Question 1

If the quantity supplied is the same regardless of price,then supply is

Accepted Answer

A)  elastic. 
B)  perfectly elastic. 
C)  perfectly inelastic. 
D)  inelastic. 
A)  elastic. 
B)  perfectly elastic. 
C)  perfectly inelastic. 
D)  inelastic.

Question 2

The supply of a good will be more elastic,the

Accepted Answer

A)  more the good is considered a luxury. 
B)  broader is the definition of the market for the good. 
C)  larger the number of close substitutes for the good. 
D)  longer the time period being considered. 
A)  more the good is considered a luxury. 
B)  broader is the definition of the market for the good. 
C)  larger the number of close substitutes for the good. 
D)  longer the time period being considered.

Question 3

When the price of knee braces increased by 25 percent,the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent.BYC's price elasticity of supply of knee braces is 0.33.

Accepted Answer

A) True 
 B)False

Question 4

An increase in price causes an increase in total revenue when

Accepted Answer

A)  demand is elastic. 
B)  demand is inelastic. 
C)  demand is unit elastic. 
D)  All of the above are possible. 
A)  demand is elastic. 
B)  demand is inelastic. 
C)  demand is unit elastic. 
D)  All of the above are possible.

Question 5

Figure 5-12
The following figure shows the supply curve for a particular good.  
-Refer to Figure 5-12.Over which range is the supply curve in this figure the least elastic?

Accepted Answer

A)  Between $16 and $40 
B)  Between $40 and $100 
C)  Between $100 and $220 
D)  Between $220 and $430 
A)  Between $16 and $40 
B)  Between $40 and $100 
C)  Between $100 and $220 
D)  Between $220 and $430

Question 6

An increase in the price of pure chocolate morsels from $2.25 to $2.45 causes suppliers of chocolate morsels to increase their quantity supplied from 125 bags per minute to 145 bags per minute.Supply is

Accepted Answer

A)  elastic,and the price elasticity of supply is 1.74. 
B)  elastic,and the price elasticity of supply is 0.57. 
C)  inelastic,and the price elasticity of supply is 1.74. 
D)  inelastic,and the price elasticity of supply is 0.57. 
A)  elastic,and the price elasticity of supply is 1.74. 
B)  elastic,and the price elasticity of supply is 0.57. 
C)  inelastic,and the price elasticity of supply is 1.74. 
D)  inelastic,and the price elasticity of supply is 0.57.

Question 7

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)  The direct impact is on buyers,not sellers. 
B)  Successful drug interdiction policies reduce the demand for illegal drugs. 
C)  Drug addicts will have an even greater need for quick cash to support their habits. 
D)  In the short run,both equilibrium quantities and prices will fall in the markets for illegal drugs. 
A)  The direct impact is on buyers,not sellers. 
B)  Successful drug interdiction policies reduce the demand for illegal drugs. 
C)  Drug addicts will have an even greater need for quick cash to support their habits. 
D)  In the short run,both equilibrium quantities and prices will fall in the markets for illegal drugs.

Question 8

If the price elasticity of demand is 1.5,regardless of which two points on the demand curve are used to compute the elasticity,then

Accepted Answer

A)  demand is perfectly inelastic,and the demand curve is vertical. 
B)  demand is elastic,and the demand curve is a straight,downward-sloping line. 
C)  demand is perfectly elastic,and the demand curve is horizontal. 
D)  demand is elastic,and the demand curve is something other than a straight,downward-sloping line. 
A)  demand is perfectly inelastic,and the demand curve is vertical. 
B)  demand is elastic,and the demand curve is a straight,downward-sloping line. 
C)  demand is perfectly elastic,and the demand curve is horizontal. 
D)  demand is elastic,and the demand curve is something other than a straight,downward-sloping line.

Question 9

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 amounted to

Accepted Answer

A)  0.2%. 
B)  0.5%. 
C)  2%. 
D)  4.5%. 
A)  0.2%. 
B)  0.5%. 
C)  2%. 
D)  4.5%.

Question 10

The value of the price elasticity of demand for a good will be relatively large when

Accepted Answer

A)  there are no good substitutes available for the good. 
B)  the time period in question is relatively short. 
C)  the good is a luxury as opposed to a necessity. 
D)  All of the above are correct. 
A)  there are no good substitutes available for the good. 
B)  the time period in question is relatively short. 
C)  the good is a luxury as opposed to a necessity. 
D)  All of the above are correct.

Question 11

Figure 5-15  
-Refer to Figure 5-15.If,holding the supply curve fixed,there were an increase in demand that caused the equilibrium price to increase from $6 to $8,then sellers' total revenue would

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  The effect on total revenue cannot be determined from the given information. 
A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  The effect on total revenue cannot be determined from the given information.

Question 12

Figure 5-4  
-Refer to Figure 5-4.The section of the demand curve at point B represents the

Accepted Answer

A)  elastic section of the demand curve. 
B)  inelastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  perfectly elastic section of the demand curve. 
A)  elastic section of the demand curve. 
B)  inelastic section of the demand curve. 
C)  unit elastic section of the demand curve. 
D)  perfectly elastic section of the demand curve.

