Question 1

If a firm is facing elastic demand,then the firm should decrease price to increase revenue.

Accepted Answer

A) True 
 B)False  True

Question 2

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Accepted Answer

A) True 
 B)False

Question 3

If the demand for textbooks is inelastic,then a decrease in the price of textbooks will

Accepted Answer

A)  increase total revenue of textbook sellers.
B)  decrease total revenue of textbook sellers.
C)  not change total revenue of textbook sellers.
D)  There is not enough information to answer this question.E) A) and B)
F) B) and C)

Question 4

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

Accepted Answer

A) True 
 B)False  True

Question 5

Figure 5-6 
-Refer to Figure 5-6.Which of the following price changes would result in no change in sellers' total revenue?

Accepted Answer

A)  The price increases from $6 to $9.
B)  The price increases from $9 to $15.
C)  The price decreases from $12 to $9.
D)  The price decreases from $9 to $5.E) A) and C)
F) A) and B)

Question 6

Figure 5-13 
-Refer to Figure 5-13.Over which range is the supply curve in this figure the most elastic?

Accepted Answer

A)  16 to 40
B)  40 to 100
C)  100 to 220
D)  220 to 430E) A) and B)
F) All of the above

Question 7

For a horizontal demand curve,

Accepted Answer

A)  the slope is undefined,and the price elasticity of demand is equal to 0.
B)  the slope is equal to 0,and the price elasticity of demand is undefined.
C)  both the slope and price elasticity of demand are undefined.
D)  both the slope and price elasticity of demand are equal to 0.E) All of the above
F) B) and C)

Question 8

Demand is inelastic if the price elasticity of demand is

Accepted Answer

A)  less than 1.
B)  equal to 1.
C)  greater than 1.
D)  equal to 0.E) A) and D)
F) B) and C)

Question 9

The midpoint method is used to compute elasticity because it

Accepted Answer

A)  automatically computes a positive number instead of a negative number.
B)  results in an elasticity that is the same as the slope of the demand curve.
C)  gives the same answer regardless of the direction of change.
D)  automatically rounds quantities to the nearest whole unit.E) A) and D)
F) A) and C)

Question 10

Table 5-5 
-Refer to Table 5-5.Which of the three supply curves represents the most elastic supply?

Accepted Answer

A)  supply curve A
B)  supply curve B
C)  supply curve C
D)  There is no difference in the elasticity of the three supply curves.E) B) and C)
F) B) and D) C

Question 11

If the price elasticity of supply is 1.5,and a price increase led to a 1.8% increase in quantity supplied,then the price increase is about

Accepted Answer

A)  0.67%.
B)  0.83%.
C)  1.20%.
D)  2.70%.E) All of the above
F) B) and C)

Question 12

Suppose that corn farmers want to increase their total revenue.Knowing that the demand for corn is inelastic,corn farmers should

Accepted Answer

A)  plant more corn so that they would be able to sell more each year.
B)  increase spending on fertilizer in an attempt to produce more corn on the acres they farm.
C)  reduce the number of acres on which they plant corn.
D)  contribute to a fund that promotes technological advances in corn production.E) B) and C)
F) None of the above

Question 13

If a 15% increase in price for a good results in a 20% decrease in quantity demanded,the price elasticity of demand is

Accepted Answer

A)  0.75.
B)  1.25.
C)  1.33.
D)  1.60.E) All of the above
F) A) and B)

Question 14

Suppose that when the price rises by 20% for a particular good,the quantity demanded of that good falls by 10%.The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Question 15

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 elastic.E) C) and D)
F) B) and C)

Question 16

A good will have a more inelastic demand,the

Accepted Answer

A)  greater the availability of close substitutes.
B)  broader the definition of the market.
C)  longer the period of time.
D)  more it is regarded as a luxury.E) A) and B)
F) A) and C)

Question 17

Table 5-5 
-Refer to Table 5-5.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) None of the above
F) C) and D)

Question 18

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

Accepted Answer

A)  Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept.
B)  Elasticity provides us with a better rationale for statements such as "an increase in x will lead to a decrease in y" than we would have in the absence of the elasticity concept.
C)  Without elasticity,we would not be able to address the direction in which price is likely to move in response to a surplus or a shortage.
D)  Without elasticity,it is very difficult to assess the degree of competition within a market.E) B) and C)
F) A) and C)

Question 19

If a supply curve is horizontal,then supply is said to be perfectly elastic,and the price elasticity of supply approaches infinity.

Accepted Answer

A) True 
 B)False

Question 20

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

If a firm is facing elastic demand,then the firm should decrease price to increase revenue.

Correct AnswerverifiedTrue

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Correct AnswerverifiedShow Answer

If the demand for textbooks is inelastic,then a decrease in the price of textbooks will

Correct AnswerverifiedShow Answer

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

Correct AnswerverifiedTrue

Figure 5-6 -Refer to Figure 5-6.Which of the following price changes would result in no change in sellers' total revenue?

Correct AnswerverifiedShow Answer

Figure 5-13 -Refer to Figure 5-13.Over which range is the supply curve in this figure the most elastic?

Correct AnswerverifiedShow Answer

For a horizontal demand curve,

Correct AnswerverifiedShow Answer

Demand is inelastic if the price elasticity of demand is

Correct AnswerverifiedShow Answer

The midpoint method is used to compute elasticity because it

Correct AnswerverifiedShow Answer

Table 5-5 -Refer to Table 5-5.Which of the three supply curves represents the most elastic supply?

Correct AnswerverifiedC

If the price elasticity of supply is 1.5,and a price increase led to a 1.8% increase in quantity supplied,then the price increase is about

Correct AnswerverifiedShow Answer

Suppose that corn farmers want to increase their total revenue.Knowing that the demand for corn is inelastic,corn farmers should

Correct AnswerverifiedShow Answer

If a 15% increase in price for a good results in a 20% decrease in quantity demanded,the price elasticity of demand is

Correct AnswerverifiedShow Answer

Suppose that when the price rises by 20% for a particular good,the quantity demanded of that good falls by 10%.The price elasticity of demand for this good is equal to 2.0.

Correct AnswerverifiedShow Answer

Total revenue

Correct AnswerverifiedShow Answer

A good will have a more inelastic demand,the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

Correct AnswerverifiedShow Answer

If a supply curve is horizontal,then supply is said to be perfectly elastic,and the price elasticity of supply approaches infinity.

Correct AnswerverifiedShow Answer

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Correct AnswerverifiedShow Answer

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True

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C

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