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Exam 5: Elasticity and Its Application

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Question 81

Multiple Choice

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Figure 5-19 -Refer to Figure 5-19. Which of the following statements is not correct?

A) Supply curve A is perfectly inelastic.
B) Supply curve B is perfectly elastic.
C) Supply curve C is unit elastic.
D) Supply curve D is more elastic than supply curve C.

E) B) and C)
F) A) and B)

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Question 82

Multiple Choice

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For which of the following goods is the price elasticity of demand most inelastic?

A) pizza
B) large pizza
C) large pepperoni pizza
D) Domino's large pepperoni pizza

E) All of the above
F) B) and D)

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Question 83

Multiple Choice

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Which of the following expressions can be used to compute the price elasticity of demand?

As we move downward and to the right along a linear, downward-sloping demand curve,

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.

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

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

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought. Which of the following best describes the effect on corn farmers in Minnesota, where sufficient rainfall occurred?

What is the price elasticity of demand at any point on a perfectly inelastic demand curve?

With regard to elasticity, if a firm has a longer time to adjust to a price increase, supply will be more

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?

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni

The price elasticity of supply measures how responsive

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

When a supply curve is relatively flat,

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

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

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. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would

Which of the following expressions represents a cross-price elasticity of demand?