Question 13

Food and clothing tend to have

Accepted Answer

A)  small income elasticities because consumers,regardless of their incomes,choose to buy relatively constant quantities of these goods. 
B)  small income elasticities because consumers buy proportionately more of both goods at higher income levels than they buy at low income levels. 
C)  large income elasticities because they are necessities. 
D)  large income elasticities because they are relatively inexpensive. 
A)  small income elasticities because consumers,regardless of their incomes,choose to buy relatively constant quantities of these goods. 
B)  small income elasticities because consumers buy proportionately more of both goods at higher income levels than they buy at low income levels. 
C)  large income elasticities because they are necessities. 
D)  large income elasticities because they are relatively inexpensive.

Question 14

Figure 5-12
The following figure shows the supply curve for a particular good.  
-Refer to Figure 5-12.Using the midpoint method,what is the price elasticity of supply between $16 and $40?

Accepted Answer

A)  0.125 
B)  0.86 
C)  1.0 
D)  2.5 
A)  0.125 
B)  0.86 
C)  1.0 
D)  2.5

Question 15

Consider airfares on flights between New York and Minneapolis.When the airfare is $250,the quantity demanded of tickets is 2,000 per week.When the airfare is $280,the quantity demanded of tickets is 1,700 per week.Using the midpoint method,

Accepted Answer

A)  the price elasticity of demand is about 1.43,and an increase in the airfare will cause airlines' total revenue to decrease. 
B)  the price elasticity of demand is about 1.43,and an increase in the airfare will cause airlines' total revenue to increase. 
C)  the price elasticity of demand is about 0.70,and an increase in the airfare will cause airlines' total revenue to decrease. 
D)  the price elasticity of demand is about 0.70,and an increase in the airfare will cause airlines' total revenue to increase. 
A)  the price elasticity of demand is about 1.43,and an increase in the airfare will cause airlines' total revenue to decrease. 
B)  the price elasticity of demand is about 1.43,and an increase in the airfare will cause airlines' total revenue to increase. 
C)  the price elasticity of demand is about 0.70,and an increase in the airfare will cause airlines' total revenue to decrease. 
D)  the price elasticity of demand is about 0.70,and an increase in the airfare will cause airlines' total revenue to increase.

Question 16

A decrease in supply will cause the smallest increase in price when

Accepted Answer

A)  both supply and demand are inelastic. 
B)  demand is elastic and supply is inelastic. 
C)  both supply and demand are elastic. 
D)  demand is inelastic and supply is elastic. 
A)  both supply and demand are inelastic. 
B)  demand is elastic and supply is inelastic. 
C)  both supply and demand are elastic. 
D)  demand is inelastic and supply is elastic.

Question 17

In general,elasticity is a measure of

Accepted Answer

A)  the extent to which advances in technology are adopted by producers. 
B)  the extent to which a market is competitive. 
C)  how firms' profits respond to changes in market prices. 
D)  how much buyers and sellers respond to changes in market conditions. 
A)  the extent to which advances in technology are adopted by producers. 
B)  the extent to which a market is competitive. 
C)  how firms' profits respond to changes in market prices. 
D)  how much buyers and sellers respond to changes in market conditions.

Question 18

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 19

Suppose the price elasticity of supply for how-to books is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for how-to books causes the price of how-to books to increase by 20%,then the quantity supplied of how-to books will increase by

Accepted Answer

A)  0.67% in the short run and 0.17% in the long run. 
B)  3% in the short run and 1.2% in the long run. 
C)  6% in the short run and 24% in the long run. 
D)  66.7% in the short run and 16.7% in the long run. 
A)  0.67% in the short run and 0.17% in the long run. 
B)  3% in the short run and 1.2% in the long run. 
C)  6% in the short run and 24% in the long run. 
D)  66.7% in the short run and 16.7% in the long run.

Question 20

If the cross-price elasticity of demand for two goods is negative,then the two goods are complements.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

If the quantity supplied is the same regardless of price,then supply is

The supply of a good will be more elastic,the

When the price of knee braces increased by 25 percent,the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent.BYC's price elasticity of supply of knee braces is 0.33.

An increase in price causes an increase in total revenue when

Figure 5-12 The following figure shows the supply curve for a particular good. -Refer to Figure 5-12.Over which range is the supply curve in this figure the least elastic?

An increase in the price of pure chocolate morsels from $2.25 to $2.45 causes suppliers of chocolate morsels to increase their quantity supplied from 125 bags per minute to 145 bags per minute.Supply is

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

If the price elasticity of demand is 1.5,regardless of which two points on the demand curve are used to compute the elasticity,then

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 amounted to

The value of the price elasticity of demand for a good will be relatively large when

Figure 5-15 -Refer to Figure 5-15.If,holding the supply curve fixed,there were an increase in demand that caused the equilibrium price to increase from $6 to $8,then sellers' total revenue would

Figure 5-4 -Refer to Figure 5-4.The section of the demand curve at point B represents the

Food and clothing tend to have

Figure 5-12 The following figure shows the supply curve for a particular good. -Refer to Figure 5-12.Using the midpoint method,what is the price elasticity of supply between $16 and $40?

Consider airfares on flights between New York and Minneapolis.When the airfare is $250,the quantity demanded of tickets is 2,000 per week.When the airfare is $280,the quantity demanded of tickets is 1,700 per week.Using the midpoint method,

A decrease in supply will cause the smallest increase in price when

In general,elasticity is a measure of

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

Suppose the price elasticity of supply for how-to books is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for how-to books causes the price of how-to books to increase by 20%,then the quantity supplied of how-to books will increase by

If the cross-price elasticity of demand for two goods is negative,then the two goods are complements.

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 of Microeconomics

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 Macroeconomics: Basic Concepts

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

Five Debates Over Macroeconomic Policy

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