Question 1

Which of the following statements about agriculture in the U.S. is not correct?

Accepted Answer

A)  From the 1950s to today, agricultural output has increased about five times.
B)  Because technological improvements increase the supply of a product for which demand is inelastic, an individual farmer would be better off not adopting the new technology.
C)  Increasing the supply of agricultural products typically benefits consumers but harms farmers.
D)  Technological improvements typically increase supply and decrease revenue for farmers.E) A) and D)
F) C) and D)

Question 2

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 B)
F) A) and D)

Question 3

For which of the following goods is the income elasticity of demand likely lowest?

Accepted Answer

A)  subscriptions to premium movie channels through the local cable television provider
B)  hi-definition DVD players
C)  champagne
D)  housingE) A) and C)
F) All of the above

Question 4

The production of methamphetamine (meth)  is a social problem in the Midwest. Iowa is considering two potential programs: Operation Methbust would increase the number of sheriffs' deputies to search out and destroy methamphetamine labs. Operation Say No to Meth would increase the training required of public school teachers so that they could better educate students about the health risks of using meth. Assuming that each program were successful, which of the following statements is correct?

Accepted Answer

A)  Both Operation Methbust and Say No would reduce the equilibrium quantity and increase the equilibrium price of meth.
B)  Both Operation Methbust and Say No would increase the equilibrium quantity and reduce the equilibrium price of meth.
C)  Both Operation Methbust and Say No would reduce the equilibrium quantity of meth; Operation Methbust would increase the equilibrium price, whereas Say No would reduce the equilibrium price of meth.
D)  Both Operation Methbust and Say No would reduce the equilibrium price of meth; Operation Methbust would reduce the equilibrium quantity, whereas Say No would increase the equilibrium quantity of meth.E) C) and D)
F) A) and B)

Question 5

Why was OPEC unable to maintain high oil prices in the long run?

Accepted Answer

A)  Demand and supply are both elastic in the long run compared to the short run.
B)  Demand and supply are both inelastic in the long run compared to the short run.
C)  Demand is elastic and supply is inelastic in the long run compared to the short run.
D)  Demand is inelastic and supply is elastic in the long run compared to the short run.E) A) and B)
F) A) and D)

Question 6

Table 5-5 
-Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A)  0.09.
B)  0.58.
C)  0.65.
D)  1.53.E) B) and C)
F) A) and B)

Question 7

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 8

For which pairs of goods is the cross-price elasticity most likely to be positive?

Accepted Answer

A)  canoes and kayaks
B)  pizza and college textbooks
C)  Halloween candy and rain coats
D)  cats and cat foodE) None of the above
F) All of the above

Question 9

Figure 5-4 
-Refer to Figure 5-4. If the price decreases in the region of the demand curve between points B and C, we can expect total revenue to

Accepted Answer

A)  increase.
B)  stay the same.
C)  decrease.
D)  first increase, then decrease until total revenue is maximized.E) None of the above
F) All of the above

Question 10

Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

Accepted Answer

A) True 
 B)False

Question 11

Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

A) True 
 B)False

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) B) and D)
F) B) and C)

Question 13

Figure 5-4 
-Refer to Figure 5-4. The section of the demand curve at point B represents the

Accepted Answer

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

Question 14

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

Question 15

If the quantity supplied responds only slightly to changes in price, then

Accepted Answer

A)  supply is said to be elastic.
B)  supply is said to be inelastic.
C)  an increase in price will not shift the supply curve very much.
D)  even a large decrease in demand will change the equilibrium price only slightly.E) C) and D)
F) A) and C)

Question 16

For which of the following goods is the income elasticity of demand likely highest?

Accepted Answer

A)  natural gas
B)  doctor's visits
C)  hamburgers
D)  boatsE) A) and B)
F) C) and D)

Question 17

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 18

Frequently, in the short run, the quantity supplied of a good is

Accepted Answer

A)  impossible, or nearly impossible, to measure.
B)  not very responsive to price changes.
C)  determined by the quantity demanded of the good.
D)  determined by psychological forces and other non-economic forces.E) A) and B)
F) A) and C)

Question 19

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 bread could be

Accepted Answer

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

Question 20

If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

Accepted Answer

A)  a 20 percent increase in the quantity demanded.
B)  an 18 percent increase in the quantity demanded.
C)  a 2 percent increase in the quantity demanded.
D)  a 1.8 percent increase in the quantity demanded.E) None of the above
F) B) and C)

Exam 5: Elasticity and Its Application

Correct Answer
verified

Table 5-5 -Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

Correct Answer
verified

Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Correct Answer
verified

If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

Correct Answer
verified

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Correct Answer
verified

Why was OPEC unable to maintain high oil prices in the long run?

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. If the price decreases in the region of the demand curve between points B and C, we can expect total revenue to

Correct Answer
verified

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

Correct Answer
verified

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

Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

Correct Answer
verified

Which of the following statements about agriculture in the U.S. is not correct?

Correct Answer
verified

Frequently, in the short run, the quantity supplied of a good is

Correct Answer
verified

For which pairs of goods is the cross-price elasticity most likely to be positive?

Correct Answer
verified

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?

Correct Answer
verified

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

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve at point B represents the

Correct Answer
verified

For which of the following goods is the income elasticity of demand likely highest?

Correct Answer
verified

If the quantity supplied responds only slightly to changes in price, then

Correct Answer
verified

For which of the following goods is the income elasticity of demand likely lowest?

Correct Answer
verified

Exam 5: Elasticity and Its Application

Correct AnswerverifiedShow Answer

Table 5-5 -Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

Correct AnswerverifiedShow Answer

Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

Correct AnswerverifiedShow Answer

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Correct AnswerverifiedShow Answer

Why was OPEC unable to maintain high oil prices in the long run?

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. If the price decreases in the region of the demand curve between points B and C, we can expect total revenue to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

Correct AnswerverifiedShow Answer

Which of the following statements about agriculture in the U.S. is not correct?

Correct AnswerverifiedShow Answer

Frequently, in the short run, the quantity supplied of a good is

Correct AnswerverifiedShow Answer

For which pairs of goods is the cross-price elasticity most likely to be positive?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve at point B represents the

Correct AnswerverifiedShow Answer

For which of the following goods is the income elasticity of demand likely highest?

Correct AnswerverifiedShow Answer

If the quantity supplied responds only slightly to changes in price, then

Correct AnswerverifiedShow Answer

For which of the following goods is the income elasticity of demand likely lowest?

Correct AnswerverifiedShow Answer

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