Question 1

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

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) B) and D)
F) B) and C)

Question 2

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

Accepted Answer

A) True 
 B)False

Question 3

If the price elasticity of demand is equal to 0, then demand is unit elastic.

Accepted Answer

A) True 
 B)False

Question 4

Scenario 5-2
Suppose the demand function for good X is given by:  where  is the quantity demanded of good X,  is the price of good X, and  is the price of good Y, which is related to good X.
-Refer to Scenario 5-2. Using the midpoint method, if the price of good Y is $10 and the price of good X decreases from $5 to $3, what is the price elasticity of demand for good X? Is the demand elastic, unitary elastic, or inelastic?

Accepted Answer

The answer of Scenario 5-2
Suppose the demand function for good...

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Suppose a market has the demand function Qd=20-0.5P. At which of the following prices will total revenue be maximized?

Accepted Answer

A)  $10
B)  $20
C)  $30
D)  $40E) A) and C)
F) None of the above

Question 7

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

Accepted Answer

A)  raise both price and total revenues.
B)  lower both price and total revenues.
C)  raise price and lower total revenues.
D)  lower price and raise total revenues.E) B) and D)
F) None of the above

Question 8

Which of the following statements is not 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 inelastic.
C)  An increase in market demand will increase the equilibrium quantity.
D)  An increase in market demand will increase the equilibrium price.E) All of the above
F) A) and B)

Question 9

In January the price of widgets was $1.00, and Wendy's Widgets produced 80 widgets. In February the price of widgets was $1.50, and Wendy's Widgets produced 110 widgets. In March the price of widgets was $2.00, and Wendy's Widgets produced 140 widgets. The price elasticity of supply of Wendy's Widgets was about

Accepted Answer

A)  0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.
B)  1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00.
C)  0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00.
D)  1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.E) A) and B)
F) A) and C)

Question 10

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

Question 11

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

Question 12

Figure 5-12 
-Refer to Figure 5-12. Sellers' total revenue would increase if the price

Accepted Answer

A)  increased from $6 to $9.
B)  increased from $33 to $36.
C)  decreased from $15 to $12.
D)  All of the above are correct.E) A) and C)
F) B) and C)

Question 13

Necessities such as food and clothing tend to have

Accepted Answer

A)  high price elasticities of demand and high income elasticities of demand.
B)  high price elasticities of demand and low income elasticities of demand.
C)  low price elasticities of demand and high income elasticities of demand.
D)  low price elasticities of demand and low income elasticities of demand.E) A) and B)
F) C) and D)

Question 14

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about

Accepted Answer

A)  0.43, and Jim regards tickets to sporting events as inferior goods.
B)  0.43, and Jim regards tickets to sporting events as normal goods.
C)  2.33, and Jim regards tickets to sporting events as inferior goods.
D)  2.33, and Jim regards tickets to sporting events as normal goods.E) A) and C)
F) A) and D)

Question 15

Figure 5-20 
-Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

Accepted Answer

A)  S1
B)  S2
C)  S3
D)  None of the supply curves is perfectly inelastic.E) A) and B)
F) A) and C)

Question 16

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

Question 17

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

Accepted Answer

A) True 
 B)False

Question 18

When demand is inelastic, the price elasticity of demand is

Accepted Answer

A)  less than 1, and price and total revenue will move in the same direction.
B)  less than 1, and price and total revenue will move in opposite directions.
C)  greater than 1, and price and total revenue will move in the same direction.
D)  greater than 1, and price and total revenue will move in opposite directions.E) None of the above
F) A) and B)

Question 19

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 $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

Accepted Answer

A)  0.00
B)  0.50
C)  1.00
D)  1.50E) B) and C)
F) A) and B)

Question 20

Table 5-2 
-Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is

Accepted Answer

A)  0.31.
B)  0.46.
C)  1.25.
D)  2.17E) C) and D)
F) A) and B)

Exam 5: Elasticity and Its Application

Correct Answer
verified

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

Correct Answer
verified

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

Correct Answer
verified

If the price elasticity of demand is equal to 0, then demand is unit elastic.

Correct Answer
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Which of the following statements is not valid when the market supply curve is vertical?

Correct Answer
verified

Necessities such as food and clothing tend to have

Correct Answer
verified

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

Correct Answer
verified

Correct Answer
verified

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

Correct Answer
verified

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

Correct Answer
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Figure 5-20 -Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

Correct Answer
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Suppose a market has the demand function Q^d=20-0.5P. At which of the following prices will total revenue be maximized?

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

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is

Correct Answer
verified

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about

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 $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

Correct Answer
verified

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

Correct Answer
verified

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

Correct Answer
verified

When demand is inelastic, the price elasticity of demand is

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

Exam 5: Elasticity and Its Application

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

Correct AnswerverifiedShow Answer

If the price elasticity of demand is equal to 0, then demand is unit elastic.

Correct AnswerverifiedShow Answer

Which of the following statements is not valid when the market supply curve is vertical?

Correct AnswerverifiedShow Answer

Necessities such as food and clothing tend to have

Correct AnswerverifiedShow Answer

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-20 -Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

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Suppose a market has the demand function Qd=20-0.5P. At which of the following prices will total revenue be maximized?

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

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is

Correct AnswerverifiedShow Answer

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about

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 $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

Correct AnswerverifiedShow Answer

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When demand is inelastic, the price elasticity of demand is

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

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Suppose a market has the demand function Q^d=20-0.5P. At which of the following prices will total revenue be maximized?

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