Question 1

The price elasticity of supply measures how much

Accepted Answer

A)  the quantity supplied responds to changes in input prices.
B)  the quantity supplied responds to changes in the price of the good.
C)  the price of the good responds to changes in supply.
D)  sellers respond to changes in technology.E) A) and C)
F) A) and B)

Question 2

Suppose you calculate the price elasticity of demand for a certain good and you report that the elasticity is 0.8.The fact that the elasticity is a positive number means that

Accepted Answer

A)  when the price of the good increases, the quantity demanded increases in response.
B)  demand for the good is elastic.
C)  you have dropped the minus sign and reported the absolute value of the elasticity.
D)  the good has close substitutes and/or the good is a luxury.E) None of the above
F) C) and D)

Question 3

A linear,upward-sloping supply curve has

Accepted Answer

A)  a constant slope and a changing elasticity of supply.
B)  a changing slope and a constant elasticity of supply.
C)  both a constant slope and a constant elasticity of supply.
D)  both a changing slope and a changing elasticity of supply.E) B) and D)
F) C) and D)

Question 4

Farm programs that pay farmers not to plant crops on all their land

Accepted Answer

A)  hurt farmers by lowering their total revenue, and hurt consumers by causing shortages of some food items.
B)  help farmers by cutting costs, which helps consumers by lowering food prices.
C)  help farmers by increasing total revenue in the market, but hurt consumers by raising prices.
D)  help farmers directly since they receive government payments, but has no real effect on consumers.E) All of the above
F) A) and B)

Question 5

Figure 5-4
 
-Refer to Figure 5-4.As price falls from PA to PB,we could use the three demand curves to calculate three different values of the price elasticity of demand.Which of the three demand curves would produce the smallest elasticity?

Accepted Answer

A)  D₁
B)  D₂
C)  D₃
D)  All of the above are equally elastic.E) A) and B)
F) A) and C)

Question 6

If the cross-price elasticity of two goods is negative,then those two goods are

Accepted Answer

A)  necessities.
B)  complements.
C)  normal goods.
D)  inferior goods.E) C) and D)
F) All of the above

Question 7

If the demand for donuts is elastic,then a decrease in the price of donuts will

Accepted Answer

A)  increase total revenue of donut sellers.
B)  decrease total revenue of donut sellers.
C)  not change total revenue of donut sellers.
D)  There is not enough information to answer this question.E) None of the above
F) B) and C)

Question 8

If the supply curve for news magazines is an upward-sloping line and goes through the point (quantity supplied = 0,price = $1.00) ,then the price elasticity of supply for news magazines is

Accepted Answer

A)  less than one.
B)  greater than one.
C)  perfectly inelastic.
D)  equal to the price elasticity of demand for news magazines.E) A) and B)
F) A) and C)

Question 9

Total revenue will be at its largest value on a linear demand curve at

Accepted Answer

A)  the top of the curve, where prices are highest.
B)  the midpoint of the curve.
C)  the low end of the curve, where quantity demanded is highest.
D)  None of the above is correct.E) B) and D)
F) A) and B)

Question 10

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

Accepted Answer

A)  both supply and demand are inelastic.
B)  both supply and demand are elastic.
C)  demand is elastic and supply is inelastic.
D)  demand is inelastic and supply is elastic.E) A) and B)
F) C) and D)

Question 11

A perfectly inelastic demand implies that buyers

Accepted Answer

A)  decrease their purchases when the price rises.
B)  purchase the same amount as before when the price rises or falls.
C)  increase their purchases only slightly when the price falls.
D)  respond substantially to an increase in price.E) A) and D)
F) C) and D)

Question 12

Table 5-2
 
-Refer to Table 5-2.Which of the three supply curves represents the most elastic supply?

