Question 1

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 2

With regard to elasticity, as a firm nears its production capacity, supply becomes more

Accepted Answer

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

Question 3

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

Accepted Answer

A) True 
 B)False

Question 4

Scenario 5-5
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-5. The equilibrium quantity will

Accepted Answer

A)   increase in both the milk and beef markets.
B)   increase in the milk market and decrease in the beef market.
C)   decrease in the milk market and increase in the beef market.
D)   decrease in both the milk and beef markets.E) A) and B)
F) A) and C)

Question 5

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

Accepted Answer

A)   the equilibrium quantity decreases, and the equilibrium price is unchanged.
B)   the equilibrium price increases, and the equilibrium quantity is unchanged.
C)   the equilibrium quantity and the equilibrium price both are unchanged.
D)   buyers' total expenditure on the good is unchanged.E) A) and B)
F) A) and C)

Question 6

Suppose that good X is a luxury and that good Y is a necessity. Which good would you expect to have more price elastic demand?

Accepted Answer

The answer of Suppose that good X is a luxury...

Question 7

Holding all other forces constant, if decreasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Accepted Answer

A)   unit elastic.
B)   inelastic.
C)   elastic.
D)   None of the above is correct because a price decrease never leads to an increase in total revenue.E) A) and D)
F) B) and C)

Question 8

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Accepted Answer

A)   0.2 percent decrease in the quantity demanded.
B)   5 percent decrease in the quantity demanded.
C)   20 percent decrease in the quantity demanded.
D)   40 percent decrease in the quantity demanded.E) B) and C)
F) A) and B)

Question 9

Figure 5-12 
-Refer to Figure 5-12. Sellers' total revenue would increase if the price

Accepted Answer

A)   increased from $6 to $9.
B)   increased from $33 to $36.
C)   decreased from $15 to $12.
D)   All of the above are correct.E) All of the above
F) B) and C)

Question 10

Figure 5-10 
-Refer to Figure 5-10. If rectangle D is larger than rectangle A, then

Accepted Answer

A)   demand is elastic between prices P1 and P2.
B)   a decrease in price from P2 to P1 will cause an increase in total revenue.
C)   the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded.
D)   All of the above are correct.E) A) and D)
F) B) and C)

Question 11

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is

Accepted Answer

A)   inelastic and equal to 6.
B)   elastic and equal to 6.
C)   inelastic and equal to 0.17.
D)   elastic and equal to 0.17.E) B) and D)
F) A) and B)

Question 12

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is

Accepted Answer

A)   0.11.
B)   0.47.
C)   1.12.
D)   2.11.E) B) and C)
F) All of the above

Question 13

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Accepted Answer

A)   a 0.2 percent increase in the price.
B)   a 2.5 percent increase in the price.
C)   a 5 percent increase in the price.
D)   a 20 percent increase in the price.E) A) and B)
F) All of the above

Question 14

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

Accepted Answer

A)   0.32, and Tess regards handbags as inferior goods.
B)   0.32, and Tess regards handbags as normal goods.
C)   3.17, and Tess regards handbags as inferior goods.
D)   3.17, and Tess regards handbags as normal goods.E) None of the above
F) All of the above

Question 15

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 demand is

Accepted Answer

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

Question 16

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?

Accepted Answer

A)   Both the mayor and city manager would be correct if demand were price elastic.
B)   Both the mayor and city manager would be correct if demand were price inelastic.
C)   The mayor would be correct if demand were price elastic; the city manager would be correct if demand were price inelastic.
D)   The mayor would be correct if demand were price inelastic; the city manager would be correct if demand were price elastic.E) All of the above
F) None of the above

Question 17

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 elastic.E) A) and C)
F) All of the above

Question 18

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

Accepted Answer

A)   increase total revenue of textbook sellers.
B)   decrease total revenue of textbook sellers.
C)   not change total revenue of textbook sellers.
D)   There is not enough information to answer this question.E) A) and D)
F) None of the above

Question 19

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would

Accepted Answer

A)   be negative, and your roommate's would be positive.
B)   be positive, and your roommate's would be negative.
C)   be zero, and your roommate's would approach infinity.
D)   approach infinity, and your roommate's would be zero.E) B) and D)
F) C) and D)

Question 20

Figure 5-11  P1. In which of the following cases could we possibly find that i)  demand is elastic and ii)  a decrease in price from P1 to P2 causes an decrease in total revenue? A)  0  $20. D)  None of the above is correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 5-11. Suppose this demand curve is a straight, downward-sloping line all the way from the horizontal intercept to the vertical intercept. We choose two prices, P1 and P2, and the corresponding quantities demanded, Q1 and Q2, for the purpose of calculating the price elasticity of demand. Also suppose P2 > P1. In which of the following cases could we possibly find that i)  demand is elastic and ii)  a decrease in price from P1 to P2 causes an decrease in total revenue?

Accepted Answer

A)   0 
B)   $10 
C)   P1 > $20.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Exam 5: Elasticity and Its Application

Correct Answer
verified

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

Correct Answer
verified

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

Correct Answer
verified

In the market for oil in the short run, demand

Correct Answer
verified

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Correct Answer
verified

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

Correct Answer
verified

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is

Correct Answer
verified

With regard to elasticity, as a firm nears its production capacity, supply becomes more

Correct Answer
verified

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Correct Answer
verified

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 demand is

Correct Answer
verified

Holding all other forces constant, if decreasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Correct Answer
verified

Suppose that good X is a luxury and that good Y is a necessity. Which good would you expect to have more price elastic demand?

Correct Answer
verified

Correct Answer
verified

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is

Correct Answer
verified

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

Correct Answer
verified

Figure 5-10 -Refer to Figure 5-10. If rectangle D is larger than rectangle A, then

Correct Answer
verified

Scenario 5-5 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-5. The equilibrium quantity will

Correct Answer
verified

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

Correct Answer
verified

Correct Answer
verified

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

Correct Answer
verified

Exam 5: Elasticity and Its Application

Correct AnswerverifiedShow Answer

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

Correct AnswerverifiedShow Answer

Last year, Tess bought 5 handbags when her income was $54,000. This year, her income is $60,000, and she purchased 7 handbags. Holding other factors constant, it follows that Tess's income elasticity of demand is about

Correct AnswerverifiedShow Answer

In the market for oil in the short run, demand

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is

Correct AnswerverifiedShow Answer

With regard to elasticity, as a firm nears its production capacity, supply becomes more

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Correct AnswerverifiedShow Answer

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 demand is

Correct AnswerverifiedShow Answer

Holding all other forces constant, if decreasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Correct AnswerverifiedShow Answer

Suppose that good X is a luxury and that good Y is a necessity. Which good would you expect to have more price elastic demand?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is

Correct AnswerverifiedShow Answer

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

Correct AnswerverifiedShow Answer

Figure 5-10 -Refer to Figure 5-10. If rectangle D is larger than rectangle A, then

Correct AnswerverifiedShow Answer

Scenario 5-5 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-5. The equilibrium quantity will

Correct AnswerverifiedShow Answer

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

Correct AnswerverifiedShow Answer

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