Question 1

Table 5-2
 
-Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the absolute value of the price elasticity of demand is

Accepted Answer

A)   5.3.
B)   2.8.
C)   0.8.
D)   0.36.E) All of the above
F) A) and C)

Question 2

Figure 5-12 
-Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point Y and point Z is

Accepted Answer

A)   0.5.
B)   1.0.
C)   0.75.
D)   1.3.E) B) and C)
F) A) and C)

Question 3

If the price elasticity of supply is zero, then

Accepted Answer

A)   supply is more elastic than it is in any other case.
B)   the supply curve is horizontal.
C)   the quantity supplied is the same, regardless of price.
D)   a change in demand will cause a relatively small change in the equilibrium price.E) B) and D)
F) B) and C)

Question 4

If a change in the price of a good results in no change in total revenue, then

Accepted Answer

A)   the demand for the good must be elastic.
B)   the demand for the good must be inelastic.
C)   the demand for the good must be unit elastic.
D)   buyers must not respond very much to a change in price.E) A) and B)
F) A) and C)

Question 5

When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea lattés is

Accepted Answer

A)   elastic, and her demand curve would be relatively flat.
B)   elastic, and her demand curve would be relatively steep.
C)   inelastic, and her demand curve would be relatively flat.
D)   inelastic, and her demand curve would be relatively steep.E) B) and D)
F) A) and B)

Question 6

Suppose that quantity demand rises by 10% as a result of a 15% decrease in price. The price elasticity of demand for this good is

Accepted Answer

A)   inelastic and equal to 0.67.
B)   elastic and equal to 0.67.
C)   inelastic and equal to 1.50.
D)   elastic and equal to 1.50.E) C) and D)
F) B) and C)

Question 7

With regard to elasticity, as a firm nears its production capacity, supply becomes more

Accepted Answer

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

Question 8

Figure 5-19 
-Refer to Figure 5-19. Which of the following statements is correct?

Accepted Answer

A)   Supply curve A is perfectly elastic.
B)   Supply curve B is perfectly inelastic.
C)   Supply curve C is more inelastic than supply curve D.
D)   Supply curve D is unit elastid.E) B) and D)
F) All of the above

Question 9

Figure 5-9 
-Refer to Figure 5-9. If the price falls from point A to point B, 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) None of the above
F) A) and C)

Question 10

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 price 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) None of the above
F) B) and C)

Question 11

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

Accepted Answer

A)   Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept.
B)   Elasticity provides us with a better rationale for statements such as "an increase in x will lead to a decrease in y" than we would have in the absence of the elasticity concept.
C)   Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus or a shortage.
D)   Without elasticity, it is very difficult to assess the degree of competition within a market.E) B) and D)
F) None of the above

Question 12

For a good that is a necessity, demand

Accepted Answer

A)   tends to be inelastic.
B)   tends to be elastic.
C)   has unit elasticity.
D)   cannot be represented by a demand curve in the usual way.E) C) and D)
F) All of the above

Question 13

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

Accepted Answer

A)   0.6
B)   0.9
C)   1
D)   2.6E) B) and C)
F) A) and D)

Question 14

In the short run, as compared to the long run, both the price elasticity of demand and the price elasticity of supply tend to be more

Accepted Answer

The answer of In the short run, as compared to...

Question 15

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 16

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is

Accepted Answer

A)   0.82, and basketball tickets are a normal good.
B)   0.82, and basketball tickets are an inferior good.
C)   1.22, and basketball tickets are a normal good.
D)   1.22, and basketball tickets are an inferior good.E) None of the above
F) A) and B)

Question 17

If the price of milk rises, when is the price elasticity of demand likely to be the lowest?

Accepted Answer

A)   immediately after the price increase
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) B) and D)

Question 18

A good will have a more inelastic demand, the

Accepted Answer

A)   greater the availability of close substitutes.
B)   broader the definition of the market.
C)   longer the period of time.
D)   more it is regarded as a luxury.E) A) and B)
F) A) and C)

Question 19

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Accepted Answer

A) True 
 B)False

Question 20

For a good that is a luxury, demand

Accepted Answer

A)   tends to be inelastic.
B)   tends to be elastic.
C)   has unit elasticity.
D)   cannot be represented by a demand curve in the usual way.E) B) and D)
F) A) and D)

Exam 5: Elasticity and Its Application

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

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In the short run, as compared to the long run, both the price elasticity of demand and the price elasticity of supply tend to be more

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Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is

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Figure 5-9 -Refer to Figure 5-9. If the price falls from point A to point B, total revenue

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Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

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When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea lattés is

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Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point Y and point Z is

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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 price will

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If the price of milk rises, when is the price elasticity of demand likely to be the lowest?

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For a good that is a luxury, demand

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Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the absolute value of the price elasticity of demand is

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Suppose that quantity demand rises by 10% as a result of a 15% decrease in price. The price elasticity of demand for this good is

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If the price elasticity of supply is zero, then

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Figure 5-19 -Refer to Figure 5-19. Which of the following statements is correct?

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With regard to elasticity, as a firm nears its production capacity, supply becomes more

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How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

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

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For a good that is a necessity, demand

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A good will have a more inelastic demand, the

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If a change in the price of a good results in no change in total revenue, then

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