Question 1

When the price of bubble gum is $0.50,the quantity demanded is 400 packs per day.When the price falls to $0.40,the quantity demanded increases to 600.Given this information and using the midpoint method,we know that the demand for bubble gum is

Accepted Answer

A)  inelastic.
B)  elastic.
C)  unit elastic.
D)  perfectly inelastic.E) A) and B)
F) All of the above

Question 2

Figure 5-11
 
-Refer to Figure 5-11.Which supply curve represents perfectly inelastic supply?

Accepted Answer

A)  S₁
B)  S₂
C)  S₃
D)  It is impossible to tell without more information.E) None of the above
F) B) and C)

Question 3

In which of these instances is demand said to be perfectly inelastic?

Accepted Answer

A)  An increase in price of 2% causes a decrease in quantity demanded of 2%.
B)  A decrease in price of 2% causes an increase in quantity demanded of 0%.
C)  A decrease in price of 2% causes a decrease in total revenue of 0%.
D)  The demand curve is horizontal.E) B) and C)
F) A) and B)

Question 4

Drug interdiction,which reduces the supply of drugs,may decrease drug-related crime because the demand for drugs is inelastic.

Accepted Answer

A) True 
 B)False

Question 5

In any market,total revenue is calculated by taking the price of the good and

Accepted Answer

A)  dividing it by the price elasticity of demand.
B)  multiplying it by the price elasticity of demand.
C)  multiplying it by the quantity of the good.
D)  multiplying it by the quantity of the good and then subtracting the costs of production.E) A) and B)
F) A) and C)

Question 6

Table 5-2
 
-Refer to Table 5-2.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)  Quantity supplied moves proportionately more than the price along none of the three supply curves.E) None of the above
F) B) and C)

Question 7

For a horizontal demand curve,

Accepted Answer

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

Question 8

Figure 5-9
 
-Refer to Figure 5-9.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) A) and B)
F) A) and C)

Question 9

Figure 5-1
 
-Refer to Figure 5-1.Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00.Then,between prices of $4.90 and $5.10,

Accepted Answer

A)  the price elasticity of demand is less than 1.
B)  the price elasticity of demand is equal to 1.
C)  the price elasticity of demand is greater than 1.
D)  any of the above could be correct, depending on the quantities demanded at prices of $4.90 and $5.10.E) All of the above
F) A) and D)

Question 10

Given the market for illegal drugs,when the government is successful in reducing the flow of drugs into the United States,

Accepted Answer

A)  supply decreases, demand is unaffected, and price increases.
B)  demand decreases, supply is unaffected, and price decreases.
C)  demand and supply both decrease, leaving price essentially unchanged.
D)  supply decreases, demand increases, and price increases substantially as a result.E) C) and D)
F) None of the above

Question 11

For which of the following goods would demand be most elastic?

Accepted Answer

A)  clothing
B)  blue jeans
C)  Tommy Hilfiger jeans
D)  All three would have the same elasticity of demand since they are all related.E) A) and B)
F) None of the above

Question 12

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) B) and D)
F) B) and C)

Question 13

Economists compute the price elasticity of demand as the

Accepted Answer

A)  percentage change in price divided by the percentage change in quantity demanded.
B)  change in quantity demanded divided by the change in the price.
C)  percentage change in quantity demanded divided by the percentage change in price.
D)  percentage change in quantity demanded divided by the percentage change in income.E) None of the above
F) All of the above

Question 14

When the price of a good is $5,the quantity demanded is 100 units per month;when the price is $7,the quantity demanded is 80 units per month.Using the midpoint method,the price elasticity of demand is about

Accepted Answer

A)  0.22.
B)  0.67.
C)  1.33.
D)  1.50.E) All of the above
F) A) and C)

Question 15

If a 6 percent increase in income results in a 10 percent increase in the quantity demanded of pizza,then the income elasticity of demand for pizza is

Accepted Answer

A)  negative and therefore pizza is an normal good.
B)  negative and therefore pizza is a inferior good.
C)  positive and therefore pizza is an inferior good.
D)  positive and therefore pizza is a normal good.E) None of the above
F) B) and C)

Question 16

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

Accepted Answer

A)  direction of the effect on the market.
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 D)
F) B) and C)

Question 17

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Accepted Answer

A) True 
 B)False

Question 18

If the price elasticity of demand is equal to 0,then demand is unit elastic.

Accepted Answer

A) True 
 B)False

Question 19

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

Question 20

Figure 5-3
 
-Refer to Figure 5-3.If price falls within the C range of the demand curve we can expect total revenue to

Accepted Answer

A)  increase.
B)  decrease.
C)  stay the same.
D)  This determination cannot be made without further information.E) All of the above
F) A) and B)

Exam 5: Elasticity and Its Applications

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

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Figure 5-11 -Refer to Figure 5-11.Which supply curve represents perfectly inelastic supply?

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Figure 5-9 -Refer to Figure 5-9.Between point A and point B on the graph,demand is

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In which of these instances is demand said to be perfectly inelastic?

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When the price of a good is $5,the quantity demanded is 100 units per month;when the price is $7,the quantity demanded is 80 units per month.Using the midpoint method,the price elasticity of demand is about

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Figure 5-1 -Refer to Figure 5-1.Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00.Then,between prices of $4.90 and $5.10,

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If the price elasticity of demand is equal to 0,then demand is unit elastic.

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Figure 5-3 -Refer to Figure 5-3.If price falls within the C range of the demand curve we can expect total revenue to

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Given the market for illegal drugs,when the government is successful in reducing the flow of drugs into the United States,

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For a horizontal demand curve,

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For which of the following goods would demand be most elastic?

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Economists compute the price elasticity of demand as the

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Table 5-2 -Refer to Table 5-2.Along which of the supply curves does quantity supplied move proportionately more than the price?

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If a 6 percent increase in income results in a 10 percent increase in the quantity demanded of pizza,then the income elasticity of demand for pizza is

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

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In any market,total revenue is calculated by taking the price of the good and

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When the price of bubble gum is $0.50,the quantity demanded is 400 packs per day.When the price falls to $0.40,the quantity demanded increases to 600.Given this information and using the midpoint method,we know that the demand for bubble gum is

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?

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

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Drug interdiction,which reduces the supply of drugs,may decrease drug-related crime because the demand for drugs is inelastic.

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