Question 1

The federal government is concerned about obesity in the United States. Congress is considering two plans. One will ban the production and sale of "junk food." The other will increase nutrition­education programs and include substantial advertising campaigns to encourage healthy eating habits. The junk-food ban program

Accepted Answer

A)   and the education program will reduce the quantity of junk food sold and raise the price.
B)   and the education program will reduce the quantity of junk food sold and lower the price.
C)   will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price.
D)   will reduce the quantity of junk food sold and lower the price. The education program will reduce the quantity of junk food sold and raise the price.E) None of the above
F) A) and B)

Question 2

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

Question 3

Table 5-4
The following table shows the demand schedule for a particular good.
 
-Refer to Table 5-4. Using the midpoint method, when price rises from $8 to $12, the price elasticity of demand is

Accepted Answer

A)   0.4
B)   1
C)   1.5
D)   2.33E) A) and B)
F) All of the above

Question 4

Refer to Figure 5-5. At a price of $10 per unit, sellers' total revenue equals

Accepted Answer

A)   $100.
B)   $450
C)   $500.
D)   $1250.E) A) and B)
F) None of the above

Question 5

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 C)
F) All of the above

Question 6

In which of the following situations will total revenue increase?

Accepted Answer

A)   Price elasticity of demand is 1.2, and the price of the good decreases.
B)   Price elasticity of demand is 0.5, and the price of the good increases.
C)   Price elasticity of demand is 3.0, and the price of the good decreases.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 7

Which of the following is likely to have the most price inelastic demand?

Accepted Answer

A)   mint-flavored toothpaste
B)   toothpaste
C)   Colgate mint-flavored toothpaste
D)   a generic mint-flavored toothpasteE) A) and B)
F) B) and C)

Question 8

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 equilibrium quantity will

Accepted Answer

A)   increase in both the aged cheddar cheese and bread markets.
B)   increase in the aged cheddar cheese market and decrease in the bread market.
C)   decrease in the aged cheddar cheese market and increase in the bread market.
D)   decrease in both the aged cheddar cheese and bread markets.E) All of the above
F) B) and C)

Question 9

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

Accepted Answer

A)   -1.2, and X and Y are complements.
B)   -0.1, and X and Y are complements.
C)   0.1, and X and Y are substitutes.
D)   1.2, and X and Y are substitutes.E) C) and D)
F) B) and C)

Question 10

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

Question 11

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

Accepted Answer

A) True 
 B)False

Question 12

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

Question 13

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

Accepted Answer

A)   all inferior goods
B)   all normal goods
C)   goods for which there are many complements
D)   luxuriesE) A) and C)
F) C) and D)

Question 14

Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples illustrate the importance of

Accepted Answer

A)   the availability of close substitutes in determining the price elasticity of demand.
B)   a necessity versus a luxury in determining the price elasticity of demand.
C)   the definition of a market in determining the price elasticity of demand.
D)   the time horizon in determining the price elasticity of demand.E) B) and C)
F) A) and D)

Question 15

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

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

Question 16

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Accepted Answer

A)   About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars.
B)   About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars.
C)   About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars.
D)   Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.E) B) and D)
F) B) and C)

Question 17

Demand is said to be inelastic if the

Accepted Answer

A)   quantity demanded changes proportionately more than price.
B)   price changes proportionately more than income.
C)   quantity demanded changes proportionately less than price.
D)   quantity demanded changes proportionately the same as price.E) A) and B)
F) None of the above

Question 18

Suppose demand is given by the equation:  Using the midpoint method, what is the price elasticity of demand between $2 and $4?

Accepted Answer

The price ...

Question 19

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%,
then ice cream is an inferior good.

Accepted Answer

A) True 
 B)False

Question 20

Scenario 5-8
Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000.
-Refer to Scenario 5-8. Considering the cross price elasticity of demand for mobile and landline telephone service, is the cross price elasticity of demand positive or negative and do the consumers of Plainville regard these goods as substitutes or complements?

Accepted Answer

The cross price elas...

Exam 5: Elasticity and Its Application

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

Correct Answer
verified

Correct Answer
verified
The cross price elas...
View Answer

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct Answer
verified

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

Correct Answer
verified

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

Correct Answer
verified

Necessities such as food and clothing tend to have

Correct Answer
verified

Correct Answer
verified

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%, then ice cream is an inferior good.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Correct Answer
verified

Refer to Figure 5-5. At a price of $10 per unit, sellers' total revenue equals

Correct Answer
verified

In which of the following situations will total revenue increase?

Correct Answer
verified

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $2 and $4?

Correct Answer
verified
The price ...
View Answer

Demand is said to be inelastic if the

Correct Answer
verified

Which of the following is likely to have the most price inelastic demand?

Correct Answer
verified

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

Correct Answer
verified

Correct Answer
verified

Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, when price rises from $8 to $12, the price elasticity of demand is

Correct Answer
verified

Exam 5: Elasticity and Its Application

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe cross price elas...View AnswerShow Answer

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Necessities such as food and clothing tend to have

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%, then ice cream is an inferior good.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Correct AnswerverifiedShow Answer

Refer to Figure 5-5. At a price of $10 per unit, sellers' total revenue equals

Correct AnswerverifiedShow Answer

In which of the following situations will total revenue increase?

Correct AnswerverifiedShow Answer

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $2 and $4?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Demand is said to be inelastic if the

Correct AnswerverifiedShow Answer

Which of the following is likely to have the most price inelastic demand?

Correct AnswerverifiedShow Answer

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, when price rises from $8 to $12, the price elasticity of demand is

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The cross price elas...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The price ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified