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You are in charge of the local city-owned aquatic center.You need to increase the revenue generated by the aquatic center in order to meet expenses.The mayor advises you to increase the price of a day pass.The city manager recommends reducing the price of a day pass.You realize that


A) the mayor thinks demand is elastic, and the city manager thinks demand is inelastic.
B) both the mayor and the city manager think that demand is elastic.
C) both the mayor and the city manager think that demand is inelastic.
D) the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.

E) B) and C)
F) C) and D)

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When the Shaffers had a monthly income of $4,000,they usually ate out 8 times a month.Now that the couple makes $4,500 a month,they eat out 10 times a month.Compute the couple's income elasticity of demand using the midpoint method.Explain your answer.Is a restaurant meal a normal or inferior good to the couple?

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The income elasticity of deman...

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Figure 5-1 Figure 5-1 -Refer to Figure 5-1.Between point A and point B,price elasticity of demand is equal to A) 0.33. B) 0.67. C) 1.5 D) 2.67. -Refer to Figure 5-1.Between point A and point B,price elasticity of demand is equal to


A) 0.33.
B) 0.67.
C) 1.5
D) 2.67.

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

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Figure 5-15 Figure 5-15 -Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between $6 and $8? A) 0.86 B) 1.00 C) 1.17 D) 1.25 -Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between $6 and $8?


A) 0.86
B) 1.00
C) 1.17
D) 1.25

E) All of the above
F) None of the above

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


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 C)
F) C) and D)

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If the price elasticity of demand for a good is 1,then a 3 percent decrease in price results in a


A) 0.1 percent increase in the quantity demanded.
B) 1 percent increase in the quantity demanded.
C) 3 percent increase in the quantity demanded.
D) 4 percent increase in the quantity demanded.

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

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Which of the following should be held constant when calculating an income elasticity of demand?


A) the quantity of the good demanded
B) the price of the good
C) income
D) All of the above should be held constant.

E) C) and D)
F) A) and C)

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A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

A) True
B) False

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Suppose the point (Q = 2,000,P = $60) is the midpoint on a certain downward-sloping,linear demand curve.Then


A) an increase in price from $40 to $42 will increase total revenue.
B) a decrease in price from $61 to $59 will leave total revenue unchanged.
C) the maximum value of total revenue is $120,000.
D) All of the above are correct.

E) B) and D)
F) All of the above

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Scenario 5-3 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 5-3.The equilibrium quantity will


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) All of the above
F) B) and C)

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For a particular good,a 10 percent increase in price causes a 5 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?


A) There are many close substitutes for this good.
B) The good is a necessity.
C) The market for the good is narrowly defined.
D) The relevant time horizon is long.

E) B) and D)
F) B) and C)

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

A) True
B) False

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

A) True
B) False

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Table 5-2 Table 5-2 -Refer to Table 5-2.Using the midpoint method,if the price falls from $80 to $60,the price elasticity of demand is A) zero. B) unit elastic. C) inelastic. D) elastic. -Refer to Table 5-2.Using the midpoint method,if the price falls from $80 to $60,the price elasticity of demand is


A) zero.
B) unit elastic.
C) inelastic.
D) elastic.

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

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Which of the following expressions can be used to compute the price elasticity of demand? Which of the following expressions can be used to compute the price elasticity of demand?

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

A) True
B) False

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The cross-price elasticity of demand can tell us whether goods are


A) normal or inferior.
B) elastic or inelastic.
C) luxuries or necessities.
D) complements or substitutes.

E) All of the above
F) A) and D)

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For a particular good,a 3 percent increase in price causes a 10 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?


A) The relevant time horizon is short.
B) The good is a necessity.
C) The market for the good is broadly defined.
D) There are many close substitutes for this good.

E) A) and C)
F) C) and D)

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Figure 5-5 Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,between prices of $30 and $36,price elasticity of demand is about A) 0.5. B) 0.82. C) 1.22. D) 2. -Refer to Figure 5-5.Using the midpoint method,between prices of $30 and $36,price elasticity of demand is about


A) 0.5.
B) 0.82.
C) 1.22.
D) 2.

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

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A key determinant of the price elasticity of supply is the


A) time horizon.
B) income of consumers.
C) price elasticity of demand.
D) importance of the good in a consumer's budget.

E) All of the above
F) None of the above

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