Question 1

When demand is inelastic, the price elasticity of demand is

Accepted Answer

A)  less than 1, and price and total revenue will move in the same direction. 
B)  less than 1, and price and total revenue will move in opposite directions. 
C)  greater than 1, and price and total revenue will move in the same direction. 
D)  greater than 1, and price and total revenue will move in opposite directions. 
A)  less than 1, and price and total revenue will move in the same direction. 
B)  less than 1, and price and total revenue will move in opposite directions. 
C)  greater than 1, and price and total revenue will move in the same direction. 
D)  greater than 1, and price and total revenue will move in opposite directions.

Question 2

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 3

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

Accepted Answer

The answer of Suppose that good X has few close...

Question 4

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

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

Question 5

When a supply curve is relatively flat,

Accepted Answer

A)  sellers are not very responsive to changes in price. 
B)  supply is relatively inelastic. 
C)  supply is relatively elastic. 
D)  Both a and b are correct. 
A)  sellers are not very responsive to changes in price. 
B)  supply is relatively inelastic. 
C)  supply is relatively elastic. 
D)  Both a and b are correct.

Question 6

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price inelastic demand?

Accepted Answer

The answer of Suppose that good X has few close...

Question 7

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

Accepted Answer

A)  the relevant time period is short rather than long. 
B)  the relevant time period is long rather than short. 
C)  supply is inelastic. 
D)  the firm is experiencing capacity problems. 
A)  the relevant time period is short rather than long. 
B)  the relevant time period is long rather than short. 
C)  supply is inelastic. 
D)  the firm is experiencing capacity problems.

Question 8

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is

Accepted Answer

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

Question 9

Figure 5-8  
-Refer to Figure 5-8. An increase in price from $15 to $20 would

Accepted Answer

A)  increase total revenue by $500 
B)  decrease total revenue by $500. 
C)  increase total revenue by $1,000. 
D)  decrease total revenue by $1,000. 
A)  increase total revenue by $500 
B)  decrease total revenue by $500. 
C)  increase total revenue by $1,000. 
D)  decrease total revenue by $1,000.

Question 10

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 11

If sellers do not adjust their quantities supplied at all in response to a change in price,

Accepted Answer

A)  advances in technology must be prevalent. 
B)  the time period under consideration must be very long. 
C)  supply is perfectly elastic. 
D)  supply is perfectly inelastid. 
A)  advances in technology must be prevalent. 
B)  the time period under consideration must be very long. 
C)  supply is perfectly elastic. 
D)  supply is perfectly inelastid.

Question 12

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a

Accepted Answer

A)  0.5 percent decrease in the quantity demanded. 
B)  2 percent decrease in the quantity demanded. 
C)  5 percent decrease in the quantity demanded. 
D)  50 percent decrease in the quantity demanded. 
A)  0.5 percent decrease in the quantity demanded. 
B)  2 percent decrease in the quantity demanded. 
C)  5 percent decrease in the quantity demanded. 
D)  50 percent decrease in the quantity demanded.

Question 13

Scenario 5-4
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 5-4. The change in equilibrium price will be

Accepted Answer

A)  greater in the aged cheddar cheese market than in the bread market. 
B)  greater in the bread market than in the aged cheddar cheese market. 
C)  the same in the aged cheddar cheese and bread markets. 
D)  Any of the above could be correct. 
A)  greater in the aged cheddar cheese market than in the bread market. 
B)  greater in the bread market than in the aged cheddar cheese market. 
C)  the same in the aged cheddar cheese and bread markets. 
D)  Any of the above could be correct.

Question 14

If the income elasticity of demand for a good is 0.56, is the good a normal or inferior good?

Accepted Answer

The good i

Question 15

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 16

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Accepted Answer

A) True 
 B)False

Question 17

The price elasticity of demand measures the

Accepted Answer

A)  magnitude of the response in quantity demanded to a change in price. 
B)  direction of the shift in the demand curve in response to a market event. 
C)  size of the shortage created by the increase in demand. 
D)  responsiveness of quantity demanded to a change in income. 
A)  magnitude of the response in quantity demanded to a change in price. 
B)  direction of the shift in the demand curve in response to a market event. 
C)  size of the shortage created by the increase in demand. 
D)  responsiveness of quantity demanded to a change in income.

Question 18

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

Accepted Answer

A)  first becomes smaller, then larger. 
B)  always becomes larger. 
C)  always becomes smaller. 
D)  first becomes larger, then smaller. 
A)  first becomes smaller, then larger. 
B)  always becomes larger. 
C)  always becomes smaller. 
D)  first becomes larger, then smaller.

Question 19

Table 5-2
  
-Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the price elasticity of demand is

Accepted Answer

A)  zero. 
B)  inelastic. 
C)  unit elastic. 
D)  elastid. 
A)  zero. 
B)  inelastic. 
C)  unit elastic. 
D)  elastid.

Question 20

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.

Exam 5: Elasticity and Its Application

When demand is inelastic, the price elasticity of demand is

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

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

When a supply curve is relatively flat,

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price inelastic demand?

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is

Figure 5-8 -Refer to Figure 5-8. An increase in price from $15 to $20 would

In general, elasticity is a measure of

If sellers do not adjust their quantities supplied at all in response to a change in price,

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a

If the income elasticity of demand for a good is 0.56, is the good a normal or inferior good?

Demand is said to be inelastic if

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

The price elasticity of demand measures the

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the price elasticity of demand is

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

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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