Question 1

An increase in the price of pure chocolate morsels from $2.25 to $2.45 causes suppliers of chocolate morsels to increase their quantity supplied from 125 bags per minute to 145 bags per minute.Supply is

Accepted Answer

A)   elastic,and the price elasticity of supply is 1.74.
B)   elastic,and the price elasticity of supply is 0.57.
C)   inelastic,and the price elasticity of supply is 1.74.
D)   inelastic,and the price elasticity of supply is 0.57.E) None of the above
F) A) and D)

Question 2

The supply of a good will be more elastic,the

Accepted Answer

A)   more the good is considered a luxury.
B)   broader is the definition of the market for the good.
C)   larger the number of close substitutes for the good.
D)   longer the time period being considered.E) A) and B)
F) A) and C)

Question 3

If the price elasticity of demand is 1.5,regardless of which two points on the demand curve are used to compute the elasticity,then

Accepted Answer

A)   demand is perfectly inelastic,and the demand curve is vertical.
B)   demand is elastic,and the demand curve is a straight,downward-sloping line.
C)   demand is perfectly elastic,and the demand curve is horizontal.
D)   demand is elastic,and the demand curve is something other than a straight,downward-sloping line.E) C) and D)
F) A) and B)

Question 4

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

Question 5

In general,elasticity is a measure of

Accepted Answer

A)   the extent to which advances in technology are adopted by producers.
B)   the extent to which a market is competitive.
C)   how firms' profits respond to changes in market prices.
D)   how much buyers and sellers respond to changes in market conditions.E) A) and B)
F) A) and C)

Question 6

Figure 5-12
The following figure shows the supply curve for a particular good. 
-Refer to Figure 5-12.Using the midpoint method,what is the price elasticity of supply between $16 and $40?

Accepted Answer

A)   0.125
B)   0.86
C)   1.0
D)   2.5E) A) and C)
F) None of the above

Question 7

Figure 5-4 
-Refer to Figure 5-4.The section of the demand curve at point B represents the

Accepted Answer

A)   elastic section of the demand curve.
B)   inelastic section of the demand curve.
C)   unit elastic section of the demand curve.
D)   perfectly elastic section of the demand curve.E) All of the above
F) None of the above

Question 8

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 C)

Question 9

An increase in price causes an increase in total revenue when

Accepted Answer

A)   demand is elastic.
B)   demand is inelastic.
C)   demand is unit elastic.
D)   All of the above are possible.E) A) and C)
F) B) and D)

Question 10

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

Question 11

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

Question 12

When the price of knee braces increased by 25 percent,the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent.BYC's price elasticity of supply of knee braces is 0.33.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)   The direct impact is on buyers,not sellers.
B)   Successful drug interdiction policies reduce the demand for illegal drugs.
C)   Drug addicts will have an even greater need for quick cash to support their habits.
D)   In the short run,both equilibrium quantities and prices will fall in the markets for illegal drugs.E) A) and B)
F) A) and C)

Question 14

Figure 5-4 
-Refer to Figure 5-4.Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00.Then,between prices of $4.99 and $5.01,the price elasticity of demand is

Accepted Answer

A)   less than 1 but greater than zero.
B)   equal to 1.
C)   greater than 1.
D)   equal to zero.E) B) and D)
F) A) and B)

Question 15

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 amounted to

Accepted Answer

A)   0.2%.
B)   0.5%.
C)   2%.
D)   4.5%.E) C) and D)
F) A) and D)

Question 16

Suppose the price elasticity of supply for how-to books is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for how-to books causes the price of how-to books to increase by 20%,then the quantity supplied of how-to books will increase by

Accepted Answer

A)   0.67% in the short run and 0.17% in the long run.
B)   3% in the short run and 1.2% in the long run.
C)   6% in the short run and 24% in the long run.
D)   66.7% in the short run and 16.7% in the long run.E) A) and B)
F) A) and C)

Question 17

Figure 5-12
The following figure shows the supply curve for a particular good. 
-Refer to Figure 5-12.Over which range is the supply curve in this figure the least elastic?

Accepted Answer

A)   Between $16 and $40
B)   Between $40 and $100
C)   Between $100 and $220
D)   Between $220 and $430E) A) and B)
F) A) and C)

Question 18

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 19

Figure 5-15 
-Refer to Figure 5-15.If,holding the supply curve fixed,there were an increase in demand that caused the equilibrium price to increase from $6 to $8,then sellers' total revenue would

Accepted Answer

A)   increase.
B)   decrease.
C)   remain unchanged.
D)   The effect on total revenue cannot be determined from the given information.E) A) and C)
F) A) and D)

Question 20

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

Exam 5: Elasticity and Its Application

Figure 5-4 -Refer to Figure 5-4.The section of the demand curve at point B represents the

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Figure 5-15 -Refer to Figure 5-15.If,holding the supply curve fixed,there were an increase in demand that caused the equilibrium price to increase from $6 to $8,then sellers' total revenue would

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The supply of a good will be more elastic,the

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Suppose the price elasticity of supply for how-to books is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for how-to books causes the price of how-to books to increase by 20%,then the quantity supplied of how-to books will increase by

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

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

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When the price of knee braces increased by 25 percent,the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent.BYC's price elasticity of supply of knee braces is 0.33.

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Figure 5-12 The following figure shows the supply curve for a particular good. -Refer to Figure 5-12.Using the midpoint method,what is the price elasticity of supply between $16 and $40?

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Figure 5-4 -Refer to Figure 5-4.Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00.Then,between prices of $4.99 and $5.01,the price elasticity of demand is

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

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In general,elasticity is a measure of

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

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If the price elasticity of demand is 1.5,regardless of which two points on the demand curve are used to compute the elasticity,then

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Figure 5-12 The following figure shows the supply curve for a particular good. -Refer to Figure 5-12.Over which range is the supply curve in this figure the least elastic?

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Food and clothing tend to have

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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

An increase in price causes an increase in total revenue when

Correct AnswerverifiedShow Answer

An increase in the price of pure chocolate morsels from $2.25 to $2.45 causes suppliers of chocolate morsels to increase their quantity supplied from 125 bags per minute to 145 bags per minute.Supply is

Correct AnswerverifiedShow Answer

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 amounted to

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Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

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