Accepted Answer

A)  supply curve A
B)  supply curve B
C)  supply curve C
D)  There is no difference in the elasticity of the three supply curves.E) B) and C)
F) All of the above

Question 13

Figure 5-6
 
-Refer to Figure 5-6.A decrease in price from $15 to $10 leads to

Accepted Answer

A)  a decrease in total revenue of $10, so the price elasticity of demand is greater than 1 in this price range.
B)  a decrease in total revenue of $10, so the price elasticity of demand is less than 1 in this price range.
C)  a decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this price range.
D)  a decrease in total revenue of $20, so demand is elastic in this price range.E) A) and C)
F) B) and D)

Question 14

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 amounted to

Accepted Answer

A)  0.67%.
B)  0.83%.
C)  1.20%.
D)  2.70%.E) A) and B)
F) B) and C)

Question 15

The price elasticity of demand changes as we move along a

Accepted Answer

A)  horizontal demand curve.
B)  vertical demand curve.
C)  linear, downward-sloping demand curve.
D)  All of the above are correct.E) B) and D)
F) All of the above

Question 16

If a person only occasionally buys a cup of coffee,his demand for coffee is probably

Accepted Answer

A)  represented by a vertical or nearly-vertical demand curve.
B)  not easily represented by a demand schedule or demand curve.
C)  inelastic.
D)  elastic.E) None of the above
F) B) and D)

Question 17

If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result,then the price elasticity of demand is 3.

Accepted Answer

A) True 
 B)False

Question 18

Holding all other factors constant and using the midpoint method,if a pencil manufacturer increases production by 20 percent when the market price of pencils increases from $0.50 to $0.60,then supply is

Accepted Answer

A)  inelastic, since the price elasticity of supply is equal to .91.
B)  inelastic, since the price elasticity of supply is equal to 1.1.
C)  elastic, since the price elasticity of supply is equal to 0.91.
D)  elastic, since the price elasticity of supply is equal to 1.1.E) A) and B)
F) None of the above

Question 19

Figure 5-2
 
-Refer to Figure 5-2.The price elasticity of demand between point A and point B,using the midpoint method,is

Accepted Answer

A)  1.
B)  1.5.
C)  2.
D)  2.5.E) All of the above
F) B) and C)

Question 20

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

Exam 5: Elasticity and Its Applications

Figure 5-2 -Refer to Figure 5-2.The price elasticity of demand between point A and point B,using the midpoint method,is

Correct AnswerverifiedShow Answer

The price elasticity of demand changes as we move along a

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Holding all other factors constant and using the midpoint method,if a pencil manufacturer increases production by 20 percent when the market price of pencils increases from $0.50 to $0.60,then supply is

Correct AnswerverifiedShow Answer

If a person only occasionally buys a cup of coffee,his demand for coffee is probably

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

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If the demand for donuts is elastic,then a decrease in the price of donuts will

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A perfectly inelastic demand implies that buyers

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Figure 5-6 -Refer to Figure 5-6.A decrease in price from $15 to $10 leads to

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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 amounted to

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The price elasticity of supply measures how much

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If the supply curve for news magazines is an upward-sloping line and goes through the point (quantity supplied = 0,price = $1.00) ,then the price elasticity of supply for news magazines is

Correct AnswerverifiedShow Answer

Necessities such as food and clothing tend to have

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4.As price falls from PA to PB,we could use the three demand curves to calculate three different values of the price elasticity of demand.Which of the three demand curves would produce the smallest elasticity?

Correct AnswerverifiedShow Answer

If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result,then the price elasticity of demand is 3.

Correct AnswerverifiedShow Answer

A linear,upward-sloping supply curve has

Correct AnswerverifiedShow Answer

If the cross-price elasticity of two goods is negative,then those two goods are

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Table 5-2 -Refer to Table 5-2.Which of the three supply curves represents the most elastic supply?

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Farm programs that pay farmers not to plant crops on all their land

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Suppose you calculate the price elasticity of demand for a certain good and you report that the elasticity is 0.8.The fact that the elasticity is a positive number means that

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Total revenue will be at its largest value on a linear demand curve at

Correct AnswerverifiedShow Answer

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