Question 1

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 2

Table 5-9  
-Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

Accepted Answer

A)  along supply curve B only 
B)  along supply curves B and C 
C)  along all three supply curves 
D)  None. Quantity supplied moves proportionately less than the price along all of the three supply curves. 
A)  along supply curve B only 
B)  along supply curves B and C 
C)  along all three supply curves 
D)  None. Quantity supplied moves proportionately less than the price along all of the three supply curves.

Question 3

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

Accepted Answer

A) True 
 B)False

Question 4

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A)  0.5, and supply is elastic. 
B)  0.5, and supply is inelastic. 
C)  2, and supply is inelastic. 
D)  2, and supply is elastic. 
A)  0.5, and supply is elastic. 
B)  0.5, and supply is inelastic. 
C)  2, and supply is inelastic. 
D)  2, and supply is elastic.

Question 5

Table 5-5  
-Refer to Table 5-5. Demand is unit elastic when quantity demanded changes from

Accepted Answer

A)  9 to 8. 
B)  10 to 9. 
C)  10 to 11. 
D)  There is not enough information given to determine the correct answer. 
A)  9 to 8. 
B)  10 to 9. 
C)  10 to 11. 
D)  There is not enough information given to determine the correct answer.

Question 6

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

Accepted Answer

A)  The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve. 
B)  The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve. 
C)  Given two prices with which to calculate the price elasticity of supply, that elasticity would be the same for both curves. 
D)  A decrease in demand will increase total revenue if the steeper supply curve is relevant, while a decrease in demand will decrease total revenue if the flatter supply cure is relevant. 
A)  The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve. 
B)  The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve. 
C)  Given two prices with which to calculate the price elasticity of supply, that elasticity would be the same for both curves. 
D)  A decrease in demand will increase total revenue if the steeper supply curve is relevant, while a decrease in demand will decrease total revenue if the flatter supply cure is relevant.

Question 7

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

Accepted Answer

A)  0.6 percent increase in the quantity demanded. 
B)  1.5 percent increase in the quantity demanded. 
C)  2 percent increase in the quantity demanded. 
D)  6 percent increase in the quantity demanded. 
A)  0.6 percent increase in the quantity demanded. 
B)  1.5 percent increase in the quantity demanded. 
C)  2 percent increase in the quantity demanded. 
D)  6 percent increase in the quantity demanded.

Question 8

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

Accepted Answer

A)  30%. 
B)  40%. 
C)  80%. 
D)  250%. 
A)  30%. 
B)  40%. 
C)  80%. 
D)  250%.

Question 9

When demand is perfectly inelastic, the demand curve will be

Accepted Answer

A)  negatively sloped, because buyers decrease their purchases when the price rises. 
B)  vertical, because buyers purchase the same amount as before whenever the price rises or falls. 
C)  positively sloped, because buyers increase their purchases when price rises. 
D)  positively sloped, because buyers increase their total expenditures when price rises. 
A)  negatively sloped, because buyers decrease their purchases when the price rises. 
B)  vertical, because buyers purchase the same amount as before whenever the price rises or falls. 
C)  positively sloped, because buyers increase their purchases when price rises. 
D)  positively sloped, because buyers increase their total expenditures when price rises.

Question 10

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 11

Figure 5-9  
-Refer to Figure 5-9. If the price rises from point D to point C, total revenue

Accepted Answer

A)  increases, and demand is price elastic. 
B)  decreases, and demand is price elastic. 
C)  increases, and demand is price inelastic. 
D)  decreases, and demand is price inelastic. 
A)  increases, and demand is price elastic. 
B)  decreases, and demand is price elastic. 
C)  increases, and demand is price inelastic. 
D)  decreases, and demand is price inelastic.

Question 12

A 10 percent increase in gasoline prices reduces gasoline consumption by about

Accepted Answer

A)  6 percent after one year and 2.5 percent after five years. 
B)  2.5 percent after one year and 6 percent after five years. 
C)  10 percent after one year and 20 percent after five years. 
D)  0 percent after one year and 1 percent after five years. 
A)  6 percent after one year and 2.5 percent after five years. 
B)  2.5 percent after one year and 6 percent after five years. 
C)  10 percent after one year and 20 percent after five years. 
D)  0 percent after one year and 1 percent after five years.

