Question 1

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

Accepted Answer

A)   0.5
B)   1
C)   1.5
D)   All of the above could be correct.E) All of the above
F) A) and B)

Question 2

For a particular good,a 10 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A)   The relevant time horizon is short.
B)   The good is a luxury.
C)   The market for the good is narrowly defined.
D)   There are many close substitutes for this good.E) A) and D)
F) A) and C)

Question 3

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)

Question 4

A decrease in supply will cause the smallest increase in price when

Accepted Answer

A)   both supply and demand are inelastic.
B)   demand is elastic and supply is inelastic.
C)   both supply and demand are elastic.
D)   demand is inelastic and supply is elastic.E) A) and C)
F) None of the above

Question 5

Figure 5-4 
-Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 2,000,P = $15) and (Q = 2,400,P = $12) .Then which of the following scenarios is possible?

Accepted Answer

A)   Both of these points lie on section BC of the demand curve.
B)   The vertical intercept of the demand curve is the point (Q = 0,P = $22) .
C)   The horizontal intercept of the demand curve is the point (Q = 5,000,P = $0) .
D)   Any of these scenarios is possible.E) A) and D)
F) B) and D)

Question 6

Because the demand for wheat tends to be inelastic,the development of a new,more productive hybrid wheat would tend to

Accepted Answer

A)   increase the total revenue of wheat farmers.
B)   decrease the total revenue of wheat farmers.
C)   decrease the demand for wheat.
D)   decrease the supply of wheat.E) A) and B)
F) C) and D)

Question 7

Figure 5-14 
-Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points A and B?

Accepted Answer

A)   2.33
B)   1.0
C)   0.43
D)   0.1E) B) and C)
F) A) and C)

Question 8

Figure 5-9 
-Refer to Figure 5-9.If price increases from $10 to $15,total revenue will

Accepted Answer

A)   increase by $20,so demand must be inelastic in this price range.
B)   increase by $5,so demand must be inelastic in this price range.
C)   decrease by $20,so demand must be elastic in this price range.
D)   decrease by $10,so demand must be elastic in this price range.E) B) and C)
F) None of the above

Question 9

The midpoint method is used to compute elasticity because it

Accepted Answer

A)   automatically computes a positive number instead of a negative number.
B)   results in an elasticity that is the same as the slope of the demand curve.
C)   gives the same answer regardless of the direction of change.
D)   automatically rounds quantities to the nearest whole unit.E) B) and D)
F) All of the above

Question 10

The demand for Hubba Bubba bubble gum is likely

Accepted Answer

A)   elastic because gum is expensive relative to other snacks.
B)   elastic because there are many close substitutes for Hubba Bubba.
C)   elastic because bubble gum is regarded as a necessity by many people.
D)   inelastic because it is consumed quickly,making the relevant time horizon short.E) All of the above
F) C) and D)

Question 11

In general,demand curves for luxuries tend to be price elastic.

Accepted Answer

A) True 
 B)False

Question 12

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00.This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Accepted Answer

A)   fall by 200 percent.
B)   fall by 40 percent.
C)   rise by 200 percent.
D)   rise by 40 percent.E) None of the above
F) A) and B)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Suppose the price elasticity of demand for good A is 1.25.If the price of good A increases by 20%,what will be the resulting percentage change in quantity demanded for good A?

Accepted Answer

Quantity d...

Question 15

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50.This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Accepted Answer

A)   fall by 8 percent.
B)   fall by 50 percent.
C)   rise by 8 percent.
D)   rise by 50 percent.E) None of the above
F) A) and C)

Question 16

When quantity moves proportionately the same amount as price,demand is

Accepted Answer

A)   elastic,and the price elasticity of demand is 1.
B)   perfectly elastic,and the price elasticity of demand is infinitely large.
C)   perfectly inelastic,and the price elasticity of demand is 0.
D)   unit elastic,and the price elasticity of demand is 1.E) A) and D)
F) All of the above

Question 17

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

Question 18

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

Accepted Answer

A)   midpoint of the demand curve.
B)   lower end of the demand curve.
C)   upper end of the demand curve.
D)   It is impossible to tell without knowing prices and quantities demanded.E) All of the above
F) A) and B)

Question 19

Suppose that gasoline prices increase dramatically this month.Lola commutes 100 miles to work each weekday.Over the next few months,Lola drives less on the weekends to try to save money.Within the year,she sells her home and purchases one only 10 miles from her place of employment.These examples illustrate the importance of

Accepted Answer

A)   the availability of 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) None of the above
F) B) and C)

Question 20

The smaller the price elasticity of demand,the

Accepted Answer

A)   steeper the demand curve will be through a given point.
B)   flatter the demand curve will be through a given point.
C)   more strongly buyers respond to a change in price between any two prices P1 and P2.
D)   smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2.E) None of the above
F) A) and D)

Exam 5: Elasticity and Its Application

Because the demand for wheat tends to be inelastic,the development of a new,more productive hybrid wheat would tend to

Correct Answer
verified

For a particular good,a 10 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Correct Answer
verified

Suppose the price elasticity of demand for good A is 1.25.If the price of good A increases by 20%,what will be the resulting percentage change in quantity demanded for good A?

Correct Answer
verified
Quantity d...
View Answer

In general,demand curves for luxuries tend to be price elastic.

Correct Answer
verified

The midpoint method is used to compute elasticity because it

Correct Answer
verified

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

Correct Answer
verified

The smaller the price elasticity of demand,the

Correct Answer
verified

Figure 5-14 -Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points A and B?

Correct Answer
verified

The demand for Hubba Bubba bubble gum is likely

Correct Answer
verified

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00.This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Correct Answer
verified

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50.This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Correct Answer
verified

A decrease in supply will cause the smallest increase in price when

Correct Answer
verified

Correct Answer
verified

Figure 5-9 -Refer to Figure 5-9.If price increases from $10 to $15,total revenue will

Correct Answer
verified

When quantity moves proportionately the same amount as price,demand is

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 2,000,P = $15) and (Q = 2,400,P = $12) .Then which of the following scenarios is possible?

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

Exam 5: Elasticity and Its Application

Because the demand for wheat tends to be inelastic,the development of a new,more productive hybrid wheat would tend to

Correct AnswerverifiedShow Answer

For a particular good,a 10 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

Suppose the price elasticity of demand for good A is 1.25.If the price of good A increases by 20%,what will be the resulting percentage change in quantity demanded for good A?

Correct AnswerverifiedQuantity d...View AnswerShow Answer

In general,demand curves for luxuries tend to be price elastic.

Correct AnswerverifiedShow Answer

The midpoint method is used to compute elasticity because it

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 smaller the price elasticity of demand,the

Correct AnswerverifiedShow Answer

Figure 5-14 -Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points A and B?

Correct AnswerverifiedShow Answer

The demand for Hubba Bubba bubble gum is likely

Correct AnswerverifiedShow Answer

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00.This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Correct AnswerverifiedShow Answer

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50.This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Correct AnswerverifiedShow Answer

A decrease in supply will cause the smallest increase in price when

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 5-9 -Refer to Figure 5-9.If price increases from $10 to $15,total revenue will

Correct AnswerverifiedShow Answer

When quantity moves proportionately the same amount as price,demand is

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 2,000,P = $15) and (Q = 2,400,P = $12) .Then which of the following scenarios is possible?

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

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Quantity d...
View Answer

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