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Exam 5: Elasticity and Its Application

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Question 181

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Figure 5-14 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between $100 and $220?

A) 0.58
B) 0.67
C) 1.00
D) 1.73

E) A) and B)
F) A) and C)

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Question 182

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For a good that is a necessity, demand

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) B) and C)

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Question 183

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Scenario 5-8 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 5-8. Using the midpoint method, what is the income elasticity of demand for mobile service?

Suppose the price elasticity of demand for good A is 1.25. If the price of good A increases by 20%, what will be the resulting percentage change in quantity demanded for good A?

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At price of $1.30 per pound, a local apple orchard is willing to supply 150 pounds of apples per day. At a price of $1.50 per pound, the orchard is willing to supply 170 pounds of apples per day. Using the midpoint method, the price elasticity of supply is about

Other things equal, the demand for a good tends to be more inelastic, the

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should

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

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

Figure 5-14 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between $16 and $40?

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from B to C represents the

Suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. When the price of wheat is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The demand for wheat is

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

Figure 5-18 -Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $4 and $5?

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

At a price of $1.20, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.40, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about