Question 1

Figure 5-6  
-Refer to Figure 5-6. Using the midpoint method, the price elasticity of demand between point A and point B is

Accepted Answer

A)  1. 
B)  1.5. 
C)  2. 
D)  2.5. 
A)  1. 
B)  1.5. 
C)  2. 
D)  2.5.

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. 
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.

Question 3

Table 5-3
The following table shows the demand schedule for a particular good. $$\begin{array} { | c | c | } 
\hline \text { Prise } & \text { Quantity } \
\hline \$ 15 & 0 \
\hline \$ 12 & 5 \
\hline \$ 9 & 10 \
\hline \$ 6 & 15 \
\hline \$ 3 & 20 \
\hline \$ 0 & 25 \
\hline
\end{array}$$
-Refer to Table 5-3. Using the midpoint method, when price falls from $6 to $3, the price elasticity of demand is

Accepted Answer

A) 0.43 
B) 0.67 
C) 1.50 
D) 2.33 
A) 0.43 
B) 0.67 
C) 1.50 
D) 2.33

Question 4

If the demand for textbooks is inelastic, then an increase 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. 
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.

Question 5

A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

Accepted Answer

A) True 
 B)False

Question 6

Figure 5-4  
-Refer to Figure 5-4. If the price decreases in the region of the demand curve between points B and C, we can expect total revenue to

Accepted Answer

A) increase. 
B) stay the same. 
C) decrease. 
D) first increase, then decrease until total revenue is maximized. 
A) increase. 
B) stay the same. 
C) decrease. 
D) first increase, then decrease until total revenue is maximized.

Question 7

If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about

Accepted Answer

A) 0.2%. 
B) 0.5%. 
C) 2.0%. 
D) 4.5%. 
A) 0.2%. 
B) 0.5%. 
C) 2.0%. 
D) 4.5%.

Question 8

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 9

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

Accepted Answer

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

Question 10

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 11

Demand is said to be inelastic if

Accepted Answer

A) buyers respond substantially to changes in the price of the good. 
B) demand shifts only slightly when the price of the good changes. 
C) the quantity demanded changes only slightly when the price of the good changes. 
D) the price of the good responds only slightly to changes in demand. 
A) buyers respond substantially to changes in the price of the good. 
B) demand shifts only slightly when the price of the good changes. 
C) the quantity demanded changes only slightly when the price of the good changes. 
D) the price of the good responds only slightly to changes in demand.

Question 12

Figure 5-8  
-Refer to Figure 5-8. 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 13

If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A) 1.33, and supply is elastic. 
B) 1.33, and supply is inelastic. 
C) 0.75, and supply is elastic. 
D) 0.75, and supply is inelastic. 
A) 1.33, and supply is elastic. 
B) 1.33, and supply is inelastic. 
C) 0.75, and supply is elastic. 
D) 0.75, and supply is inelastic.

Question 14

Figure 5-10  
-Refer to Figure 5-10. When the price is $30, total revenue is

Accepted Answer

A) $3,000. 
B) $5,000. 
C) $7,000. 
D) $9,000. 
A) $3,000. 
B) $5,000. 
C) $7,000. 
D) $9,000.

Question 15

When demand is unit elastic, price elasticity of demand equals

Accepted Answer

A) 1, and total revenue and price move in the same direction. 
B) 1, and total revenue and price move in opposite directions. 
C) 1, and total revenue does not change when price changes. 
D) 0, and total revenue does not change when price changes. 
A) 1, and total revenue and price move in the same direction. 
B) 1, and total revenue and price move in opposite directions. 
C) 1, and total revenue does not change when price changes. 
D) 0, and total revenue does not change when price changes.

Question 16

When demand is inelastic, an increase in price will cause

Accepted Answer

A) an increase in total revenue. 
B) a decrease in total revenue. 
C) no change in total revenue but an increase in quantity demanded. 
D) no change in total revenue but a decrease in quantity demanded. 
A) an increase in total revenue. 
B) a decrease in total revenue. 
C) no change in total revenue but an increase in quantity demanded. 
D) no change in total revenue but a decrease in quantity demanded.

Question 17

For a particular good, a 10 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A) The relevant time horizon is short. 
B) The good is a luxury. 
C) The market for the good is narrowly defined. 
D) There are many close substitutes for this good. 
A) The relevant time horizon is short. 
B) The good is a luxury. 
C) The market for the good is narrowly defined. 
D) There are many close substitutes for this good.

Question 18

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Accepted Answer

A) a 7.5 increase in the price of the good 
B) a 13.33 percent increase in the price of the good 
C) an increase in the price of the good from $7.50 to $10 
D) an increase in the price of the good from $10 to $17.50 
A) a 7.5 increase in the price of the good 
B) a 13.33 percent increase in the price of the good 
C) an increase in the price of the good from $7.50 to $10 
D) an increase in the price of the good from $10 to $17.50

Question 19

Scenario 5-3
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 5-3. The change in equilibrium quantity 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. 
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.

Question 20

A perfectly elastic demand implies that

Accepted Answer

A) buyers will not respond to any change in price. 
B) any rise in price above that represented by the demand curve will result in a quantity demanded of zero. 
C) quantity demanded and price change by the same percent as we move along the demand curve. 
D) price will rise by an infinite amount when there is a change in quantity demanded. 
A) buyers will not respond to any change in price. 
B) any rise in price above that represented by the demand curve will result in a quantity demanded of zero. 
C) quantity demanded and price change by the same percent as we move along the demand curve. 
D) price will rise by an infinite amount when there is a change in quantity demanded.

Exam 5: Elasticity and Its Application

Figure 5-6 -Refer to Figure 5-6. Using the midpoint method, the price elasticity of demand between point A and point B is

A good will have a more inelastic demand, the

Table 5-3 The following table shows the demand schedule for a particular good. Prise Quantity \ 15 0 \ 12 5 \ 9 10 \ 6 15 \ 3 20 \ 0 25 -Refer to Table 5-3. Using the midpoint method, when price falls from $6 to $3, the price elasticity of demand is

If the demand for textbooks is inelastic, then an increase in the price of textbooks will

A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

Figure 5-4 -Refer to Figure 5-4. If the price decreases in the region of the demand curve between points B and C, we can expect total revenue to

If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about

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

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

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

Demand is said to be inelastic if

Figure 5-8 -Refer to Figure 5-8. For prices below $5, demand is price

If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of supply is about

Figure 5-10 -Refer to Figure 5-10. When the price is $30, total revenue is

When demand is unit elastic, price elasticity of demand equals

When demand is inelastic, an increase in price will cause

For a particular good, a 10 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Scenario 5-3 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 5-3. The change in equilibrium quantity will be

A perfectly elastic demand implies that

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

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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