Question 1

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

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)  The demand for illegal drugs is inelastic.
B)  Interdiction results in drug addicts having a greater need for quick cash.
C)  Interdiction results in an increase in the amount of money needed to buy the same amount of drugs.
D)  Government drug programs are more lenient now with drug offenders than they were in the 1980s.E) C) and D)
F) All of the above

Question 4

Which of the following expressions is valid for the price elasticity of demand?

Accepted Answer

A)  Price elasticity of demand = ) 
B)  Price elasticity of demand = ) 
C)  Price elasticity of demand = ) 
D)  Price elasticity of demand = ) E) B) and D)
F) A) and D)

Question 5

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A)  0.63, and supply is elastic.
B)  0.63, and supply is inelastic.
C)  1.60, and supply is elastic.
D)  1.60, and supply is inelastic.E) A) and C)
F) None of the above

Question 6

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) A) and D)

Question 7

Figure 5-3 
-Refer to Figure 5-3. Which demand curve is perfectly elastic?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) None of the above
F) A) and B)

Question 8

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

Accepted Answer

A)  peanut butter and jelly
B)  celery and coffee
C)  pens and pencils
D)  iPods and iPadsE) All of the above
F) C) and D)

Question 9

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

Accepted Answer

A)  a 0.8 percent increase in the price of the good
B)  a 2.4 percent increase in the price of the good
C)  a 5 percent increase in the price of the good
D)  a 8 percent increase in the price of the goodE) A) and C)
F) A) and B)

Question 10

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 D)
F) C) and D)

Question 11

If demand is price inelastic, then

Accepted Answer

A)  buyers do not respond much to a change in price.
B)  buyers respond substantially to a change in price, but the response is very slow.
C)  buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes.
D)  the demand curve is very flat.E) A) and D)
F) All of the above

Question 12

Figure 5-8 
-Refer to Figure 5-8. When the price is $15, total revenue is

Accepted Answer

A)  $1,500.
B)  $2,500.
C)  $3,500.
D)  $4,500.E) B) and C)
F) A) and D)

Question 13

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 14

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)  0.3
B)  1
C)  1.8
D)  None of the above could be correct.E) A) and B)
F) A) and C)

Question 15

The cross-price elasticity of demand can tell us whether goods are

Accepted Answer

A)  normal or inferior.
B)  elastic or inelastic.
C)  luxuries or necessities.
D)  complements or substitutes.E) A) and B)
F) None of the above

Question 16

If the price elasticity of supply for a good is equal to infinity, then the

Accepted Answer

A)  supply curve is vertical.
B)  supply curve is horizontal.
C)  supply curve also has a slope equal to infinity.
D)  quantity supplied is constant regardless of the price.E) A) and B)
F) All of the above

Question 17

Holding all other forces constant, if increasing the price of a good leads to a decrease 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 decrease in total revenue.E) All of the above
F) B) and C)

Question 18

Figure 5-12 
-Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Accepted Answer

A)  0.4.
B)  1.
C)  2.
D)  2.5.E) B) and D)
F) A) and C)

Question 19

Figure 5-3 
-Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve

Accepted Answer

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

Question 20

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about

Accepted Answer

A)  0.67%.
B)  0.83%.
C)  1.20%.
D)  2.70%.E) All of the above
F) C) and D)

Exam 5: Elasticity and Its Application

Figure 5-3 -Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about

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Figure 5-3 -Refer to Figure 5-3. Which demand curve is perfectly elastic?

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

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

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If the price elasticity of supply for a good is equal to infinity, then the

Correct AnswerverifiedShow Answer

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

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

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

Correct AnswerverifiedShow Answer

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

Correct AnswerverifiedShow Answer

Which of the following expressions is valid for the price elasticity of demand?

Correct AnswerverifiedShow Answer

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Correct AnswerverifiedShow Answer

The cross-price elasticity of demand can tell us whether goods are

Correct AnswerverifiedShow Answer

Figure 5-8 -Refer to Figure 5-8. When the price is $15, total revenue is

Correct AnswerverifiedShow Answer

If demand is price inelastic, then

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

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

Correct AnswerverifiedShow Answer

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