Question 1

Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls.

Accepted Answer

A) True 
 B)False

Question 2

Figure 5-12 
-Refer to Figure 5-12. Sellers' total revenue would increase if the price

Accepted Answer

A)   increased from $12 to $15.
B)   decreased from $39 to $36.
C)   decreased from $27 to $24.
D)   All of the above are correct.E) A) and D)
F) B) and D)

Question 3

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) A) and D)
F) All of the above

Question 4

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to

Accepted Answer

A)   an inelastic demand for oil and a reduction in the amount of oil supplied.
B)   a reduction in the amount of oil supplied and a world-wide oil embargo.
C)   a world-wide oil embargo and an elastic demand for oil.
D)   a reduction in the amount of oil supplied and an elastic demand for oil.E) B) and C)
F) All of the above

Question 5

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

Question 6

At price of $1.20, a local pencil manufacturer is willing to supply 150 boxes per day. At a price of $1.40, the manufacturer is willing to supply 170 boxes per day. Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A)   2.0.
B)   1.23.
C)   1.00.
D)   0.81.E) A) and B)
F) None of the above

Question 7

When consumers face rising gasoline prices, they typically

Accepted Answer

A)   reduce their quantity demanded more in the long run than in the short run.
B)   reduce their quantity demanded more in the short run than in the long run.
C)   do not reduce their quantity demanded in the short run or the long run.
D)   increase their quantity demanded in the short run but reduce their quantity demanded in the long run.E) C) and D)
F) A) and B)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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 inelastid.E) All of the above
F) B) and C)

Question 10

Danita rescues dogs from her local animal shelter. When Danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. For Danita, the income elasticity of demand for dog biscuits is

Accepted Answer

A)   negative, and dog biscuits are a normal good.
B)   negative, and dog biscuits are an inferior good.
C)   positive, and dog biscuits are an inferior good.
D)   positive, and dog biscuits are a normal good.E) A) and B)
F) A) and C)

Question 11

Suppose that when the price of good X falls from $10 to $8, the quantity demanded of good Y rises from 20 units to 25 units. Using the midpoint method, the cross-price elasticity of demand is

Accepted Answer

A)   -1.0, and X and Y are complements.
B)   -1.0, and X and Y are substitutes.
C)   1.0, and X and Y are complements.
D)   1.0, and X and Y are substitutes.E) A) and B)
F) None of the above

Question 12

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

Question 13

Good news for farming can be bad news for farmers because the

Accepted Answer

A)   supply curve for an individual farmer is usually perfectly elastic.
B)   supply curve for an individual farmer is usually perfectly inelastic.
C)   demand for basic foodstuffs is usually inelastic, meaning that factors that shift supply to the right decrease total revenues to sellers.
D)   demand for basic foodstuffs is usually elastic, meaning that factors that shift supply to the right increase total revenues to sellers.E) All of the above
F) B) and D)

Question 14

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A)   0.63, and supply is elastic.
B)   0.63, and supply is inelastic.
C)   1.60, and supply is elastic.
D)   1.60, and supply is inelastid.E) B) and C)
F) All of the above

Question 15

Scenario 5-5
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-5. The equilibrium quantity will

Accepted Answer

A)   increase in both the milk and beef markets.
B)   increase in the milk market and decrease in the beef market.
C)   decrease in the milk market and increase in the beef market.
D)   decrease in both the milk and beef markets.E) A) and B)
F) None of the above

Question 16

Figure 5-4 
-Refer to Figure 5-4. If the price decreases in the region of the demand curve between points B and C, we can expect total revenue to

Accepted Answer

A)   increase.
B)   stay the same.
C)   decrease.
D)   first increase, then decrease until total revenue is maximized.E) All of the above
F) B) and D)

Question 17

Figure 5-16 
-Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $4 and $6?

Accepted Answer

A)   0.75
B)   1.00
C)   1.20
D)   1.25E) All of the above
F) A) and C)

Question 18

The price elasticity of supply measures how responsive

Accepted Answer

A)   equilibrium price is to equilibrium quantity.
B)   sellers are to a change in buyers' income.
C)   sellers are to a change in price.
D)   consumers are to the number of substitutes.E) B) and D)
F) B) and C)

Question 19

Figure 5-21 
-If a supply curve is perfectly horizontal, what is the value of the price elasticity of supply?

Accepted Answer

The answer of Figure 5-21 
-If a supply curve is...

Question 20

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.
 
-Refer to Table 5-7. Using the midpoint method, when income equals $5,000, what is the price elasticity of demand between $8 and $12?

Accepted Answer

A)   0.56
B)   0.75
C)   1.33
D)   1.80E) A) and C)
F) A) and B)

Exam 5: Elasticity and Its Application

Suppose that when the price of good X falls from $10 to $8, the quantity demanded of good Y rises from 20 units to 25 units. Using the midpoint method, the cross-price elasticity of demand is

Correct AnswerverifiedShow Answer

At price of $1.20, a local pencil manufacturer is willing to supply 150 boxes per day. At a price of $1.40, the manufacturer is willing to supply 170 boxes per day. Using the midpoint method, the price elasticity of supply is about

Correct AnswerverifiedShow Answer

When consumers face rising gasoline prices, they typically

Correct AnswerverifiedShow Answer

Figure 5-21 -If a supply curve is perfectly horizontal, what is the value of the price elasticity of supply?

Correct AnswerverifiedShow Answer

Figure 5-16 -Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $4 and $6?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Danita rescues dogs from her local animal shelter. When Danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. For Danita, the income elasticity of demand for dog biscuits is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The price elasticity of supply measures how responsive

Correct AnswerverifiedShow Answer

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, when income equals $5,000, what is the price elasticity of demand between $8 and $12?

Correct AnswerverifiedShow Answer

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Scenario 5-5 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-5. The equilibrium quantity will

Correct AnswerverifiedShow Answer

Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls.

Correct AnswerverifiedShow Answer

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. If the price decreases in the region of the demand curve between points B and C, we can expect total revenue to

Correct AnswerverifiedShow Answer

Good news for farming can be bad news for farmers because the

Correct AnswerverifiedShow Answer

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

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

Correct Answer
verified