Question 1

A manufacturer produces 400 units when the market price of $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Accepted Answer

A)  0.45.
B)  2.0.
C)  2.2.
D)  200.E) B) and D)
F) All of the above

Question 2

Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about

Accepted Answer

A)  1.5% in the short run and 6% in the long run.
B)  6% in the short run and 1.5% in the long run.
C)  16.7% in the short run and 4.2% in the long run.
D)  4.2% in the short run and 16.7% in the long run.E) B) and C)
F) A) and D)

Question 5

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

Question 6

Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she needs. Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. If you know that the demand for lemonade is elastic, what is your advice to her?

Accepted Answer

A)  Leave the price at 25 cents and be patient.
B)  Raise the price to increase total revenue.
C)  Lower the price to increase total revenue.
D)  There isn't enough information given to answer this question.E) B) and D)
F) C) and D)

Question 7

Suppose good X has a negative income elasticity of demand. This implies that good X is

Accepted Answer

A)  a normal good.
B)  a necessity.
C)  an inferior good.
D)  a luxury.E) B) and C)
F) C) and D)

Question 8

Table 5-1
   Gond  Price Elaticity of Demend  A 1.3B2.1\begin{array} { | c | c | } \hline 	ext { Gond } & 	ext { Price Elaticity of Demend } \\hline 	ext { A } & 1.3 \\hline \mathrm { B } & \mathbf { 2 . 1 } \\hline\end{array} Gond  A B​ Price Elaticity of Demend 1.32.1​​ 
-Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Accepted Answer

A)  A is grapes, and B is fruit.
B)  A is T-shirts, and B is socks.
C)  A is train tickets before cars were invented, and B is train tickets after cars were invented.
D)  A is diamond necklaces, and B is beds. E) All of the above
F) B) and D)

Question 9

Which of the following is not possible?

Accepted Answer

A)  Demand is elastic, and a decrease in price causes an increase in revenue.
B)  Demand is unit elastic, and a decrease in price causes an increase in revenue.
C)  Demand is inelastic, and an increase in price causes an increase in revenue.
D)  Demand is perfectly inelastic, and an increase in price causes an increase in revenue.E) A) and B)
F) A) and C)

Question 10

The price elasticity of supply measures how responsive

Accepted Answer

A)  sellers are to a change in price.
B)  sellers are to a change in buyers' income.
C)  buyers are to a change in production costs.
D)  equilibrium price is to a change in supply.E) A) and D)
F) All of the above

Question 11

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

Accepted Answer

A)  0.2
B)  1
C)  1.5
D)  All of the above could be correct.E) C) and D)
F) A) and B)

Question 12

There are very few, if any, good substitutes for motor oil. Therefore, the

Accepted Answer

A)  demand for motor oil would tend to be inelastic.
B)  demand for motor oil would tend to be elastic.
C)  demand for motor oil would tend to respond strongly to changes in prices of other goods.
D)  supply of motor oil would tend to respond strongly to changes in people's tastes for large cars relative to their tastes for small cars.E) None of the above
F) A) and B)

Question 13

Which of the following statements is valid when the market supply curve is vertical?

Accepted Answer

A)  Market quantity supplied does not change when the price changes.
B)  Supply is perfectly elastic.
C)  An increase in market demand will increase the equilibrium quantity.
D)  An increase in market demand will not increase the equilibrium price.E) A) and C)
F) B) and D)

Question 14

For a good that is a luxury, demand

Accepted Answer

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) A) and C)
F) C) and D)

Question 15

A key determinant of the price elasticity of supply is the

Accepted Answer

A)  number of close substitutes for the good in question.
B)  extent to which buyers alter their quantities demanded in response to changes in prices.
C)  length of the time period.
D)  extent to which buyers alter their quantities demanded in response to changes in their incomes.E) A) and D)
F) A) and C)

Question 16

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

Accepted Answer

A)  30%.
B)  40%.
C)  80%.
D)  250%.E) B) and D)
F) A) and D)

Question 17

Figure 5-4 
-Refer to Figure 5-4. Assume the section of the demand curve from B to C corresponds to prices between $0 and $15. Then, when the price changes between $7 and $9,

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 zero.E) A) and B)
F) A) and C)

Question 18

The flatter the demand curve that passes through a given point, the more inelastic the demand.

