Question 1

Reta's income elasticity of demand for steak dinners is 1.50.All else equal,this means that if her income increases by 20 percent,she will buy

Accepted Answer

A)   150 percent more steak dinners.
B)   50 percent more steak dinners.
C)   30 percent more steak dinners.
D)   20 percent more steak dinners.E) C) and D)
F) A) and B)

Question 2

A linear,upward-sloping supply curve has

Accepted Answer

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

Question 3

Figure 5-10 
-Refer to Figure 5-10.When the price is $30,total revenue is

Accepted Answer

A)   $3,000.
B)   $5,000.
C)   $7,000.
D)   $9,000.E) B) and D)
F) None of the above

Question 4

If the price elasticity of supply is 1.2,and price increased by 5%,quantity supplied would

Accepted Answer

A)   increase by 4.2%.
B)   increase by 6%.
C)   decrease by 4.2%.
D)   decrease by 6%.E) A) and B)
F) B) and C)

Question 5

The demand for soap is more elastic than the demand for Dove soap.

Accepted Answer

A) True 
 B)False

Question 6

Table 5-5
The following table shows a portion of the demand schedule for a particular good at various levels of income.
 
-Refer to Table 5-5.Using the midpoint method,at a price of $8,what is the income elasticity of demand when income rises from $7,500 to $10,000?

Accepted Answer

A)   0.00
B)   0.41
C)   1.00
D)   2.45E) None of the above
F) All of the above

Question 7

Table 5-1
 
-Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

Accepted Answer

A)   A is grapes,and B is fruit.
B)   A is T-shirts,and B is socks.
C)   A is train tickets before cars were invented,and B is train tickets after cars were invented.
D)   A is diamond necklaces,and B is beds.E) A) and B)
F) C) and D)

Question 8

Suppose that demand is inelastic within a certain price range.For that price range,

Accepted Answer

A)   an increase in price would increase total revenue because the decrease in quantity demanded is proportionately less than the increase in price.
B)   an increase in price would decrease total revenue because the decrease in quantity demanded is proportionately greater than the increase in price.
C)   a decrease in price would increase total revenue because the increase in quantity demanded is proportionately smaller than the decrease in price.
D)   a decrease in price would not affect total revenue.E) None of the above
F) C) and D)

Question 9

Drug interdiction,which reduces the supply of drugs,will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

A) True 
 B)False

Question 10

Figure 5-12 2 is represented by the area(s)  A)  B + D. B)  A + B. C)  C + D. D)  D." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 5-12.Total revenue when the price is P2 is represented by the area(s)

Accepted Answer

A)   B + D.
B)   A + B.
C)   C + D.
D)   D.E) All of the above
F) A) and C) B

Question 11

OPEC failed to maintain a high price of oil in the long run,partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)   The demand for illegal drugs is inelastic.
B)   Interdiction results in drug addicts having a greater need for quick cash.
C)   Interdiction results in an increase in the amount of money needed to buy the same amount of drugs.
D)   Government drug programs are more lenient now with drug offenders than they were in the 1980s.E) B) and C)
F) A) and B)

Question 13

Which of the following statements about the price elasticity of demand is correct?

Accepted Answer

A)   The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases.
B)   Price elasticity of demand reflects the many economic,psychological,and social forces that shape consumer tastes.
C)   Other things equal,if good x has close substitutes and good y does not have close substitutes,then the demand for good x will be more elastic than the demand for good y.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 14

Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase revenue?

Accepted Answer

A)   0
B)   0.2
C)   1
D)   2.1E) A) and B)
F) A) and C)

Question 15

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) All of the above

Question 16

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Accepted Answer

A)   -1.3
B)   0
C)   0.2
D)   1.4E) B) and D)
F) B) and C)

Question 17

The discovery of a new hybrid wheat would increase the supply of wheat.As a result,wheat farmers would realize an increase in total revenue if the

Accepted Answer

A)   supply of wheat is elastic.
B)   supply of wheat is inelastic.
C)   demand for wheat is inelastic.
D)   demand for wheat is elastic.E) A) and D)
F) A) and C)

Question 18

Table 5-2
 
-Refer to Table 5-2.Using the midpoint method,if the price falls from $40 to $20,the price elasticity of demand is

Accepted Answer

A)   zero.
B)   inelastic.
C)   unit elastic.
D)   elastic.E) C) and D)
F) None of the above

Question 19

Which of the following expressions represents a cross-price elasticity of demand?

Accepted Answer

A)   percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread
B)   percentage change in quantity demanded of bread divided by percentage change in price of butter
C)   percentage change in price of bread divided by percentage change in quantity demanded of bread
D)   percentage change in quantity demanded of bread divided by percentage change in incomeE) A) and B)
F) B) and C)

Question 20

When the price of knee braces increased by 25 percent,the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent.BYC's price elasticity of supply of knee braces is 0.33.

Accepted Answer

A) True 
 B)False  False

Exam 5: Elasticity and Its Application

Reta's income elasticity of demand for steak dinners is 1.50.All else equal,this means that if her income increases by 20 percent,she will buy

Correct AnswerverifiedShow Answer

A linear,upward-sloping supply curve has

Correct AnswerverifiedA

Figure 5-10 -Refer to Figure 5-10.When the price is $30,total revenue is

Correct AnswerverifiedShow Answer

If the price elasticity of supply is 1.2,and price increased by 5%,quantity supplied would

Correct AnswerverifiedShow Answer

The demand for soap is more elastic than the demand for Dove soap.

Correct AnswerverifiedShow Answer

Table 5-5 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-5.Using the midpoint method,at a price of $8,what is the income elasticity of demand when income rises from $7,500 to $10,000?

Correct AnswerverifiedShow Answer

Table 5-1 -Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

Correct AnswerverifiedShow Answer

Suppose that demand is inelastic within a certain price range.For that price range,

Correct AnswerverifiedShow Answer

Drug interdiction,which reduces the supply of drugs,will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Correct AnswerverifiedShow Answer

Figure 5-12 -Refer to Figure 5-12.Total revenue when the price is P2 is represented by the area(s)

Correct AnswerverifiedB

OPEC failed to maintain a high price of oil in the long run,partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

Correct AnswerverifiedShow Answer

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Correct AnswerverifiedShow Answer

Which of the following statements about the price elasticity of demand is correct?

Correct AnswerverifiedShow Answer

Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase revenue?

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

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Correct AnswerverifiedShow Answer

The discovery of a new hybrid wheat would increase the supply of wheat.As a result,wheat farmers would realize an increase in total revenue if the

Correct AnswerverifiedShow Answer

Table 5-2 -Refer to Table 5-2.Using the midpoint method,if the price falls from $40 to $20,the price elasticity of demand is

Correct AnswerverifiedShow Answer

Which of the following expressions represents a cross-price elasticity of demand?

Correct AnswerverifiedShow Answer

When the price of knee braces increased by 25 percent,the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent.BYC's price elasticity of supply of knee braces is 0.33.

Correct AnswerverifiedFalse

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Figure 5-12 -Refer to Figure 5-12.Total revenue when the price is P₂ is represented by the area(s)

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B

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