Question 1

When consumers face rising gasoline prices, they typically

Accepted Answer

A)  reduce their quantity demanded more in the long run than in the short run. 
B)  reduce their quantity demanded more in the short run than in the long run. 
C)  do not reduce their quantity demanded in the short run or the long run. 
D)  increase their quantity demanded in the short run but reduce their quantity demanded in the long run. 
A)  reduce their quantity demanded more in the long run than in the short run. 
B)  reduce their quantity demanded more in the short run than in the long run. 
C)  do not reduce their quantity demanded in the short run or the long run. 
D)  increase their quantity demanded in the short run but reduce their quantity demanded in the long run.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is

Accepted Answer

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

Question 4

If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

Accepted Answer

A) True 
 B)False

Question 5

Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

Accepted Answer

A) True 
 B)False

Question 6

The price elasticity of supply measures how much

Accepted Answer

A)  the quantity supplied responds to changes in input prices. 
B)  the quantity supplied responds to changes in the price of the good. 
C)  the price of the good responds to changes in supply. 
D)  sellers respond to changes in technology. 
A)  the quantity supplied responds to changes in input prices. 
B)  the quantity supplied responds to changes in the price of the good. 
C)  the price of the good responds to changes in supply. 
D)  sellers respond to changes in technology.

Question 7

When demand is elastic, a decrease in price will cause

Accepted Answer

A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded. 
A)  an increase in total revenue. 
B)  a decrease in total revenue. 
C)  no change in total revenue but an increase in quantity demanded. 
D)  no change in total revenue but a decrease in quantity demanded.

Question 8

Figure 5-4  
-Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are Q = 1,000, P= $40) and Q = 1,500, P = $30). Then which of the following scenarios is possible?

Accepted Answer

A)  Both of these points lie on the section of the demand curve from B to C. 
B)  The vertical intercept of the demand curve is the point Q = 0, P = $60). 
C)  The horizontal intercept of the demand curve is the point Q = 1,800, P = $0). 
D)  Any of these scenarios is possible. 
A)  Both of these points lie on the section of the demand curve from B to C. 
B)  The vertical intercept of the demand curve is the point Q = 0, P = $60). 
C)  The horizontal intercept of the demand curve is the point Q = 1,800, P = $0). 
D)  Any of these scenarios is possible.

Question 9

Demand is said to be inelastic if the

Accepted Answer

A)  quantity demanded changes proportionately more than price. 
B)  price changes proportionately more than income. 
C)  quantity demanded changes proportionately less than price. 
D)  quantity demanded changes proportionately the same as price. 
A)  quantity demanded changes proportionately more than price. 
B)  price changes proportionately more than income. 
C)  quantity demanded changes proportionately less than price. 
D)  quantity demanded changes proportionately the same as price.

Question 10

Table 5-8
  
-Refer to Table 5-8. Using the midpoint method, what is the income elasticity of demand for good X?

Accepted Answer

A)  -3.5 
B)  -0.29 
C)  0.29 
D)  3.5 
A)  -3.5 
B)  -0.29 
C)  0.29 
D)  3.5

Question 11

If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about

Accepted Answer

A)  0.2%. 
B)  0.5%. 
C)  2.0%. 
D)  4.5%. 
A)  0.2%. 
B)  0.5%. 
C)  2.0%. 
D)  4.5%.

Question 12

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

Accepted Answer

A)  0.22. 
B)  0.67. 
C)  1.33. 
D)  1.50. 
A)  0.22. 
B)  0.67. 
C)  1.33. 
D)  1.50.

Question 13

Table 5-13
Consider the following demand schedule.
  
-Refer to Table 5-13. Using the midpoint method, what is the price elasticity of demand between $12 and $15?

Accepted Answer

The answer of Table 5-13
Consider the following demand schedule.
 ...

Question 14

Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

Accepted Answer

A) True 
 B)False

Question 15

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Accepted Answer

A) True 
 B)False

Question 16

Recently, in Smalltown, the price of Twinkies fell from $0.80 to $0.70. As a result, the quantity demanded of Ho- Ho's decreased from 120 to 100. What would be the appropriate elasticity to compute? Using the midpoint method, compute this elasticity. What does your answer tell you?

Accepted Answer

The appropriate elasticity to compute wo

Question 17

Figure 5-6  
-Refer to Figure 5-6. For prices below $8, demand is price

Accepted Answer

A)  elastic, and total revenue will rise as price rises. 
B)  inelastic, and total revenue will rise as price rises. 
C)  elastic, and total revenue will fall as price rises. 
D)  inelastic, and total revenue will fall as price rises. 
A)  elastic, and total revenue will rise as price rises. 
B)  inelastic, and total revenue will rise as price rises. 
C)  elastic, and total revenue will fall as price rises. 
D)  inelastic, and total revenue will fall as price rises.

Question 18

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

Accepted Answer

A)  the availability of close substitutes in determining the price elasticity of demand. 
B)  a necessity versus a luxury in determining the price elasticity of demand. 
C)  the definition of a market in determining the price elasticity of demand. 
D)  the time horizon in determining the price elasticity of demand. 
A)  the availability of close substitutes in determining the price elasticity of demand. 
B)  a necessity versus a luxury in determining the price elasticity of demand. 
C)  the definition of a market in determining the price elasticity of demand. 
D)  the time horizon in determining the price elasticity of demand.

Question 19

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

Accepted Answer

A)  0.6 
B)  0.9 
C)  1 
D)  2.6 
A)  0.6 
B)  0.9 
C)  1 
D)  2.6

Question 20

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then

Accepted Answer

A)  consumers of wheat would buy more wheat. 
B)  wheat farmers would suffer a reduction in their total revenue. 
C)  wheat farmers would experience an increase in their total revenue. 
D)  the demand for wheat would decrease. 
A)  consumers of wheat would buy more wheat. 
B)  wheat farmers would suffer a reduction in their total revenue. 
C)  wheat farmers would experience an increase in their total revenue. 
D)  the demand for wheat would decrease.

Exam 5: Elasticity and Its Application

When consumers face rising gasoline prices, they typically

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

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is

If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

The price elasticity of supply measures how much

When demand is elastic, a decrease in price will cause

Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are Q = 1,000, P= $40) and Q = 1,500, P = $30). Then which of the following scenarios is possible?

Demand is said to be inelastic if the

Table 5-8 -Refer to Table 5-8. Using the midpoint method, what is the income elasticity of demand for good X?

If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, what is the price elasticity of demand between $12 and $15?

Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Recently, in Smalltown, the price of Twinkies fell from $0.80 to $0.70. As a result, the quantity demanded of Ho- Ho's decreased from 120 to 100. What would be the appropriate elasticity to compute? Using the midpoint method, compute this elasticity. What does your answer tell you?

Figure 5-6 -Refer to Figure 5-6. For prices below $8, demand is price

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

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

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then

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 Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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