Question 1

If the demand for donuts is elastic, then a decrease in the price of donuts will

Accepted Answer

A)   increase total revenue of donut sellers.
B)   decrease total revenue of donut sellers.
C)   not change total revenue of donut sellers.
D)   There is not enough information to answer this question.

Question 2

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.

Question 3

A linear, downward-sloping demand curve has a constant elasticity but a changing slope.

Accepted Answer

A) True 
 B)False

Question 4

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Accepted Answer

A) True 
 B)False

Question 5

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Accepted Answer

A) True 
 B)False

Question 6

If the price elasticity of demand for a good is 0.8, then a 12 percent increase in the quantity demanded must be the result of

Accepted Answer

A)   a 0.06 percent decrease in the price.
B)   a 1.5 percent decrease in the price.
C)   a 9.6 percent decrease in the price.
D)   a 15 percent decrease in the price.

Question 7

Figure 5-4 
-Refer to Figure 5-4. If the price decreases in the region of the demand curve between points A and B, 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.

Question 8

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

Accepted Answer

A) True 
 B)False

Question 9

Table 5-11
 
-Refer to Table 5-11. Which scenario describes the market for oil in the long run?

Accepted Answer

A)   A
B)   B
C)   C
D)   D

Question 10

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

Accepted Answer

The price ...

Question 11

An advance in farm technology that results in an increased market supply is

Accepted Answer

A)   good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food.
B)   bad for farmers because total revenue will fall but good for consumers because prices for food will fall.
C)   good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption.
D)   bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue.

Question 12

Total revenue will be at its largest value on a linear demand curve at the

Accepted Answer

A)   top of the curve, where prices are highest.
B)   midpoint of the curve.
C)   low end of the curve, where quantity demanded is highest.
D)   None of the above is correct.

Question 13

Last month, sellers of good Y took in $100 in total revenue on sales of 50 units of good Y. This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y. At the same time, the price of good X stayed the same, but sales of good X increased from 20 units to 40 units. We can conclude that goods X and Y are

Accepted Answer

A)   substitutes, and have a cross-price elasticity of 0.60.
B)   complements, and have a cross-price elasticity of -0.60.
C)   substitutes, and have a cross-price elasticity of 1.67.
D)   complements, and have a cross-price elasticity of -1.67.

Question 14

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 15

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

Accepted Answer

A)   first becomes smaller, then larger.
B)   always becomes larger.
C)   always becomes smaller.
D)   first becomes larger, then smaller.

Question 16

Demand is elastic if the price elasticity of demand is

Accepted Answer

A)   less than 1.
B)   equal to 1.
C)   equal to 0.
D)   greater than 1.

Question 17

Figure 5-11  A: The Elasticity of Demand
-Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

Accepted Answer

A)   increase by $120, so demand must be inelastic in this price range.
B)   increase by $320, so demand must be inelastic in this price range.
C)   decrease by $120, so demand must be elastic in this price range.
D)   decrease by $320, so demand must be elastic in this price range.

Question 18

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

Accepted Answer

A)   The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve.
B)   The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve.
C)   Given two prices with which to calculate the price elasticity of supply, that elasticity would be the same for both curves.
D)   A decrease in demand will increase total revenue if the steeper supply curve is relevant, while a decrease in demand will decrease total revenue if the flatter supply cure is relevant.

Question 19

Suppose that good X is a luxury and that good Y is a necessity. Which good would you expect to have more price elastic demand?

Accepted Answer

The answer of Suppose that good X is a luxury...

Question 20

Figure 5-4 
-Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are Q = 2,000, P= $15)  and Q = 2,400, P = $12) . Then which of the following scenarios is possible?

Accepted Answer

A)   Both of these points lie on section BC of the demand curve.
B)   The vertical intercept of the demand curve is the point Q = 0, P = $22) .
C)   The horizontal intercept of the demand curve is the point Q = 5,000, P = $0) .
D)   Any of these scenarios is possible.

Exam 5: Elasticity and Its Application

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are Q = 2,000, P= $15) and Q = 2,400, P = $12) . Then which of the following scenarios is possible?

Correct Answer
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Table 5-11 -Refer to Table 5-11. Which scenario describes the market for oil in the long run?

Correct Answer
verified

Figure 5-11 A: The Elasticity of Demand -Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

Correct Answer
verified

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

Correct Answer
verified
The price ...
View Answer

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Correct Answer
verified

A linear, downward-sloping demand curve has a constant elasticity but a changing slope.

Correct Answer
verified

An advance in farm technology that results in an increased market supply is

Correct Answer
verified

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Correct Answer
verified

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

Correct Answer
verified

If the price elasticity of demand for a good is 0.8, then a 12 percent increase in the quantity demanded must be the result of

Correct Answer
verified

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

Correct Answer
verified

Total revenue will be at its largest value on a linear demand curve at the

Correct Answer
verified

Suppose that good X is a luxury and that good Y is a necessity. Which good would you expect to have more price elastic demand?

Correct Answer
verified

Demand is elastic if the price elasticity of demand is

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Correct Answer
verified

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

Correct Answer
verified

If the demand for donuts is elastic, then a decrease in the price of donuts will

Correct Answer
verified

Exam 5: Elasticity and Its Application

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are Q = 2,000, P= $15) and Q = 2,400, P = $12) . Then which of the following scenarios is possible?

Correct AnswerverifiedShow Answer

Table 5-11 -Refer to Table 5-11. Which scenario describes the market for oil in the long run?

Correct AnswerverifiedShow Answer

Figure 5-11 A: The Elasticity of Demand -Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe price ...View AnswerShow Answer

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Correct AnswerverifiedShow Answer

A linear, downward-sloping demand curve has a constant elasticity but a changing slope.

Correct AnswerverifiedShow Answer

An advance in farm technology that results in an increased market supply is

Correct AnswerverifiedShow Answer

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Correct AnswerverifiedShow Answer

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 0.8, then a 12 percent increase in the quantity demanded must be the result of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Total revenue will be at its largest value on a linear demand curve at the

Correct AnswerverifiedShow Answer

Suppose that good X is a luxury and that good Y is a necessity. Which good would you expect to have more price elastic demand?

Correct AnswerverifiedShow Answer

Demand is elastic if the price elasticity of demand is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Correct AnswerverifiedShow Answer

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If the demand for donuts is elastic, then a decrease in the price of donuts will

Correct AnswerverifiedShow Answer

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The price ...
View Answer

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