Question 1

Figure 5-1
 
-Refer to Figure 5-1.Assume the section of the demand curve labeled A corresponds to prices between $6 and $12.Then,when the price increases from $8 to $10,

Accepted Answer

A) the percent decrease in the quantity demanded exceeds the percent increase in the price. 
B) the percent increase in the price exceeds the percent decrease in the quantity demanded. 
C) sellers' total revenue increases as a result. 
D) it is possible that the quantity demanded fell from 550 to 500 as a result.

Question 2

Figure 5-12
 
-Refer to Figure 5-12.Using the midpoint method,what is the price elasticity of supply between points D and E?

Accepted Answer

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

Question 3

Which of the following expressions can be used to compute the price elasticity of demand?

Accepted Answer

A) Price elasticity of demand = $ \frac{Q_{1}-Q_{1}}{\left(Q+Q_{2}\right) / 2} * \frac{P_{1}+P_{2}}{\left(P_{2}-P_{1}\right) / 2} $ 
B) Price elasticity of demand = $ \frac{\left(Q+Q_{2}\right) / 2}{\left(Q_{1}-Q_{2}\right) / 2} * \frac{\left(P_{2}-P_{1}\right) / 2}{\left(P_{2}+P_{1}\right) / 2} $ 
C) Price elasticity of demand = $ \frac{Q_{2}-Q_{1}}{Q_{1}+Q_{2}} * \frac{P_{1}+P_{2}}{P_{2}-P_{1}} $ 
D) Price elasticity of demand = $ \frac{Q_{2}-Q_{1}}{Q_{1}+Q_{2}} * \frac{P_{2}-P_{1}}{P_{1}+P_{2}} $

Question 4

A key determinant of the price elasticity of supply is

Accepted Answer

A) the length of the time period. 
B) the definition of the market. 
C) the number of close substitutes for the good in question. 
D) the extent to which buyers alter their quantities demanded in response to changes in their incomes.

Question 5

Figure 5-1
 
-Refer to Figure 5-1.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 section C of the demand curve. 
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 6

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 7

When demand is inelastic within a certain price range,then within 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.

Question 8

Suppose you are in charge of setting prices at a local sandwich shop.The business needs to increase its total revenue and your job is on the line.If the demand for sandwiches is elastic,you

Accepted Answer

A) should increase the price of sandwiches. 
B) should decrease the price of sandwiches. 
C) should not change the price of sandwiches. 
D) could not determine what to do with price until you determine whether supply is elastic or inelastic.

Question 9

When the price of knee braces increased by 25 percent,the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent.BYC's price elasticity of supply of knee braces is 0.33.

Accepted Answer

A) True 
 B)False

Question 10

Figure 5-1
 
-Refer to Figure 5-1.The section of the demand curve labeled C represents the

Accepted Answer

A) elastic section of the demand curve. 
B) perfectly elastic section of the demand curve. 
C) unit elastic section of the demand curve. 
D) inelastic section of the demand curve.

Question 11

Moving downward and to the right along a linear demand curve,we know that total revenue

Accepted Answer

A) first increases, then decreases. 
B) first decreases, then increases. 
C) always increases. 
D) always decreases.

Question 12

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.

Question 13

When her income increased from $10,000 to $20,000,Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds.We can conclude that for Heather,

Accepted Answer

A) macaroni and soy-burgers are both normal goods with income elasticities equal to 1. 
B) macaroni is an inferior good and soy-burgers are normal goods; both have income elasticities of 1. 
C) macaroni is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1. 
D) macaroni and soy-burgers are both inferior goods with income elasticities equal to -1.

Question 14

A decrease in supply will cause the smallest increase in price when

Accepted Answer

A) both supply and demand are inelastic. 
B) demand is elastic and supply is inelastic. 
C) both supply and demand are elastic. 
D) demand is inelastic and supply is elastic.

Question 15

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good.The income elasticity of demand for the good is

Accepted Answer

A) negative and therefore the good is an inferior good. 
B) negative and therefore the good is a normal good. 
C) positive and therefore the good is an inferior good. 
D) positive and therefore the good is a normal good.

Question 16

Alice says that she would buy one banana split a day regardless of the price.If she is telling the truth,

Accepted Answer

A) Alice's demand for banana splits is perfectly inelastic. 
B) Alice's price elasticity of demand for banana splits is 1. 
C) Alice's income elasticity of demand for banana splits is 0. 
D) None of the above answers is correct.

Question 17

In the case of perfectly inelastic demand,

Accepted Answer

A) the change in quantity demanded equals the change in price. 
B) the percentage change in quantity demanded equals the percentage change in price. 
C) infinitely-large changes in quantity demanded result from very small changes in the price. 
D) quantity demanded stays the same whenever price changes.

Question 18

As we move downward and to the right along a linear,downward-sloping demand curve,

Accepted Answer

A) slope and elasticity both remain constant. 
B) slope changes but elasticity remains constant. 
C) slope and elasticity both change. 
D) slope remains constant but elasticity changes.

Question 19

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Accepted Answer

A) True 
 B)False

Question 20

Suppose the price of Twinkies decreases from $1.45 to $1.25 and,as a result,the quantity of Twinkies demanded increases from 2,000 to 2,200.Using the midpoint method,the price elasticity of demand for Twinkies in the given price range is

Accepted Answer

A) 2.00. 
B) 1.55. 
C) 1.00. 
D) 0.64.

Exam 5: Elasticity and Its Applications

Figure 5-1 -Refer to Figure 5-1.Assume the section of the demand curve labeled A corresponds to prices between $6 and $12.Then,when the price increases from $8 to $10,

Figure 5-12 -Refer to Figure 5-12.Using the midpoint method,what is the price elasticity of supply between points D and E?

Which of the following expressions can be used to compute the price elasticity of demand?

A key determinant of the price elasticity of supply is

Figure 5-1 -Refer to Figure 5-1.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?

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

When demand is inelastic within a certain price range,then within that price range,

Suppose you are in charge of setting prices at a local sandwich shop.The business needs to increase its total revenue and your job is on the line.If the demand for sandwiches is elastic,you

When the price of knee braces increased by 25 percent,the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent.BYC's price elasticity of supply of knee braces is 0.33.

Figure 5-1 -Refer to Figure 5-1.The section of the demand curve labeled C represents the

Moving downward and to the right along a linear demand curve,we know that total revenue

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

When her income increased from $10,000 to $20,000,Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds.We can conclude that for Heather,

A decrease in supply will cause the smallest increase in price when

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good.The income elasticity of demand for the good is

Alice says that she would buy one banana split a day regardless of the price.If she is telling the truth,

In the case of perfectly inelastic demand,

As we move downward and to the right along a linear,downward-sloping demand curve,

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Suppose the price of Twinkies decreases from $1.45 to $1.25 and,as a result,the quantity of Twinkies demanded increases from 2,000 to 2,200.Using the midpoint method,the price elasticity of demand for Twinkies in the given price range is