Question 1

Because the demand for wheat tends to be inelastic,the development of a new,more productive hybrid wheat would tend to

Accepted Answer

A)  increase the total revenue of wheat farmers.
B)  decrease the total revenue of wheat farmers.
C)  decrease the demand for wheat.
D)  decrease the supply of wheat.E) None of the above
F) All of the above

Question 2

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) All of the above
F) C) and D)

Question 3

Figure 5-2
 
-Refer to Figure 5-2.If the price decreased from $18 to $6,

Accepted Answer

A)  total revenue would increase by $1,200 and demand is elastic between points A and C.
B)  total revenue would increase by $800 and demand is elastic between points A and C.
C)  total revenue would decrease by $1,200 and demand is inelastic between points A and C.
D)  total revenue would decrease by $800 and demand is inelastic between points A and C.E) B) and D)
F) C) and D)

Question 4

Food and clothing tend to have

Accepted Answer

A)  small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods.
B)  small income elasticities because consumers buy proportionately more of both goods at higher income levels than they buy at low income levels.
C)  large income elasticities because they are necessities.
D)  large income elasticities because they are relatively inexpensive.E) All of the above
F) A) and D)

Question 5

Suppose the point (Q = 2,000,P = $60) is the midpoint on a certain downward-sloping,linear demand curve.Then

Accepted Answer

A)  an increase in price from $40 to $42 will increase total revenue.
B)  a decrease in price from $61 to $59 will leave total revenue unchanged.
C)  the maximum value of total revenue is $120,000.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 6

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

Question 7

Figure 5-7
 
-Refer to Figure 5-7.Total revenue when the price is P₁ is represented by the area(s)

Accepted Answer

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

Question 8

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 9

Figure 5-2
 
-Refer to Figure 5-2.The elasticity of demand between point B and point C,using the midpoint method,is

Accepted Answer

A)  0.5.
B)  0.75.
C)  1.0.
D)  1.3.E) C) and D)
F) A) and B)

Question 10

Consider airfares on flights between New York and Minneapolis.When the airfare is $250,the quantity demanded of tickets is 2,000 per week.When the airfare is $280,the quantity demanded of tickets is 1,700 per week.Using the midpoint method,

Accepted Answer

A)  the price elasticity of demand is about 1.43 and an increase in the airfare will cause airlines' total revenue to decrease.
B)  the price elasticity of demand is about 1.43 and an increase in the airfare will cause airlines' total revenue to increase.
C)  the price elasticity of demand is about 0.70 and an increase in the airfare will cause airlines' total revenue to decrease.
D)  the price elasticity of demand is about 0.70 and an increase in the airfare will cause airlines' total revenue to increase.E) None of the above
F) A) and B)

Question 11

Figure 5-4
 
-Refer to Figure 5-4.As price falls from PA to PB,which demand curve represents the most elastic demand?

Accepted Answer

A)  D₁
B)  D₂
C)  D₃
D)  All of the above are equally elastic.E) A) and D)
F) All of the above

Question 12

Figure 5-6
 
-Refer to Figure 5-6.If price increases from $10 to $15,total revenue will

Accepted Answer

A)  increase by $20, so demand must be inelastic in this price range.
B)  increase by $5, so demand must be inelastic in this price range.
C)  decrease by $20, so demand must be elastic in this price range.
D)  decrease by $10, so demand must be elastic in this price range.E) A) and C)
F) B) and C)

Question 13

If,for two goods,the cross-price elasticity of demand is 1.25,then

Accepted Answer

A)  the two goods are luxuries.
B)  the two goods are substitutes.
C)  one of the goods is normal and the other good is inferior.
D)  the demand for one of the goods conforms to the law of demand and the demand for the other good violates the law of demand.E) None of the above
F) A) and D)

Question 14

Figure 5-9
 
-Refer to Figure 5-9.Between point A and point B,

Accepted Answer

A)  the slope is equal to -1/4 and the price elasticity of demand is equal to 2/3.
B)  the slope is equal to -1/4 and the price elasticity of demand is equal to 3/2.
C)  the slope is equal to -3/2 and the price elasticity of demand is equal to 1/4.
D)  the slope is equal to -2/3 and the price elasticity of demand is equal to 3/2.E) B) and C)
F) A) and C)

Question 15

If the quantity supplied responds only slightly to changes in price,then

Accepted Answer

A)  supply is said to be elastic.
B)  supply is said to be inelastic.
C)  an increase in price will not shift the supply curve very much.
D)  even a large decrease in demand will change the equilibrium price only slightly.E) A) and B)
F) B) and C)

Question 16

The price elasticity of demand for a good measures the willingness of

Accepted Answer

A)  consumers to move away from the good as price rises.
B)  consumers to avoid monopolistic markets in favor of competitive markets.
C)  firms to produce more of a good as price rises.
D)  firms to cater to the tastes of consumers.E) B) and C)
F) None of the above

Question 17

The value of the price elasticity of demand for a good will be relatively large when

Accepted Answer

A)  there are no good substitutes available for the good.
B)  the time period in question is relatively short.
C)  the good is a luxury as opposed to a necessity.
D)  All of the above are correct.E) None of the above
F) B) and D)

Question 18

Table 5-2
 
-Refer to Table 5-2.Which of the three supply curves represents the least 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) A) and D)
F) A) and B)

Question 19

Technological advances in wheat production can lower farmers' total revenue because the

Accepted Answer

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

Question 20

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Applications

Figure 5-7 -Refer to Figure 5-7.Total revenue when the price is P₁ is represented by the area(s)

Correct AnswerverifiedShow Answer

Figure 5-9 -Refer to Figure 5-9.Between point A and point B,

Correct AnswerverifiedShow Answer

Suppose the point (Q = 2,000,P = $60) is the midpoint on a certain downward-sloping,linear demand curve.Then

Correct AnswerverifiedShow Answer

Because the demand for wheat tends to be inelastic,the development of a new,more productive hybrid wheat would tend to

Correct AnswerverifiedShow Answer

The value of the price elasticity of demand for a good will be relatively large when

Correct AnswerverifiedShow Answer

Food and clothing tend to have

Correct AnswerverifiedShow Answer

The price elasticity of demand for a good measures the willingness of

Correct AnswerverifiedShow Answer

Technological advances in wheat production can lower farmers' total revenue because the

Correct AnswerverifiedShow Answer

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Correct AnswerverifiedShow Answer

If,for two goods,the cross-price elasticity of demand is 1.25,then

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

Figure 5-6 -Refer to Figure 5-6.If price increases from $10 to $15,total revenue will

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As price elasticity of supply increases,the supply curve

Correct AnswerverifiedShow Answer

Figure 5-2 -Refer to Figure 5-2.If the price decreased from $18 to $6,

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Figure 5-2 -Refer to Figure 5-2.The elasticity of demand between point B and point C,using the midpoint method,is

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Table 5-2 -Refer to Table 5-2.Which of the three supply curves represents the least elastic supply?

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Figure 5-4 -Refer to Figure 5-4.As price falls from PA to PB,which demand curve represents the most elastic demand?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Consider airfares on flights between New York and Minneapolis.When the airfare is $250,the quantity demanded of tickets is 2,000 per week.When the airfare is $280,the quantity demanded of tickets is 1,700 per week.Using the midpoint method,

Correct AnswerverifiedShow Answer

If the quantity supplied responds only slightly to changes in price,then

Correct AnswerverifiedShow Answer

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The appropriate elasticity to compute wo...
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