Accepted Answer

A) True 
 B)False

Question 19

Recently, in Smalltown, the price of Twinkies fell from $0.80 to $0.70. As a result, the quantity demanded of Ho-Ho's decreased from 120 to 100. What would be the appropriate elasticity to compute? Using the midpoint method, compute this elasticity. What does your answer tell you?

Accepted Answer

The appropriate elasticity to compute wo...

Question 20

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) A) and D)
F) B) and D)

Exam 5: Elasticity and Its Application

For a good that is a luxury, demand

Correct Answer
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Which of the following statements is valid when the market supply curve is vertical?

Correct Answer
verified

Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls.

Correct Answer
verified

A key determinant of the price elasticity of supply is the

Correct Answer
verified

Table 5-1 $\begin{array} { | c | c | } \hline \text { Gond } & \text { Price Elaticity of Demend } \\\hline \text { A } & 1.3 \\\hline \mathrm { B } & \mathbf { 2 . 1 } \\\hline\end{array}$ -Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Correct Answer
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The flatter the demand curve that passes through a given point, the more inelastic the demand.

Correct Answer
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Which of the following is not possible?

Correct Answer
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Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

There are very few, if any, good substitutes for motor oil. Therefore, the

Correct Answer
verified

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. Assume the section of the demand curve from B to C corresponds to prices between $0 and $15. Then, when the price changes between $7 and $9,

Correct Answer
verified

Recently, in Smalltown, the price of Twinkies fell from $0.80 to $0.70. As a result, the quantity demanded of Ho-Ho's decreased from 120 to 100. What would be the appropriate elasticity to compute? Using the midpoint method, compute this elasticity. What does your answer tell you?

Correct Answer
verified
The appropriate elasticity to compute wo...
View Answer

The price elasticity of supply measures how responsive

Correct Answer
verified

Suppose good X has a negative income elasticity of demand. This implies that good X is

Correct Answer
verified

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

A manufacturer produces 400 units when the market price of $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Correct Answer
verified

Exam 5: Elasticity and Its Application

For a good that is a luxury, demand

Correct AnswerverifiedShow Answer

Which of the following statements is valid when the market supply curve is vertical?

Correct AnswerverifiedShow Answer

Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls.

Correct AnswerverifiedShow Answer

A key determinant of the price elasticity of supply is the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The flatter the demand curve that passes through a given point, the more inelastic the demand.

Correct AnswerverifiedShow Answer

Which of the following is not possible?

Correct AnswerverifiedShow Answer

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

There are very few, if any, good substitutes for motor oil. Therefore, the

Correct AnswerverifiedShow Answer

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. Assume the section of the demand curve from B to C corresponds to prices between $0 and $15. Then, when the price changes between $7 and $9,

Correct AnswerverifiedShow Answer

Recently, in Smalltown, the price of Twinkies fell from $0.80 to $0.70. As a result, the quantity demanded of Ho-Ho's decreased from 120 to 100. What would be the appropriate elasticity to compute? Using the midpoint method, compute this elasticity. What does your answer tell you?

Correct AnswerverifiedThe appropriate elasticity to compute wo...View AnswerShow Answer

The price elasticity of supply measures how responsive

Correct AnswerverifiedShow Answer

Suppose good X has a negative income elasticity of demand. This implies that good X is

Correct AnswerverifiedShow Answer

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A manufacturer produces 400 units when the market price of $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Correct AnswerverifiedShow Answer

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The appropriate elasticity to compute wo...
View Answer

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