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If marijuana were legalized, it is likely that there would be an increase in the demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana is perfectly elastic, this will result in


A) higher prices and higher total revenue from marijuana sales.
B) higher prices but lower total revenue from marijuana sales.
C) the same price and higher total revenue from marijuana sales.
D) the same price but lower total revenue from marijuana sales.

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

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Figure 5-5 Figure 5-5 -Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of A) $20. B) $50. C) $70 D) $100. -Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of


A) $20.
B) $50.
C) $70
D) $100.

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

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The production of methamphetamine (meth) is a social problem in the Midwest. Iowa is considering two potential programs: Operation Methbust would increase the number of sheriffs' deputies to search out and destroy methamphetamine labs. Operation Say No to Meth would increase the training required of public school teachers so that they could better educate students about the health risks of using meth. Assuming that each program were successful, which of the following statements is correct?


A) Both Operation Methbust and Say No would reduce the equilibrium quantity and increase the equilibrium price of meth.
B) Both Operation Methbust and Say No would increase the equilibrium quantity and reduce the equilibrium price of meth.
C) Both Operation Methbust and Say No would reduce the equilibrium quantity of meth; Operation Methbust would increase the equilibrium price, whereas Say No would reduce the equilibrium price of meth.
D) Both Operation Methbust and Say No would reduce the equilibrium price of meth; Operation Methbust would reduce the equilibrium quantity, whereas Say No would increase the equilibrium quantity of meth.

E) None of the above
F) B) and C)

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Table 5-12 Table 5-12 -Refer to Table 5-12. Between which two quantities listed is demand unit elastic? -Refer to Table 5-12. Between which two quantities listed is demand unit elastic?

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When the price of a bracelet was $28 each, the jewelry shop sold 128 per month. When it raised the price to $32 each, it sold 112 per month. Using the midpoint method, the price elasticity of demand for bracelets is


A) 1.14.
B) 1.
C) 0.25.
D) 0.13.

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

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Figure 5-14 Figure 5-14 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between $16 and $40? A) 0.125 B) 0.86 C) 1.0 D) 2.5 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between $16 and $40?


A) 0.125
B) 0.86
C) 1.0
D) 2.5

E) C) and D)
F) B) and D)

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Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. 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, when income equals $7,500, what is the price elasticity of demand between $16 and $20? A) 0.56 B) 0.75 C) 1.33 D) 1.80 -Refer to Table 5-7. Using the midpoint method, when income equals $7,500, what is the price elasticity of demand between $16 and $20?


A) 0.56
B) 0.75
C) 1.33
D) 1.80

E) All of the above
F) A) and C)

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If the price elasticity of supply for wheat is less than 1, then the supply of wheat is


A) inelastic.
B) elastic.
C) unit elastic.
D) quite sensitive to changes in income.

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

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


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 inelastid.

E) A) and D)
F) A) and C)

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The smaller the price elasticity of demand, the


A) more likely the product is a luxury.
B) smaller the responsiveness of quantity demanded to a change in price.
C) more substitutes the product has.
D) greater the responsiveness of quantity demanded to a change in price.

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

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Figure 5-8 Figure 5-8 -Refer to Figure 5-8. An increase in price from $10 to $15 would A) increase total revenue by $1,000. B) decrease total revenue by $1,000. C) increase total revenue by $500. D) decrease total revenue by $500. -Refer to Figure 5-8. An increase in price from $10 to $15 would


A) increase total revenue by $1,000.
B) decrease total revenue by $1,000.
C) increase total revenue by $500.
D) decrease total revenue by $500.

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

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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 is about


A) 0.67%.
B) 0.83%.
C) 1.20%.
D) 2.70%.

E) C) and D)
F) All of the above

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Frequently, in the short run, the quantity supplied of a good is


A) impossible, or nearly impossible, to measure.
B) not very responsive to price changes.
C) determined by the quantity demanded of the good.
D) determined by psychological forces and other non-economic forces.

E) A) and B)
F) A) and C)

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For a good that is a necessity,


A) quantity demanded tends to respond substantially to a change in price.
B) demand tends to be inelastic.
C) the law of demand does not apply.
D) All of the above are correct.

E) C) and D)
F) B) and D)

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If two goods are complements, their cross-price elasticity will be


A) positive.
B) negative.
C) zero.
D) equal to the difference between the income elasticities of demand for the two goods.

E) B) and C)
F) All of the above

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An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is


A) elastic, and the price elasticity of supply is 1.74.
B) elastic, and the price elasticity of supply is 0.57.
C) inelastic, and the price elasticity of supply is 1.74.
D) inelastic, and the price elasticity of supply is 0.57.

E) B) and C)
F) None of the above

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If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about


A) 0.2%.
B) 0.5%.
C) 2.0%.
D) 4.5%.

E) A) and B)
F) A) and C)

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Last month, sellers of good Y took in $100 in total revenue on sales of 50 units of good Y. This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y. At the same time, the price of good X stayed the same, but sales of good X increased from 20 units to 40 units. We can conclude that goods X and Y are


A) substitutes, and have a cross-price elasticity of 0.60.
B) complements, and have a cross-price elasticity of -0.60.
C) substitutes, and have a cross-price elasticity of 1.67.
D) complements, and have a cross-price elasticity of -1.67.

E) A) and C)
F) B) and C)

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Figure 5-14 Figure 5-14 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between $100 and $220? A) 0.58 B) 0.67 C) 1.00 D) 1.73 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between $100 and $220?


A) 0.58
B) 0.67
C) 1.00
D) 1.73

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

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A 10 percent increase in gasoline prices reduces gasoline consumption by about


A) 6 percent after one year and 2.5 percent after five years.
B) 2.5 percent after one year and 6 percent after five years.
C) 10 percent after one year and 20 percent after five years.
D) 0 percent after one year and 1 percent after five years.

E) A) and C)
F) None of the above

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