Question 1

Figure 5-7 
-Refer to Figure 5-7.For prices below $5,demand is price

Accepted Answer

A) elastic,and raising price will increase total revenue. 
B) inelastic,and raising price will increase total revenue. 
C) elastic,and lowering price will increase total revenue. 
D) inelastic,and lowering price will increase total revenue.

Question 2

Figure 5-3 
-Refer to Figure 5-3.Which demand curve is perfectly inelastic?

Accepted Answer

A) A 
B) B 
C) C 
D) D

Question 3

If the quantity demanded of a certain good responds only slightly to a change in the price of the good,then the

Accepted Answer

A) demand for the good is said to be elastic. 
B) demand for the good is said to be inelastic. 
C) law of demand does not apply to the good. 
D) demand curve for the good shifts only slightly in response to a change in price.

Question 4

For which pairs of goods is the cross-price elasticity most likely to be positive?

Accepted Answer

A) peanut butter and jelly 
B) bicycle frames and bicycle tires 
C) pens and pencils 
D) college textbooks and iPods

Question 5

Suppose that when the price of good X increases from $800 to $850,the quantity demanded of good Y increases from 65 to 70.Using the midpoint method,the cross price elasticity of demand is about

Accepted Answer

A) -1.2,and X and Y are complements. 
B) -0.1,and X and Y are complements. 
C) 0.1,and X and Y are substitutes. 
D) 1.2,and X and Y are substitutes.

Question 6

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.

Question 7

Holding all other forces constant,if increasing 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 increase always leads to an decrease in total revenue.

Question 8

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

Accepted Answer

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

Question 9

There are very few,if any,good substitutes for automotive tires.Therefore,the demand for automotive tires would tend to be

Accepted Answer

A) elastic. 
B) unit elastic. 
C) inelastic. 
D) highly responsive to changes in income as well as changes in prices.

Question 10

The demand for Godiva mint chocolates is likely quite elastic because

Accepted Answer

A) there are many close substitutes. 
B) this particular type of chocolate is viewed as a luxury by many chocolate lovers. 
C) the market is narrowly defined. 
D) All of the above are correct.

Question 11

Figure 5-4 
-Refer to Figure 5-4.Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00.Then,between prices of $4.99 and $5.01,the price elasticity of demand is

Accepted Answer

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

Question 12

Demand is elastic if the price elasticity of demand is

Accepted Answer

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

Question 13

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.

Question 14

Consider luxury weekend hotel packages in Las Vegas.When the price is $250,the quantity demanded is 2,000 packages per week.When the price is $280,the quantity demanded is 1,700 packages per week.Using the midpoint method,the price elasticity of demand is about

Accepted Answer

A) 1.43,and an increase in the price will cause hotels' total revenue to decrease. 
B) 1.43,and an increase in the price will cause hotels' total revenue to increase. 
C) 0.70,and an increase in the price will cause hotels' total revenue to decrease. 
D) 0.70,and an increase in the price will cause hotels' total revenue to increase.

Question 15

Economists compute the price elasticity of demand as the

Accepted Answer

A) percentage change in price divided by the percentage change in quantity demanded. 
B) change in quantity demanded divided by the change in the price. 
C) percentage change in quantity demanded divided by the percentage change in price. 
D) percentage change in quantity demanded divided by the percentage change in income.

Question 16

Hilda's Hair Hysteria earned $3,750 in total revenue last month when it sold 125 haircuts.This month it earned $3,600 in total revenue when it sold 90 haircuts.The price elasticity of demand for Hilda's Hair Hysteria is

Accepted Answer

A) 0.33. 
B) 0.88. 
C) 1.14. 
D) 7.98.

Question 17

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 18

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded.Price elasticity of demand for X is

Accepted Answer

A) 0. 
B) 1. 
C) 6. 
D) 36.

Question 19

The case of perfectly elastic demand is illustrated by a demand curve that is

Accepted Answer

A) vertical. 
B) horizontal. 
C) downward-sloping but relatively steep. 
D) downward-sloping but relatively flat.

Question 20

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.

Exam 5: Elasticity and Its Applications: The Elasticity of Demand

Figure 5-7 -Refer to Figure 5-7.For prices below $5,demand is price

Figure 5-3 -Refer to Figure 5-3.Which demand curve is perfectly inelastic?