Question 1

If we observe that when the price of ice cream rises by 10%, ice cream manufacturers increase the quantity supplied of ice cream by 20%, then the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A)   yoga mats
B)   prescription medicine
C)   protein powder
D)   gym membershipsE) All of the above
F) None of the above

Question 3

Table 5-5
 
-Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A)   0.09.
B)   0.58.
C)   0.65.
D)   1.53.E) None of the above
F) All of the above

Question 4

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Accepted Answer

A)   a 7.5 increase in the price of the good
B)   a 13.33 percent increase in the price of the good
C)   an increase in the price of the good from $7.50 to $10
D)   an increase in the price of the good from $10 to $17.50E) A) and C)
F) B) and D)

Question 5

Total revenue

Accepted Answer

A)   always increases as price increases.
B)   increases as price increases, as long as demand is elastic.
C)   decreases as price increases, as long as demand is inelastic.
D)   remains unchanged as price increases when demand is unit elastid.E) A) and B)
F) None of the above

Question 6

A key determinant of the price elasticity of supply is

Accepted Answer

A)   the ability of sellers to change the price of the good they produce.
B)   the ability of sellers to change the amount of the good they produce.
C)   how responsive buyers are to changes in sellers' prices.
D)   the slope of the demand curve.E) A) and D)
F) B) and D)

Question 7

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

Accepted Answer

A)   The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve.
B)   The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve.
C)   Given two prices with which to calculate the price elasticity of supply, that elasticity would be the same for both curves.
D)   A decrease in demand will increase total revenue if the steeper supply curve is relevant, while a decrease in demand will decrease total revenue if the flatter supply cure is relevant.E) B) and D)
F) B) and C)

Question 8

In January the price of dark chocolate candy bars was $2.00, and Willy's Chocolate Factory produced 80 pounds. In February the price of dark chocolate candy bars was $2.50, and Willy's produced 110 pounds. In March the price of dark chocolate candy bars was $3.00, and Willy's produced 140 pounds. The price elasticity of supply of Willy's dark chocolate candy bars was about

Accepted Answer

A)   0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00.
B)   0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00.
C)   1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00.
D)   1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00.E) A) and C)
F) A) and B)

Question 9

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Accepted Answer

A)   unit elastic.
B)   inelastic.
C)   elastic.
D)   None of the above is correct because a price increase always leads to an increase in total revenue.E) B) and C)
F) None of the above

Question 10

Figure 5-3 
-Refer to Figure 5-3. Which demand curve is perfectly inelastic?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) A) and D)
F) All of the above

Question 11

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. Your roommate still enjoys Ramen noodles very much and buys even more, but you plan to buy fewer Ramen noodles in favor of foods you prefer more. When looking at income elasticity of demand for Ramen noodles, yours would

Accepted Answer

A)   be negative and your roommate's would be positive.
B)   be positive and your roommate's would be negative.
C)   be zero and your roommate's would approach infinity.
D)   approach infinity and your roommate's would be zero.E) None of the above
F) C) and D)

Question 12

Figure 5-4 
-Refer to Figure 5-4. The section of the demand curve at point B represents the

Accepted Answer

A)   elastic section of the demand curve.
B)   inelastic section of the demand curve.
C)   unit elastic section of the demand curve.
D)   perfectly elastic section of the demand curve.E) A) and C)
F) None of the above

Question 13

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

Accepted Answer

A)   natural gas
B)   doctor's visits
C)   hamburgers
D)   boatsE) None of the above
F) All of the above

Question 14

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by

Accepted Answer

A)   30%.
B)   40%.
C)   60%.
D)   74%.E) C) and D)
F) A) and D)

Question 15

Figure 5-2 
-Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

Accepted Answer

A)   D1
B)   D2
C)   D3
D)   All of the above are equally elastid.E) A) and C)
F) All of the above

Question 16

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?

Accepted Answer

A)   Both Operation Methbust and Say No would reduce the demand for meth.
B)   Both Operation Methbust and Say No would reduce the supply of meth.
C)   Operation Methbust would reduce the demand for meth; Operation Say No would reduce the supply of meth.
D)   Operation Methbust would reduce the supply of meth; Operation Say No would reduce the demand for meth.E) A) and D)
F) B) and C)

Question 17

If the cross-price elasticity of demand between two goods is positive, what is the relationship between the two goods?

Accepted Answer

The goods ...

Question 18

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is

Accepted Answer

A)   0.
B)   1.
C)   6.
D)   36.E) A) and C)
F) All of the above

Question 19

Figure 5-5 
-Refer to Figure 5-5. Using the midpoint method, between prices of $70 and $80, price elasticity of demand is

Accepted Answer

A)   0.33.
B)   0.4.
C)   1.33.
D)   3.E) C) and D)
F) A) and C)

Question 20

Suppose the point (Q = 3,400, P = $20)  is the midpoint on a certain downward-sloping, linear demand curve. Then

Accepted Answer

A)   a decrease in price from $18 to $16 will increase total revenue.
B)   a decrease in price from $24 to $22 will decrease total revenue.
C)   a decrease in the price from $21 to $19 will decrease total revenue.
D)   the maximum value of total revenue is $68,000.E) All of the above
F) B) and C)

Exam 5: Elasticity and Its Application

Correct Answer
verified

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Correct Answer
verified

Table 5-5 -Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

Correct Answer
verified

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Correct Answer
verified

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is

Correct Answer
verified

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

Correct Answer
verified

Suppose the point (Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear demand curve. Then

Correct Answer
verified

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

Correct Answer
verified

A key determinant of the price elasticity of supply is

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve at point B represents the

Correct Answer
verified

Figure 5-3 -Refer to Figure 5-3. Which demand curve is perfectly inelastic?

Correct Answer
verified

Correct Answer
verified

Total revenue

Correct Answer
verified

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

Correct Answer
verified

If we observe that when the price of ice cream rises by 10%, ice cream manufacturers increase the quantity supplied of ice cream by 20%, then the price elasticity of supply is 2.

Correct Answer
verified

If the cross-price elasticity of demand between two goods is positive, what is the relationship between the two goods?

Correct Answer
verified
The goods ...
View Answer

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $70 and $80, price elasticity of demand is

Correct Answer
verified

Exam 5: Elasticity and Its Application

Correct AnswerverifiedShow Answer

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Correct AnswerverifiedShow Answer

Table 5-5 -Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

Correct AnswerverifiedShow Answer

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Correct AnswerverifiedShow Answer

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the point (Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear demand curve. Then

Correct AnswerverifiedShow Answer

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

A key determinant of the price elasticity of supply is

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve at point B represents the

Correct AnswerverifiedShow Answer

Figure 5-3 -Refer to Figure 5-3. Which demand curve is perfectly inelastic?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Total revenue

Correct AnswerverifiedShow Answer

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

Correct AnswerverifiedShow Answer

If we observe that when the price of ice cream rises by 10%, ice cream manufacturers increase the quantity supplied of ice cream by 20%, then the price elasticity of supply is 2.

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand between two goods is positive, what is the relationship between the two goods?

Correct AnswerverifiedThe goods ...View AnswerShow Answer

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $70 and $80, price elasticity of demand is

Correct AnswerverifiedShow Answer

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The goods ...
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