Question 1

In general,elasticity is a measure of

Accepted Answer

A)   the extent to which advances in technology are adopted by producers.
B)   the extent to which a market is competitive.
C)   how firms' profits respond to changes in market prices.
D)   how much buyers and sellers respond to changes in market conditions.E) A) and B)
F) All of the above

Question 2

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 D)
F) All of the above

Question 3

Table 5-6
 
-Refer to Table 5-6.Which scenario describes the market for oil in the short run in comparison to the long run?

Accepted Answer

A)   Scenario A describes both the short run and the long run.
B)   Scenario D describes both the short run and the long run.
C)   Scenario D describes the short run, whereas scenario A describes the long run.
D)   Scenario C describes the short run, whereas scenario B describes the long run.E) All of the above
F) B) and C)

Question 4

Figure 5-7
 
-Refer to Figure 5-7.For prices above $8,demand is price

Accepted Answer

A)   elastic, and total revenue will rise as price rises.
B)   inelastic, and total revenue will rise as price rises.
C)   elastic, and total revenue will fall as price rises.
D)   inelastic, and total revenue will fall as price rises.E) A) and B)
F) B) and C)

Question 5

When demand is inelastic,the price elasticity of demand is

Accepted Answer

A)   less than 1, and price and total revenue will move in the same direction.
B)   less than 1, and price and total revenue will move in opposite directions.
C)   greater than 1, and price and total revenue will move in the same direction.
D)   greater than 1, and price and total revenue will move in opposite directions.E) A) and D)
F) A) and C)

Question 6

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

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

Question 7

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)   0.2
C)   1
D)   2.1E) A) and B)
F) A) and C)

Question 8

The smaller the price elasticity of demand,the

Accepted Answer

A)   steeper the demand curve will be through a given point.
B)   flatter the demand curve will be through a given point.
C)   more strongly buyers respond to a change in price between any two prices P1 and P2.
D)   smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2.E) A) and B)
F) A) and D)

Question 9

There are very few,if any,good substitutes for automotive tires.Therefore,the demand for automotive tires would tend to be

Accepted Answer

A)   elastic.
B)   unit elastic.
C)   inelastic.
D)   highly responsive to changes in income as well as changes in prices.E) None of the above
F) B) and D)

Question 10

In general,demand curves for luxuries tend to be price elastic.

Accepted Answer

A) True 
 B)False

Question 11

Last year,Shelley bought 6 pairs of designer jeans when her income was $40,000.This year,her income is $50,000,and she purchased 10 pairs of designer jeans.Holding other factors constant,it follows that Shelley

Accepted Answer

A)   considers designer jeans to be a necessity.
B)   considers designer jeans to be an inferior good.
C)   considers designer jeans to be a normal good.
D)   has a low price elasticity of demand for jeans.E) A) and D)
F) A) and C)

Question 12

Scenario 5-2
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-2.The equilibrium quantity will

Accepted Answer

A)   increase in both the aged cheddar cheese and bread markets.
B)   increase in the aged cheddar cheese market and decrease in the bread market.
C)   decrease in the aged cheddar cheese market and increase in the bread market.
D)   decrease in both the aged cheddar cheese and bread markets.E) A) and B)
F) A) and C)

Question 13

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

Accepted Answer

A)   water
B)   diamonds
C)   hamburgers
D)   housingE) A) and D)
F) B) and C)

Question 14

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Accepted Answer

A) True 
 B)False

Question 15

If the price elasticity of supply for wheat is less than 1,then the supply of wheat is

Accepted Answer

A)   inelastic.
B)   elastic.
C)   unit elastic.
D)   quite sensitive to changes in income.E) A) and D)
F) A) and C)

Question 16

Figure 5-10
 
-Refer to Figure 5-10.When the price is $30,total revenue is

Accepted Answer

A)   $3,000.
B)   $5,000.
C)   $7,000.
D)   $9,000.E) A) and B)
F) C) and D)

Question 17

If the cross-price elasticity of two goods is positive,then the two goods are

Accepted Answer

A)   substitutes.
B)   complements.
C)   normal goods.
D)   inferior goods.E) A) and B)
F) A) and C)

Question 18

The midpoint method for calculating elasticities is convenient in that it allows us to

