Question 1

Which of the following is likely to have the most price inelastic demand?

Accepted Answer

A)   strawberry-banana milk shakes
B)   gasoline in the short run
C)   diamond earrings
D)   box seats at a major league baseball gameE) C) and D)
F) B) and D)

Question 2

Recently,in Smalltown,the price of Twinkies fell from $0.80 to $0.70.As a result,the quantity demanded of Ho-Ho's decreased from 120 to 100.What would be the appropriate elasticity to compute? Using the midpoint method,compute this elasticity.What does your answer tell you?

Accepted Answer

The appropriate elasticity to compute wo...

Question 3

Demand is said to be unit elastic if quantity demanded

Accepted Answer

A)   changes by the same percent as the price.
B)   changes by a larger percent than the price.
C)   changes by a smaller percent than the price.
D)   does not respond to a change in price.E) All of the above
F) None of the above

Question 4

For a particular good,a 5 percent increase in price causes a 2 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A)   There are many 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 long.E) None of the above
F) B) and D)

Question 5

When demand is inelastic,an increase in price will cause

Accepted Answer

A)   an increase in total revenue.
B)   a decrease in total revenue.
C)   no change in total revenue but an increase in quantity demanded.
D)   no change in total revenue but a decrease in quantity demanded.E) B) and C)
F) A) and C)

Question 6

If the price elasticity of supply is 1.2,and a price increase led to a 5% increase in quantity supplied,then the price increase is about

Accepted Answer

A)   0.24%.
B)   4.2%.
C)   6%.
D)   6.2%.E) B) and C)
F) All of the above

Question 7

Figure 5-4 
-Refer to Figure 5-4.The section of the demand curve from B to C represents the

Accepted Answer

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

Question 8

If marijuana were legalized,it is likely that there would be an increase in the supply of marijuana.Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana.These advocates believe that the

Accepted Answer

A)   supply for marijuana is elastic.
B)   demand for marijuana is elastic.
C)   supply for marijuana is inelastic.
D)   demand for marijuana is inelastic.E) A) and B)
F) A) and C)

Question 9

Along the elastic portion of a linear demand curve,total revenue rises as price rises.

Accepted Answer

A) True 
 B)False

Question 10

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 B)
F) A) and C)

Question 11

Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for soccer balls causes the price of soccer balls to increase by 20%,then the quantity supplied of soccer balls will increase by about

Accepted Answer

A)   0.67% in the short run and 0.17% in the long run.
B)   3% in the short run and 1.2% in the long run.
C)   6% in the short run and 24% in the long run.
D)   66.7% in the short run and 16.7% in the long run.E) A) and B)
F) B) and C)

Question 12

The greater the price elasticity of demand,the

Accepted Answer

A)   more likely the product is a necessity.
B)   smaller the responsiveness of quantity demanded to a change in price.
C)   greater the percentage change in price over the percentage change in quantity demanded.
D)   greater the responsiveness of quantity demanded to a change in price.E) B) and C)
F) A) and D)

Question 13

Suppose that when the price of wheat is $2 per bushel,farmers can sell 10 million bushels.When the price of wheat is $3 per bushel,farmers can sell 8 million bushels.Which of the following statements is true? The demand for wheat is

Accepted Answer

A)   income inelastic,so an increase in the price of wheat will increase the total revenue of wheat farmers.
B)   income elastic,so an increase in the price of wheat will increase the total revenue of wheat farmers.
C)   price inelastic,so an increase in the price of wheat will increase the total revenue of wheat farmers.
D)   price elastic,so an increase in the price of wheat will increase the total revenue of wheat farmers.E) None of the above
F) All of the above

Question 14

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) A) and C)

Question 15

Holding all other forces constant,if increasing the price of a good leads to a decrease in total revenue,then the demand for the good must be

Accepted Answer

A)   unit elastic.
B)   inelastic.
C)   elastic.
D)   None of the above is correct because a price increase always leads to an increase in total revenue.E) All of the above
F) B) and C)

Question 16

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

Question 17

Figure 5-1 
-Refer to Figure 5-1.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 C)
F) A) and D)

Question 18

Table 5-2
 
-Refer to Table 5-2.Using the midpoint method,if the price falls from $60 to $40,the price elasticity of demand is

Accepted Answer

A)   zero.
B)   inelastic.
C)   unit elastic.
D)   elastic.E) A) and B)
F) A) and C)

Question 19

Consider luxury weekend hotel packages in Las Vegas.When the price is $250,the quantity demanded is 2,000 packages per week.When the price is $280,the quantity demanded is 1,700 packages per week.Using the midpoint method,the price elasticity of demand is about

Accepted Answer

A)   1.43,and an increase in the price will cause hotels' total revenue to decrease.
B)   1.43,and an increase in the price will cause hotels' total revenue to increase.
C)   0.70,and an increase in the price will cause hotels' total revenue to decrease.
D)   0.70,and an increase in the price will cause hotels' total revenue to increase.E) B) and D)
F) C) and D)

Question 20

If the price of milk rises,when is the price elasticity of demand likely to be the lowest?

