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Figure 5-15 Figure 5-15 -Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between $4 and $6? A) 0.75 B) 1.00 C) 1.20 D) 1.25 -Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between $4 and $6?


A) 0.75
B) 1.00
C) 1.20
D) 1.25

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

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


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) None of the above
F) B) and C)

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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.

A) True
B) False

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Which of the following statements is correct?


A) The demand for flat-screen computer monitors is more elastic than the demand for monitors in general.
B) The demand for grandfather clocks is more elastic than the demand for clocks in general.
C) The demand for cardboard is more elastic over a long period of time than over a short period of time.
D) All of the above are correct.

E) B) and D)
F) A) and B)

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An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

A) True
B) False

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Demand is said to be price elastic if


A) the price of the good responds substantially to changes in demand.
B) demand shifts substantially when income or the expected future price of the good changes.
C) buyers do not respond much to changes in the price of the good.
D) buyers respond substantially to changes in the price of the good.

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

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Scenario 5-4 Suppose the government is concerned about firms in the United States importing illegal caviar. As a result, the government increases border patrols to catch illegal shipments. U.S. Customs agents perform DNA testing on the caviar to determine if it comes from endangered species of fish. If so, the government destroys the caviar. -Refer to Scenario 5-4.What would we expect to observe in the caviar market?


A) Equilibrium prices and quantities will increase.
B) Equilibrium prices will increase by more if the demand for caviar is elastic than if demand is inelastic.
C) Total revenues to caviar firms will increase if the demand for caviar is inelastic.
D) All of the above are correct.

E) All of the above
F) A) and B)

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Elasticity of demand is closely related to the slope of the demand curve.The less responsive buyers are to a change in price,the


A) steeper the demand curve will be.
B) flatter the demand curve will be.
C) further to the right the demand curve will sit.
D) closer to the vertical axis the demand curve will sit.

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

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Ryan says that he would buy one cup of coffee every day regardless of the price.If he is telling the truth,Ryan's


A) demand for coffee is perfectly inelastic.
B) price elasticity of demand for coffee is 1.
C) income elasticity of demand for coffee is 0.
D) None of the above answers is correct.

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

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If the demand for textbooks is inelastic,then a decrease in the price of textbooks will


A) increase total revenue of textbook sellers.
B) decrease total revenue of textbook sellers.
C) not change total revenue of textbook sellers.
D) There is not enough information to answer this question.

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

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A government program that reduces land under cultivation hurts farmers but helps consumers.

A) True
B) False

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Cross-price elasticity is used to determine whether goods are inferior or normal goods.

A) True
B) False

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Figure 5-5 Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,between prices of $48 and $54,price elasticity of demand is about A) 0.92. B) 3.89. C) 4.33. D) 5.67. -Refer to Figure 5-5.Using the midpoint method,between prices of $48 and $54,price elasticity of demand is about


A) 0.92.
B) 3.89.
C) 4.33.
D) 5.67.

E) None of the above
F) C) and D)

Correct Answer

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Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

A) True
B) False

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A good will have a more elastic demand,the


A) greater the availability of close substitutes.
B) more broad the definition of the market.
C) shorter the period of time.
D) more it is regarded as a necessity.

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

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If the price elasticity of supply is 1.5,and a price increase led to a 3% increase in quantity supplied,then the price increase is about


A) 0.2%.
B) 0.5%.
C) 2.0%.
D) 4.5%.

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

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Which of the following was not a reason OPEC failed to keep the price of oil high?


A) Over the long run, producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity.
B) Consumers responded to higher prices with greater conservation.
C) Consumers replaced old inefficient cars with newer efficient ones.
D) The agreement OPEC members signed allowed each country to produce as much oil as each wanted.

E) All of the above
F) A) and B)

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The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

A) True
B) False

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On a downward-sloping linear demand curve,total revenue reaches its maximum value at the


A) midpoint of the demand curve.
B) lower end of the demand curve.
C) upper end of the demand curve.
D) It is impossible to tell without knowing prices and quantities demanded.

E) C) and D)
F) A) and D)

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If the price elasticity of demand for a good is 10.0,then a 4 percent increase in price results in a


A) 0.4 percent decrease in the quantity demanded.
B) 2.5 percent decrease in the quantity demanded.
C) 4 percent decrease in the quantity demanded.
D) 40 percent decrease in the quantity demanded.

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

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