Question 1

Suppose demand is perfectly elastic,and the supply of the good in question decreases.As a result,

Accepted Answer

A)   the equilibrium quantity decreases, and the equilibrium price is unchanged.
B)   the equilibrium price increases, and the equilibrium quantity is unchanged.
C)   the equilibrium quantity and the equilibrium price both are unchanged.
D)   buyers' total expenditure on the good is unchanged.E) A) and B)
F) B) and C)

Question 2

Figure 5-9
 
-Refer to Figure 5-9.If price increases from $10 to $15,total revenue will

Accepted Answer

A)   increase by $20, so demand must be inelastic in this price range.
B)   increase by $5, so demand must be inelastic in this price range.
C)   decrease by $20, so demand must be elastic in this price range.
D)   decrease by $10, so demand must be elastic in this price range.E) B) and C)
F) All of the above

Question 3

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 2.Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Accepted Answer

A)   The quantity of the good demanded decreases from 250 to 150.
B)   The quantity of the good demanded decreases from 200 to 100.
C)   The quantity of the good demanded decreases by 0.05 percent.
D)   The quantity of the good demanded decreases by 0.2 percent.E) A) and C)
F) B) and C)

Question 4

For a particular good,a 2 percent increase in price causes a 12 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A)   There are no close substitutes for this good.
B)   The good is a luxury.
C)   The market for the good is broadly defined.
D)   The relevant time horizon is short.E) All of the above
F) B) and C)

Question 5

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

Accepted Answer

A)   necessities.
B)   complements.
C)   normal goods.
D)   inferior goods.E) A) and B)
F) None of the above

Question 6

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Accepted Answer

A) True 
 B)False

Question 7

If two goods are complements,their cross-price elasticity will be

Accepted Answer

A)   positive.
B)   negative.
C)   zero.
D)   equal to the difference between the income elasticities of demand for the two goods.E) All of the above
F) B) and C)

Question 8

While in college,John and Bethany each buy five packages of mac-n-cheese per week.After they graduate and have full-time jobs,John buys six packages per week,but Bethany buys only two packages per week.When looking at income elasticity of demand for mac-n-cheese,John's

Accepted Answer

A)   is negative, and Bethany's is positive.
B)   is positive, and Bethany's is negative.
C)   is zero, and Bethany's approaches infinity.
D)   approaches infinity, and Bethany's is zero.E) A) and B)
F) A) and C)

Question 9

The demand for Hubba Bubba bubble gum is likely

Accepted Answer

A)   elastic because gum is expensive relative to other snacks.
B)   elastic because there are many close substitutes for Hubba Bubba.
C)   elastic because bubble gum is regarded as a necessity by many people.
D)   inelastic because it is consumed quickly, making the relevant time horizon short.E) B) and D)
F) B) and C)

Question 10

Even the demand for a necessity such as gasoline will respond to a change in price,especially over a longer time horizon.

Accepted Answer

A) True 
 B)False

Question 11

Scenario 5-1
Suppose that 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 5-1.The price elasticity of supply for aged cheddar cheese could be

Accepted Answer

A)   -1.
B)   0.
C)   0.5.
D)   1.5.E) A) and B)
F) None of the above

Question 12

To determine whether a good is considered normal or inferior,one could examine the value of the

Accepted Answer

A)   income elasticity of demand for that good.
B)   price elasticity of demand for that good.
C)   price elasticity of supply for that good.
D)   cross-price elasticity of demand for that good.E) A) and C)
F) B) and C)

Question 13

Holding all other forces constant,when the price of gasoline rises,the number of gallons of gasoline demanded would fall substantially over a ten-year period because

Accepted Answer

A)   buyers tend to be much less sensitive to a change in price when given more time to react.
B)   buyers tend to be much more sensitive to a change in price when given more time to react.
C)   buyers will have substantially more real income over a ten-year period.
D)   the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline.E) C) and D)
F) None of the above

Question 14

A perfectly inelastic demand implies that buyers

Accepted Answer

A)   decrease their purchases when the price rises.
B)   purchase the same amount as before when the price rises or falls.
C)   increase their purchases only slightly when the price falls.
D)   respond substantially to an increase in price.E) B) and C)
F) A) and D)

Question 15

A key determinant of the price elasticity of supply is the time period under consideration.Which of the following statements best explains this fact?

