Question 1

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by

Accepted Answer

A)   0.4% in the short run and 4.6% in the long run.
B)   1.7% in the short run and 0.7% in the long run.
C)   9% in the short run and 21% in the long run.
D)   25% in the short run and 10.7% in the long run.E) A) and B)
F) A) and C)

Question 2

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

Accepted Answer

A)   tablet computers
B)   leather boots
C)   lightbulbs
D)   optional textbooksE) None of the above
F) B) and D)

Question 3

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

Accepted Answer

A)   fewer the available substitutes.
B)   longer the time period considered.
C)   more the good is considered a luxury good.
D)   more narrowly defined is the market for the good.E) B) and D)
F) None of the above

Question 4

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

Question 5

The demand for Rice Krispies is more elastic than the demand for cereal in general.

Accepted Answer

A) True 
 B)False

Question 6

Figure 5-10 
-Refer to Figure 5-10. Total revenue when the price is P1 is represented by the area(s)

Accepted Answer

A)   B + D.
B)   A + B.
C)   C + D.
D)   D.E) None of the above
F) A) and C)

Question 7

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

Accepted Answer

A)   strawberry-banana milk shakes
B)   gasoline in the short run
C)   diamond earrings
D)   box seats at a major league baseball gameE) A) and B)
F) A) and C)

Question 8

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

Accepted Answer

The answer of Suppose that good X has few close...

Question 9

Figure 5-5 
-Refer to Figure 5-5. Using the midpoint method, between prices of $70 and $80, price elasticity of demand is

Accepted Answer

A)   0.33.
B)   0.4.
C)   1.33.
D)   3.E) B) and C)
F) All of the above

Question 10

Figure 5-2 
-Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

Accepted Answer

A)   D1
B)   D2
C)   D3
D)   All of the above are equally elastic.E) None of the above
F) A) and C)

Question 11

Elasticity is

Accepted Answer

A)   a measure of how much buyers and sellers respond to changes in market conditions.
B)   the study of how the allocation of resources affects economic well-being.
C)   the maximum amount that a buyer will pay for a good.
D)   the value of everything a seller must give up to produce a good.E) A) and B)
F) A) and C)

Question 12

In which of these instances is demand said to be perfectly inelastic?

Accepted Answer

A)   An increase in price of 2% causes a decrease in quantity demanded of 2%.
B)   A decrease in price of 2% causes an increase in quantity demanded of 0%.
C)   A decrease in price of 2% causes a decrease in total revenue of 0%.
D)   An increase in price of 2% causes a decrease in quantity demanded of 1/2%.E) A) and B)
F) A) and C)

Question 13

Figure 5-4 
-Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 2,000, P= $15)  and (Q = 2,400, P = $12) . Then which of the following scenarios is possible?

Accepted Answer

A)   Both of these points lie on section BC of the demand curve.
B)   The vertical intercept of the demand curve is the point (Q = 0, P = $22) .
C)   The horizontal intercept of the demand curve is the point (Q = 5,000, P = $0) .
D)   Any of these scenarios is possible.E) A) and B)
F) All of the above

Question 14

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 15

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income. 
-Refer to Table 5-7. Using the midpoint method, when income equals $5,000, what is the price elasticity of demand between $8 and $12?

Accepted Answer

A)   0.56
B)   0.75
C)   1.33
D)   1.80E) A) and B)
F) All of the above

Question 16

If the price elasticity of supply for a good is equal to infinity, then the

Accepted Answer

A)   supply curve is vertical.
B)   supply curve is horizontal.
C)   supply curve also has a slope equal to infinity.
D)   quantity supplied is constant regardless of the price.E) B) and D)
F) B) and C)

Question 17

In the market for oil in the short run, demand

Accepted Answer

A)   and supply are both elastic.
B)   and supply are both inelastic.
C)   is elastic and supply is inelastic.
D)   is inelastic and supply is elastic.E) B) and D)
F) None of the above

Question 18

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is

Accepted Answer

A)   0.11.
B)   0.47.
C)   1.12.
D)   2.11.E) All of the above
F) B) and D)

Question 19

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

Accepted Answer

A)   supply decreases, demand is unaffected, and price increases.
B)   demand decreases, supply is unaffected, and price decreases.
C)   demand and supply both decrease, leaving price essentially unchanged.
D)   supply decreases, demand increases, and price increases substantially.E) B) and C)
F) All of the above

Question 20

A key determinant of the price elasticity of supply is

Accepted Answer

A)   the ability of sellers to change the price of the good they produce.
B)   the ability of sellers to change the amount of the good they produce.
C)   how responsive buyers are to changes in sellers' prices.
D)   the slope of the demand curve.E) All of the above
F) B) and C)

Exam 5: Elasticity and Its Application

If the price elasticity of supply for a good is equal to infinity, then the

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Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 2,000, P= $15) and (Q = 2,400, P = $12) . Then which of the following scenarios is possible?

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Elasticity is

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A key determinant of the price elasticity of supply is

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Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is

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

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Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P1 is represented by the area(s)

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Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

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

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Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by

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Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $70 and $80, price elasticity of demand is

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

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In the market for oil in the short run, demand

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In which of these instances is demand said to be perfectly inelastic?

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Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

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The demand for Rice Krispies is more elastic than the demand for cereal in general.

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Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

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Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, when income equals $5,000, what is the price elasticity of demand between $8 and $12?

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

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

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