Question 1

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Accepted Answer

A)  fall by 8 percent.
B)  fall by 50 percent.
C)  rise by 8 percent.
D)  rise by 50 percent.E) A) and B)
F) None of the above

Question 2

A key determinant of the price elasticity of supply is the

Accepted Answer

A)  number of close substitutes for the good in question.
B)  extent to which buyers alter their quantities demanded in response to changes in prices.
C)  length of the time period.
D)  extent to which buyers alter their quantities demanded in response to changes in their incomes.E) A) and C)
F) B) and D)

Question 3

Josh mows lawns. If the demand for lawn-mowing service is elastic and Josh wants to increase his total revenue, he should

Accepted Answer

A)  increase the price of his lawn-mowing service.
B)  decrease the price of his lawn-mowing service.
C)  reduce the costs of operating his lawn-mowing service.
D)  More than one of the above is correct.E) A) and D)
F) All of the above

Question 4

Table 5-3
Consider the following demand schedule. 
-Refer to Table 5-3. Using the midpoint method, demand is unit elastic when price changes from

Accepted Answer

The answer of Table 5-3
Consider the following demand schedule. 
-Refer...

Question 5

Table 5-12 
-Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $6 and $8?

Accepted Answer

The price ...

Question 6

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about

Accepted Answer

A)  0.62.
B)  0.77.
C)  1.24.
D)  1.63.E) A) and C)
F) A) and D)

Question 7

Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples illustrate the importance of

Accepted Answer

A)  the availability of close substitutes in determining the price elasticity of demand.
B)  a necessity versus a luxury in determining the price elasticity of demand.
C)  the definition of a market in determining the price elasticity of demand.
D)  the time horizon in determining the price elasticity of demand.E) None of the above
F) B) and D)

Question 8

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is correct?

Accepted Answer

A)  The demand for natural gas is more elastic over a short period of time than over a long period of time.
B)  The demand for smoke alarms is more elastic than the demand for Persian rugs.
C)  The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general.
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 10

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 decrease in total revenue.E) None of the above
F) B) and C)

Question 11

With regard to elasticity, as a firm nears its production capacity, supply becomes more

Accepted Answer

The answer of With regard to elasticity, as a firm...

Question 12

Suppose good X has a positive income elasticity of demand. This implies that good X could be
(i) a normal good.
(ii) a necessity.
(iii) an inferior good.
(iv) a luxury.

Accepted Answer

A)  (i)  only
B)  (i)  and (ii)  only
C)  (i) , (ii) , and (iv)  only
D)  (iii)  onlyE) A) and C)
F) C) and D)

Question 13

Table 5-12 
-Refer to Table 5-12. Between which two quantities listed is demand most inelastic?

Accepted Answer

The answer of Table 5-12 
-Refer to Table 5-12. Between...

Question 14

Table 5-6 
-Refer to Table 5-6. As price rises from $10 to $15, the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A)  0.40.
B)  0.56.
C)  1.80.
D)  2.50.E) A) and D)
F) A) and C)

Question 15

Scenario 5-2
Suppose the demand function for good X is given by:  where  is the quantity demanded of good X,  is the price of good X, and  is the price of good Y, which is related to good X.
-Refer to Scenario 5-2. Using the midpoint method, if the price of good X is $10 and the price of good Y increases from $8 to $10, the cross price elasticity of demand is about

Accepted Answer

The answer of Scenario 5-2
Suppose the demand function for good...

Question 16

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 D)
F) B) and C)

Question 17

Which of the following statements is correct?

Accepted Answer

A)  Advocates for drug-interdiction policies that reduce the supply of illegal drugs argue that the demand for illegal drugs may be more responsive in the long run than in the short run.
B)  The demand for illegal drugs is price inelastic.
C)  Drug interdiction efforts that reduce the supply of illegal drugs may increase drug-related crimes.
D)  All of the above are correct.E) B) and D)
F) B) and C)

Question 18

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) A) and B)
F) A) and C)

Question 19

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

Accepted Answer

A)  0.6 percent increase in the quantity demanded.
B)  1.5 percent increase in the quantity demanded.
C)  2 percent increase in the quantity demanded.
D)  6 percent increase in the quantity demanded.E) B) and C)
F) A) and B)

Question 20

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

Accepted Answer

A)  increase by 4%.
B)  increase by 6.25%.
C)  decrease by 4%.
D)  decrease by 6.25%.E) A) and D)
F) None of the above

Exam 5: Elasticity and Its Application

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about

Correct Answer
verified

With regard to elasticity, as a firm nears its production capacity, supply becomes more

Correct Answer
verified

Suppose good X has a positive income elasticity of demand. This implies that good X could be (i) a normal good. (ii) a necessity. (iii) an inferior good. (iv) a luxury.

Correct Answer
verified

Table 5-3 Consider the following demand schedule. -Refer to Table 5-3. Using the midpoint method, demand is unit elastic when price changes from

Correct Answer
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Table 5-12 -Refer to Table 5-12. Between which two quantities listed is demand most inelastic?

Correct Answer
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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

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

Correct Answer
verified

Josh mows lawns. If the demand for lawn-mowing service is elastic and Josh wants to increase his total revenue, he should

Correct Answer
verified

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

Correct Answer
verified

Demand is said to be unit elastic if quantity demanded

Correct Answer
verified

Table 5-12 -Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $6 and $8?

Correct Answer
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The price ...
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If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Correct Answer
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Table 5-6 -Refer to Table 5-6. As price rises from $10 to $15, the price elasticity of demand using the midpoint method is approximately

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Correct Answer
verified

A key determinant of the price elasticity of supply is the

Correct Answer
verified

Correct Answer
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The demand for a good becomes more inelastic

Correct Answer
verified

Exam 5: Elasticity and Its Application

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about

Correct AnswerverifiedShow Answer

With regard to elasticity, as a firm nears its production capacity, supply becomes more

Correct AnswerverifiedShow Answer

Suppose good X has a positive income elasticity of demand. This implies that good X could be (i) a normal good. (ii) a necessity. (iii) an inferior good. (iv) a luxury.

Correct AnswerverifiedShow Answer

Table 5-3 Consider the following demand schedule. -Refer to Table 5-3. Using the midpoint method, demand is unit elastic when price changes from

Correct AnswerverifiedShow Answer

Table 5-12 -Refer to Table 5-12. Between which two quantities listed is demand most inelastic?

Correct AnswerverifiedShow Answer

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

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

Correct AnswerverifiedShow Answer

Josh mows lawns. If the demand for lawn-mowing service is elastic and Josh wants to increase his total revenue, he should

Correct AnswerverifiedShow Answer

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

Correct AnswerverifiedShow Answer

Demand is said to be unit elastic if quantity demanded

Correct AnswerverifiedShow Answer

Table 5-12 -Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $6 and $8?

Correct AnswerverifiedThe price ...View AnswerShow Answer

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 5-6 -Refer to Table 5-6. As price rises from $10 to $15, the price elasticity of demand using the midpoint method is approximately

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Correct AnswerverifiedShow Answer

A key determinant of the price elasticity of supply is the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The demand for a good becomes more inelastic

Correct AnswerverifiedShow Answer

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The price ...
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