Question 1

Elasticity is

Accepted Answer

A)  a measure of how much buyers and sellers respond to changes in market conditions.
B)  the study of how the allocation of resources affects economic well-being.
C)  the maximum amount that a buyer will pay for a good.
D)  the value of everything a seller must give up to produce a good.E) C) and D)
F) A) and D)

Question 2

Demand is elastic if the price elasticity of demand is greater than 1.

Accepted Answer

A) True 
 B)False

Question 3

Scenario 5-3
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 5-3. The change in equilibrium price will be

Accepted Answer

A)  greater in the aged cheddar cheese market than in the bread market.
B)  greater in the bread market than in the aged cheddar cheese market.
C)  the same in the aged cheddar cheese and bread markets.
D)  Any of the above could be correct.E) All of the above
F) B) and D)

Question 4

For a particular good, an 8 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 necessity.
C)  The market for the good is broadly defined.
D)  The relevant time horizon is long.E) A) and D)
F) B) and D)

Question 5

The smaller the price elasticity of demand, the

Accepted Answer

A)  steeper the demand curve will be through a given point.
B)  flatter the demand curve will be through a given point.
C)  more strongly buyers respond to a change in price between any two prices P1 and P2.
D)  smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2.E) A) and C)
F) B) and C)

Question 6

The demand for a good becomes more inelastic

Accepted Answer

A)  as more close substitutes for it become available.
B)  as it is increasingly viewed as a luxury good.
C)  as the market is defined more broadly.
D)  the longer the time horizon.E) B) and C)
F) A) and C)

Question 7

For a good that is a luxury, demand

Accepted Answer

A)  tends to be inelastic.
B)  tends to be elastic.
C)  has unit elasticity.
D)  cannot be represented by a demand curve in the usual way.E) B) and D)
F) A) and C)

Question 8

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.E) A) and C)
F) A) and B)

Question 9

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Accepted Answer

A)  positive.
B)  negative.
C)  either positive or negative. It depends whether A and B are normal goods or inferior goods.
D)  either positive or negative. It depends whether the current price level is on the elastic or inelastic portion of the demand curve.E) All of the above
F) C) and D)

Question 10

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a

Accepted Answer

A)  0.4 percent increase in the quantity demanded.
B)  2.5 percent increase in the quantity demanded.
C)  3.6 percent increase in the quantity demanded.
D)  6 percent increase in the quantity demanded.E) B) and C)
F) A) and C)

Question 11

If the price elasticity of supply is zero, then

Accepted Answer

A)  supply is more elastic than it is in any other case.
B)  the supply curve is horizontal.
C)  the quantity supplied is the same, regardless of price.
D)  a change in demand will cause a relatively small change in the equilibrium price.E) B) and C)
F) None of the above

Question 12

A tax accounting firm produces 500 tax returns units when the market price is $150 per return and produces 700 tax returns when the market price is $170 per tax return. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Accepted Answer

A)  2.67.
B)  0.67.
C)  0.4.
D)  0.125.E) A) and C)
F) None of the above

Question 13

The difference between slope and elasticity is that slope

Accepted Answer

A)  is a ratio of two changes, and elasticity is a ratio of two percentage changes.
B)  is a ratio of two percentage changes, and elasticity is a ratio of two changes.
C)  measures changes in quantity demanded more accurately than elasticity.
D)  None of the above is correct; there is no difference between slope and elasticity.E) C) and D)
F) A) and B)

Question 14

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

A) True 
 B)False

Question 15

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

Accepted Answer

A)  30%.
B)  40%.
C)  80%.
D)  250%.E) All of the above
F) A) and B)

Question 16

Suppose that 50 hot dogs are demanded at a particular price. If the price of hot dogs rises from that price by 5 percent, the number of hot dogs demanded falls to 48. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Accepted Answer

A)  demand for hot dogs in this price range is unit elastic.
B)  price increase will decrease the total revenue of hot dog sellers.
C)  price elasticity of demand for hot dogs in this price range is about 1.22.
D)  price elasticity of demand for hot dogs in this price range is about 0.82.E) None of the above
F) B) and D)

Question 17

Which of the following statements about agriculture in the U.S. is correct?

Accepted Answer

A)  From the 1950s to today, agricultural output has approximately doubled.
B)  Because technological improvements increase the supply of a product for which demand is inelastic, an individual farmer would be better off not adopting the new technology.
C)  Increasing the supply of agricultural products typically benefits consumers but harms farmers.
D)  Technological improvements typically increase both supply and revenue for individual farmers.E) A) and B)
F) A) and D)

Question 18

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

Accepted Answer

A) True 
 B)False

Question 19

Figure 5-14 
-Refer to Figure 5-14. Over which range is the supply curve in this figure the least elastic?

Accepted Answer

A)  $16 to $40
B)  $40 to $100
C)  $100 to $220
D)  $220 to $430E) A) and B)
F) B) and D)

Question 20

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

For a good that is a luxury, demand

Correct Answer
verified

Elasticity is

Correct Answer
verified

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

Correct Answer
verified

Figure 5-14 -Refer to Figure 5-14. Over which range is the supply curve in this figure the least elastic?

Correct Answer
verified

If the price elasticity of supply is zero, then

Correct Answer
verified

Suppose that 50 hot dogs are demanded at a particular price. If the price of hot dogs rises from that price by 5 percent, the number of hot dogs demanded falls to 48. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Correct Answer
verified

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

Correct Answer
verified

The difference between slope and elasticity is that slope

Correct Answer
verified

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a

Correct Answer
verified

For a particular good, an 8 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

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Correct Answer
verified

A tax accounting firm produces 500 tax returns units when the market price is $150 per return and produces 700 tax returns when the market price is $170 per tax return. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Correct Answer
verified

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

Correct Answer
verified

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

Correct Answer
verified

Demand is elastic if the price elasticity of demand is greater than 1.

Correct Answer
verified

Correct Answer
verified

The smaller the price elasticity of demand, the

Correct Answer
verified

Which of the following statements about agriculture in the U.S. is correct?

Correct Answer
verified

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

Correct Answer
verified

The demand for a good becomes more inelastic

Correct Answer
verified

Exam 5: Elasticity and Its Application

For a good that is a luxury, demand

Correct AnswerverifiedShow Answer

Elasticity is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-14 -Refer to Figure 5-14. Over which range is the supply curve in this figure the least elastic?

Correct AnswerverifiedShow Answer

If the price elasticity of supply is zero, then

Correct AnswerverifiedShow Answer

Suppose that 50 hot dogs are demanded at a particular price. If the price of hot dogs rises from that price by 5 percent, the number of hot dogs demanded falls to 48. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Correct AnswerverifiedShow Answer

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

Correct AnswerverifiedShow Answer

The difference between slope and elasticity is that slope

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a

Correct AnswerverifiedShow Answer

For a particular good, an 8 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

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Correct AnswerverifiedShow Answer

A tax accounting firm produces 500 tax returns units when the market price is $150 per return and produces 700 tax returns when the market price is $170 per tax return. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Correct AnswerverifiedShow Answer

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

Correct AnswerverifiedShow Answer

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

Correct AnswerverifiedShow Answer

Demand is elastic if the price elasticity of demand is greater than 1.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The smaller the price elasticity of demand, the

Correct AnswerverifiedShow Answer

Which of the following statements about agriculture in the U.S. is correct?

Correct AnswerverifiedShow Answer

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

Correct AnswerverifiedShow Answer

The demand for a good becomes more inelastic

Correct AnswerverifiedShow Answer

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