Question 13

The midpoint method for calculating elasticities is convenient in that it allows us to

Accepted Answer

A)  ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price. 
B)  calculate the same value for the elasticity, regardless of whether the price increases or decreases. 
C)  assume that sellers' total revenue stays constant when the price changes. 
D)  restrict all elasticity values to between 0 and 1. 
A)  ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price. 
B)  calculate the same value for the elasticity, regardless of whether the price increases or decreases. 
C)  assume that sellers' total revenue stays constant when the price changes. 
D)  restrict all elasticity values to between 0 and 1.

Question 14

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 15

Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result,

Accepted Answer

A)  the equilibrium quantity decreases, and the equilibrium price is unchanged. 
B)  the equilibrium price increases, and the equilibrium quantity is unchanged. 
C)  the equilibrium quantity and the equilibrium price both are unchanged. 
D)  buyers' total expenditure on the good is unchanged. 
A)  the equilibrium quantity decreases, and the equilibrium price is unchanged. 
B)  the equilibrium price increases, and the equilibrium quantity is unchanged. 
C)  the equilibrium quantity and the equilibrium price both are unchanged. 
D)  buyers' total expenditure on the good is unchanged.

Question 16

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is

Accepted Answer

A)  0.75. 
B)  1.25. 
C)  1.33. 
D)  1.60. 
A)  0.75. 
B)  1.25. 
C)  1.33. 
D)  1.60.

Question 17

The supply of oil is likely to be

Accepted Answer

A)  inelastic in both the short run and long run. 
B)  elastic in both the short run and long run. 
C)  elastic in the short run and inelastic in the long run. 
D)  inelastic in the short run and elastic in the long run. 
A)  inelastic in both the short run and long run. 
B)  elastic in both the short run and long run. 
C)  elastic in the short run and inelastic in the long run. 
D)  inelastic in the short run and elastic in the long run.

Question 18

If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A)  1.33, and supply is elastic. 
B)  1.33, and supply is inelastic. 
C)  0.75, and supply is elastic. 
D)  0.75, and supply is inelastic. 
A)  1.33, and supply is elastic. 
B)  1.33, and supply is inelastic. 
C)  0.75, and supply is elastic. 
D)  0.75, and supply is inelastic.

Question 19

In which of the following situations will total revenue increase?

Accepted Answer

A)  Price elasticity of demand is 1.2, and the price of the good decreases. 
B)  Price elasticity of demand is 0.5, and the price of the good increases. 
C)  Price elasticity of demand is 3.0, and the price of the good decreases. 
D)  All of the above are correct. 
A)  Price elasticity of demand is 1.2, and the price of the good decreases. 
B)  Price elasticity of demand is 0.5, and the price of the good increases. 
C)  Price elasticity of demand is 3.0, and the price of the good decreases. 
D)  All of the above are correct.

Question 20

If the price elasticity of demand for a good is 0.8, then a 12 percent increase in the quantity demanded must be the result of

Accepted Answer

A)  a 0.06 percent decrease in the price. 
B)  a 1.5 percent decrease in the price. 
C)  a 9.6 percent decrease in the price. 
D)  a 15 percent decrease in the price. 
A)  a 0.06 percent decrease in the price. 
B)  a 1.5 percent decrease in the price. 
C)  a 9.6 percent decrease in the price. 
D)  a 15 percent decrease in the price.

Exam 5: Elasticity and Its Application

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

Table 5-9 -Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about

Table 5-5 -Refer to Table 5-5. Demand is unit elastic when quantity demanded changes from

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

When demand is perfectly inelastic, the demand curve will be

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

Figure 5-9 -Refer to Figure 5-9. If the price rises from point D to point C, total revenue

A 10 percent increase in gasoline prices reduces gasoline consumption by about

The midpoint method for calculating elasticities is convenient in that it allows us to

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?

Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result,

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is

The supply of oil is likely to be

If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of supply is about

In which of the following situations will total revenue increase?

If the price elasticity of demand for a good is 0.8, then a 12 percent increase in the quantity demanded must be the result of

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

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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