Question 1

Figure 5-17 
-Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point A and point B?

Accepted Answer

A)   0.4
B)   0.6
C)   1.67
D)   2.16E) B) and C)
F) None of the above

Question 2

Suppose demand is given by the equation:  At what point along this demand curve will total revenue be maximized?

Accepted Answer

Total revenue is con...

Question 3

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

Accepted Answer

A)   0.32, and Tess regards handbags as inferior goods.
B)   0.32, and Tess regards handbags as normal goods.
C)   3.17, and Tess regards handbags as inferior goods.
D)   3.17, and Tess regards handbags as normal goods.E) C) and D)
F) A) and B)

Question 4

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

Accepted Answer

The answer of With regard to elasticity, if a firm...

Question 5

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Accepted Answer

A)   a 0.2 percent increase in the price.
B)   a 2.5 percent increase in the price.
C)   a 5 percent increase in the price.
D)   a 20 percent increase in the price.E) A) and D)
F) B) and C)

Question 6

Figure 5-4 
-Refer to Figure 5-4. The section of the demand curve from A to 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) None of the above
F) All of the above

Question 7

Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's

Accepted Answer

A)   demand for cigarettes is perfectly inelastic.
B)   price elasticity of demand for cigarettes is infinite.
C)   income elasticity of demand for cigarettes is 0.
D)   More than one of the above is correct.E) C) and D)
F) B) and D)

Question 8

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the

Accepted Answer

A)   demand for the good is said to be elastic.
B)   demand for the good is said to be inelastic.
C)   law of demand does not apply to the good.
D)   demand curve for the good shifts only slightly in response to a change in price.E) B) and C)
F) A) and D)

Question 9

Table 5-9 
-Refer to Table 5-9. 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) All of the above
F) A) and B)

Question 10

Scenario 5-7
Suppose the demand function for good X is given by:  where  is the quantity demanded of good X,  is the price of good X, and  is the price of good Y, which is related to good X.
-Refer to Scenario 5-7. Good X and Good Y are related as

Accepted Answer

The answer of Scenario 5-7
Suppose the demand function for good...

Question 11

Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8. You should

Accepted Answer

A)   increase the price of ice cream.
B)   decrease the price of ice cream.
C)   decrease the cost of operating the ice cream shop.
D)   increase the price of bottled water also sold at the ice cream shop because its price elasticity of demand is 1.2.E) B) and C)
F) B) and D)

Question 12

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

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) None of the above
F) B) and D)

Question 13

Figure 5-13 
-Refer to Figure 5-13. Between point A and point B on the graph, demand is

Accepted Answer

A)   perfectly elastic.
B)   inelastic.
C)   unit elastic.
D)   elastic, but not perfectly elastic.E) B) and C)
F) A) and D)

Question 14

Which of the following statements is valid when the market supply curve is vertical?

Accepted Answer

A)   Market quantity supplied does not change when the price changes.
B)   Supply is perfectly elastic.
C)   An increase in market demand will increase the equilibrium quantity.
D)   An increase in market demand will not increase the equilibrium price.E) A) and D)
F) B) and D)

Question 15

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...

Question 16

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) None of the above

Question 17

Figure 5-14 
-Refer to Figure 5-14. 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 C)
F) B) and D)

Question 18

Recently, in Smalltown, the price of Twinkies fell from $0.80 to $0.70. As a result, the quantity demanded of Ho- Ho's decreased from 120 to 100. What would be the appropriate elasticity to compute? Using the midpoint method, compute this elasticity. What does your answer tell you?

Accepted Answer

The appropriate elasticity to compute wo...

Question 19

Figure 5-12 
-Refer to Figure 5-12. Sellers' total revenue would increase if the price

Accepted Answer

A)   increased from $12 to $15.
B)   decreased from $39 to $36.
C)   decreased from $27 to $24.
D)   All of the above are correct.E) None of the above
F) B) and D)

Question 20

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) A) and D)
F) None of the above

Exam 5: Elasticity and Its Application

Figure 5-17 -Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point A and point B?

Correct Answer
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Correct Answer
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The cross price elas...
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Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

Correct Answer
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Scenario 5-7 Suppose the demand function for good X is given by: where is the quantity demanded of good X, is the price of good X, and is the price of good Y, which is related to good X. -Refer to Scenario 5-7. Good X and Good Y are related as

Correct Answer
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Figure 5-13 -Refer to Figure 5-13. Between point A and point B on the graph, demand is

Correct Answer
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Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from A to B represents the

Correct Answer
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Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's

Correct Answer
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If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Correct Answer
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Figure 5-14 -Refer to Figure 5-14. Over which range is the supply curve in this figure the most elastic?

Correct Answer
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Table 5-9 -Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?

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

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

Correct Answer
verified

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the

Correct Answer
verified

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

Correct Answer
verified

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

Correct Answer
verified

Suppose demand is given by the equation: At what point along this demand curve will total revenue be maximized?

Correct Answer
verified
Total revenue is con...
View Answer

Which of the following statements is valid when the market supply curve is vertical?

Correct Answer
verified

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 Answer
verified

Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8. You should

Correct Answer
verified

Recently, in Smalltown, the price of Twinkies fell from $0.80 to $0.70. As a result, the quantity demanded of Ho- Ho's decreased from 120 to 100. What would be the appropriate elasticity to compute? Using the midpoint method, compute this elasticity. What does your answer tell you?

Correct Answer
verified
The appropriate elasticity to compute wo...
View Answer

Exam 5: Elasticity and Its Application

Figure 5-17 -Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point A and point B?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe cross price elas...View AnswerShow Answer

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

Correct AnswerverifiedShow Answer

Scenario 5-7 Suppose the demand function for good X is given by: where is the quantity demanded of good X, is the price of good X, and is the price of good Y, which is related to good X. -Refer to Scenario 5-7. Good X and Good Y are related as

Correct AnswerverifiedShow Answer

Figure 5-13 -Refer to Figure 5-13. Between point A and point B on the graph, demand is

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from A to B represents the

Correct AnswerverifiedShow Answer

Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Correct AnswerverifiedShow Answer

Figure 5-14 -Refer to Figure 5-14. Over which range is the supply curve in this figure the most elastic?

Correct AnswerverifiedShow Answer

Table 5-9 -Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the

Correct AnswerverifiedShow Answer

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose demand is given by the equation: At what point along this demand curve will total revenue be maximized?

Correct AnswerverifiedTotal revenue is con...View AnswerShow Answer

Which of the following statements is valid when the market supply curve is vertical?

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

Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8. You should

Correct AnswerverifiedShow Answer

Recently, in Smalltown, the price of Twinkies fell from $0.80 to $0.70. As a result, the quantity demanded of Ho- Ho's decreased from 120 to 100. What would be the appropriate elasticity to compute? Using the midpoint method, compute this elasticity. What does your answer tell you?

Correct AnswerverifiedThe appropriate elasticity to compute wo...View AnswerShow Answer

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

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Total revenue is con...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The appropriate elasticity to compute wo...
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