Exam 5: Elasticity and Its Application

Scenario 5-6 Suppose the government is concerned about firms in the United States importing illegal caviar. As a result, the government increases border patrols to catch illegal shipments. U.S. Customs agents perform DNA testing on the caviar to determine if it comes from endangered species of fish. If so, the government destroys the caviar. -Refer to Scenario 5-6. What would we expect to observe in the caviar market?

If the income elasticity of demand for a good is negative, then the good must be an inferior good.

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

Suppose good X has a negative income elasticity of demand. This implies that good X is

Farm programs that pay farmers not to plant crops on all their land

Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to

In general, demand curves for luxuries tend to be price elastic.

Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price of ginger ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statements is true?

When a university bookstore prices chemistry textbooks at $200 each, it generally sells 120 books per month. If it lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity of demand for chemistry books is about

If a firm is facing inelastic demand, then the firm should decrease price to increase revenue.

Which of the following expressions represents a cross-price elasticity of demand?

Which of the following is not a determinant of the price elasticity of demand for a good?

The demand for soap is more elastic than the demand for Dove soap.

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

The price elasticity of supply measures how responsive

Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, what is the price elasticity of demand when price rises from $12 to $16?

Figure 5-18 -Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $4 and $5?

Figure 5-1 -Refer to Figure 5-1. Between point A and point B on the graph, demand is

Income elasticity of demand measures how

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the price elasticity of demand for tortilla chips in the given price range is