Question 1

Scenario 5-4
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-4. The change in equilibrium quantity will be

Accepted Answer

A)   greater in the aged cheddar cheese market than in the bread market.
B)   greater in the bread market than in the aged cheddar cheese market.
C)   the same in the aged cheddar cheese and bread markets.
D)   Any of the above could be correct.E) None of the above
F) B) and C)

Question 2

An advance in farm technology that results in an increased market supply is

Accepted Answer

A)   good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food.
B)   bad for farmers because total revenue will fall but good for consumers because prices for food will fall.
C)   good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption.
D)   bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue.E) C) and D)
F) A) and B)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

What is the price elasticity of demand at any point on a perfectly inelastic demand curve?

Accepted Answer

The price ...

Question 5

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

Accepted Answer

A)   supply decreases, demand is unaffected, and price increases.
B)   demand decreases, supply is unaffected, and price decreases.
C)   demand and supply both decrease, leaving price essentially unchanged.
D)   supply decreases, demand increases, and price increases substantially.E) B) and D)
F) All of the above

Question 6

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Accepted Answer

A)   -1.3
B)   0
C)   0.2
D)   1.4E) A) and B)
F) A) and D)

Question 7

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

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) A) and D)
F) B) and D)

Question 8

At price of $1.30 per pound, a local apple orchard is willing to supply 150 pounds of apples per day. At a price of $1.50 per pound, the orchard is willing to supply 170 pounds of apples per day. Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A)   1.14.
B)   1.00.
C)   0.875.
D)   0.50.E) All of the above
F) B) and C)

Question 9

When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about

Accepted Answer

A)   0.55.
B)   2.
C)   1.83.
B)   10.C) A) and B)
D) A) and C)

Question 10

A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

Accepted Answer

A)   raise the price, reduce the quantity, decrease total revenues, and decrease crime.
B)   lower the price, increase the quantity, increase total revenues, and increase crime.
C)   raise the price, increase the quantity, decrease total revenues, and increase crime.
D)   raise the price, reduce the quantity, increase total revenues, and increase crime.E) A) and D)
F) C) and D)

Question 11

Figure 5-5 
-Refer to Figure 5-5. At a price of $10 per unit, sellers' total revenue equals

Accepted Answer

A)   $100.
B)   $450
C)   $500.
D)   $1250.E) A) and B)
F) All of the above

Question 12

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

Accepted Answer

A)   0.22.
B)   0.67.
C)   1.33.
D)   1.50.E) A) and B)
F) None of the above

Question 13

If the cross-price elasticity of demand between two goods is negative, what is the relationship between the two goods?

Accepted Answer

The goods ...

Question 14

Scenario 5-4
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-4. Total consumer spending on aged cheddar cheese will

Accepted Answer

A)   increase, and total consumer spending on bread will increase.
B)   increase, and total consumer spending on bread will decrease.
C)   decrease, and total consumer spending on bread will increase.
D)   decrease, and total consumer spending on bread will decrease.E) A) and B)
F) A) and C)

Question 15

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

Accepted Answer

A)   clothing
B)   blue jeans
C)   Tommy Hilfiger jeans
D)   All three would have the same elasticity of demand because they are all related.E) A) and B)
F) A) and C)

Question 16

For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A)   There are many 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) None of the above
F) C) and D)

Question 17

Which of the following is not possible?

Accepted Answer

A)   Demand is elastic, and a decrease in price causes an increase in revenue.
B)   Demand is unit elastic, and a decrease in price causes an increase in revenue.
C)   Demand is inelastic, and an increase in price causes an increase in revenue.
D)   Demand is perfectly inelastic, and an increase in price causes an increase in revenue.E) All of the above
F) A) and C)

Question 18

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

Accepted Answer

A)   the availability of close substitutes in determining the price elasticity of demand.
B)   a necessity versus a luxury in determining the price elasticity of demand.
C)   the definition of a market in determining the price elasticity of demand.
D)   the time horizon in determining the price elasticity of demand.E) A) and C)
F) None of the above

Question 19

When quantity moves proportionately the same amount as price, demand is

Accepted Answer

A)   elastic, and the price elasticity of demand is 1.
B)   perfectly elastic, and the price elasticity of demand is infinitely large.
C)   perfectly inelastic, and the price elasticity of demand is 0.
D)   unit elastic, and the price elasticity of demand is 1.E) C) and D)
F) A) and C)

Question 20

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

Exam 5: Elasticity and Its Application

What is the price elasticity of demand at any point on a perfectly inelastic demand curve?

Correct Answer
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The price ...
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Which of the following is not possible?

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If the cross-price elasticity of demand between two goods is negative, what is the relationship between the two goods?

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The goods ...
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When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

Correct Answer
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Which of the following is likely to have the most price elastic demand?

Correct Answer
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Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Correct Answer
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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

When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about

Correct Answer
verified

When quantity moves proportionately the same amount as price, demand is

Correct Answer
verified

Figure 5-5 -Refer to Figure 5-5. At a price of $10 per unit, sellers' total revenue equals

Correct Answer
verified

A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

Correct Answer
verified

An advance in farm technology that results in an increased market supply is

Correct Answer
verified

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

Correct Answer
verified

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

At price of $1.30 per pound, a local apple orchard is willing to supply 150 pounds of apples per day. At a price of $1.50 per pound, the orchard is willing to supply 170 pounds of apples per day. Using the midpoint method, the price elasticity of supply is about

Correct Answer
verified

For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct Answer
verified

Exam 5: Elasticity and Its Application

What is the price elasticity of demand at any point on a perfectly inelastic demand curve?

Correct AnswerverifiedThe price ...View AnswerShow Answer

Which of the following is not possible?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand between two goods is negative, what is the relationship between the two goods?

Correct AnswerverifiedThe goods ...View AnswerShow Answer

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

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

When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about

Correct AnswerverifiedShow Answer

When quantity moves proportionately the same amount as price, demand is

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5. At a price of $10 per unit, sellers' total revenue equals

Correct AnswerverifiedShow Answer

A drug interdiction program that successfully reduces the supply of illegal drugs in the United States likely will

Correct AnswerverifiedShow Answer

An advance in farm technology that results in an increased market supply is

Correct AnswerverifiedShow Answer

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

Correct AnswerverifiedShow Answer

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

At price of $1.30 per pound, a local apple orchard is willing to supply 150 pounds of apples per day. At a price of $1.50 per pound, the orchard is willing to supply 170 pounds of apples per day. Using the midpoint method, the price elasticity of supply is about

Correct AnswerverifiedShow Answer

For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

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The price ...
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The goods ...
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