Question 1

Holding all other forces constant, if decreasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Accepted Answer

A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price decrease never leads to an decrease in total revenue. 
A)  unit elastic. 
B)  inelastic. 
C)  elastic. 
D)  None of the above is correct because a price decrease never leads to an decrease in total revenue.

Question 2

When the Shaffers had a monthly income of $4,000, they usually ate out 8 times a month. Now that the couple makes $4,500 a month, they eat out 10 times a month. Compute the couple's income elasticity of demand using the midpoint method. Explain your answer. Is a restaurant meal a normal or inferior good to the couple?

Accepted Answer

The income elasticity of deman

Question 3

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.
  
-Refer to Table 5-7. Using the midpoint method, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

Accepted Answer

A)  0.00 
B)  0.50 
C)  1.00 
D)  1.50 
A)  0.00 
B)  0.50 
C)  1.00 
D)  1.50

Question 4

The measure of how willing consumers are to buy less of a good as its price rises is called

Accepted Answer

price elas

Question 5

The price elasticity of supply along a typical supply curve is

Accepted Answer

A)  constant. 
B)  equal to zero. 
C)  higher at low levels of quantity supplied and lower at high levels of quantity supplied. 
D)  lower at low levels of quantity supplied and higher at high levels of quantity supplied. 
A)  constant. 
B)  equal to zero. 
C)  higher at low levels of quantity supplied and lower at high levels of quantity supplied. 
D)  lower at low levels of quantity supplied and higher at high levels of quantity supplied.

Question 6

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Accepted Answer

A)  fall by 200 percent. 
B)  fall by 40 percent. 
C)  rise by 200 percent. 
D)  rise by 40 percent. 
A)  fall by 200 percent. 
B)  fall by 40 percent. 
C)  rise by 200 percent. 
D)  rise by 40 percent.

Question 7

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

Accepted Answer

A) True 
 B)False

Question 8

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 9

If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result, then the price elasticity of demand is 3.

Accepted Answer

A) True 
 B)False

Question 10

Figure 5-4  
-Refer to Figure 5-4. The section of the demand curve from B to C 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 11

Total revenue will be at its largest value on a linear demand curve at the

Accepted Answer

A)  top of the curve, where prices are highest. 
B)  midpoint of the curve. 
C)  low end of the curve, where quantity demanded is highest. 
D)  None of the above is correct. 
A)  top of the curve, where prices are highest. 
B)  midpoint of the curve. 
C)  low end of the curve, where quantity demanded is highest. 
D)  None of the above is correct.

Question 12

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?

Accepted Answer

A)  Supply curves are steeper over long periods of time than over short periods of time. 
B)  Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time. 
C)  The number of firms in a market tends to be more variable over long periods of time than over short periods of time. 
D)  Firms prefer to change their prices in the short run rather than in the long run. 
A)  Supply curves are steeper over long periods of time than over short periods of time. 
B)  Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time. 
C)  The number of firms in a market tends to be more variable over long periods of time than over short periods of time. 
D)  Firms prefer to change their prices in the short run rather than in the long run.

Question 13

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)  The demand for illegal drugs is inelastic. 
B)  Interdiction results in drug addicts having a greater need for quick cash. 
C)  Interdiction results in an increase in the amount of money needed to buy the same amount of drugs. 
D)  Government drug programs are more lenient now with drug offenders than they were in the 1980s. 
A)  The demand for illegal drugs is inelastic. 
B)  Interdiction results in drug addicts having a greater need for quick cash. 
C)  Interdiction results in an increase in the amount of money needed to buy the same amount of drugs. 
D)  Government drug programs are more lenient now with drug offenders than they were in the 1980s.

Question 14

Suppose that demand is inelastic within a certain price range. For that price range,

Accepted Answer

A)  an increase in price would increase total revenue because the decrease in quantity demanded is proportionately less than the increase in price. 
B)  an increase in price would decrease total revenue because the decrease in quantity demanded is proportionately greater than the increase in price. 
C)  a decrease in price would increase total revenue because the increase in quantity demanded is proportionately smaller than the decrease in price. 
D)  a decrease in price would not affect total revenue. 
A)  an increase in price would increase total revenue because the decrease in quantity demanded is proportionately less than the increase in price. 
B)  an increase in price would decrease total revenue because the decrease in quantity demanded is proportionately greater than the increase in price. 
C)  a decrease in price would increase total revenue because the increase in quantity demanded is proportionately smaller than the decrease in price. 
D)  a decrease in price would not affect total revenue.

Question 15

Suppose a market has the demand function Qd=20-0.5P. At which of the following prices will total revenue be maximized?

Accepted Answer

A)  $10 
B)  $20 
C)  $30 
D)  $40 
A)  $10 
B)  $20 
C)  $30 
D)  $40

Question 16

Figure 5-9  
-Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point C and point D is about

Accepted Answer

A)  0.29. 
B)  0.54. 
C)  1.86. 
D)  2.0. 
A)  0.29. 
B)  0.54. 
C)  1.86. 
D)  2.0.

Question 17

Demand is inelastic if the price elasticity of demand is

Accepted Answer

A)  less than 1. 
B)  equal to 1. 
C)  greater than 1. 
D)  equal to 0. 
A)  less than 1. 
B)  equal to 1. 
C)  greater than 1. 
D)  equal to 0.

Question 18

Figure 5-12  
-Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Accepted Answer

A)  0.4. 
B)  1. 
C)  2. 
D)  2.5. 
A)  0.4. 
B)  1. 
C)  2. 
D)  2.5.

Question 19

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?

Accepted Answer

A)  the mayor 
B)  the city manager 
C)  The answer depends on the price elasticity of demand. 
D)  The answer depends on the costs of construction of the new municipal swimming pool. 
A)  the mayor 
B)  the city manager 
C)  The answer depends on the price elasticity of demand. 
D)  The answer depends on the costs of construction of the new municipal swimming pool.

Question 20

If demand is price inelastic, then when price rises, total revenue

Accepted Answer

A)  will fall. 
B)  will rise. 
C)  will remain unchanged. 
D)  may rise, fall, or remain unchanged. More information is need to determine the change in total revenue with certainty. 
A)  will fall. 
B)  will rise. 
C)  will remain unchanged. 
D)  may rise, fall, or remain unchanged. More information is need to determine the change in total revenue with certainty.

Holding all other forces constant, if decreasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

The measure of how willing consumers are to buy less of a good as its price rises is called

The price elasticity of supply along a typical supply curve is

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

The supply of a good will be more elastic, the

If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result, then the price elasticity of demand is 3.

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from B to C represents the

Total revenue will be at its largest value on a linear demand curve at the

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Suppose that demand is inelastic within a certain price range. For that price range,

Suppose a market has the demand function Qd=20-0.5P. At which of the following prices will total revenue be maximized?

Figure 5-9 -Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point C and point D is about

Demand is inelastic if the price elasticity of demand is

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

If demand is price inelastic, then when price rises, total revenue

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

Holding all other forces constant, if decreasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

The measure of how willing consumers are to buy less of a good as its price rises is called

The price elasticity of supply along a typical supply curve is

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

The supply of a good will be more elastic, the

If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result, then the price elasticity of demand is 3.

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from B to C represents the

Total revenue will be at its largest value on a linear demand curve at the

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Suppose that demand is inelastic within a certain price range. For that price range,

Suppose a market has the demand function Qd=20-0.5P. At which of the following prices will total revenue be maximized?

Figure 5-9 -Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point C and point D is about

Demand is inelastic if the price elasticity of demand is

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

If demand is price inelastic, then when price rises, total revenue

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