Question 1

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

Accepted Answer

A)  immediately after the price increase
B)  one month after the price increase
C)  three months after the price increase
D)  one year after the price increaseE) B) and D)
F) C) and D)

Question 2

Suppose that when the price of good X falls from $10 to $8, the quantity demanded of good Y rises from 20 units to 25 units. Using the midpoint method, the cross-price elasticity of demand is

Accepted Answer

A)  -1.0, and X and Y are complements.
B)  -1.0, and X and Y are substitutes.
C)  1.0, and X and Y are complements.
D)  1.0, and X and Y are substitutes.E) B) and D)
F) B) and C)

Question 3

There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be

Accepted Answer

A)  elastic.
B)  unit elastic.
C)  inelastic.
D)  highly responsive to changes in income as well as changes in prices.E) All of the above
F) A) and D)

Question 4

In general, elasticity is a measure of

Accepted Answer

A)  the extent to which advances in technology are adopted by producers.
B)  the extent to which a market is competitive.
C)  how firms' profits respond to changes in market prices.
D)  how much buyers and sellers respond to changes in market conditions.E) All of the above
F) A) and B)

Question 5

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

Accepted Answer

A)  laptop computers
B)  iPod shuffles
C)  designer jeans
D)  college tuition for a junior or seniorE) B) and D)
F) B) and C)

Question 6

A perfectly inelastic demand implies that buyers

Accepted Answer

A)  decrease their purchases when the price rises.
B)  purchase the same amount as before when the price rises or falls.
C)  increase their purchases only slightly when the price falls.
D)  respond substantially to an increase in price.E) B) and C)
F) None of the above

Question 7

Suppose that demand is inelastic within a certain price range. For that price range,

Accepted Answer

A)  an increase in price would increase total revenue because the decrease in quantity demanded is proportionately less than the increase in price.
B)  an increase in price would decrease total revenue because the decrease in quantity demanded is proportionately greater than the increase in price.
C)  a decrease in price would increase total revenue because the increase in quantity demanded is proportionately smaller than the decrease in price.
D)  a decrease in price would not affect total revenue.E) None of the above
F) All of the above

Question 8

Figure 5-11 
-Refer to Figure 5-11. Using the midpoint method, the price elasticity of demand between point C and point D is about

Accepted Answer

A)  0.29.
B)  0.54.
C)  1.86.
D)  2.0.E) C) and D)
F) A) and B)

Question 9

In the case of perfectly inelastic demand,

Accepted Answer

A)  the change in quantity demanded equals the change in price.
B)  the percentage change in quantity demanded equals the percentage change in price.
C)  infinitely-large changes in quantity demanded result from very small changes in the price.
D)  quantity demanded stays the same whenever price changes.E) None of the above
F) A) and B)

Question 10

If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A)  1.33, and supply is elastic.
B)  1.33, and supply is inelastic.
C)  0.75, and supply is elastic.
D)  0.75, and supply is inelastic.E) None of the above
F) A) and B)

Question 11

If the demand for donuts is elastic, then a decrease in the price of donuts will

Accepted Answer

A)  increase total revenue of donut sellers.
B)  decrease total revenue of donut sellers.
C)  not change total revenue of donut sellers.
D)  There is not enough information to answer this question.E) B) and C)
F) A) and C)

Question 12

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

Accepted Answer

A)  0.15
B)  0.375
C)  2.5
D)  2.60E) All of the above
F) B) and C)

Question 13

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

Accepted Answer

A)  raises prices and total revenue in the drug market.
B)  can increase drug-related crime.
C)  shifts the demand curve for drugs to the left.
D)  shifts the supply curve of drugs to the left.E) None of the above
F) A) and B)

Question 14

At price of $1.25, a paper manufacturer is willing to supply 150 spiral notebooks per day. At a price of $1.50, the paper manufacturer is willing to supply 175 spiral notebooks per day. Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A)  1.18.
B)  1.00.
C)  0.85.
D)  0.25.E) A) and B)
F) A) and C)

Question 15

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in a

Accepted Answer

A)  0.4 percent decrease in the quantity demanded.
B)  2.5 percent decrease in the quantity demanded.
C)  4 percent decrease in the quantity demanded.
D)  40 percent decrease in the quantity demanded.E) All of the above
F) C) and D)

Question 16

Last month, sellers of good Y took in $100 in total revenue on sales of 50 units of good Y. This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y. At the same time, the price of good X stayed the same, but sales of good X increased from 20 units to 40 units. We can conclude that goods X and Y are

Accepted Answer

A)  substitutes, and have a cross-price elasticity of 0.60.
B)  complements, and have a cross-price elasticity of 0.60.
C)  substitutes, and have a cross-price elasticity of 1.67.
D)  complements, and have a cross-price elasticity of 1.67.E) None of the above
F) A) and B)

