Question 1

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

Accepted Answer

A)  a 0.8 percent increase in the price of the good
B)  a 2.4 percent increase in the price of the good
C)  a 5 percent increase in the price of the good
D)  a 8 percent increase in the price of the goodE) All of the above
F) A) and B)

Question 2

Figure 5-15 
-Refer to Figure 5-15. Along which of these segments of the supply curve is supply most elastic?

Accepted Answer

A)  AB
B)  CD
C)  DH
D)  GHE) B) and C)
F) A) and D)

Question 3

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

Question 4

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 5

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

Accepted Answer

A) True 
 B)False

Question 6

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) A) and B)
F) None of the above

Question 7

The federal government is concerned about obesity in the United States. Congress is considering two plans. One will ban the production and sale of "junk food." The other will increase nutrition-education programs and include substantial advertising campaigns to encourage healthy eating habits. The junk-food ban program

Accepted Answer

A)  and the education program will reduce the quantity of junk food sold and raise the price.
B)  and the education program will reduce the quantity of junk food sold and lower the price.
C)  will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price.
D)  will reduce the quantity of junk food sold and lower the price. The education program will reduce the quantity of junk food sold and raise the price.E) B) and C)
F) A) and B)

Question 8

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

Accepted Answer

A)  0.71, and they are substitutes.
B)  -0.71, and they are complements.
C)  1.4, and they are substitutes.
D)  -1.4, and they are complements.E) B) and D)
F) A) and D)

Question 9

An increase in price causes an increase in total revenue when demand is

Accepted Answer

A)  elastic.
B)  inelastic.
C)  unit elastic.
D)  All of the above are possible.E) A) and B)
F) A) and C)

Question 10

In the early 1970s, OPEC's goal was to

Accepted Answer

A)  decrease the world-wide price of oil so that the quantity demanded increased, thus raising total revenues for OPEC members.
B)  increase the world-wide price of oil by reducing the quantity of oil supplied.
C)  increase the world-wide price of oil by increasing the quantity of oil supplied, thus raising total revenues for OPEC members.
D)  decrease the world-wide price of oil so that quantity demanded increased.E) C) and D)
F) A) and D)

Question 11

When a supply curve is relatively flat,

Accepted Answer

A)  sellers are not very responsive to changes in price.
B)  supply is relatively inelastic.
C)  supply is relatively elastic.
D)  Both a and b are correct.E) C) and D)
F) A) and D)

Question 12

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

Accepted Answer

A) True 
 B)False

Question 13

For which of the following goods is the income elasticity of demand likely highest?

Accepted Answer

A)  water
B)  diamonds
C)  hamburgers
D)  housingE) None of the above
F) B) and C)

Question 14

Frequently, in the short run, the quantity supplied of a good is

Accepted Answer

A)  impossible, or nearly impossible, to measure.
B)  not very responsive to price changes.
C)  determined by the quantity demanded of the good.
D)  determined by psychological forces and other non-economic forces.E) A) and B)
F) A) and C)

Question 15

Table 5-4
The following table shows the demand schedule for a particular good. 
-Refer to Table 5-4. Using the midpoint method, when price falls from $8 to $4, the price elasticity of demand is

Accepted Answer

A)  0.43
B)  0.67
C)  1
D)  2.33E) None of the above
F) A) and B)

Question 16

Scenario 5-3
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-3. The change in equilibrium price will be

Accepted Answer

A)  greater in the aged cheddar cheese market than in the bread market.
B)  greater in the bread market than in the aged cheddar cheese market.
C)  the same in the aged cheddar cheese and bread markets.
D)  Any of the above could be correct.E) A) and B)
F) A) and C)

Question 17

Suppose the price elasticity of demand for a product is 1. If a supplier wants to increase revenue, what change should it make to price, if any?

Accepted Answer

No change,...

Question 18

A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

Accepted Answer

A)  raise the price, reduce the quantity, decrease total revenues, and decrease crime.
B)  lower the price, increase the quantity, increase total revenues, and increase crime.
C)  raise the price, increase the quantity, decrease total revenues, and increase crime.
D)  raise the price, reduce the quantity, increase total revenues, and increase crime.E) A) and B)
F) A) and C)

Question 19

Figure 5-5 
-Refer to Figure 5-5. Using the midpoint method, between prices of $70 and $80, price elasticity of demand is

Accepted Answer

A)  0.33.
B)  0.4.
C)  1.33.
D)  3.E) B) and D)
F) C) and D)

Question 20

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

Accepted Answer

A)  0.3
B)  1
C)  1.8
D)  None of the above could be correct.E) None of the above
F) A) and D)

Exam 5: Elasticity and Its Application

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

Correct Answer
verified

An increase in price causes an increase in total revenue when demand is

Correct Answer
verified

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

Correct Answer
verified

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

Correct Answer
verified

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

Correct Answer
verified

Correct Answer
verified

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

Correct Answer
verified

Frequently, in the short run, the quantity supplied of a good is

Correct Answer
verified

When a supply curve is relatively flat,

Correct Answer
verified

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?

Correct Answer
verified

For which of the following goods is the income elasticity of demand likely highest?

Correct Answer
verified

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

Correct Answer
verified

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $70 and $80, price elasticity of demand is

Correct Answer
verified

Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, when price falls from $8 to $4, the price elasticity of demand is

Correct Answer
verified

Correct Answer
verified

A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

Correct Answer
verified

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

Correct Answer
verified

In the early 1970s, OPEC's goal was to

Correct Answer
verified

Suppose the price elasticity of demand for a product is 1. If a supplier wants to increase revenue, what change should it make to price, if any?

Correct Answer
verified
No change,...
View Answer

Figure 5-15 -Refer to Figure 5-15. Along which of these segments of the supply curve is supply most elastic?

Correct Answer
verified

Exam 5: Elasticity and Its Application

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

Correct AnswerverifiedShow Answer

An increase in price causes an increase in total revenue when demand is

Correct AnswerverifiedShow Answer

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

Correct AnswerverifiedShow Answer

Frequently, in the short run, the quantity supplied of a good is

Correct AnswerverifiedShow Answer

When a supply curve is relatively flat,

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

For which of the following goods is the income elasticity of demand likely highest?

Correct AnswerverifiedShow Answer

Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $70 and $80, price elasticity of demand is

Correct AnswerverifiedShow Answer

Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, when price falls from $8 to $4, the price elasticity of demand is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the early 1970s, OPEC's goal was to

Correct AnswerverifiedShow Answer

Suppose the price elasticity of demand for a product is 1. If a supplier wants to increase revenue, what change should it make to price, if any?

Correct AnswerverifiedNo change,...View AnswerShow Answer

Figure 5-15 -Refer to Figure 5-15. Along which of these segments of the supply curve is supply most elastic?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
No change,...
View Answer

Correct Answer
verified