increase total revenue.

Question 15

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.  
-Refer to Table 5-7. Using the midpoint method, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

Accepted Answer

A) 0.00 
B) 0.50 
C) 1.00 
D) 1.50 
A) 0.00 
B) 0.50 
C) 1.00 
D) 1.50

Question 16

Last month, sellers of good Y took in $100 in total revenue on sales of 50 units of good Y. This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y. At the same time, the price of good X stayed the same, but sales of good X increased from 20 units to 40 units. We can conclude that goods X and Y are

Accepted Answer

A) substitutes, and have a cross-price elasticity of 0.60. 
B) complements, and have a cross-price elasticity of -0.60. 
C) substitutes, and have a cross-price elasticity of 1.67. 
D) complements, and have a cross-price elasticity of -1.67. 
A) substitutes, and have a cross-price elasticity of 0.60. 
B) complements, and have a cross-price elasticity of -0.60. 
C) substitutes, and have a cross-price elasticity of 1.67. 
D) complements, and have a cross-price elasticity of -1.67.

Question 17

Figure 5-7  
-Refer to Figure 5-7. For prices below $5, demand is price

Accepted Answer

A) elastic, and raising price will increase total revenue. 
B) inelastic, and raising price will increase total revenue. 
C) elastic, and lowering price will increase total revenue. 
D) inelastic, and lowering price will increase total revenue. 
A) elastic, and raising price will increase total revenue. 
B) inelastic, and raising price will increase total revenue. 
C) elastic, and lowering price will increase total revenue. 
D) inelastic, and lowering price will increase total revenue.

Question 18

Figure 5-4  
-Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 2,000, P = $15) and (Q = 2,400, P = $12). Then which of the following scenarios is possible?

Accepted Answer

A) Both of these points lie on section BC of the demand curve. 
B) The vertical intercept of the demand curve is the point (Q = 0, P = $22). 
C) The horizontal intercept of the demand curve is the point (Q = 5,000, P = $0). 
D) Any of these scenarios is possible. 
A) Both of these points lie on section BC of the demand curve. 
B) The vertical intercept of the demand curve is the point (Q = 0, P = $22). 
C) The horizontal intercept of the demand curve is the point (Q = 5,000, P = $0). 
D) Any of these scenarios is possible.

Question 19

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

Accepted Answer

A) immediately after the price increase 
B) one month after the price increase 
C) three months after the price increase 
D) one year after the price increase 
A) immediately after the price increase 
B) one month after the price increase 
C) three months after the price increase 
D) one year after the price increase

Question 20

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. 
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.

Exam 5: Elasticity and Its Application

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

What is the price elasticity of demand at any point on a perfectly inelastic demand curve?

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

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

Drug-interdiction policies that reduce the supply of illegal drugs may

Figure 5-4 -Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

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

Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain.

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Demand is said to be unit elastic if quantity demanded

At price of $1.25, a paper manufacturer is willing to supply 150 spiral notebooks per day. At a price of $1.50, the paper manufacturer is willing to supply 175 spiral notebooks per day. Using the midpoint method, the price elasticity of supply is about

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

Figure 5-7 -Refer to Figure 5-7. For prices above $5, demand is price

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

Figure 5-7 -Refer to Figure 5-7. For prices below $5, demand is price

Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 2,000, P = $15) and (Q = 2,400, P = $12). Then which of the following scenarios is possible?

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

A good will have a more inelastic demand, the

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

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