Question 1

Figure 5-9
  
-Refer to Figure 5-9.If price increases from $10 to $15,total revenue will

Accepted Answer

A)  increase by $20, so demand must be inelastic in this price range. 
B)  increase by $5, so demand must be inelastic in this price range. 
C)  decrease by $20, so demand must be elastic in this price range. 
D)  decrease by $10, so demand must be elastic in this price range. 
A)  increase by $20, so demand must be inelastic in this price range. 
B)  increase by $5, so demand must be inelastic in this price range. 
C)  decrease by $20, so demand must be elastic in this price range. 
D)  decrease by $10, so demand must be elastic in this price range.

Question 2

Scenario 5-1
Suppose that 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 5-1.The price elasticity of supply for aged cheddar cheese could be

Accepted Answer

A)  -1. 
B)  0. 
C)  0.5. 
D)  1.5. 
A)  -1. 
B)  0. 
C)  0.5. 
D)  1.5.

Question 3

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 2.Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Accepted Answer

A)  The quantity of the good demanded decreases from 250 to 150. 
B)  The quantity of the good demanded decreases from 200 to 100. 
C)  The quantity of the good demanded decreases by 0.05 percent. 
D)  The quantity of the good demanded decreases by 0.2 percent. 
A)  The quantity of the good demanded decreases from 250 to 150. 
B)  The quantity of the good demanded decreases from 200 to 100. 
C)  The quantity of the good demanded decreases by 0.05 percent. 
D)  The quantity of the good demanded decreases by 0.2 percent.

Question 4

To determine whether a good is considered normal or inferior,one could examine the value of the

Accepted Answer

A)  income elasticity of demand for that good. 
B)  price elasticity of demand for that good. 
C)  price elasticity of supply for that good. 
D)  cross-price elasticity of demand for that good. 
A)  income elasticity of demand for that good. 
B)  price elasticity of demand for that good. 
C)  price elasticity of supply for that good. 
D)  cross-price elasticity of demand for that good.

Question 5

If a change in the price of a good results in no change in total revenue,then

Accepted Answer

A)  the demand for the good must be elastic. 
B)  the demand for the good must be inelastic. 
C)  the demand for the good must be unit elastic. 
D)  buyers must not respond very much to a change in price. 
A)  the demand for the good must be elastic. 
B)  the demand for the good must be inelastic. 
C)  the demand for the good must be unit elastic. 
D)  buyers must not respond very much to a change in price.

Question 6

In the early 1970s,OPEC's goal was to

Accepted Answer

A)  decrease the world-wide price of oil so that the quantity demanded increased, thus raising total revenues for OPEC members. 
B)  increase the world-wide price of oil by reducing the quantity of oil supplied. 
C)  increase the world-wide price of oil by increasing the quantity of oil supplied, thus raising total revenues for OPEC members. 
D)  decrease the world-wide price of oil so that quantity demanded increased. 
A)  decrease the world-wide price of oil so that the quantity demanded increased, thus raising total revenues for OPEC members. 
B)  increase the world-wide price of oil by reducing the quantity of oil supplied. 
C)  increase the world-wide price of oil by increasing the quantity of oil supplied, thus raising total revenues for OPEC members. 
D)  decrease the world-wide price of oil so that quantity demanded increased.

Question 7

If the cross-price elasticity of two goods is negative,then the two goods are

Accepted Answer

A)  necessities. 
B)  complements. 
C)  normal goods. 
D)  inferior goods. 
A)  necessities. 
B)  complements. 
C)  normal goods. 
D)  inferior goods.

Question 8

For a particular good,a 2 percent increase in price causes a 12 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A)  There are no 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 short. 
A)  There are no 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 short.

Question 9

When studying how some event or policy affects a market,elasticity provides information on the

Accepted Answer

A)  equity effects on the market by identifying the winners and losers. 
B)  magnitude of the effect on the market. 
C)  speed of adjustment of the market in response to the event or policy. 
D)  number of market participants who are directly affected by the event or policy. 
A)  equity effects on the market by identifying the winners and losers. 
B)  magnitude of the effect on the market. 
C)  speed of adjustment of the market in response to the event or policy. 
D)  number of market participants who are directly affected by the event or policy.

Question 10

Suppose demand is perfectly elastic,and the supply of the good in question decreases.As a result,

Accepted Answer

A)  the equilibrium quantity decreases, and the equilibrium price is unchanged. 
B)  the equilibrium price increases, and the equilibrium quantity is unchanged. 
C)  the equilibrium quantity and the equilibrium price both are unchanged. 
D)  buyers' total expenditure on the good is unchanged. 
A)  the equilibrium quantity decreases, and the equilibrium price is unchanged. 
B)  the equilibrium price increases, and the equilibrium quantity is unchanged. 
C)  the equilibrium quantity and the equilibrium price both are unchanged. 
D)  buyers' total expenditure on the good is unchanged.

Question 11

Even the demand for a necessity such as gasoline will respond to a change in price,especially over a longer time horizon.

