Question 1

In the market for oil in the short run,demand

Accepted Answer

A)   and supply are both elastic.
B)   and supply are both inelastic.
C)   is elastic and supply is inelastic.
D)   is inelastic and supply is elastic.E) B) and C)
F) All of the above

Question 2

How did the farm population in the United States change between 1950 and today?

Accepted Answer

A)   It dropped from 10 million to fewer than 3 million people.
B)   It dropped from 20 million to fewer than 5 million people.
C)   It dropped from 30 million to just over 6 million people.
D)   It increased from 10 million to almost 13 million people.E) A) and C)
F) A) and B)

Question 3

Food and clothing tend to have

Accepted Answer

A)   small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods.
B)   small income elasticities because consumers buy proportionately more of both goods at higher income levels than they buy at low income levels.
C)   large income elasticities because they are necessities.
D)   large income elasticities because they are relatively inexpensive.E) A) and B)
F) A) and C)

Question 4

Elasticity of demand is closely related to the slope of the demand curve.The more responsive buyers are to a change in price,the

Accepted Answer

A)   steeper the demand curve will be.
B)   flatter the demand curve will be.
C)   further to the right the demand curve will sit.
D)   closer to the vertical axis the demand curve will sit.E) All of the above
F) B) and C)

Question 5

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 6

Table 5-6
 
-Refer to Table 5-6.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)   3.5E) B) and C)
F) None of the above

Question 7

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.E) A) and C)
F) A) and D)

Question 8

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

Accepted Answer

A)   lattés
B)   filet mignon
C)   Grey Goose® vodka
D)   milkE) None of the above
F) A) and C)

Question 9

Cross-price elasticity is used to determine whether goods are substitutes or complements.

Accepted Answer

A) True 
 B)False

Question 10

If the price elasticity of demand for a good is 0.4,then a 10 percent increase in price results in a

Accepted Answer

A)   0.4 percent decrease in the quantity demanded.
B)   2.5 percent decrease in the quantity demanded.
C)   4 percent decrease in the quantity demanded.
D)   40 percent decrease in the quantity demanded.E) A) and C)
F) B) and C)

Question 11

How does total revenue change as one moves downward and to the right along a linear demand curve?

Accepted Answer

A)   It always increases.
B)   It always decreases.
C)   It first increases, then decreases.
D)   It is unaffected by a movement along the demand curve.E) B) and C)
F) A) and D)

Question 12

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Accepted Answer

A)   The interdiction has the effect of shifting the demand curve for illegal drugs to the right.
B)   The price elasticity of demand for illegal drugs is 1.3.
C)   The price elasticity of supply for illegal drugs is 0.8.
D)   As a result of the interdiction, the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent.E) None of the above
F) B) and C)

Question 13

Pierre says that he will spend exactly 75 cents a day on candy bars,regardless of the price of candy bars.Pierre's demand for candy bars is

Accepted Answer

A)   perfectly elastic.
B)   unit elastic.
C)   perfectly inelastic.
D)   None of the above answers is correct.E) A) and B)
F) B) and D)

Question 14

When the price of good A is $50,the quantity demanded of good A is 500 units.When the price of good A rises to $70,the quantity demanded of good A falls to 400 units.Using the midpoint method,the price elasticity of demand for good A is

Accepted Answer

A)   1.50, and an increase in price will result in an increase in total revenue for good A.
B)   1.50, and an increase in price will result in a decrease in total revenue for good A.
C)   0.67, and an increase in price will result in an increase in total revenue for good A.
D)   0.67, and an increase in price will result in a decrease in total revenue for good A.E) A) and B)
F) A) and C)

Question 15

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.E) B) and C)
F) A) and D)

Question 16

The demand for soap is more elastic than the demand for Dove soap.

Accepted Answer

A) True 
 B)False

Question 17

Elasticity measures how responsive quantity is to changes in price.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds.Using the midpoint method,what is the approximate value of the price elasticity of supply?

Accepted Answer

A)   0.67
B)   0.89
C)   1.00
D)   1.13E) A) and D)
F) A) and C)

Question 19

Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for soccer balls causes the price of soccer balls to increase by 20%,then the quantity supplied of soccer balls will increase by about

Accepted Answer

A)   0.67% in the short run and 0.17% in the long run.
B)   3% in the short run and 1.2% in the long run.
C)   6% in the short run and 24% in the long run.
D)   66.7% in the short run and 16.7% in the long run.E) All of the above
F) B) and D)

Question 20

Table 5-3
The following table shows the demand schedule for a particular good.
 
-Refer to Table 5-3.Using the midpoint method,what is the price elasticity of demand when price rises from $9 to $12?

Accepted Answer

A)   0.43
B)   0.67
C)   1.50
D)   2.33E) C) and D)
F) B) and C)

Exam 5: Elasticity and Its Application

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

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

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Pierre says that he will spend exactly 75 cents a day on candy bars,regardless of the price of candy bars.Pierre's demand for candy bars is

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In the market for oil in the short run,demand

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The demand for soap is more elastic than the demand for Dove soap.

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When the price of good A is $50,the quantity demanded of good A is 500 units.When the price of good A rises to $70,the quantity demanded of good A falls to 400 units.Using the midpoint method,the price elasticity of demand for good A is

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Elasticity measures how responsive quantity is to changes in price.

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How did the farm population in the United States change between 1950 and today?

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If the price elasticity of demand for a good is 0.4,then a 10 percent increase in price results in a

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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.

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Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds.Using the midpoint method,what is the approximate value of the price elasticity of supply?

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Food and clothing tend to have

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How does total revenue change as one moves downward and to the right along a linear demand curve?

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Cross-price elasticity is used to determine whether goods are substitutes or complements.

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Elasticity of demand is closely related to the slope of the demand curve.The more responsive buyers are to a change in price,the

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Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

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Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for soccer balls causes the price of soccer balls to increase by 20%,then the quantity supplied of soccer balls will increase by about

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In the case of perfectly inelastic demand,

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Table 5-6 -Refer to Table 5-6.Using the midpoint method,what is the income elasticity of demand for good X?

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Table 5-3 The following table shows the demand schedule for a particular good. -Refer to Table 5-3.Using the midpoint method,what is the price elasticity of demand when price rises from $9 to $12?

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