Question 1

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Accepted Answer

A)   positive.
B)   negative.
C)   either positive or negative. It depends whether A and B are normal goods or inferior goods.
D)   either positive or negative. It depends whether the current price level is on the elastic or inelastic portion of the demand curve.E) A) and B)
F) All of the above

Question 2

Table 5-3
Consider the following demand schedule.
 
-Refer to Table 5-3. Using the midpoint method, what is the price elasticity of demand between $0 and $3?

Accepted Answer

A)   0.11
B)   0.22
C)   0.40
D)   2.00E) A) and D)
F) B) and D)

Question 3

For which of the following goods is the income elasticity of demand likely lowest?

Accepted Answer

A)   water
B)   sapphire pendant necklaces
C)   filet mignon steaks
D)   fresh fruitE) None of the above
F) A) and D)

Question 4

A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

Accepted Answer

A)   infinity.
B)   zero.
C)   one.
D)   negative one.E) A) and B)
F) A) and C)

Question 5

The measure of how willing consumers are to buy less of a good as its price rises is called

Accepted Answer

price elas...

Question 6

Figure 5-4 
-Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are Q = 2,000, P= $15)  and Q = 2,400, P = $12) . Then which of the following scenarios is possible?

Accepted Answer

A)   Both of these points lie on section BC of the demand curve.
B)   The vertical intercept of the demand curve is the point Q = 0, P = $22) .
C)   The horizontal intercept of the demand curve is the point Q = 5,000, P = $0) .
D)   Any of these scenarios is possible.E) A) and C)
F) B) and C)

Question 7

Between 1950 and today there was a

Accepted Answer

A)   20 percent drop in the number of farmers, but farm output more than tripled.
B)   30 percent drop in the number of farmers, but farm output more than tripled.
C)   50 percent drop in the number of farmers, but farm output more than doubled.
D)   70 percent drop in the number of farmers, but farm output more than doubled.E) B) and C)
F) None of the above

Question 8

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 B)
F) C) and D)

Question 9

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

Accepted Answer

A)   A is a luxury and B is a necessity.
B)   A is a good after an increase in income and B is that same good after a decrease in income.
C)   A has fewer substitutes than B.
D)   A is a good immediately after a price increase and B is that same good 3 years after the price increase.E) None of the above
F) A) and C)

Question 10

Total revenue will be at its largest value on a linear demand curve at the

Accepted Answer

A)   top of the curve, where prices are highest.
B)   midpoint of the curve.
C)   low end of the curve, where quantity demanded is highest.
D)   None of the above is correct.E) A) and D)
F) A) and C)

Question 11

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 12

If the price elasticity of supply for a good is equal to infinity, then the

Accepted Answer

A)   supply curve is vertical.
B)   supply curve is horizontal.
C)   supply curve also has a slope equal to infinity.
D)   quantity supplied is constant regardless of the price.E) A) and D)
F) None of the above

Question 13

Figure 5-3 
-Refer to Figure 5-3. Which demand curve is unit elastic?

Accepted Answer

A)   A
B)   B
C)   D
D)   None of the above.E) All of the above
F) A) and B)

Question 14

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Accepted Answer

A) True 
 B)False

Question 15

Figure 5-4 
-Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $6 and $12. Then, when the price increases from $8 to $10,

Accepted Answer

A)   the percent decrease in the quantity demanded exceeds the percent increase in the price.
B)   the percent increase in the price exceeds the percent decrease in the quantity demanded.
C)   sellers' total revenue increases as a result.
D)   it is possible that the quantity demanded fell from 550 to 500 as a result.E) B) and C)
F) A) and D)

Question 16

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

Accepted Answer

A) True 
 B)False

Question 17

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)   0.4
C)   1
D)   4E) All of the above
F) B) and D)

Question 18

A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each. At a price of $20.00, the t- shirt maker would be willing to supply 100 t-shirts. Using the midpoint method, the price elasticity of supply for t- shirts is about

Accepted Answer

A)   0.37, and supply is elastic.
B)   0.37, and supply is inelastic.
C)   2.71, and supply is elastic.
D)   2.71, and supply is inelastic.E) All of the above
F) A) and C)

Question 19

Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain.

Accepted Answer

If demand is inelastic, then r...

Question 20

Figure 5-1 
-Refer to Figure 5-1. Between point A and point B, the slope is equal to

Accepted Answer

A)   -1/4, and the price elasticity of demand is equal to 2/3.
B)   -1/4, and the price elasticity of demand is equal to 3/2.
C)   -3/2, and the price elasticity of demand is equal to 1/4.
D)   -2/3, and the price elasticity of demand is equal to 3/2.E) A) and C)
F) B) and C)

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

The measure of how willing consumers are to buy less of a good as its price rises is called

Correct Answerverifiedprice elas...View AnswerShow Answer

Total revenue will be at its largest value on a linear demand curve at the

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

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Correct AnswerverifiedShow Answer

For which of the following goods is the income elasticity of demand likely lowest?

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $6 and $12. Then, when the price increases from $8 to $10,

Correct AnswerverifiedShow Answer

A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each. At a price of $20.00, the t- shirt maker would be willing to supply 100 t-shirts. Using the midpoint method, the price elasticity of supply for t- shirts is about

Correct AnswerverifiedShow Answer

If the price elasticity of supply for a good is equal to infinity, then the

Correct AnswerverifiedShow Answer

Figure 5-3 -Refer to Figure 5-3. Which demand curve is unit elastic?

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are Q = 2,000, P= $15) and Q = 2,400, P = $12) . Then which of the following scenarios is possible?

Correct AnswerverifiedShow Answer

Between 1950 and today there was a

Correct AnswerverifiedShow Answer

Table 5-3 Consider the following demand schedule. -Refer to Table 5-3. Using the midpoint method, what is the price elasticity of demand between $0 and $3?

Correct AnswerverifiedShow Answer

A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

Correct AnswerverifiedShow Answer

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Correct AnswerverifiedShow Answer

Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain.

Correct AnswerverifiedIf demand is inelastic, then r...View AnswerShow Answer

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, the slope is equal to

Correct AnswerverifiedShow Answer

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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If demand is inelastic, then r...
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