Question 1

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 B)
F) A) and C)

Question 2

If sellers do not adjust their quantities supplied at all in response to a change in price,

Accepted Answer

A)   advances in technology must be prevalent.
B)   the time period under consideration must be very long.
C)   supply is perfectly elastic.
D)   supply is perfectly inelastic.E) A) and D)
F) C) and D)

Question 3

Figure 5-5 
-Refer to Figure 5-5.Using the midpoint method,between prices of $12 and $18,price elasticity of demand is

Accepted Answer

A)   0.33.
B)   0.67.
C)   1.33.
D)   1.89.E) A) and B)
F) All of the above

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Figure 5-4 
-Refer to Figure 5-4.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 $4.99 and $5.01,the price elasticity of demand is

Accepted Answer

A)   less than 1 but greater than zero.
B)   equal to 1.
C)   greater than 1.
D)   equal to zero.E) B) and D)
F) B) and C)

Question 6

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 7

Suppose demand is perfectly inelastic,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) None of the above

Question 8

Figure 5-9 
-Refer to Figure 5-9.A decrease in price from $15 to $10 leads to a

Accepted Answer

A)   decrease in total revenue of $10,so the price elasticity of demand is greater than 1 in this price range.
B)   decrease in total revenue of $10,so the price elasticity of demand is less than 1 in this price range.
C)   decrease in total revenue of $20,so the price elasticity of demand is less than 1 in this price range.
D)   decrease in total revenue of $20,so demand is elastic in this price range.E) All of the above
F) A) and B)

Question 9

Suppose that 500 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 10 percent,the number of candy bars demanded falls to 480.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Accepted Answer

A)   demand for candy bars in this price range is unit elastic.
B)   price increase will decrease the total revenue of candy bar sellers.
C)   price elasticity of demand for candy bars in this price range is about 0.41.
D)   price elasticity of demand for candy bars in this price range is about 0.24.E) None of the above
F) A) and B)

Question 10

Figure 5-14 
-Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points C and D?

Accepted Answer

A)   0.21
B)   0.29
C)   0.73
D)   1.36E) B) and C)
F) All of the above

Question 11

Total revenue

Accepted Answer

A)   always increases as price increases.
B)   increases as price increases,as long as demand is elastic.
C)   decreases as price increases,as long as demand is inelastic.
D)   remains unchanged as price increases when demand is unit elastic.E) All of the above
F) A) and D)

Question 12

A decrease in supply will cause the largest increase in price when

Accepted Answer

A)   both supply and demand are inelastic.
B)   both supply and demand are elastic.
C)   demand is elastic and supply is inelastic.
D)   demand is inelastic and supply is elastic.E) A) and B)
F) B) and C)

Question 13

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

Accepted Answer

The price ...

Question 14

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) None of the above

Question 15

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 16

If a supply curve is horizontal,then supply is said to be perfectly elastic,and the price elasticity of supply approaches infinity.

Accepted Answer

A) True 
 B)False

Question 17

Figure 5-5 
-Refer to Figure 5-5.Using the midpoint method,demand is unit elastic between prices of

Accepted Answer

A)   $18 and $24.
B)   $24 and $30.
C)   $24 and $36.
D)   $30 and $36.E) A) and D)
F) A) and B)

Question 18

Drug interdiction,which reduces the supply of drugs,will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,demand is unit elastic between prices of

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

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Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,between prices of $12 and $18,price elasticity of demand is

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Figure 5-9 -Refer to Figure 5-9.A decrease in price from $15 to $10 leads to a

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

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

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Figure 5-14 -Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points C and D?

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The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Correct AnswerverifiedShow Answer

If a supply curve is horizontal,then supply is said to be perfectly elastic,and the price elasticity of supply approaches infinity.

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

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Suppose that 500 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 10 percent,the number of candy bars demanded falls to 480.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Correct AnswerverifiedShow Answer

If sellers do not adjust their quantities supplied at all in response to a change in price,

Correct AnswerverifiedShow Answer

Drug interdiction,which reduces the supply of drugs,will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Correct AnswerverifiedShow Answer

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

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Figure 5-4 -Refer to Figure 5-4.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 $4.99 and $5.01,the price elasticity of demand is

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Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

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Total revenue

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

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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 decrease in supply will cause the largest increase in price when

Correct AnswerverifiedShow Answer

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