Question 1

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Accepted Answer

A)  The quantity of the good demanded decreases from 250 to 150.
B)  The quantity of the good demanded decreases from 200 to 100.
C)  The quantity of the good demanded decreases by 0.05 percent.
D)  The quantity of the good demanded decreases by 0.2 percent.E) C) and D)
F) B) and C)

Question 2

Figure 5-3 
-Refer to Figure 5-3. Which demand curve is unit elastic?

Accepted Answer

A)  A
B)  B
C)  D
D)  None of the above.E) A) and B)
F) All of the above

Question 3

Cross-price elasticity is used to determine whether goods are substitutes or complements.

Accepted Answer

A) True 
 B)False

Question 4

If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is

Accepted Answer

A)  0.75.
B)  1.25.
C)  1.33.
D)  1.60.E) A) and D)
F) All of the above

Question 5

Scenario 5-2
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 5-2. Total consumer spending on aged cheddar cheese will

Accepted Answer

A)  increase, and total consumer spending on bread will increase.
B)  increase, and total consumer spending on bread will decrease.
C)  decrease, and total consumer spending on bread will increase.
D)  decrease, and total consumer spending on bread will decrease.E) B) and D)
F) A) and B)

Question 6

Figure 5-12 2 is represented by the area(s)  A) B + D. B) A + B. C) C + D. D) D. " class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 5-12. Total revenue when the price is P2 is represented by the area(s)

Accepted Answer

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

Question 7

When the price of a bracelet was $25 each, the jewelry shop sold 20 per month. When it raised the price to $35 each, it sold 14 per month. Using the midpoint method, the price elasticity of demand for bracelets is about

Accepted Answer

A)  1.66.
B)  1.06.
C)  0.94.
D)  0.60.E) A) and B)
F) A) and C)

Question 8

Which of the following is likely to have the most price elastic demand?

Accepted Answer

A)  ice cream
B)  frozen yogurt
C)  vanilla ice cream
D)  Häagen-Dazs® vanilla bean ice creamE) B) and D)
F) C) and D)

Question 9

Figure 5-9 
-Refer to Figure 5-9. 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) All of the above
F) B) and D)

Question 10

When demand is elastic, a decrease in price will cause

Accepted Answer

A)  an increase in total revenue.
B)  a decrease in total revenue.
C)  no change in total revenue but an increase in quantity demanded.
D)  no change in total revenue but a decrease in quantity demanded.E) A) and C)
F) C) and D)

Question 11

Figure 5-1 
-Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

Accepted Answer

A)  0.33.
B)  0.67.
C)  1.5
D)  2.67.E) C) and D)
F) A) and B)

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Figure 5-5 
-Refer to Figure 5-5. Using the midpoint method, between prices of $12 and $18, price elasticity of demand is

Accepted Answer

A)  0.33.
B)  0.67.
C)  1.33.
D)  1.89.E) All of the above
F) C) and D)

Question 14

Suppose you are in charge of setting prices at a local sandwich shop. The business needs to increase its total revenue, and your job is on the line. If the demand for sandwiches is elastic, you

Accepted Answer

A)  should increase the price of sandwiches.
B)  should decrease the price of sandwiches.
C)  should not change the price of sandwiches.
D)  could not determine what to do with price until you determine whether supply is elastic or inelastic.E) A) and B)
F) A) and C)

Question 15

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

Question 16

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 17

For a particular good, a 10 percent increase in price causes a 15 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) B) and D)
F) C) and D)

Question 18

If the cross-price elasticity of demand for two goods is -4.5, then

Accepted Answer

A)  the two goods are substitutes.
B)  the two goods are complements.
C)  one of the goods is normal while the other good is inferior.
D)  one of the goods is a luxury while the other good is a necessity.E) B) and D)
F) A) and D)

Question 19

Figure 5-14 
-Refer to Figure 5-14. Along which of these segments of the supply curve is supply most elastic?

Accepted Answer

A)  AB
B)  CD
C)  DH
D)  GHE) A) and D)
F) None of the above

Question 20

Cross-price elasticity of demand measures how

Accepted Answer

A)  the price of one good changes in response to a change in the price of another good.
B)  the quantity demanded of one good changes in response to a change in the quantity demanded of another good.
C)  the quantity demanded of one good changes in response to a change in the price of another good.
D)  strongly normal or inferior a good is.E) A) and B)
F) A) and C)

Exam 5: Elasticity and Its Application

Cross-price elasticity is used to determine whether goods are substitutes or complements.

Correct Answer
verified

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

Correct Answer
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Figure 5-14 -Refer to Figure 5-14. Along which of these segments of the supply curve is supply most elastic?

Correct Answer
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For a particular good, a 10 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct Answer
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Figure 5-12 -Refer to Figure 5-12. Total revenue when the price is P₂ is represented by the area(s)

Correct Answer
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When the price of a bracelet was $25 each, the jewelry shop sold 20 per month. When it raised the price to $35 each, it sold 14 per month. Using the midpoint method, the price elasticity of demand for bracelets is about

Correct Answer
verified

Which of the following is likely to have the most price elastic demand?

Correct Answer
verified

When demand is elastic, a decrease in price will cause

Correct Answer
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If the cross-price elasticity of demand for two goods is -4.5, then

Correct Answer
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Suppose you are in charge of setting prices at a local sandwich shop. The business needs to increase its total revenue, and your job is on the line. If the demand for sandwiches is elastic, you

Correct Answer
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Figure 5-1 -Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

Correct Answer
verified

If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is

Correct Answer
verified

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Correct Answer
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Figure 5-3 -Refer to Figure 5-3. Which demand curve is unit elastic?

Correct Answer
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Figure 5-9 -Refer to Figure 5-9. If price increases from $10 to $15, total revenue will

Correct Answer
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Correct Answer
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If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Correct Answer
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Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $12 and $18, price elasticity of demand is

Correct Answer
verified

Cross-price elasticity of demand measures how

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

Correct Answer
verified

Exam 5: Elasticity and Its Application

Cross-price elasticity is used to determine whether goods are substitutes or complements.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-14 -Refer to Figure 5-14. Along which of these segments of the supply curve is supply most elastic?

Correct AnswerverifiedShow Answer

For a particular good, a 10 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

Figure 5-12 -Refer to Figure 5-12. Total revenue when the price is P2 is represented by the area(s)

Correct AnswerverifiedShow Answer

When the price of a bracelet was $25 each, the jewelry shop sold 20 per month. When it raised the price to $35 each, it sold 14 per month. Using the midpoint method, the price elasticity of demand for bracelets is about

Correct AnswerverifiedShow Answer

Which of the following is likely to have the most price elastic demand?

Correct AnswerverifiedShow Answer

When demand is elastic, a decrease in price will cause

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand for two goods is -4.5, then

Correct AnswerverifiedShow Answer

Suppose you are in charge of setting prices at a local sandwich shop. The business needs to increase its total revenue, and your job is on the line. If the demand for sandwiches is elastic, you

Correct AnswerverifiedShow Answer

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

Correct AnswerverifiedShow Answer

If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is

Correct AnswerverifiedShow Answer

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Correct AnswerverifiedShow Answer

Figure 5-3 -Refer to Figure 5-3. Which demand curve is unit elastic?

Correct AnswerverifiedShow Answer

Figure 5-9 -Refer to Figure 5-9. If price increases from $10 to $15, total revenue will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $12 and $18, price elasticity of demand is

Correct AnswerverifiedShow Answer

Cross-price elasticity of demand measures how

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

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Figure 5-12 -Refer to Figure 5-12. Total revenue when the price is P₂ is represented by the area(s)

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