Accepted Answer

A)   immediately after the price increase
B)   one month after the price increase
C)   three months after the price increase
D)   one year after the price increaseE) B) and C)
F) C) and D)

Exam 5: Elasticity and Its Application

Holding all other forces constant,if increasing the price of a good leads to a decrease in total revenue,then the demand for the good must be

Correct Answer
verified

Along the elastic portion of a linear demand curve,total revenue rises as price rises.

Correct Answer
verified

When demand is inelastic,an increase in price will cause

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

For a particular good,a 5 percent increase in price causes a 2 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Correct Answer
verified

The greater the price elasticity of demand,the

Correct Answer
verified

Figure 5-1 -Refer to Figure 5-1.Between point A and point B on the graph,demand is

Correct Answer
verified

Recently,in Smalltown,the price of Twinkies fell from $0.80 to $0.70.As a result,the quantity demanded of Ho-Ho's decreased from 120 to 100.What would be the appropriate elasticity to compute? Using the midpoint method,compute this elasticity.What does your answer tell you?

Correct Answer
verified
The appropriate elasticity to compute wo...
View Answer

Which of the following is likely to have the most price inelastic demand?

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

Table 5-2 -Refer to Table 5-2.Using the midpoint method,if the price falls from $60 to $40,the price elasticity of demand is

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4.The section of the demand curve from B to C represents the

Correct Answer
verified

Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for soccer balls causes the price of soccer balls to increase by 20%,then the quantity supplied of soccer balls will increase by about

Correct Answer
verified

Suppose that when the price of wheat is $2 per bushel,farmers can sell 10 million bushels.When the price of wheat is $3 per bushel,farmers can sell 8 million bushels.Which of the following statements is true? The demand for wheat is

Correct Answer
verified

Demand is said to be unit elastic if quantity demanded

Correct Answer
verified

If the price of milk rises,when is the price elasticity of demand likely to be the lowest?

Correct Answer
verified

Consider luxury weekend hotel packages in Las Vegas.When the price is $250,the quantity demanded is 2,000 packages per week.When the price is $280,the quantity demanded is 1,700 packages per week.Using the midpoint method,the price elasticity of demand is about

Correct Answer
verified

If the price elasticity of supply is 1.2,and a price increase led to a 5% increase in quantity supplied,then the price increase is about

Correct Answer
verified

A perfectly inelastic demand implies that buyers

Correct Answer
verified

Exam 5: Elasticity and Its Application

Holding all other forces constant,if increasing the price of a good leads to a decrease in total revenue,then the demand for the good must be

Correct AnswerverifiedShow Answer

Along the elastic portion of a linear demand curve,total revenue rises as price rises.

Correct AnswerverifiedShow Answer

When demand is inelastic,an increase in price will cause

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

For a particular good,a 5 percent increase in price causes a 2 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

The greater the price elasticity of demand,the

Correct AnswerverifiedShow Answer

Figure 5-1 -Refer to Figure 5-1.Between point A and point B on the graph,demand is

Correct AnswerverifiedShow Answer

Recently,in Smalltown,the price of Twinkies fell from $0.80 to $0.70.As a result,the quantity demanded of Ho-Ho's decreased from 120 to 100.What would be the appropriate elasticity to compute? Using the midpoint method,compute this elasticity.What does your answer tell you?

Correct AnswerverifiedThe appropriate elasticity to compute wo...View AnswerShow Answer

Which of the following is likely to have the most price inelastic demand?

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

Table 5-2 -Refer to Table 5-2.Using the midpoint method,if the price falls from $60 to $40,the price elasticity of demand is

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4.The section of the demand curve from B to C represents the

Correct AnswerverifiedShow Answer

Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for soccer balls causes the price of soccer balls to increase by 20%,then the quantity supplied of soccer balls will increase by about

Correct AnswerverifiedShow Answer

Suppose that when the price of wheat is $2 per bushel,farmers can sell 10 million bushels.When the price of wheat is $3 per bushel,farmers can sell 8 million bushels.Which of the following statements is true? The demand for wheat is

Correct AnswerverifiedShow Answer

Demand is said to be unit elastic if quantity demanded

Correct AnswerverifiedShow Answer

If the price of milk rises,when is the price elasticity of demand likely to be the lowest?

Correct AnswerverifiedShow Answer

Consider luxury weekend hotel packages in Las Vegas.When the price is $250,the quantity demanded is 2,000 packages per week.When the price is $280,the quantity demanded is 1,700 packages per week.Using the midpoint method,the price elasticity of demand is about

Correct AnswerverifiedShow Answer

If the price elasticity of supply is 1.2,and a price increase led to a 5% increase in quantity supplied,then the price increase is about

Correct AnswerverifiedShow Answer

A perfectly inelastic demand implies that buyers

Correct AnswerverifiedShow Answer

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The appropriate elasticity to compute wo...
View Answer

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