Question 1

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

Accepted Answer

A) True 
 B)False

Question 2

Suppose demand is given by the equation:  Using the midpoint method, what is the price elasticity of demand between $1 and $2?

Accepted Answer

The price ...

Question 3

If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

Accepted Answer

A)   a 0.1 percent decrease in the price.
B)   a 1 percent decrease in the price.
C)   a 10 percent decrease in the price.
D)   a 19.6 percent decrease in the price.E) B) and C)
F) A) and C)

Question 4

The discovery of a new hybrid wheat would increase the supply of wheat. As a result, wheat farmers would realize an increase in total revenue if the

Accepted Answer

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

Question 5

If the price elasticity of demand is equal to 0, then demand is unit elastic.

Accepted Answer

A) True 
 B)False

Question 6

Scenario 5-2
Suppose the demand function for good X is given by:  where  is the quantity demanded of good X,  is the price of good X, and  is the price of good Y, which is related to good X.
-Refer to Scenario 5-2. Using the midpoint method, if the price of good X is constant at $10 and the price of good Y decreases from $10 to $8, the cross price elasticity of demand is about

Accepted Answer

A)   0.57, and X and Y are substitutes.
B)   -0.22, and X and Y are complements.
C)   -0.80, and X and Y are complements.
D)   -2.57, and X and Y are complements.E) B) and C)
F) A) and D)

Question 7

The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

Accepted Answer

A) True 
 B)False

Question 8

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Accepted Answer

A)   negative, and the good is an inferior good.
B)   negative, and the good is a normal good.
C)   positive, and the good is an inferior good.
D)   positive, and the good is a normal good.E) A) and B)
F) A) and C)

Question 9

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by

Accepted Answer

A)   0.4% in the short run and 4.6% in the long run.
B)   1.7% in the short run and 0.7% in the long run.
C)   9% in the short run and 21% in the long run.
D)   25% in the short run and 10.7% in the long run.E) All of the above
F) B) and C)

Question 10

If the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Accepted Answer

A)   1.66%, and aluminum foil sellers' total revenue will increase as a result.
B)   1.66%, and aluminum foil sellers' total revenue will decrease as a result.
C)   3.48%, and aluminum foil sellers' total revenue will increase as a result.
D)   3.48%, and aluminum foil sellers' total revenue will decrease as a result.E) C) and D)
F) B) and C)

Question 11

Scenario 5-8
Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000.
-Refer to Scenario 5-8. Using the midpoint method, what is the cross price elasticity of demand for landline and mobile service?

Accepted Answer

The answer of Scenario 5-8
Consider the markets for mobile and...

Question 12

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Accepted Answer

A) True 
 B)False

Question 13

Table 5-11
 
-Refer to Table 5-11. Which scenario describes the market for oil in the short run in comparison to the long run?

Accepted Answer

A)   Scenario A describes both the short run and the long run.
B)   Scenario D describes both the short run and the long run.
C)   Scenario D describes the short run, whereas scenario A describes the long run.
D)   Scenario C describes the short run, whereas scenario B describes the long run.E) B) and C)
F) C) and D)

Question 14

Table 5-5
 
-Refer to Table 5-5. Demand is unit elastic when quantity demanded changes from

Accepted Answer

A)   9 to 8.
B)   10 to 9.
C)   10 to 11.
D)   There is not enough information given to determine the correct answer.E) None of the above
F) A) and C)

Question 15

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

Accepted Answer

A)   -1.2, and X and Y are complements.
B)   -0.1, and X and Y are complements.
C)   0.1, and X and Y are substitutes.
D)   1.2, and X and Y are substitutes.E) B) and D)
F) All of the above

Question 16

When demand is elastic, an increase 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) All of the above
F) A) and D)

Question 17

The smaller the price elasticity of demand, the

Accepted Answer

A)   steeper the demand curve will be through a given point.
B)   flatter the demand curve will be through a given point.
C)   more strongly buyers respond to a change in price between any two prices P1 and P2.
D)   smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2.E) None of the above
F) A) and B)

Question 18

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

Accepted Answer

A)   1.50, and an increase in price will result in an increase in total revenue for good A.
B)   1.50, and an increase in price will result in a decrease in total revenue for good b.
C)   0.67, and an increase in price will result in an increase in total revenue for good A.
D)   0.67, and an increase in price will result in a decrease in total revenue for good A.E) B) and C)
F) A) and D)

Question 19

In the market for oil in the short run, demand

Accepted Answer

A)   and supply are both elastic.
B)   and supply are both inelastic.
C)   is elastic and supply is inelastic.
D)   is inelastic and supply is elastid.E) C) and D)
F) None of the above

Question 20

The flatter the demand curve that passes through a given point, the more elastic the demand.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

The discovery of a new hybrid wheat would increase the supply of wheat. As a result, wheat farmers would realize an increase in total revenue if the

Correct Answer
verified

When demand is elastic, an increase in price will cause

Correct Answer
verified

The smaller the price elasticity of demand, the

Correct Answer
verified

Correct Answer
verified

Table 5-5 -Refer to Table 5-5. Demand is unit elastic when quantity demanded changes from

Correct Answer
verified

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by

Correct Answer
verified

If the price elasticity of demand is equal to 0, then demand is unit elastic.

Correct Answer
verified

The flatter the demand curve that passes through a given point, the more elastic the demand.

Correct Answer
verified

Correct Answer
verified

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

Correct Answer
verified

The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

Correct Answer
verified

If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

Correct Answer
verified

If the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Correct Answer
verified

In the market for oil in the short run, demand

Correct Answer
verified

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

Correct Answer
verified

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $1 and $2?

Correct Answer
verified
The price ...
View Answer

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Correct Answer
verified

Table 5-11 -Refer to Table 5-11. Which scenario describes the market for oil in the short run in comparison to the long run?

Correct Answer
verified

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

Correct Answer
verified

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Correct Answer
verified

Exam 5: Elasticity and Its Application

The discovery of a new hybrid wheat would increase the supply of wheat. As a result, wheat farmers would realize an increase in total revenue if the

Correct AnswerverifiedShow Answer

When demand is elastic, an increase in price will cause

Correct AnswerverifiedShow Answer

The smaller the price elasticity of demand, the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 5-5 -Refer to Table 5-5. Demand is unit elastic when quantity demanded changes from

Correct AnswerverifiedShow Answer

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by

Correct AnswerverifiedShow Answer

If the price elasticity of demand is equal to 0, then demand is unit elastic.

Correct AnswerverifiedShow Answer

The flatter the demand curve that passes through a given point, the more elastic the demand.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

Correct AnswerverifiedShow Answer

The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

Correct AnswerverifiedShow Answer

If the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Correct AnswerverifiedShow Answer

In the market for oil in the short run, demand

Correct AnswerverifiedShow Answer

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

Correct AnswerverifiedShow Answer

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $1 and $2?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Correct AnswerverifiedShow Answer

Table 5-11 -Refer to Table 5-11. Which scenario describes the market for oil in the short run in comparison to the long run?

Correct AnswerverifiedShow Answer

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

Correct AnswerverifiedShow Answer

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Correct AnswerverifiedShow Answer

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The price ...
View Answer

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