Question 1

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds. Using the midpoint method, what is the approximate value of the price elasticity of supply?

Accepted Answer

A)   0.67
B)   0.89
C)   1.00
D)   1.13E) C) and D)
F) None of the above

Question 2

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) A) and D)
F) None of the above

Question 3

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

Question 4

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, at a price of $8, what is the income elasticity of demand when income rises from $7,500 to $10,000?

Accepted Answer

A)   0.00
B)   0.41
C)   1.00
D)   2.45E) C) and D)
F) B) and C)

Question 5

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 6

Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples illustrate the importance of

Accepted Answer

A)   the availability of close substitutes in determining the price elasticity of demand.
B)   a necessity versus a luxury in determining the price elasticity of demand.
C)   the definition of a market in determining the price elasticity of demand.
D)   the time horizon in determining the price elasticity of demand.E) C) and D)
F) B) and D)

Question 7

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) B) and C)
F) All of the above

Question 8

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

Accepted Answer

A)   clothing
B)   blue jeans
C)   Tommy Hilfiger jeans
D)   All three would have the same elasticity of demand because they are all related.E) None of the above
F) C) and D)

Question 9

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then

Accepted Answer

A)   consumers of wheat would buy more wheat.
B)   wheat farmers would suffer a reduction in their total revenue.
C)   wheat farmers would experience an increase in their total revenue.
D)   the demand for wheat would decrease.E) A) and B)
F) A) and C)

Question 10

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Accepted Answer

A)   positive.
B)   negative.
C)   either positive or negative. It depends whether A and B are normal goods or inferior goods.
D)   either positive or negative. It depends whether the current price level is on the elastic or inelastic portion of the demand curve.E) B) and C)
F) All of the above

Question 11

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the

Accepted Answer

A)   steeper the demand curve will be.
B)   flatter the demand curve will be.
C)   further to the right the demand curve will sit.
D)   closer to the vertical axis the demand curve will sit.E) B) and C)
F) None of the above

Question 12

The demand for Godiva mint chocolates is likely quite elastic because

Accepted Answer

A)   there are many close substitutes.
B)   this particular type of chocolate is viewed as a luxury by many chocolate lovers.
C)   the market is narrowly defined.
D)   All of the above are correct.E) All of the above
F) A) and D)

Question 13

Josh mows lawns. If the demand for lawn-mowing service is elastic and Josh wants to increase his total revenue, he should

Accepted Answer

A)   increase the price of his lawn-mowing service.
B)   decrease the price of his lawn-mowing service.
C)   reduce the costs of operating his lawn-mowing service.
D)   More than one of the above is correct.E) B) and C)
F) All of the above

Question 14

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

Accepted Answer

A)   inelastic.
B)   elastic.
C)   unit elastic.
D)   quite sensitive to changes in income.E) A) and D)
F) B) and C)

Question 15

Table 5-8 
-Refer to Table 5-8. Using the midpoint method, the income elasticity of demand for good Y is

Accepted Answer

A)   2.33, and good Y is a normal good.
B)   -2.33, and good Y is an inferior good.
C)   -0.43, and good Y is a normal good.
D)   -0.43, and good Y is an inferior good.E) B) and C)
F) C) and D)

Question 16

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 B)
F) A) and C)

Question 17

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

Accepted Answer

A)   yoga mats
B)   prescription medicine
C)   protein powder
D)   gym membershipsE) A) and B)
F) A) and D)

Question 18

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

Accepted Answer

A)   0
B)   0.4
C)   1
D)   4E) A) and B)
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 quantity 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) A) and B)
F) None of the above

Question 20

Figure 5-9 
-Refer to Figure 5-9. 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) B) and C)
F) None of the above

Exam 5: Elasticity and Its Application

Josh mows lawns. If the demand for lawn-mowing service is elastic and Josh wants to increase his total revenue, he should

Correct Answer
verified

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

Correct Answer
verified

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

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

The demand for Godiva mint chocolates is likely quite elastic because

Correct Answer
verified

Correct Answer
verified

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the

Correct Answer
verified

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Correct Answer
verified

Table 5-8 -Refer to Table 5-8. Using the midpoint method, the income elasticity of demand for good Y is

Correct Answer
verified

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

Correct Answer
verified

Figure 5-9 -Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point C and point D is about

Correct Answer
verified

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

Correct Answer
verified

The price elasticity of supply measures how responsive

Correct Answer
verified

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
verified

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then

Correct Answer
verified

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

Correct Answer
verified

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, at a price of $8, what is the income elasticity of demand when income rises from $7,500 to $10,000?

Correct Answer
verified

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Correct Answer
verified

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds. Using the midpoint method, what is the approximate value of the price elasticity of supply?

Correct Answer
verified

Correct Answer
verified

Exam 5: Elasticity and Its Application

Josh mows lawns. If the demand for lawn-mowing service is elastic and Josh wants to increase his total revenue, he should

Correct AnswerverifiedShow Answer

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

Correct AnswerverifiedShow Answer

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

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

The demand for Godiva mint chocolates is likely quite elastic because

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the

Correct AnswerverifiedShow Answer

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Correct AnswerverifiedShow Answer

Table 5-8 -Refer to Table 5-8. Using the midpoint method, the income elasticity of demand for good Y is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-9 -Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point C and point D is about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The price elasticity of supply measures how responsive

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

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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, at a price of $8, what is the income elasticity of demand when income rises from $7,500 to $10,000?

Correct AnswerverifiedShow Answer

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Correct AnswerverifiedShow Answer

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds. Using the midpoint method, what is the approximate value of the price elasticity of supply?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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