Question 1

When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea lattés is

Accepted Answer

A)   elastic, and her demand curve would be relatively flat.
B)   elastic, and her demand curve would be relatively steep.
C)   inelastic, and her demand curve would be relatively flat.
D)   inelastic, and her demand curve would be relatively steep.E) C) and D)
F) B) and C)

Question 2

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

Question 3

Table 5-9
 
-Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

Accepted Answer

A)   along supply curve B only
B)   along supply curves B and C
C)   along all three supply curves
D)   None. Quantity supplied moves proportionately less than the price along all of the three supply curves.E) All of the above
F) C) and D)

Question 4

Figure 5-6 
-Refer to Figure 5-6. For prices above $8, demand is price

Accepted Answer

A)   elastic, and total revenue will rise as price rises.
B)   inelastic, and total revenue will rise as price rises.
C)   elastic, and total revenue will fall as price rises.
D)   inelastic, and total revenue will fall as price rises.E) B) and C)
F) A) and D)

Question 5

The midpoint method for calculating elasticities is convenient in that it allows us to

Accepted Answer

A)   ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price.
B)   calculate the same value for the elasticity, regardless of whether the price increases or decreases.
C)   assume that sellers' total revenue stays constant when the price changes.
D)   restrict all elasticity values to between 0 and 1.E) A) and B)
F) A) and C)

Question 6

If the quantity supplied responds only slightly to changes in price, then

Accepted Answer

A)   supply is said to be elastic.
B)   supply is said to be inelastic.
C)   an increase in price will not shift the supply curve very much.
D)   even a large decrease in demand will change the equilibrium price only slightly.E) A) and C)
F) None of the above

Question 7

Other things equal, the demand for a good tends to be more inelastic, the

Accepted Answer

A)   fewer the available substitutes.
B)   longer the time period considered.
C)   more the good is considered a luxury good.
D)   more narrowly defined is the market for the good.E) B) and C)
F) C) and D)

Question 8

While in college, John and Bethany each buy five packages of mac-n-cheese per week. After they graduate and have full-time jobs, John buys six packages per week, but Bethany buys only two packages per week. When looking at income elasticity of demand for mac­n­cheese, John's

Accepted Answer

A)   is negative, and Bethany's is positive.
B)   is positive, and Bethany's is negative.
C)   is zero, and Bethany's approaches infinity.
D)   approaches infinity, and Bethany's is zero.E) All of the above
F) C) and D)

Question 9

On a certain supply curve, one point is quantity supplied = 200, price = $4.00)  and another point is quantity supplied = 250, price = $4.50) . Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A)   0.22.
B)   0.53.
C)   1.00.
D)   1.89.E) B) and D)
F) All of the above

Question 10

If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

Accepted Answer

A)   a 20 percent increase in the quantity demanded.
B)   an 18 percent increase in the quantity demanded.
C)   a 2 percent increase in the quantity demanded.
D)   a 1.8 percent increase in the quantity demanded.E) A) and D)
F) B) and C)

Question 11

Scenario 5-7
Suppose the demand function for good X is given by:  where  is the quantity demanded of good X,  is the price of good X, and  is the price of good Y, which is related to good X.
-Refer to Scenario 5-7. Good X and Good Y are related as

Accepted Answer

The answer of Scenario 5-7
Suppose the demand function for good...

Question 12

Figure 5-9 
-Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point A and point B is

Accepted Answer

A)   0.33.
B)   0.5.
C)   2.0.
D)   3.0.E) None of the above
F) A) and C)

Question 13

Which of the following statements is correct?

Accepted Answer

A)   The demand for natural gas is more elastic over a short period of time than over a long period of time.
B)   The demand for smoke alarms is more elastic than the demand for Persian rugs.
C)   The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general.
D)   All of the above are correct.E) A) and B)
F) C) and D)

Question 14

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 inelastic.E) B) and D)
F) A) and B)

Question 15

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

Accepted Answer

The answer of 
-Refer to Table 5-12. Between which two...

Question 16

Figure 5-15 
-Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points C and D?

Accepted Answer

A)   0.21
B)   0.29
C)   0.73
D)   1.36E) None of the above
F) C) and D)

Question 17

Suppose a freeze in Florida significantly reduces the supply of oranges this year. As a result, would you expect the total revenue from the sale of orange juice to rise or fall? Explain.

Accepted Answer

Since oranges are an input into the prod...

Question 18

Suppose that when the price of good X falls from $6 to $4, the quantity demanded of good Y rises from 30 units to 40 units. Using the midpoint method, the cross-price elasticity of demand is

Accepted Answer

A)   -0.71, and X and Y are complements.
B)   -1.40, and X and Y are complements.
C)   -0.71, and X and Y are substitutes.
D)   -1.40, and X and Y are substitutes.E) A) and B)
F) C) and D)

Question 19

On a certain supply curve, one point is quantity supplied = 200, price = $2.00)  and another point is quantity supplied= 250, price = $2.50) . Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A)   0.2.
B)   0.5.
C)   1.0.
D)   2.5.E) B) and C)
F) A) and D)

Question 20

Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

Suppose a freeze in Florida significantly reduces the supply of oranges this year. As a result, would you expect the total revenue from the sale of orange juice to rise or fall? Explain.

Correct AnswerverifiedSince oranges are an input into the prod...View AnswerShow Answer

Other things equal, the demand for a good tends to be more inelastic, the

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When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea lattés is

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If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

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

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Table 5-9 -Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

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

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While in college, John and Bethany each buy five packages of mac-n-cheese per week. After they graduate and have full-time jobs, John buys six packages per week, but Bethany buys only two packages per week. When looking at income elasticity of demand for mac­n­cheese, John's

Correct AnswerverifiedShow Answer

Figure 5-9 -Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point A and point B is

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The midpoint method for calculating elasticities is convenient in that it allows us to

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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

Scenario 5-7 Suppose the demand function for good X is given by: where is the quantity demanded of good X, is the price of good X, and is the price of good Y, which is related to good X. -Refer to Scenario 5-7. Good X and Good Y are related as

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On a certain supply curve, one point is quantity supplied = 200, price = $4.00) and another point is quantity supplied = 250, price = $4.50) . Using the midpoint method, the price elasticity of supply is about

Correct AnswerverifiedShow Answer

Suppose that when the price of good X falls from $6 to $4, the quantity demanded of good Y rises from 30 units to 40 units. Using the midpoint method, the cross-price elasticity of demand is

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Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points C and D?

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On a certain supply curve, one point is quantity supplied = 200, price = $2.00) and another point is quantity supplied= 250, price = $2.50) . Using the midpoint method, the price elasticity of supply is about

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Which of the following statements is correct?

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Figure 5-6 -Refer to Figure 5-6. For prices above $8, demand is price

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If the quantity supplied responds only slightly to changes in price, then

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Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls.

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Since oranges are an input into the prod...
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While in college, John and Bethany each buy five packages of mac-n-cheese per week. After they graduate and have full-time jobs, John buys six packages per week, but Bethany buys only two packages per week. When looking at income elasticity of demand for macncheese, John's

Correct Answer
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