Question 17

Suppose that quantity demand rises by 10% as a result of a 15% decrease in price. The price elasticity of demand for this good is

Accepted Answer

A)  inelastic and equal to 0.67.
B)  elastic and equal to 0.67.
C)  inelastic and equal to 1.50.
D)  elastic and equal to 1.50.E) C) and D)
F) B) and D)

Question 18

When demand is elastic, an increase in price will cause

Accepted Answer

A)  an increase in total revenue.
B)  a decrease in total revenue.
C)  no change in total revenue but an increase in quantity demanded.
D)  no change in total revenue but a decrease in quantity demanded.E) A) and D)
F) A) and C)

Question 19

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Accepted Answer

A)  unit elastic.
B)  inelastic.
C)  elastic.
D)  None of the above is correct because a price increase always leads to an increase in total revenue.E) A) and C)
F) B) and D)

Question 20

Figure 5-10 
-Refer to Figure 5-10. When price falls from $50 to $40, demand is

Accepted Answer

A)  inelastic, since total revenue decreases from $8,000 to $5,000.
B)  inelastic, since total revenue increases from $5,000 to $8,000.
C)  elastic, since total revenue increases from $5,000 to $8,000.
D)  unit elastic, since total revenue does not change.E) All of the above
F) A) and B)

Exam 5: Elasticity and Its Application

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

Correct Answer
verified

In general, elasticity is a measure of

Correct Answer
verified

Figure 5-11 -Refer to Figure 5-11. Using the midpoint method, the price elasticity of demand between point C and point D is about

Correct Answer
verified

Suppose that when the price of good X falls from $10 to $8, the quantity demanded of good Y rises from 20 units to 25 units. Using the midpoint method, the cross-price elasticity of demand is

Correct Answer
verified

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Correct Answer
verified

If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of supply is about

Correct Answer
verified

A perfectly inelastic demand implies that buyers

Correct Answer
verified

In the case of perfectly inelastic demand,

Correct Answer
verified

Suppose that quantity demand rises by 10% as a result of a 15% decrease in price. The price elasticity of demand for this good is

Correct Answer
verified

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

Correct Answer
verified

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

Correct Answer
verified

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

Correct Answer
verified

Suppose that demand is inelastic within a certain price range. For that price range,

Correct Answer
verified

If the demand for donuts is elastic, then a decrease in the price of donuts will

Correct Answer
verified

There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be

Correct Answer
verified

Correct Answer
verified

When demand is elastic, an increase in price will cause

Correct Answer
verified

At price of $1.25, a paper manufacturer is willing to supply 150 spiral notebooks per day. At a price of $1.50, the paper manufacturer is willing to supply 175 spiral notebooks per day. Using the midpoint method, the price elasticity of supply is about

Correct Answer
verified

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in a

Correct Answer
verified

Figure 5-10 -Refer to Figure 5-10. When price falls from $50 to $40, demand is

Correct Answer
verified

Exam 5: Elasticity and Its Application

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

Correct AnswerverifiedShow Answer

In general, elasticity is a measure of

Correct AnswerverifiedShow Answer

Figure 5-11 -Refer to Figure 5-11. Using the midpoint method, the price elasticity of demand between point C and point D is about

Correct AnswerverifiedShow Answer

Suppose that when the price of good X falls from $10 to $8, the quantity demanded of good Y rises from 20 units to 25 units. Using the midpoint method, the cross-price elasticity of demand is

Correct AnswerverifiedShow Answer

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Correct AnswerverifiedShow Answer

If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of supply is about

Correct AnswerverifiedShow Answer

A perfectly inelastic demand implies that buyers

Correct AnswerverifiedShow Answer

In the case of perfectly inelastic demand,

Correct AnswerverifiedShow Answer

Suppose that quantity demand rises by 10% as a result of a 15% decrease in price. The price elasticity of demand for this good is

Correct AnswerverifiedShow Answer

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

Correct AnswerverifiedShow Answer

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that demand is inelastic within a certain price range. For that price range,

Correct AnswerverifiedShow Answer

If the demand for donuts is elastic, then a decrease in the price of donuts will

Correct AnswerverifiedShow Answer

There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When demand is elastic, an increase in price will cause

Correct AnswerverifiedShow Answer

At price of $1.25, a paper manufacturer is willing to supply 150 spiral notebooks per day. At a price of $1.50, the paper manufacturer is willing to supply 175 spiral notebooks per day. Using the midpoint method, the price elasticity of supply is about

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in a

Correct AnswerverifiedShow Answer

Figure 5-10 -Refer to Figure 5-10. When price falls from $50 to $40, demand is

Correct AnswerverifiedShow Answer

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