Question 1

For a vertical demand curve,

Accepted Answer

A)  the slope is undefined, and the price elasticity of demand is equal to 0. 
B)  the slope is equal to 0, and the price elasticity of demand is undefined. 
C)  both the slope and price elasticity of demand are undefined. 
D)  both the slope and price elasticity of demand are equal to 0. 
A)  the slope is undefined, and the price elasticity of demand is equal to 0. 
B)  the slope is equal to 0, and the price elasticity of demand is undefined. 
C)  both the slope and price elasticity of demand are undefined. 
D)  both the slope and price elasticity of demand are equal to 0.

Question 2

Figure 5-13  
-Refer to Figure 5-13. Between point A and point B on the graph, demand is

Accepted Answer

A)  perfectly elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  elastic, but not perfectly elastid. 
A)  perfectly elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  elastic, but not perfectly elastid.

Question 3

Suppose good X has a positive income elasticity of demand. This implies that good X could be (i) a normal good.
(ii) a necessity.
(iii) an inferior good.
(iv) a luxury.

Accepted Answer

A)  (i) only 
B)  (i) and (ii) only 
C)  (i), (ii), and (iv) only 
D)  (iii) only 
A)  (i) only 
B)  (i) and (ii) only 
C)  (i), (ii), and (iv) only 
D)  (iii) only

Question 4

Suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. When the price of wheat is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The demand for wheat is

Accepted Answer

A)  income inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. 
B)  income elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. 
C)  price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. 
D)  price elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. 
A)  income inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. 
B)  income elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. 
C)  price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. 
D)  price elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.

Question 5

When demand is perfectly inelastic, the price elasticity of demand

Accepted Answer

A)  is zero, and the demand curve is vertical. 
B)  is zero, and the demand curve is horizontal. 
C)  approaches infinity, and the demand curve is vertical. 
D)  approaches infinity, and the demand curve is horizontal. 
A)  is zero, and the demand curve is vertical. 
B)  is zero, and the demand curve is horizontal. 
C)  approaches infinity, and the demand curve is vertical. 
D)  approaches infinity, and the demand curve is horizontal.

Question 6

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 7

Suppose demand is given by the equation:   Using the midpoint method, what is the price elasticity of demand between $2 and $4?

Accepted Answer

The price

Question 8

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A)  0.5, and supply is elastic. 
B)  0.5, and supply is inelastic. 
C)  2, and supply is inelastic. 
D)  2, and supply is elastid. 
A)  0.5, and supply is elastic. 
B)  0.5, and supply is inelastic. 
C)  2, and supply is inelastic. 
D)  2, and supply is elastid.

Question 9

A good will have a more elastic demand, the

Accepted Answer

A)  greater the availability of close substitutes. 
B)  more broad the definition of the market. 
C)  shorter the period of time. 
D)  more it is regarded as a necessity. 
A)  greater the availability of close substitutes. 
B)  more broad the definition of the market. 
C)  shorter the period of time. 
D)  more it is regarded as a necessity.

Question 10

If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

Accepted Answer

A)  increase by 4.2%. 
B)  increase by 6%. 
C)  decrease by 4.2%. 
D)  decrease by 6%. 
A)  increase by 4.2%. 
B)  increase by 6%. 
C)  decrease by 4.2%. 
D)  decrease by 6%.

Question 11

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 12

Table 5-9
  
-Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?

Accepted Answer

A)  supply curve A 
B)  supply curve B 
C)  supply curve C 
D)  There is no difference in the elasticity of the three supply curves. 
A)  supply curve A 
B)  supply curve B 
C)  supply curve C 
D)  There is no difference in the elasticity of the three supply curves.

Question 13

Which of the following statements is not valid when supply is perfectly elastic?

Accepted Answer

A)  The elasticity of supply approaches infinity. 
B)  The supply curve is horizontal. 
C)  Very small changes in price lead to very large changes in quantity supplied. 
D)  The time period under consideration is more likely a short period rather than a long period. 
A)  The elasticity of supply approaches infinity. 
B)  The supply curve is horizontal. 
C)  Very small changes in price lead to very large changes in quantity supplied. 
D)  The time period under consideration is more likely a short period rather than a long period.

