Question 1

Graph 5-1
 
-In Graph 5-1, the section of the demand curve labelled A represents the:

Accepted Answer

A)   inelastic section of the demand curve
B)   unit elastic section of the demand curve
C)   elastic section of the demand curve
D)   perfectly elastic section of the demand curveE) None of the above
F) All of the above

Question 2

If price changes and total revenue changes in the opposite direction, we can conclude that demand is relatively elastic.

Accepted Answer

A) True 
 B)False

Question 3

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Accepted Answer

A) True 
 B)False

Question 4

The concept of the slope is the best way to measure the responsiveness of demand to changes in its determinants.

Accepted Answer

A) True 
 B)False

Question 5

Cross-price elasticity of demand is calculated as:

Accepted Answer

A)   the percentage change in quantity demanded of good one divided by the percentage change in the price of good two
B)   the total percentage change in quantity demanded divided by the total percentage change in price
C)   the percentage change in quantity demanded divided by the percentage change in income
D)   none of the above answers is correctE) A) and B)
F) B) and C)

Question 6

If the demand for illegal drugs is inelastic, drug education campaigns should:

Accepted Answer

A)   reduce both drug use and drug-related crime
B)   reduce drug use and increase drug-related crime
C)   increase both drug use and drug-related crime unchanged
D)   increase drug use and reduce drug-related crimeE) B) and D)
F) B) and C)

Question 7

Graph 5-4
 1 is represented by area(s) : A)  B + D B)  A + B C)  C + D D)  D" class="answers-bank-image d-inline" rel="preload" >
-Refer to Graph 5-4. The total revenue at P1 is represented by area(s) :

Accepted Answer

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

Question 8

Graph 5-5
 1 B)  S2 C)  S3 D)  all of the above are equally likely to be the long-run supply curve" class="answers-bank-image d-inline" rel="preload" >
-In Graph 5-5, which supply curve is most likely the long-run supply curve?

Accepted Answer

A)   S1
B)   S2
C)   S3
D)   all of the above are equally likely to be the long-run supply curveE) A) and B)
F) A) and C)

Question 9

The price of product X is reduced from $45 to $20 and, as a result, the quantity demanded increases from 20 to 25 units. From this we can conclude that the demand for X in this price range:

Accepted Answer

A)   has declined
B)   is of unit elasticity
C)   is inelastic
D)   is elasticE) None of the above
F) A) and B)

Question 10

Price elasticity of supply measures how much the quantity supplied responds to changes in demand.

Accepted Answer

A) True 
 B)False

Question 11

If sellers do NOT respond at all to a change in price:

Accepted Answer

A)   supply must be perfectly inelastic
B)   supply must be perfectly elastic
C)   a long period of time must have elapsed
D)   the rate of technological advancement must be greatE) B) and C)
F) A) and B)

Question 12

Table 5-2
Quantities purchased
 
-Refer to Table 5-2. Good Y is:

Accepted Answer

A)   not related to income
B)   an inferior good
C)   price inelastic
D)   a normal goodE) B) and D)
F) B) and C)

Question 13

Graph 5-3
 A to PB, which demand curve is most elastic? A)  D1 B)  D2 C)  D3 D)  all of the above are equally elastic" class="answers-bank-image d-inline" rel="preload" >
-In Graph 5-3, as price falls from PA to PB, which demand curve is most elastic?

Accepted Answer

A)   D1
B)   D2
C)   D3
D)   all of the above are equally elasticE) A) and B)
F) B) and C)

Question 14

Suppose that after a five per cent increase in the price of timber, a forestry company increases its supply of timber by 10 per cent in the next three months, and 15 per cent by 12 months. This means that the elasticity of supply is _____.

Accepted Answer

A)   3 at three months and 2 at 12 months
B)   0.5 at three months and 0.3 at 12 months
C)   2 at three months and 3 at 12 months
D)   0.3 at three months and 0.5 at 12 monthsE) C) and D)
F) B) and C)

Question 15

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

A) True 
 B)False

Question 16

As price elasticity of demand increases, the demand curve gets steeper and steeper.

Accepted Answer

A) True 
 B)False

Question 17

Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand. If the producer's objective is to increase total revenue, she should:

Accepted Answer

A)   increase the price charged to customers with the price elastic demand and decrease the price charged to customers with the price inelastic demand
B)   decrease the price charged to customers with the price elastic demand and increase the price charged to customers with the price inelastic demand
C)   charge the same price to both groups of customers
D)   increase the price for both groups of customersE) C) and D)
F) All of the above

Question 18

The demand for basic foodstuffs such as rice or flour is usually elastic.

Accepted Answer

A) True 
 B)False

Question 19

Consider the following pairs of goods. Which would you expect to have the more elastic demand? Why?
a. water or diamonds
b. insulin or nasal decongestant spray
c. food in general or breakfast cereal
d. gasoline over the course of a week or gasoline over the course of a year
e. personal computers or IBM personal computers

Accepted Answer

a. Diamonds are luxuries and water is a ...

Question 20

What is the definition of the income elasticity of demand. What does it measure? How can it be used to determine whether a good is normal or inferior. What happens to the demand for an inferior good is income decreases?

Accepted Answer

The income elasticity of demand is defin...

