Question 1

Table 5-5
 
-Refer to Table 5-5.Which of the three supply curves represents the most elastic supply?

Accepted Answer

A)   supply curve A
B)   supply curve B
C)   supply curve C
D)   There is no difference in the elasticity of the three supply curves.E) C) and D)
F) A) and D)

Question 2

As price elasticity of supply increases,the supply curve

Accepted Answer

A)   becomes flatter.
B)   becomes steeper.
C)   becomes downward sloping.
D)   shifts to the right.E) C) and D)
F) B) and C)

Question 3

Get Smart University is contemplating an increase in tuition to enhance revenue.If GSU feels that raising tuition would enhance revenue,it is

Accepted Answer

A)   ignoring the law of demand.
B)   assuming that the demand for university education is elastic.
C)   assuming that the demand for university education is inelastic.
D)   assuming that the supply of university education is elastic.E) B) and C)
F) B) and D)

Question 4

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?

Accepted Answer

A)   0.5
B)   1
C)   1.5
D)   All of the above could be correct.E) B) and C)
F) C) and D)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Table 5-4
 
-Refer to Table 5-4.Demand is unit elastic when quantity demanded changes from

Accepted Answer

A)   10 to 9.
B)   9 to 8.
C)   8 to 7.
D)   There is not enough information given to determine the correct answer.E) A) and C)
F) A) and B)

Question 7

If the quantity supplied is the same regardless of price,then supply is

Accepted Answer

A)   elastic.
B)   perfectly elastic.
C)   perfectly inelastic.
D)   inelastic.E) C) and D)
F) B) and D)

Question 8

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 9

The price elasticity of supply measures how responsive

Accepted Answer

A)   equilibrium price is to equilibrium quantity.
B)   sellers are to a change in buyers' income.
C)   sellers are to a change in price.
D)   consumers are to the number of substitutes.E) All of the above
F) A) and D)

Question 10

A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

Accepted Answer

A)   raise the price, reduce the quantity, decrease total revenues, and decrease crime.
B)   lower the price, increase the quantity, increase total revenues, and increase crime.
C)   raise the price, increase the quantity, decrease total revenues, and increase crime.
D)   raise the price, reduce the quantity, increase total revenues, and increase crime.E) None of the above
F) A) and B)

Question 11

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 D)
F) B) and C)

Question 12

Suppose that when the price of good X falls from $10 to $8,the quantity demanded of good Y rises from 20 units to 25 units.Using the midpoint method,the cross-price elasticity of demand is

Accepted Answer

A)   -1.0, and X and Y are complements.
B)   -1.0, and X and Y are substitutes.
C)   1.0, and X and Y are complements.
D)   1.0, and X and Y are substitutes.E) None of the above
F) C) and D)

Question 13

Suppose the price elasticity of supply for candles is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for candles causes the price of candles to increase by 36%,then the quantity supplied of candles will increase by about

Accepted Answer

A)   0.8% in the short run and 3.3% in the long run.
B)   1.2% in the short run and 0.3% in the long run.
C)   10.8% in the short run and 43.2% in the long run.
D)   120% in the short run and 30% in the long run.E) A) and B)
F) C) and D)

Question 14

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

Accepted Answer

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

Question 15

Danita rescues dogs from her local animal shelter.When Danita's income rises by 7 percent,her quantity demanded of dog biscuits increases by 12 percent.For Danita,the income elasticity of demand for dog biscuits is

Accepted Answer

A)   negative, and dog biscuits are a normal good.
B)   negative, and dog biscuits are an inferior good.
C)   positive, and dog biscuits are an inferior good.
D)   positive, and dog biscuits are a normal good.E) A) and B)
F) B) and C)

Question 16

If a 15% change in price results in a 20% change in quantity supplied,then the price elasticity of supply is about

Accepted Answer

A)   1.33, and supply is elastic.
B)   1.33, and supply is inelastic.
C)   0.75, and supply is elastic.
D)   0.75, and supply is inelastic.E) A) and B)
F) C) and D)

Question 17

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 18

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.E) None of the above
F) A) and B)

Question 19

The flatter the demand curve that passes through a given point,the more inelastic the demand.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

Accepted Answer

A)   0.2
B)   1
C)   1.5
D)   All of the above could be correct.E) A) and B)
F) A) and C)

Exam 5: Elasticity and Its Application

Demand is elastic if the price elasticity of demand is

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Suppose the price elasticity of supply for candles is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for candles causes the price of candles to increase by 36%,then the quantity supplied of candles will increase by about

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As price elasticity of supply increases,the supply curve

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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.

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Get Smart University is contemplating an increase in tuition to enhance revenue.If GSU feels that raising tuition would enhance revenue,it is

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Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

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Table 5-4 -Refer to Table 5-4.Demand is unit elastic when quantity demanded changes from

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The flatter the demand curve that passes through a given point,the more inelastic the demand.

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Suppose that when the price of good X falls from $10 to $8,the quantity demanded of good Y rises from 20 units to 25 units.Using the midpoint method,the cross-price elasticity of demand is

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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

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Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?

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If a 15% change in price results in a 20% change in quantity supplied,then the price elasticity of supply is about

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If the quantity supplied is the same regardless of price,then supply is

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Table 5-5 -Refer to Table 5-5.Which of the three supply curves represents the most elastic supply?

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A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

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

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Danita rescues dogs from her local animal shelter.When Danita's income rises by 7 percent,her quantity demanded of dog biscuits increases by 12 percent.For Danita,the income elasticity of demand for dog biscuits is

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.

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

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The price elasticity of supply measures how responsive

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