Accepted Answer

A) True 
 B)False

Question 12

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Accepted Answer

A) True 
 B)False

Question 13

While in college,John and Bethany each buy five packages of mac-n-cheese per week.After they graduate and have full-time jobs,John buys six packages per week,but Bethany buys only two packages per week.When looking at income elasticity of demand for mac-n-cheese,John's

Accepted Answer

A)  is negative, and Bethany's is positive. 
B)  is positive, and Bethany's is negative. 
C)  is zero, and Bethany's approaches infinity. 
D)  approaches infinity, and Bethany's is zero. 
A)  is negative, and Bethany's is positive. 
B)  is positive, and Bethany's is negative. 
C)  is zero, and Bethany's approaches infinity. 
D)  approaches infinity, and Bethany's is zero.

Question 14

Holding all other factors constant and using the midpoint method,if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60,then supply is

Accepted Answer

A)  inelastic, since the price elasticity of supply is equal to .91. 
B)  inelastic, since the price elasticity of supply is equal to 1.1. 
C)  elastic, since the price elasticity of supply is equal to 0.91. 
D)  elastic, since the price elasticity of supply is equal to 1.1. 
A)  inelastic, since the price elasticity of supply is equal to .91. 
B)  inelastic, since the price elasticity of supply is equal to 1.1. 
C)  elastic, since the price elasticity of supply is equal to 0.91. 
D)  elastic, since the price elasticity of supply is equal to 1.1.

Question 15

The demand for Hubba Bubba bubble gum is likely

Accepted Answer

A)  elastic because gum is expensive relative to other snacks. 
B)  elastic because there are many close substitutes for Hubba Bubba. 
C)  elastic because bubble gum is regarded as a necessity by many people. 
D)  inelastic because it is consumed quickly, making the relevant time horizon short. 
A)  elastic because gum is expensive relative to other snacks. 
B)  elastic because there are many close substitutes for Hubba Bubba. 
C)  elastic because bubble gum is regarded as a necessity by many people. 
D)  inelastic because it is consumed quickly, making the relevant time horizon short.

Question 16

A perfectly inelastic demand implies that buyers

Accepted Answer

A)  decrease their purchases when the price rises. 
B)  purchase the same amount as before when the price rises or falls. 
C)  increase their purchases only slightly when the price falls. 
D)  respond substantially to an increase in price. 
A)  decrease their purchases when the price rises. 
B)  purchase the same amount as before when the price rises or falls. 
C)  increase their purchases only slightly when the price falls. 
D)  respond substantially to an increase in price.

Question 17

A key determinant of the price elasticity of supply is the time period under consideration.Which of the following statements best explains this fact?

Accepted Answer

A)  Supply curves are steeper over long periods of time than over short periods of time. 
B)  Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time. 
C)  The number of firms in a market tends to be more variable over long periods of time than over short periods of time. 
D)  Firms prefer to change their prices in the short run rather than in the long run. 
A)  Supply curves are steeper over long periods of time than over short periods of time. 
B)  Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time. 
C)  The number of firms in a market tends to be more variable over long periods of time than over short periods of time. 
D)  Firms prefer to change their prices in the short run rather than in the long run.

Question 18

The price elasticity of demand is defined as the percentage change in price divided by the percentage change in quantity demanded.

Accepted Answer

A) True 
 B)False

Question 19

Holding all other forces constant,when the price of gasoline rises,the number of gallons of gasoline demanded would fall substantially over a ten-year period because

Accepted Answer

A)  buyers tend to be much less sensitive to a change in price when given more time to react. 
B)  buyers tend to be much more sensitive to a change in price when given more time to react. 
C)  buyers will have substantially more real income over a ten-year period. 
D)  the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline. 
A)  buyers tend to be much less sensitive to a change in price when given more time to react. 
B)  buyers tend to be much more sensitive to a change in price when given more time to react. 
C)  buyers will have substantially more real income over a ten-year period. 
D)  the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline.

Question 20

If two goods are complements,their cross-price elasticity will be

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  equal to the difference between the income elasticities of demand for the two goods. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  equal to the difference between the income elasticities of demand for the two goods.

Exam 5: Elasticity and Its Application

Figure 5-9 -Refer to Figure 5-9.If price increases from $10 to $15,total revenue will

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 2.Which of the following events is consistent with a 0.1 percent increase in the price of the good?

To determine whether a good is considered normal or inferior,one could examine the value of the

If a change in the price of a good results in no change in total revenue,then

In the early 1970s,OPEC's goal was to

If the cross-price elasticity of two goods is negative,then the two goods are

For a particular good,a 2 percent increase in price causes a 12 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

When studying how some event or policy affects a market,elasticity provides information on the

Suppose demand is perfectly elastic,and the supply of the good in question decreases.As a result,

Even the demand for a necessity such as gasoline will respond to a change in price,especially over a longer time horizon.

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

While in college,John and Bethany each buy five packages of mac-n-cheese per week.After they graduate and have full-time jobs,John buys six packages per week,but Bethany buys only two packages per week.When looking at income elasticity of demand for mac-n-cheese,John's

Holding all other factors constant and using the midpoint method,if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60,then supply is

The demand for Hubba Bubba bubble gum is likely

A perfectly inelastic demand implies that buyers

A key determinant of the price elasticity of supply is the time period under consideration.Which of the following statements best explains this fact?

The price elasticity of demand is defined as the percentage change in price divided by the percentage change in quantity demanded.

Holding all other forces constant,when the price of gasoline rises,the number of gallons of gasoline demanded would fall substantially over a ten-year period because

If two goods are complements,their cross-price elasticity will be

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 Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

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