Question 1

Demand is said to be unit elastic if quantity demanded

Accepted Answer

A)   changes by the same percent as the price.
B)   changes by a larger percent than the price.
C)   changes by a smaller percent than the price.
D)   does not respond to a change in price.E) B) and D)
F) C) and D)

Question 2

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Accepted Answer

A)   fall by 8 percent.
B)   fall by 50 percent.
C)   rise by 8 percent.
D)   rise by 50 percent.E) None of the above
F) A) and B)

Question 3

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

Accepted Answer

A)   white chocolate chip with macadamia nut cookies
B)   hardback novels
C)   salt
D)   box seats at a major league baseball gameE) A) and B)
F) A) and C)

Question 4

Suppose the price elasticity of demand for a product is 1. If a supplier wants to increase revenue, what change should it make to price, if any?

Accepted Answer

No change,...

Question 5

Figure 5-10 
-Refer to Figure 5-10. 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) None of the above
F) A) and C)

Question 6

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Accepted Answer

A) True 
 B)False

Question 7

Moving downward and to the right along a linear demand curve, we know that total revenue

Accepted Answer

A)   first increases, then decreases.
B)   first decreases, then increases.
C)   always increases.
D)   always decreases.E) None of the above
F) All of the above

Question 8

When supply is perfectly elastic, the value of the price elasticity of supply is

Accepted Answer

A)   0.
B)   1.
C)   greater than 0 and less than 1.
D)   infinity.E) A) and C)
F) A) and B)

Question 9

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 10

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Accepted Answer

A) True 
 B)False

Question 11

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 12

As the price elasticity of supply approaches infinity, very small changes in price lead to

Accepted Answer

A)   very large changes in quantity supplied.
B)   very small changes in quantity supplied.
C)   no change in quantity supplied.
D)   None of the above is correct.E) C) and D)
F) A) and B)

Question 13

If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

Accepted Answer

A) True 
 B)False

Question 14

With regard to elasticity, if a firm has a longer time to adjust to a price increase, supply will be more

Accepted Answer

The answer of With regard to elasticity, if a firm...

Question 15

When studying how some event or policy affects a market, elasticity provides information on the

Accepted Answer

A)   change in the costs of production.
B)   tradeoff between equality and efficiency.
C)   effect on the budget deficit or surplus.
D)   direction and magnitude of the effect.E) None of the above
F) All of the above

Question 16

The price elasticity of demand measures

Accepted Answer

A)   buyers' responsiveness to a change in the price of a good.
B)   the extent to which demand increases as additional buyers enter the market.
C)   how much more of a good consumers will demand when incomes rise.
D)   the movement along a supply curve when there is a change in demand.E) None of the above
F) A) and B)

Question 17

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 18

The federal government is concerned about the negative effects of cigarette smoking in the United States. Suppose Congress is considering two plans. One plan would limit the production of cigarettes. The other would require manufacturers to include graphic photos on cigarette packages of people suffering cancer's effects. Which of the following statements is true?

Accepted Answer

A)   Both programs would increase the price of cigarettes.
B)   Both programs would reduce the quantity of cigarettes sold.
C)   Both programs would decrease revenues for cigarette manufacturers.
D)   All of the above are correct.E) A) and B)
F) C) and D)

Question 19

Figure 5-15 
-Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points A and B?

Accepted Answer

A)   1.0
B)   2.33
C)   0.43
D)   0.1E) A) and C)
F) None of the above

Question 20

To determine whether a good is considered normal or inferior, one could examine the value of the

Accepted Answer

A)   income elasticity of demand for that good.
B)   price elasticity of demand for that good.
C)   price elasticity of supply for that good.
D)   cross-price elasticity of demand for that good.E) None of the above
F) A) and D)

Exam 5: Elasticity and Its Application

If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

Correct Answer
verified

When supply is perfectly elastic, the value of the price elasticity of supply is

Correct Answer
verified

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.

Correct Answer
verified

Correct Answer
verified

Demand is said to be unit elastic if quantity demanded

Correct Answer
verified

When studying how some event or policy affects a market, elasticity provides information on the

Correct Answer
verified

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Correct Answer
verified

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.

Correct Answer
verified

Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P1 is represented by the area(s)

Correct Answer
verified

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Correct Answer
verified

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Correct Answer
verified

With regard to elasticity, if a firm has a longer time to adjust to a price increase, supply will be more

Correct Answer
verified

The price elasticity of demand measures

Correct Answer
verified

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points A and B?

Correct Answer
verified

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

Correct Answer
verified

Suppose the price elasticity of demand for a product is 1. If a supplier wants to increase revenue, what change should it make to price, if any?

Correct Answer
verified
No change,...
View Answer

Moving downward and to the right along a linear demand curve, we know that total revenue

Correct Answer
verified

As the price elasticity of supply approaches infinity, very small changes in price lead to

Correct Answer
verified

To determine whether a good is considered normal or inferior, one could examine the value of the

Correct Answer
verified

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Correct Answer
verified

Exam 5: Elasticity and Its Application

If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

Correct AnswerverifiedShow Answer

When supply is perfectly elastic, the value of the price elasticity of supply is

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Demand is said to be unit elastic if quantity demanded

Correct AnswerverifiedShow Answer

When studying how some event or policy affects a market, elasticity provides information on the

Correct AnswerverifiedShow Answer

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

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.

Correct AnswerverifiedShow Answer

Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P1 is represented by the area(s)

Correct AnswerverifiedShow Answer

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Correct AnswerverifiedShow Answer

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Correct AnswerverifiedShow Answer

With regard to elasticity, if a firm has a longer time to adjust to a price increase, supply will be more

Correct AnswerverifiedShow Answer

The price elasticity of demand measures

Correct AnswerverifiedShow Answer

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points A and B?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the price elasticity of demand for a product is 1. If a supplier wants to increase revenue, what change should it make to price, if any?

Correct AnswerverifiedNo change,...View AnswerShow Answer

Moving downward and to the right along a linear demand curve, we know that total revenue

Correct AnswerverifiedShow Answer

As the price elasticity of supply approaches infinity, very small changes in price lead to

Correct AnswerverifiedShow Answer

To determine whether a good is considered normal or inferior, one could examine the value of the

Correct AnswerverifiedShow Answer

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Correct AnswerverifiedShow Answer

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No change,...
View Answer

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