Question 1

The price elasticity of demand for bread

Accepted Answer

A)   is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread.
B)   depends, in part, on the availability of close substitutes for bread.
C)   reflects the many economic, social, and psychological forces that influence consumers' tastes for bread.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 2

Figure 5-14 
-Refer to Figure 5-14. Over which range is the supply curve in this figure the least elastic?

Accepted Answer

A)   $16 to $40
B)   $40 to $100
C)   $100 to $220
D)   $220 to $430E) A) and B)
F) A) and C)

Question 3

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

Accepted Answer

A)   the equilibrium quantity decreases, and the equilibrium price is unchanged.
B)   the equilibrium price increases, and the equilibrium quantity is unchanged.
C)   the equilibrium quantity and the equilibrium price both are unchanged.
D)   buyers' total expenditure on the good is unchanged.E) All of the above
F) A) and B)

Question 4

The price elasticity of demand measures how much

Accepted Answer

A)   quantity demanded responds to a change in price.
B)   quantity demanded responds to a change in income.
C)   price responds to a change in demand.
D)   demand responds to a change in supply.E) A) and B)
F) A) and C)

Question 5

Figure 5-8 
-Refer to Figure 5-8. An increase in price from $15 to $20 would

Accepted Answer

A)   increase total revenue by $500
B)   decrease total revenue by $500.
C)   increase total revenue by $1,000.
D)   decrease total revenue by $1,000.E) A) and B)
F) B) and C)

Question 6

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A)   There are many substitutes for this good.
B)   The good is a necessity.
C)   The market for the good is broadly defined.
D)   The relevant time horizon is short.E) All of the above
F) A) and B)

Question 7

Good news for farming can be bad news for farmers because the

Accepted Answer

A)   supply curve for an individual farmer is usually perfectly elastic.
B)   supply curve for an individual farmer is usually perfectly inelastic.
C)   demand for basic foodstuffs is usually inelastic, meaning that factors that shift supply to the right decrease total revenues to sellers.
D)   demand for basic foodstuffs is usually elastic, meaning that factors that shift supply to the right increase total revenues to sellers.E) None of the above
F) A) and D)

Question 8

Which of the following was not a reason OPEC failed to keep the price of oil high?

Accepted Answer

A)   Over the long run, producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity.
B)   Consumers responded to higher prices with greater conservation.
C)   Consumers replaced old inefficient cars with newer efficient ones.
D)   The agreement OPEC members signed allowed each country to produce as much oil as each wanted.E) B) and C)
F) All of the above

Question 9

The difference between slope and elasticity is that slope

Accepted Answer

A)   is a ratio of two changes, and elasticity is a ratio of two percentage changes.
B)   is a ratio of two percentage changes, and elasticity is a ratio of two changes.
C)   measures changes in quantity demanded more accurately than elasticity.
D)   None of the above is correct; there is no difference between slope and elasticity.E) A) and D)
F) A) and C)

Question 10

If a supply curve is perfectly horizontal, what is the value of the price elasticity of supply?

Accepted Answer

The answer of If a supply curve is perfectly horizontal,...

Question 11

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

Accepted Answer

A)   0.50
B)   0.56
C)   1.80
D)   2.00E) None of the above
F) B) and C)

Question 12

Figure 5-4 
-Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $6 and $12. Then, when the price increases from $8 to $10,

Accepted Answer

A)   the percent decrease in the quantity demanded exceeds the percent increase in the price.
B)   the percent increase in the price exceeds the percent decrease in the quantity demanded.
C)   sellers' total revenue increases as a result.
D)   it is possible that the quantity demanded fell from 550 to 500 as a result.E) A) and B)
F) A) and C)

Question 13

Table 5-5
 
-Refer to Table 5-5. When price is between $5 and $9, demand is

Accepted Answer

A)   elastic.
B)   unit elastic.
C)   inelastic.
D)   There is not enough information given to determine whether demand is elastic, unit elastic, or inelastic.E) A) and B)
F) A) and D)

Question 14

Figure 5-4 
-Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $8 and $16. Then, when the price changes between $9 and $10,

