Question 1

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

Question 2

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

Accepted Answer

A) True 
 B)False

Question 3

Cross-price elasticity of demand measures how

Accepted Answer

A)   the price of one good changes in response to a change in the price of another good.
B)   the quantity demanded of one good changes in response to a change in the quantity demanded of another good.
C)   the quantity demanded of one good changes in response to a change in the price of another good.
D)   strongly normal or inferior a good is.E) A) and D)
F) A) and C)

Question 4

The price elasticity of supply along a typical supply curve is

Accepted Answer

A)   constant.
B)   equal to zero.
C)   higher at low levels of quantity supplied and lower at high levels of quantity supplied.
D)   lower at low levels of quantity supplied and higher at high levels of quantity supplied.E) C) and D)
F) A) and D)

Question 5

Suppose demand is given by the equation:  Using the midpoint method, what is the price elasticity of demand between $1 and $2?

Accepted Answer

The price ...

Question 6

If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the elasticity, then demand is

Accepted Answer

A)   perfectly inelastic, and the demand curve is vertical.
B)   elastic, and the demand curve is a straight, downward-sloping line.
C)   perfectly elastic, and the demand curve is horizontal.
D)   elastic, and the demand curve is something other than a straight, downward-sloping line.E) A) and B)
F) A) and C)

Question 7

Scenario 5-3
Suppose that 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 price elasticity of supply for aged cheddar cheese could be

Accepted Answer

A)   -1.
B)   0.
C)   0.5.
D)   1.5.E) C) and D)
F) A) and B)

Question 8

If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is

Accepted Answer

A)   0.75.
B)   1.25.
C)   1.33.
D)   1.60.E) B) and C)
F) None of the above

Question 9

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

Accepted Answer

A)   increased from $6 to $9.
B)   increased from $33 to $36.
C)   decreased from $15 to $12.
D)   All of the above are correct.E) A) and C)
F) A) and D)

Question 10

If the cross-price elasticity of two goods is negative, then the two goods are

Accepted Answer

A)   necessities.
B)   complements.
C)   normal goods.
D)   inferior goods.E) None of the above
F) All of the above

Question 11

Figure 5-21 
-Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $15 and $25?

Accepted Answer

The price ...

Question 12

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

Question 13

Figure 5-17 
-Refer to Figure 5-17. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

Accepted Answer

A)   increase.
B)   decrease.
C)   remain unchanged.
D)   The effect on total revenue cannot be determined from the given information.E) B) and C)
F) All of the above

Question 14

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

Accepted Answer

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

Question 15

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)   yoga mats
B)   prescription medicine
C)   protein powder
D)   gym membershipsE) A) and C)
F) None of the above

Question 17

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)   The direct impact is on buyers, not sellers.
B)   Successful drug interdiction policies reduce the demand for illegal drugs.
C)   Drug addicts will have an even greater need for quick cash to support their habits.
D)   In the short run, both equilibrium quantities and prices will fall in the markets for illegal drugs.E) None of the above
F) B) and D)

Question 18

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

Question 19

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

Accepted Answer

A)   increase the total revenue of wheat farmers.
B)   decrease the total revenue of wheat farmers.
C)   decrease the demand for wheat.
D)   decrease the supply of wheat.E) B) and D)
F) None of the above

Question 20

The flatter the demand curve that passes through a given point, the more elastic the demand.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

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

Correct Answer
verified

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Correct Answer
verified

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $15 and $25?

Correct Answer
verified
The price ...
View Answer

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $1 and $2?

Correct Answer
verified
The price ...
View Answer

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Correct Answer
verified

If the cross-price elasticity of two goods is negative, then the two goods are

Correct Answer
verified

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

Correct Answer
verified

The price elasticity of supply along a typical supply curve is

Correct Answer
verified

If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is

Correct Answer
verified

Correct Answer
verified

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

Correct Answer
verified

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

Correct Answer
verified

Cross-price elasticity of demand measures how

Correct Answer
verified

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

Correct Answer
verified

The flatter the demand curve that passes through a given point, the more elastic the demand.

Correct Answer
verified

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

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 5-17 -Refer to Figure 5-17. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

Correct Answer
verified

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

Correct Answer
verified

If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the elasticity, then demand is

Correct Answer
verified

Exam 5: Elasticity and Its Application

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

Correct AnswerverifiedShow Answer

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Correct AnswerverifiedShow Answer

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $15 and $25?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $1 and $2?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Correct AnswerverifiedShow Answer

If the cross-price elasticity of two goods is negative, then the two goods are

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The price elasticity of supply along a typical supply curve is

Correct AnswerverifiedShow Answer

If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

Correct AnswerverifiedShow Answer

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

Correct AnswerverifiedShow Answer

Cross-price elasticity of demand measures how

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The flatter the demand curve that passes through a given point, the more elastic the demand.

Correct AnswerverifiedShow Answer

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

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 5-17 -Refer to Figure 5-17. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the elasticity, then demand is

Correct AnswerverifiedShow Answer

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The price ...
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The price ...
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