Question 1

Elasticity measures how responsive quantity is to changes in price.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Figure 5-15  
-Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points D and G?

Accepted Answer

A)  1.89 
B)  1.26 
C)  0.53 
D)  0.34 
A)  1.89 
B)  1.26 
C)  0.53 
D)  0.34

Question 4

Figure 5-18  
-Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $5 and $6?

Accepted Answer

A)  0.60 
B)  0.64 
C)  1.57 
D)  1.67 
A)  0.60 
B)  0.64 
C)  1.57 
D)  1.67

Question 5

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

Accepted Answer

A)  ice cream 
B)  frozen yogurt 
C)  vanilla ice cream 
D)  Häagen­Dazs® vanilla bean ice cream 
A)  ice cream 
B)  frozen yogurt 
C)  vanilla ice cream 
D)  Häagen­Dazs® vanilla bean ice cream

Question 6

Table 5-13
Consider the following demand schedule.
  
-Refer to Table 5-13. Using the midpoint method, between which two prices is price elasticity of demand most inelastic?

Accepted Answer

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

Question 7

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 8

If the cross-price elasticity of demand between two goods is positive, what is the relationship between the two goods?

Accepted Answer

The goods

Question 9

If the price elasticity of demand is equal to 0, then demand is unit elastic.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)  athletic shoes 
B)  running shoes 
C)  Nike running shoes 
D)  Nike Shox running shoes 
A)  athletic shoes 
B)  running shoes 
C)  Nike running shoes 
D)  Nike Shox running shoes

Question 11

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 12

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.

Question 13

Normal goods have negative income elasticities of demand, while inferior goods have positive income elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 14

Figure 5-4  
-Refer to Figure 5-4. Assume the section of the demand curve from B to C corresponds to prices between $0 and $15. Then, when the price changes between $7 and $9,

Accepted Answer

A)  quantity demanded changes proportionately less than the price. 
B)  quantity demanded changes proportionately more than the price. 
C)  quantity demanded changes the same amount proportionately as price. 
D)  the price elasticity of demand equals zero. 
A)  quantity demanded changes proportionately less than the price. 
B)  quantity demanded changes proportionately more than the price. 
C)  quantity demanded changes the same amount proportionately as price. 
D)  the price elasticity of demand equals zero.

Question 15

Figure 5-16  
-Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $6 and $8?

Accepted Answer

A)  0.86 
B)  1.00 
C)  1.17 
D)  1.25 
A)  0.86 
B)  1.00 
C)  1.17 
D)  1.25

Question 16

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 17

When quantity demanded responds strongly to changes in price, demand is said to be

Accepted Answer

A)  fluid. 
B)  elastic. 
C)  dynamic. 
D)  highly variable. 
A)  fluid. 
B)  elastic. 
C)  dynamic. 
D)  highly variable.

Question 18

The smaller the price elasticity of demand, the

Accepted Answer

A)  steeper the demand curve will be through a given point. 
B)  flatter the demand curve will be through a given point. 
C)  more strongly buyers respond to a change in price between any two prices P1 and P2. 
D)  smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2. 
A)  steeper the demand curve will be through a given point. 
B)  flatter the demand curve will be through a given point. 
C)  more strongly buyers respond to a change in price between any two prices P1 and P2. 
D)  smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2.

Question 19

Scenario 5-7
Suppose the demand function for good X is given by:   where   is the quantity demanded of good X,   is the price of good X, and   is the price of good Y, which is related to good X.
-Refer to Scenario 5-7. Using the midpoint method, if the price of good X is $10 and the price of good Y increases from $8 to $10, the cross price elasticity of demand is about

Accepted Answer

The answer of Scenario 5-7
Suppose the demand function for good...

Question 20

Refer to Figure 5-5. Using the midpoint method, between prices of $50 and $60, price elasticity of demand is about

Accepted Answer

A)  0.22. 
B)  0.82. 
C)  1.22. 
D)  2. 
A)  0.22. 
B)  0.82. 
C)  1.22. 
D)  2.

Exam 5: Elasticity and Its Application

Elasticity measures how responsive quantity is to changes in price.

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

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points D and G?

Figure 5-18 -Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $5 and $6?

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

Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, between which two prices is price elasticity of demand most inelastic?

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

If the cross-price elasticity of demand between two goods is positive, what is the relationship between the two goods?

If the price elasticity of demand is equal to 0, then demand is unit elastic.

Which of the following is likely to have the most price inelastic 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?

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

Normal goods have negative income elasticities of demand, while inferior goods have positive income elasticities of demand.

Figure 5-4 -Refer to Figure 5-4. Assume the section of the demand curve from B to C corresponds to prices between $0 and $15. Then, when the price changes between $7 and $9,

Figure 5-16 -Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $6 and $8?

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 quantity demanded responds strongly to changes in price, demand is said to be

The smaller the price elasticity of demand, the

Refer to Figure 5-5. Using the midpoint method, between prices of $50 and $60, price elasticity of demand is about

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

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

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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