Question 1

Figure 5-21 
-Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $5 and $15?

Accepted Answer

The price ...

Question 2

Table 5-12 
-Refer to Table 5-12. Between which two quantities listed is demand most elastic?

Accepted Answer

The answer of Table 5-12 
-Refer to Table 5-12. Between...

Question 3

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

Accepted Answer

A)  dental floss
B)  milk
C)  salt
D)  diamond earringsE) None of the above
F) A) and B)

Question 4

If marijuana were legalized, it is likely that there would be an increase in the demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana is perfectly elastic, this will result in

Accepted Answer

A)  higher prices and higher total revenue from marijuana sales.
B)  higher prices but lower total revenue from marijuana sales.
C)  the same price and higher total revenue from marijuana sales.
D)  the same price but lower total revenue from marijuana sales.E) A) and B)
F) C) and D)

Question 5

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Accepted Answer

A) True 
 B)False

Question 6

Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she needs. Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. If you know that the demand for lemonade is elastic, what is your advice to her?

Accepted Answer

A)  Leave the price at 25 cents and be patient.
B)  Raise the price to increase total revenue.
C)  Lower the price to increase total revenue.
D)  There isn't enough information given to answer this question.E) All of the above
F) A) and B)

Question 7

If the cross-price elasticity of demand between two goods is positive, what is the relationship between the two goods?

Accepted Answer

The goods ...

Question 8

Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is

Accepted Answer

A)  inelastic, since the price elasticity of supply is equal to .91.
B)  inelastic, since the price elasticity of supply is equal to 1.1.
C)  elastic, since the price elasticity of supply is equal to 0.91.
D)  elastic, since the price elasticity of supply is equal to 1.1.E) A) and B)
F) A) and C)

Question 9

The price elasticity of demand measures the

Accepted Answer

A)  magnitude of the response in quantity demanded to a change in price.
B)  direction of the shift in the demand curve in response to a market event.
C)  size of the shortage created by the increase in demand.
D)  responsiveness of quantity demanded to a change in income.E) B) and C)
F) A) and C)

Question 10

Figure 5-12 
-Refer to Figure 5-12. Which of the following price changes would result in no change in sellers' total revenue?

Accepted Answer

A)  The price increases from $15 to $21.
B)  The price increases from $18 to $21.
C)  The price decreases from $24 to $18.
D)  The price decreases from $27 to $24.E) B) and D)
F) All of the above

Question 11

Scenario 5-4
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 5-4. The change in equilibrium price will be

Accepted Answer

A)  greater in the milk market than in the beef market.
B)  greater in the beef market than in the milk market.
C)  the same in the milk and beef markets.
D)  Any of the above could be correct.E) A) and D)
F) A) and C)

Question 12

When demand is inelastic, a decrease in price will cause

Accepted Answer

A)  an increase in total revenue.
B)  a decrease in total revenue.
C)  no change in total revenue but an increase in quantity demanded.
D)  no change in total revenue but a decrease in quantity demanded.E) B) and C)
F) A) and B)

Question 13

Figure 5-11 
-Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

Accepted Answer

A)  increase by $120, so demand must be inelastic in this price range.
B)  increase by $320, so demand must be inelastic in this price range.
C)  decrease by $120, so demand must be elastic in this price range.
D)  decrease by $320, so demand must be elastic in this price range.E) B) and D)
F) A) and D)

Question 14

Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms,

Accepted Answer

A)  market power is substantial.
B)  supply is perfectly inelastic.
C)  supply is more elastic at low levels of output and less elastic at high levels of output.
D)  supply is less elastic at low levels of output and more elastic at high levels of output.E) B) and C)
F) A) and D)

Question 15

Scenario 5-6
Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000.
-Refer to Scenario 5-6. Using the midpoint method, what is the cross price elasticity of demand for landline and mobile service?

Accepted Answer

The answer of Scenario 5-6
Consider the markets for mobile and...

Question 16

If the demand curve is linear and downward sloping, which of the following statements is not correct?

