Question 1

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the

Accepted Answer

A)  steeper the demand curve will be. 
B)  flatter the demand curve will be. 
C)  further to the right the demand curve will sit. 
D)  closer to the vertical axis the demand curve will sit. 
A)  steeper the demand curve will be. 
B)  flatter the demand curve will be. 
C)  further to the right the demand curve will sit. 
D)  closer to the vertical axis the demand curve will sit.

Question 4

Which of the following is likely to have the most price elastic demand?

Accepted Answer

A)  scissors 
B)  fruit 
C)  music downloads 
D)  toothpaste 
A)  scissors 
B)  fruit 
C)  music downloads 
D)  toothpaste

Question 5

Figure 5-17  
-Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point A and point B?

Accepted Answer

A)  0.4 
B)  0.6 
C)  1.67 
D)  2.16 
A)  0.4 
B)  0.6 
C)  1.67 
D)  2.16

Question 6

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

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 7

Scenario 5-3
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 5-3. The price elasticity of supply for bread 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 8

Figure 5-21  
-If the quantity supplied is exactly the same regardless of the price, supply is

Accepted Answer

perfectly

Question 9

For which of the following goods is the income elasticity of demand likely highest?

Accepted Answer

A)  water 
B)  diamonds 
C)  hamburgers 
D)  housing 
A)  water 
B)  diamonds 
C)  hamburgers 
D)  housing

Question 10

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

Accepted Answer

A)  The elasticity of supply approaches infinity. 
B)  The supply curve is vertical. 
C)  At a price below $4, quantity supplied is infinite. 
D)  At a price above $4, quantity supplied is zero. 
A)  The elasticity of supply approaches infinity. 
B)  The supply curve is vertical. 
C)  At a price below $4, quantity supplied is infinite. 
D)  At a price above $4, quantity supplied is zero.

Question 11

Holding all other factors constant and using the midpoint method, if a tractor manufacturer increases production from 80 to 100 units when price increases by 15 percent, then supply is

Accepted Answer

A)  inelastic, since the price elasticity of supply is equal to 0.68. 
B)  inelastic, since the price elasticity of supply is equal to 1.48. 
C)  elastic, since the price elasticity of supply is equal to 0.68. 
D)  elastic, since the price elasticity of supply is equal to 1.48. 
A)  inelastic, since the price elasticity of supply is equal to 0.68. 
B)  inelastic, since the price elasticity of supply is equal to 1.48. 
C)  elastic, since the price elasticity of supply is equal to 0.68. 
D)  elastic, since the price elasticity of supply is equal to 1.48.

Question 12

There are fewer farmers in the United States today than 200 years ago because of

Accepted Answer

A)  improvements in farm technology. 
B)  increased government regulations in farming. 
C)  an elastic demand for food. 
D)  environmental programs designed to reduce soil erosion. 
A)  improvements in farm technology. 
B)  increased government regulations in farming. 
C)  an elastic demand for food. 
D)  environmental programs designed to reduce soil erosion.

Question 13

Table 5-9
  
-Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

Accepted Answer

A)  along supply curve B only 
B)  along supply curves B and C 
C)  along all three supply curves 
D)  None. Quantity supplied moves proportionately less than the price along all of the three supply curves. 
A)  along supply curve B only 
B)  along supply curves B and C 
C)  along all three supply curves 
D)  None. Quantity supplied moves proportionately less than the price along all of the three supply curves.

Question 14

The flatter the demand curve that passes through a given point, the more inelastic the demand.

Accepted Answer

A) True 
 B)False

Question 15

If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a

Accepted Answer

A)  0.1 percent decrease in the quantity demanded. 
B)  1 percent decrease in the quantity demanded. 
C)  2.5 percent decrease in the quantity demanded. 
D)  10 percent decrease in the quantity demanded. 
A)  0.1 percent decrease in the quantity demanded. 
B)  1 percent decrease in the quantity demanded. 
C)  2.5 percent decrease in the quantity demanded. 
D)  10 percent decrease in the quantity demanded.

Question 16

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Accepted Answer

A) True 
 B)False

Question 17

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

Accepted Answer

A)  30%. 
B)  40%. 
C)  80%. 
D)  250%. 
A)  30%. 
B)  40%. 
C)  80%. 
D)  250%.

Question 18

Figure 5-2  
-Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

Accepted Answer

A)  D1 
B)  D2 
C)  D3 
D)  All of the above are equally elastid. 
A)  D1 
B)  D2 
C)  D3 
D)  All of the above are equally elastid.

Question 19

Figure 5-5  
-Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

Accepted Answer

A)  $20 and $40. 
B)  $40 and$50. 
C)  $40 and$60. 
D)  $50 and$70. 
A)  $20 and $40. 
B)  $40 and$50. 
C)  $40 and$60. 
D)  $50 and$70.

Question 20

Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she needs. Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. If you know that the demand for lemonade is elastic, what is your advice to her?

Accepted Answer

A)  Leave the price at 25 cents and be patient. 
B)  Raise the price to increase total revenue. 
C)  Lower the price to increase total revenue. 
D)  There isn't enough information given to answer this question. 
A)  Leave the price at 25 cents and be patient. 
B)  Raise the price to increase total revenue. 
C)  Lower the price to increase total revenue. 
D)  There isn't enough information given to answer this question.

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

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

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the

Which of the following is likely to have the most price elastic demand?

Figure 5-17 -Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point A and point B?

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

Figure 5-21 -If the quantity supplied is exactly the same regardless of the price, supply is

For which of the following goods is the income elasticity of demand likely highest?

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

Holding all other factors constant and using the midpoint method, if a tractor manufacturer increases production from 80 to 100 units when price increases by 15 percent, then supply is

There are fewer farmers in the United States today than 200 years ago because of

Table 5-9 -Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

The flatter the demand curve that passes through a given point, the more inelastic the demand.

If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

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

Filters

Exam 5: Elasticity and Its Application

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

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

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the

Which of the following is likely to have the most price elastic demand?

Figure 5-17 -Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point A and point B?

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

Figure 5-21 -If the quantity supplied is exactly the same regardless of the price, supply is

For which of the following goods is the income elasticity of demand likely highest?

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

Holding all other factors constant and using the midpoint method, if a tractor manufacturer increases production from 80 to 100 units when price increases by 15 percent, then supply is

There are fewer farmers in the United States today than 200 years ago because of

Table 5-9 -Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

The flatter the demand curve that passes through a given point, the more inelastic the demand.

If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

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

Filters