Question 14

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?

Accepted Answer

A)  0.8 
B)  1 
C)  1.8 
D)  2.4 
A)  0.8 
B)  1 
C)  1.8 
D)  2.4

Question 15

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 16

Scenario 5-7
Suppose the demand function for good X is given by:   where   is the quantity demanded of good X,   is the price of good X, and   is the price of good Y, which is related to good X.
-Refer to Scenario 5-7. Using the midpoint method, if the price of good Y is $10 and the price of good X decreases from $5 to $3, what is the price elasticity of demand for good X? Is the demand elastic, unitary elastic, or inelastic?

Accepted Answer

The answer of Scenario 5-7
Suppose the demand function for good...

Question 17

Suppose a farmer knows that he will be able to harvest and sell 3,000 bushels of wheat. Would he prefer a market in which conditions are favorable and most farmers harvest large crops or a market in which conditions are unfavorable and many farmers harvest small crops? Why?

Accepted Answer

The farmer prefers a market in

Question 18

Demand is said to be price elastic if

Accepted Answer

A)  the price of the good responds substantially to changes in demand. 
B)  demand shifts substantially when income or the expected future price of the good changes. 
C)  buyers do not respond much to changes in the price of the good. 
D)  buyers respond substantially to changes in the price of the good. 
A)  the price of the good responds substantially to changes in demand. 
B)  demand shifts substantially when income or the expected future price of the good changes. 
C)  buyers do not respond much to changes in the price of the good. 
D)  buyers respond substantially to changes in the price of the good.

Question 19

Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about

Accepted Answer

A)  1.43, and an increase in the price will cause hotels' total revenue to decrease. 
B)  1.43, and an increase in the price will cause hotels' total revenue to increase. 
C)  0.70, and an increase in the price will cause hotels' total revenue to decrease. 
D)  0.70, and an increase in the price will cause hotels' total revenue to increase. 
A)  1.43, and an increase in the price will cause hotels' total revenue to decrease. 
B)  1.43, and an increase in the price will cause hotels' total revenue to increase. 
C)  0.70, and an increase in the price will cause hotels' total revenue to decrease. 
D)  0.70, and an increase in the price will cause hotels' total revenue to increase.

Question 20

Figure 5-11  
-Refer to Figure 5-11. A decrease in price from $20 to $10 leads to a

Accepted Answer

A)  decrease in total revenue of $200, so the price elasticity of demand is greater than 1 in this price range. 
B)  decrease in total revenue of $200, so the price elasticity of demand is less than 1 in this price range. 
C)  decrease in total revenue of $120, so the price elasticity of demand is less than 1 in this price range. 
D)  decrease in total revenue of $120, so demand is elastic in this price range. 
A)  decrease in total revenue of $200, so the price elasticity of demand is greater than 1 in this price range. 
B)  decrease in total revenue of $200, so the price elasticity of demand is less than 1 in this price range. 
C)  decrease in total revenue of $120, so the price elasticity of demand is less than 1 in this price range. 
D)  decrease in total revenue of $120, so demand is elastic in this price range.

Exam 5: Elasticity and Its Application

For a vertical demand curve,

Figure 5-13 -Refer to Figure 5-13. Between point A and point B on the graph, demand is

Suppose good X has a positive income elasticity of demand. This implies that good X could be (i) a normal good. (ii) a necessity. (iii) an inferior good. (iv) a luxury.

Suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. When the price of wheat is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The demand for wheat is

When demand is perfectly inelastic, the price elasticity of demand

Food and clothing tend to have

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $2 and $4?

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about

A good will have a more elastic demand, the

If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

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

Table 5-9 -Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?

Which of the following statements is not valid when supply is perfectly elastic?

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?

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

Suppose a farmer knows that he will be able to harvest and sell 3,000 bushels of wheat. Would he prefer a market in which conditions are favorable and most farmers harvest large crops or a market in which conditions are unfavorable and many farmers harvest small crops? Why?

Demand is said to be price elastic if

Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about

Figure 5-11 -Refer to Figure 5-11. A decrease in price from $20 to $10 leads to a

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

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