Accepted Answer

A)  Demand is more elastic on the lower part of the demand curve than on the upper part.
B)  Different pairs of points on the demand curve can result in different values of the price elasticity of demand.
C)  Different pairs of points on the demand curve result in identical values of the slope of the demand curve.
D)  Starting from a point on the upper part of the demand curve, an increase in price leads to a decrease in total revenue.E) None of the above
F) A) and B)

Question 17

If the price of gasoline rises, when is the price elasticity of demand likely to be the highest?

Accepted Answer

A)  immediately after the price increases
B)  one month after the price increase
C)  three months after the price increase
D)  one year after the price increaseE) All of the above
F) A) and D)

Question 18

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

Accepted Answer

A)  lattés
B)  doctor's visits
C)  eggs
D)  natural gasE) A) and B)
F) A) and C)

Question 19

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

Accepted Answer

A)  ice cream
B)  frozen yogurt
C)  vanilla ice cream
D)  Häagen-Dazs® vanilla bean ice creamE) All of the above
F) C) and D)

Question 20

With regard to elasticity, if a firm has a longer time to adjust to a price increase, supply will be more

Accepted Answer

The answer of With regard to elasticity, if a firm...

Exam 5: Elasticity and Its Application

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

Correct Answer
verified

If the cross-price elasticity of demand between two goods is positive, what is the relationship between the two goods?

Correct Answer
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The goods ...
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Figure 5-11 -Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

Correct Answer
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If the price of gasoline rises, when is the price elasticity of demand likely to be the highest?

Correct Answer
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When demand is inelastic, a decrease in price will cause

Correct Answer
verified

Table 5-12 -Refer to Table 5-12. Between which two quantities listed is demand most elastic?

Correct Answer
verified

The price elasticity of demand measures the

Correct Answer
verified

Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms,

Correct Answer
verified

Figure 5-12 -Refer to Figure 5-12. Which of the following price changes would result in no change in sellers' total revenue?

Correct Answer
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Scenario 5-4 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 5-4. The change in equilibrium price will be

Correct Answer
verified

Correct Answer
verified

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Correct Answer
verified

With regard to elasticity, if a firm has a longer time to adjust to a price increase, supply will be more

Correct Answer
verified

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

Correct Answer
verified

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $5 and $15?

Correct Answer
verified
The price ...
View Answer

Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is

Correct Answer
verified

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

Correct Answer
verified

If the demand curve is linear and downward sloping, which of the following statements is not correct?

Correct Answer
verified

Correct Answer
verified

If marijuana were legalized, it is likely that there would be an increase in the demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana is perfectly elastic, this will result in

Correct Answer
verified

Exam 5: Elasticity and Its Application

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

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand between two goods is positive, what is the relationship between the two goods?

Correct AnswerverifiedThe goods ...View AnswerShow Answer

Figure 5-11 -Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

Correct AnswerverifiedShow Answer

If the price of gasoline rises, when is the price elasticity of demand likely to be the highest?

Correct AnswerverifiedShow Answer

When demand is inelastic, a decrease in price will cause

Correct AnswerverifiedShow Answer

Table 5-12 -Refer to Table 5-12. Between which two quantities listed is demand most elastic?

Correct AnswerverifiedShow Answer

The price elasticity of demand measures the

Correct AnswerverifiedShow Answer

Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms,

Correct AnswerverifiedShow Answer

Figure 5-12 -Refer to Figure 5-12. Which of the following price changes would result in no change in sellers' total revenue?

Correct AnswerverifiedShow Answer

Scenario 5-4 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 5-4. The change in equilibrium price will be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Correct AnswerverifiedShow Answer

With regard to elasticity, if a firm has a longer time to adjust to a price increase, supply will be more

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $5 and $15?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the demand curve is linear and downward sloping, which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If marijuana were legalized, it is likely that there would be an increase in the demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana is perfectly elastic, this will result in

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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The goods ...
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The price ...
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