Accepted Answer

A)   quantity demanded changes proportionately less than the price.
B)   quantity demanded changes proportionately more than the price.
C)   quantity demanded changes the same amount proportionately as price.
D)   the price elasticity of demand equals 1.E) A) and B)
F) A) and C)

Question 15

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%.
The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Question 16

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Accepted Answer

A)   a 0.2 percent increase in the price.
B)   a 2.5 percent increase in the price.
C)   a 5 percent increase in the price.
D)   a 20 percent increase in the price.E) B) and D)
F) B) and C)

Question 17

If marijuana were legalized, it is likely that there would be an increase in the supply of marijuana. Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana. These advocates believe that the

Accepted Answer

A)   supply for marijuana is elastic.
B)   demand for marijuana is elastic.
C)   supply for marijuana is inelastic.
D)   demand for marijuana is inelastic.E) A) and D)
F) B) and C)

Question 18

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

Accepted Answer

A)   -1.2, and X and Y are complements.
B)   -0.1, and X and Y are complements.
C)   0.1, and X and Y are substitutes.
D)   1.2, and X and Y are substitutes.E) C) and D)
F) B) and D)

Question 19

Scenario 5-4
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 5-4. The equilibrium price will

Accepted Answer

A)   increase in both the aged cheddar cheese and bread markets.
B)   increase in the aged cheddar cheese market and decrease in the bread market.
C)   decrease in the aged cheddar cheese market and increase in the bread market.
D)   decrease in both the aged cheddar cheese and bread markets.E) C) and D)
F) A) and D)

Question 20

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

Accepted Answer

A)   elastic section of the demand curve.
B)   perfectly elastic section of the demand curve.
C)   unit elastic section of the demand curve.
D)   inelastic section of the demand curve.E) A) and B)
F) A) and C)

Exam 5: Elasticity and Its Application

The difference between slope and elasticity is that slope

Correct Answer
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The price elasticity of demand measures how much

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

Correct Answer
verified

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $8 and $16. Then, when the price changes between $9 and $10,

Correct Answer
verified

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Correct Answer
verified

Table 5-5 -Refer to Table 5-5. When price is between $5 and $9, demand is

Correct Answer
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Figure 5-14 -Refer to Figure 5-14. Over which range is the supply curve in this figure the least elastic?

Correct Answer
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Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Correct Answer
verified

Which of the following was not a reason OPEC failed to keep the price of oil high?

Correct Answer
verified

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

Correct Answer
verified

Figure 5-8 -Refer to Figure 5-8. An increase in price from $15 to $20 would

Correct Answer
verified

If a supply curve is perfectly horizontal, what is the value of the price elasticity of supply?

Correct Answer
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For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct Answer
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Good news for farming can be bad news for farmers because the

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

Correct Answer
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The price elasticity of demand for bread

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $6 and $12. Then, when the price increases from $8 to $10,

Correct Answer
verified

Correct Answer
verified

Exam 5: Elasticity and Its Application

The difference between slope and elasticity is that slope

Correct AnswerverifiedShow Answer

The price elasticity of demand measures how much

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $8 and $16. Then, when the price changes between $9 and $10,

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Correct AnswerverifiedShow Answer

Table 5-5 -Refer to Table 5-5. When price is between $5 and $9, demand is

Correct AnswerverifiedShow Answer

Figure 5-14 -Refer to Figure 5-14. Over which range is the supply curve in this figure the least elastic?

Correct AnswerverifiedShow Answer

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Correct AnswerverifiedShow Answer

Which of the following was not a reason OPEC failed to keep the price of oil high?

Correct AnswerverifiedShow Answer

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

Correct AnswerverifiedShow Answer

Figure 5-8 -Refer to Figure 5-8. An increase in price from $15 to $20 would

Correct AnswerverifiedShow Answer

If a supply curve is perfectly horizontal, what is the value of the price elasticity of supply?

Correct AnswerverifiedShow Answer

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

Good news for farming can be bad news for farmers because the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The price elasticity of demand for bread

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $6 and $12. Then, when the price increases from $8 to $10,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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