Question 1

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) A) and D)
F) A) and C)

Question 2

When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.

Accepted Answer

A) True 
 B)False

Question 3

If the price elasticity of demand is equal to 0, then demand is unit elastic.

Accepted Answer

A) True 
 B)False

Question 4

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 5

Necessities such as food and clothing tend to have

Accepted Answer

A)   high price elasticities of demand and high income elasticities of demand.
B)   high price elasticities of demand and low income elasticities of demand.
C)   low price elasticities of demand and high income elasticities of demand.
D)   low price elasticities of demand and low income elasticities of demand.E) A) and B)
F) A) and C)

Question 6

For a vertical demand curve,

Accepted Answer

A)   the slope is undefined, and the price elasticity of demand is equal to 0.
B)   the slope is equal to 0, and the price elasticity of demand is undefined.
C)   both the slope and price elasticity of demand are undefined.
D)   both the slope and price elasticity of demand are equal to 0.E) A) and B)
F) B) and C)

Question 7

Demand is said to be inelastic if

Accepted Answer

A)   buyers respond substantially to changes in the price of the good.
B)   demand shifts only slightly when the price of the good changes.
C)   the quantity demanded changes only slightly when the price of the good changes.
D)   the price of the good responds only slightly to changes in demand.E) C) and D)
F) A) and D)

Question 8

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

Question 9

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Accepted Answer

A)   unit elastic.
B)   inelastic.
C)   elastic.
D)   None of the above is correct because a price increase always leads to an decrease in total revenue.E) B) and D)
F) B) and C)

Question 10

In which of the following situations will total revenue increase?

Accepted Answer

A)   Price elasticity of demand is 1.2, and the price of the good decreases.
B)   Price elasticity of demand is 0.5, and the price of the good increases.
C)   Price elasticity of demand is 3.0, and the price of the good decreases.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 11

If the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Accepted Answer

A)   1.66%, and aluminum foil sellers' total revenue will increase as a result.
B)   1.66%, and aluminum foil sellers' total revenue will decrease as a result.
C)   3.48%, and aluminum foil sellers' total revenue will increase as a result.
D)   3.48%, and aluminum foil sellers' total revenue will decrease as a result.E) A) and B)
F) A) and C)

Question 12

Which of the following statements is correct?

Accepted Answer

A)   The demand for flat-screen computer monitors is more elastic than the demand for monitors in general.
B)   The demand for grandfather clocks is more elastic than the demand for clocks in general.
C)   The demand for cardboard is more elastic over a long period of time than over a short period of time.
D)   All of the above are correct.E) A) and D)
F) C) and D)

Question 13

The federal government is concerned about the negative effects of cigarette smoking in the United States. Suppose Congress is considering two plans. One plan would limit the production of cigarettes. The other would require manufacturers to include graphic photos on cigarette packages of people suffering cancer's effects. Which of the following statements is true?

Accepted Answer

A)   Both programs would increase the price of cigarettes.
B)   Both programs would reduce the quantity of cigarettes sold.
C)   Both programs would decrease revenues for cigarette manufacturers.
D)   All of the above are correct.E) None of the above
F) All of the above

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Figure 5-8 
-Refer to Figure 5-8. When the price is $15, total revenue is

Accepted Answer

A)   $1,500.
B)   $2,500.
C)   $3,500.
D)   $4,500.E) B) and D)
F) A) and D)

Question 16

Table 5-2
 
-Refer to Table 5-2. Using the midpoint method, if the price falls from $150 to $100, the absolute value of the price elasticity of demand is

Accepted Answer

A)   0.4.
B)   0.9.
C)   1.1.
D)   2.E) C) and D)
F) B) and D)

Question 17

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

Accepted Answer

A)   the relevant time period is short rather than long.
B)   the relevant time period is long rather than short.
C)   supply is inelastic.
D)   the firm is experiencing capacity problems.E) A) and D)
F) B) and D)

Question 18

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Accepted Answer

A)   fall by 8 percent.
B)   fall by 50 percent.
C)   rise by 8 percent.
D)   rise by 50 percent.E) A) and B)
F) A) and C)

Question 19

Scenario 5-6
Suppose the government is concerned about firms in the United States importing illegal caviar. As a result, the government increases border patrols to catch illegal shipments. U.S. Customs agents perform DNA testing on the caviar to determine if it comes from endangered species of fish. If so, the government destroys the caviar.
-Refer to Scenario 5-6. What would we expect to observe in the caviar market?

Accepted Answer

A)   Equilibrium prices and quantities will increase.
B)   Equilibrium prices will increase by more if the demand for caviar is elastic than if demand is inelastic.
C)   Total revenues to caviar firms will increase if the demand for caviar is inelastic.
D)   All of the above are correct.E) B) and C)
F) A) and B)

Question 20

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) B) and D)
F) A) and D)

Exam 5: Elasticity and Its Application

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

If the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Demand is said to be inelastic if

Correct Answer
verified

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

Correct Answer
verified

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Correct Answer
verified

When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.

Correct Answer
verified

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

Correct Answer
verified

For a good that is a necessity, demand

Correct Answer
verified

In which of the following situations will total revenue increase?

Correct Answer
verified

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

Correct Answer
verified

Figure 5-8 -Refer to Figure 5-8. When the price is $15, total revenue is

Correct Answer
verified

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $150 to $100, the absolute value of the price elasticity of demand is

Correct Answer
verified

Necessities such as food and clothing tend to have

Correct Answer
verified

Correct Answer
verified

For a vertical demand curve,

Correct Answer
verified

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Correct Answer
verified

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

Correct Answer
verified

If the price elasticity of demand is equal to 0, then demand is unit elastic.

Correct Answer
verified

Exam 5: Elasticity and Its Application

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

If the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Demand is said to be inelastic if

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 price will

Correct AnswerverifiedShow Answer

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Correct AnswerverifiedShow Answer

When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.

Correct AnswerverifiedShow Answer

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

Correct AnswerverifiedShow Answer

For a good that is a necessity, demand

Correct AnswerverifiedShow Answer

In which of the following situations will total revenue increase?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-8 -Refer to Figure 5-8. When the price is $15, total revenue is

Correct AnswerverifiedShow Answer

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $150 to $100, the absolute value of the price elasticity of demand is

Correct AnswerverifiedShow Answer

Necessities such as food and clothing tend to have

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For a vertical demand curve,

Correct AnswerverifiedShow Answer

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the price elasticity of demand is equal to 0, then demand is unit elastic.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
No change,...
View Answer

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