Exam 5: Elasticity and Its Application

The concept of the slope is the best way to measure the responsiveness of demand to changes in its determinants.

Correct Answer
verified

Suppose that after a five per cent increase in the price of timber, a forestry company increases its supply of timber by 10 per cent in the next three months, and 15 per cent by 12 months. This means that the elasticity of supply is _____.

Correct Answer
verified

Graph 5-3 -In Graph 5-3, as price falls from P_A to P_B, which demand curve is most elastic?

Correct Answer
verified

If sellers do NOT respond at all to a change in price:

Correct Answer
verified

Price elasticity of supply measures how much the quantity supplied responds to changes in demand.

Correct Answer
verified

Graph 5-4 -Refer to Graph 5-4. The total revenue at P₁ is represented by area(s) :

Correct Answer
verified

If price changes and total revenue changes in the opposite direction, we can conclude that demand is relatively elastic.

Correct Answer
verified

Graph 5-5 -In Graph 5-5, which supply curve is most likely the long-run supply curve?

Correct Answer
verified

As price elasticity of demand increases, the demand curve gets steeper and steeper.

Correct Answer
verified

The price of product X is reduced from $45 to $20 and, as a result, the quantity demanded increases from 20 to 25 units. From this we can conclude that the demand for X in this price range:

Correct Answer
verified

Correct Answer
verified
a. Diamonds are luxuries and water is a ...
View Answer

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Correct Answer
verified

Cross-price elasticity of demand is calculated as:

Correct Answer
verified

Graph 5-1 -In Graph 5-1, the section of the demand curve labelled A represents the:

Correct Answer
verified

A government program that reduces land under cultivation hurts farmers but helps consumers.

Correct Answer
verified

Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand. If the producer's objective is to increase total revenue, she should:

Correct Answer
verified

Table 5-2 Quantities purchased -Refer to Table 5-2. Good Y is:

Correct Answer
verified

What is the definition of the income elasticity of demand. What does it measure? How can it be used to determine whether a good is normal or inferior. What happens to the demand for an inferior good is income decreases?

Correct Answer
verified
The income elasticity of demand is defin...
View Answer

The demand for basic foodstuffs such as rice or flour is usually elastic.

Correct Answer
verified

If the demand for illegal drugs is inelastic, drug education campaigns should:

Correct Answer
verified

Exam 5: Elasticity and Its Application

The concept of the slope is the best way to measure the responsiveness of demand to changes in its determinants.

Correct AnswerverifiedShow Answer

Suppose that after a five per cent increase in the price of timber, a forestry company increases its supply of timber by 10 per cent in the next three months, and 15 per cent by 12 months. This means that the elasticity of supply is _____.

Correct AnswerverifiedShow Answer

Graph 5-3 -In Graph 5-3, as price falls from PA to PB, which demand curve is most elastic?

Correct AnswerverifiedShow Answer

If sellers do NOT respond at all to a change in price:

Correct AnswerverifiedShow Answer

Price elasticity of supply measures how much the quantity supplied responds to changes in demand.

Correct AnswerverifiedShow Answer

Graph 5-4 -Refer to Graph 5-4. The total revenue at P1 is represented by area(s) :

Correct AnswerverifiedShow Answer

If price changes and total revenue changes in the opposite direction, we can conclude that demand is relatively elastic.

Correct AnswerverifiedShow Answer

Graph 5-5 -In Graph 5-5, which supply curve is most likely the long-run supply curve?

Correct AnswerverifiedShow Answer

As price elasticity of demand increases, the demand curve gets steeper and steeper.

Correct AnswerverifiedShow Answer

The price of product X is reduced from $45 to $20 and, as a result, the quantity demanded increases from 20 to 25 units. From this we can conclude that the demand for X in this price range:

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Diamonds are luxuries and water is a ...View AnswerShow Answer

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Correct AnswerverifiedShow Answer

Cross-price elasticity of demand is calculated as:

Correct AnswerverifiedShow Answer

Graph 5-1 -In Graph 5-1, the section of the demand curve labelled A represents the:

Correct AnswerverifiedShow Answer

A government program that reduces land under cultivation hurts farmers but helps consumers.

Correct AnswerverifiedShow Answer

Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand. If the producer's objective is to increase total revenue, she should:

Correct AnswerverifiedShow Answer

Table 5-2 Quantities purchased -Refer to Table 5-2. Good Y is:

Correct AnswerverifiedShow Answer

What is the definition of the income elasticity of demand. What does it measure? How can it be used to determine whether a good is normal or inferior. What happens to the demand for an inferior good is income decreases?

Correct AnswerverifiedThe income elasticity of demand is defin...View AnswerShow Answer

The demand for basic foodstuffs such as rice or flour is usually elastic.

Correct AnswerverifiedShow Answer

If the demand for illegal drugs is inelastic, drug education campaigns should:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Graph 5-3 -In Graph 5-3, as price falls from P_A to P_B, which demand curve is most elastic?

Correct Answer
verified

Correct Answer
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Correct Answer
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Graph 5-4 -Refer to Graph 5-4. The total revenue at P₁ is represented by area(s) :

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
a. Diamonds are luxuries and water is a ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The income elasticity of demand is defin...
View Answer

Correct Answer
verified

Correct Answer
verified