Question 1

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A)   zero.
B)   inelastic.
C)   unit elastic.
D)   elastid.E) All of the above
F) C) and D)

Question 3

Scenario 5-4
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-4. The change in equilibrium price will be

Accepted Answer

A)   greater in the aged cheddar cheese market than in the bread market.
B)   greater in the bread market than in the aged cheddar cheese market.
C)   the same in the aged cheddar cheese and bread markets.
D)   Any of the above could be correct.E) C) and D)
F) A) and D)

Question 4

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is

Accepted Answer

A)   inelastic.
B)   elastic.
C)   unit elastic.
D)   perfectly inelastid.E) A) and B)
F) All of the above

Question 5

When a supply curve is relatively flat,

Accepted Answer

A)   sellers are not very responsive to changes in price.
B)   supply is relatively inelastic.
C)   supply is relatively elastic.
D)   Both a and b are correct.E) B) and C)
F) A) and D)

Question 6

Figure 5-8 
-Refer to Figure 5-8. An increase in price from $15 to $20 would

Accepted Answer

A)   increase total revenue by $500
B)   decrease total revenue by $500.
C)   increase total revenue by $1,000.
D)   decrease total revenue by $1,000.E) A) and B)
F) All of the above

Question 7

Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy 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) All of the above

Question 8

Demand is said to be inelastic if

Accepted Answer

A)   buyers respond substantially to changes in the price of the good.
B)   demand shifts only slightly when the price of the good changes.
C)   the quantity demanded changes only slightly when the price of the good changes.
D)   the price of the good responds only slightly to changes in demand.E) C) and D)
F) All of the above

Question 9

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

Question 10

In general, elasticity is a measure of

Accepted Answer

A)   the extent to which advances in technology are adopted by producers.
B)   the extent to which a market is competitive.
C)   how firms' profits respond to changes in market prices.
D)   how much buyers and sellers respond to changes in market conditions.E) A) and B)
F) None of the above

Question 11

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a

Accepted Answer

A)   0.5 percent decrease in the quantity demanded.
B)   2 percent decrease in the quantity demanded.
C)   5 percent decrease in the quantity demanded.
D)   50 percent decrease in the quantity demanded.E) All of the above
F) B) and D)

Question 12

If the income elasticity of demand for a good is 0.56, is the good a normal or inferior good?

Accepted Answer

The good i...

Question 13

The price elasticity of demand measures the

Accepted Answer

A)   magnitude of the response in quantity demanded to a change in price.
B)   direction of the shift in the demand curve in response to a market event.
C)   size of the shortage created by the increase in demand.
D)   responsiveness of quantity demanded to a change in income.E) A) and D)
F) All of the above

Question 14

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

Accepted Answer

The answer of Suppose that good X has few close...

Question 15

If sellers do not adjust their quantities supplied at all in response to a change in price,

Accepted Answer

A)   advances in technology must be prevalent.
B)   the time period under consideration must be very long.
C)   supply is perfectly elastic.
D)   supply is perfectly inelastid.E) C) and D)
F) None of the above

Question 16

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

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

Question 17

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)   The direct impact is on buyers, not sellers.
B)   Successful drug interdiction policies reduce the demand for illegal drugs.
C)   Drug addicts will have an even greater need for quick cash to support their habits.
D)   In the short run, both equilibrium quantities and prices will fall in the markets for illegal drugs.E) B) and D)
F) None of the above

Question 18

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

Accepted Answer

A)   first becomes smaller, then larger.
B)   always becomes larger.
C)   always becomes smaller.
D)   first becomes larger, then smaller.E) A) and B)
F) B) and D)

Question 19

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

Accepted Answer

A)   the relevant time period is short rather than long.
B)   the relevant time period is long rather than short.
C)   supply is inelastic.
D)   the firm is experiencing capacity problems.E) A) and D)
F) None of the above

Question 20

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price inelastic demand?

Accepted Answer

The answer of Suppose that good X has few close...

Exam 5: Elasticity and Its Application

When a supply curve is relatively flat,

Correct Answer
verified

If sellers do not adjust their quantities supplied at all in response to a change in price,

Correct Answer
verified

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Correct Answer
verified

In general, elasticity is a measure of

Correct Answer
verified

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

Correct Answer
verified

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

Correct Answer
verified

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

Correct Answer
verified

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is

Correct Answer
verified

Demand is said to be inelastic if

Correct Answer
verified

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a

Correct Answer
verified

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

Correct Answer
verified

If the income elasticity of demand for a good is 0.56, is the good a normal or inferior good?

Correct Answer
verified
The good i...
View Answer

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

Correct Answer
verified

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price inelastic demand?

Correct Answer
verified

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Correct Answer
verified

The price elasticity of demand measures the

Correct Answer
verified

Figure 5-8 -Refer to Figure 5-8. An increase in price from $15 to $20 would

Correct Answer
verified

Correct Answer
verified

When demand is inelastic, the price elasticity of demand is

Correct Answer
verified

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct Answer
verified

Exam 5: Elasticity and Its Application

When a supply curve is relatively flat,

Correct AnswerverifiedShow Answer

If sellers do not adjust their quantities supplied at all in response to a change in price,

Correct AnswerverifiedShow Answer

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Correct AnswerverifiedShow Answer

In general, elasticity is a measure of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

Correct AnswerverifiedShow Answer

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

Correct AnswerverifiedShow Answer

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is

Correct AnswerverifiedShow Answer

Demand is said to be inelastic if

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a

Correct AnswerverifiedShow Answer

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

Correct AnswerverifiedShow Answer

If the income elasticity of demand for a good is 0.56, is the good a normal or inferior good?

Correct AnswerverifiedThe good i...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price inelastic demand?

Correct AnswerverifiedShow Answer

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Correct AnswerverifiedShow Answer

The price elasticity of demand measures the

Correct AnswerverifiedShow Answer

Figure 5-8 -Refer to Figure 5-8. An increase in price from $15 to $20 would

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When demand is inelastic, the price elasticity of demand is

Correct AnswerverifiedShow Answer

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

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The good i...
View Answer

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