Accepted Answer

A)   Supply curves are steeper over long periods of time than over short periods of time.
B)   Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time.
C)   The number of firms in a market tends to be more variable over long periods of time than over short periods of time.
D)   Firms prefer to change their prices in the short run rather than in the long run.E) A) and B)
F) B) and D)

Question 16

If a change in the price of a good results in no change in total revenue,then

Accepted Answer

A)   the demand for the good must be elastic.
B)   the demand for the good must be inelastic.
C)   the demand for the good must be unit elastic.
D)   buyers must not respond very much to a change in price.E) A) and B)
F) A) and C)

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

In the early 1970s,OPEC's goal was to

Accepted Answer

A)   decrease the world-wide price of oil so that the quantity demanded increased, thus raising total revenues for OPEC members.
B)   increase the world-wide price of oil by reducing the quantity of oil supplied.
C)   increase the world-wide price of oil by increasing the quantity of oil supplied, thus raising total revenues for OPEC members.
D)   decrease the world-wide price of oil so that quantity demanded increased.E) B) and C)
F) A) and B)

Question 19

When studying how some event or policy affects a market,elasticity provides information on the

Accepted Answer

A)   equity effects on the market by identifying the winners and losers.
B)   magnitude of the effect on the market.
C)   speed of adjustment of the market in response to the event or policy.
D)   number of market participants who are directly affected by the event or policy.E) B) and C)
F) All of the above

Question 20

Holding all other factors constant and using the midpoint method,if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60,then supply is

Accepted Answer

A)   inelastic, since the price elasticity of supply is equal to .91.
B)   inelastic, since the price elasticity of supply is equal to 1.1.
C)   elastic, since the price elasticity of supply is equal to 0.91.
D)   elastic, since the price elasticity of supply is equal to 1.1.E) None of the above
F) A) and D)

Exam 5: Elasticity and Its Application

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Correct Answer
verified

Holding all other factors constant and using the midpoint method,if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60,then supply is

Correct Answer
verified

If a change in the price of a good results in no change in total revenue,then

Correct Answer
verified

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

Correct Answer
verified

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 2.Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Correct Answer
verified

If two goods are complements,their cross-price elasticity will be

Correct Answer
verified

To determine whether a good is considered normal or inferior,one could examine the value of the

Correct Answer
verified

A perfectly inelastic demand implies that buyers

Correct Answer
verified

When studying how some event or policy affects a market,elasticity provides information on the

Correct Answer
verified

Suppose demand is perfectly elastic,and the supply of the good in question decreases.As a result,

Correct Answer
verified

Holding all other forces constant,when the price of gasoline rises,the number of gallons of gasoline demanded would fall substantially over a ten-year period because

Correct Answer
verified

Even the demand for a necessity such as gasoline will respond to a change in price,especially over a longer time horizon.

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

In the early 1970s,OPEC's goal was to

Correct Answer
verified

While in college,John and Bethany each buy five packages of mac-n-cheese per week.After they graduate and have full-time jobs,John buys six packages per week,but Bethany buys only two packages per week.When looking at income elasticity of demand for mac-n-cheese,John's

Correct Answer
verified

Figure 5-9 -Refer to Figure 5-9.If price increases from $10 to $15,total revenue will

Correct Answer
verified

For a particular good,a 2 percent increase in price causes a 12 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Correct Answer
verified

A key determinant of the price elasticity of supply is the time period under consideration.Which of the following statements best explains this fact?

Correct Answer
verified

The demand for Hubba Bubba bubble gum is likely

Correct Answer
verified

Exam 5: Elasticity and Its Application

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Correct AnswerverifiedShow Answer

Holding all other factors constant and using the midpoint method,if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60,then supply is

Correct AnswerverifiedShow Answer

If a change in the price of a good results in no change in total revenue,then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 2.Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Correct AnswerverifiedShow Answer

If two goods are complements,their cross-price elasticity will be

Correct AnswerverifiedShow Answer

To determine whether a good is considered normal or inferior,one could examine the value of the

Correct AnswerverifiedShow Answer

A perfectly inelastic demand implies that buyers

Correct AnswerverifiedShow Answer

When studying how some event or policy affects a market,elasticity provides information on the

Correct AnswerverifiedShow Answer

Suppose demand is perfectly elastic,and the supply of the good in question decreases.As a result,

Correct AnswerverifiedShow Answer

Holding all other forces constant,when the price of gasoline rises,the number of gallons of gasoline demanded would fall substantially over a ten-year period because

Correct AnswerverifiedShow Answer

Even the demand for a necessity such as gasoline will respond to a change in price,especially over a longer time horizon.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the early 1970s,OPEC's goal was to

Correct AnswerverifiedShow Answer

While in college,John and Bethany each buy five packages of mac-n-cheese per week.After they graduate and have full-time jobs,John buys six packages per week,but Bethany buys only two packages per week.When looking at income elasticity of demand for mac-n-cheese,John's

Correct AnswerverifiedShow Answer

Figure 5-9 -Refer to Figure 5-9.If price increases from $10 to $15,total revenue will

Correct AnswerverifiedShow Answer

For a particular good,a 2 percent increase in price causes a 12 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

A key determinant of the price elasticity of supply is the time period under consideration.Which of the following statements best explains this fact?

Correct AnswerverifiedShow Answer

The demand for Hubba Bubba bubble gum is likely

Correct AnswerverifiedShow Answer

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