Accepted Answer

A)   ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price.
B)   calculate the same value for the elasticity, regardless of whether the price increases or decreases.
C)   assume that sellers' total revenue stays constant when the price changes.
D)   restrict all elasticity values to between 0 and 1.E) B) and C)
F) A) and D)

Question 19

Figure 5-6
 
-Refer to Figure 5-6.Sellers' total revenue would increase if the price

Accepted Answer

A)   increased from $6 to $8.
B)   decreased from $18 to $16.
C)   decreased from $16 to $15.
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 20

Figure 5-4
 
-Refer to Figure 5-4.If the price increases in the region of the demand curve between points B and C,we can expect total revenue to

Accepted Answer

A)   increase.
B)   stay the same.
C)   decrease.
D)   first decrease, then increase until total revenue is maximized.E) A) and D)
F) A) and C)

Exam 5: Elasticity and Its Application

Figure 5-6 -Refer to Figure 5-6.Sellers' total revenue would increase if the price

Correct Answer
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In general,elasticity is a measure of

Correct Answer
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The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Correct Answer
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Correct Answer
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If the cross-price elasticity of two goods is positive,then the two goods are

Correct Answer
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Last year,Shelley bought 6 pairs of designer jeans when her income was $40,000.This year,her income is $50,000,and she purchased 10 pairs of designer jeans.Holding other factors constant,it follows that Shelley

Correct Answer
verified

Figure 5-7 -Refer to Figure 5-7.For prices above $8,demand is price

Correct Answer
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The smaller the price elasticity of demand,the

Correct Answer
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The midpoint method for calculating elasticities is convenient in that it allows us to

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

Correct Answer
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Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase revenue?

Correct Answer
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Figure 5-10 -Refer to Figure 5-10.When the price is $30,total revenue is

Correct Answer
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When demand is inelastic,the price elasticity of demand is

Correct Answer
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Figure 5-4 -Refer to Figure 5-4.If the price increases in the region of the demand curve between points B and C,we can expect total revenue to

Correct Answer
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If the price elasticity of supply for wheat is less than 1,then the supply of wheat is

Correct Answer
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In general,demand curves for luxuries tend to be price elastic.

Correct Answer
verified

There are very few,if any,good substitutes for automotive tires.Therefore,the demand for automotive tires would tend to be

Correct Answer
verified

Table 5-6 -Refer to Table 5-6.Which scenario describes the market for oil in the short run in comparison to the long run?

Correct Answer
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Correct Answer
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Exam 5: Elasticity and Its Application

Figure 5-6 -Refer to Figure 5-6.Sellers' total revenue would increase if the price

Correct AnswerverifiedShow Answer

In general,elasticity is a measure of

Correct AnswerverifiedShow Answer

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the cross-price elasticity of two goods is positive,then the two goods are

Correct AnswerverifiedShow Answer

Last year,Shelley bought 6 pairs of designer jeans when her income was $40,000.This year,her income is $50,000,and she purchased 10 pairs of designer jeans.Holding other factors constant,it follows that Shelley

Correct AnswerverifiedShow Answer

Figure 5-7 -Refer to Figure 5-7.For prices above $8,demand is price

Correct AnswerverifiedShow Answer

The smaller the price elasticity of demand,the

Correct AnswerverifiedShow Answer

The midpoint method for calculating elasticities is convenient in that it allows us to

Correct AnswerverifiedShow Answer

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

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

Figure 5-10 -Refer to Figure 5-10.When the price is $30,total revenue is

Correct AnswerverifiedShow Answer

When demand is inelastic,the price elasticity of demand is

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4.If the price increases in the region of the demand curve between points B and C,we can expect total revenue to

Correct AnswerverifiedShow Answer

If the price elasticity of supply for wheat is less than 1,then the supply of wheat is

Correct AnswerverifiedShow Answer

In general,demand curves for luxuries tend to be price elastic.

Correct AnswerverifiedShow Answer

There are very few,if any,good substitutes for automotive tires.Therefore,the demand for automotive tires would tend to be

Correct AnswerverifiedShow Answer

Table 5-6 -Refer to Table 5-6.Which scenario describes the market for oil in the short run in comparison to the long run?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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