Question 1

Scenario 5-4
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 5-4. The change in equilibrium price will be

Accepted Answer

A)  greater in the milk market than in the beef market.
B)  greater in the beef market than in the milk market.
C)  the same in the milk and beef markets.
D)  Any of the above could be correct.E) B) and C)
F) A) and C)

Question 2

A perfectly inelastic demand implies that buyers

Accepted Answer

A)  decrease their purchases when the price rises.
B)  purchase the same amount as before when the price rises or falls.
C)  increase their purchases only slightly when the price falls.
D)  respond substantially to an increase in price.E) B) and D)
F) C) and D)

Question 3

For a good that is a necessity,

Accepted Answer

A)  quantity demanded tends to respond substantially to a change in price.
B)  demand tends to be inelastic.
C)  the law of demand does not apply.
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 4

A linear, downward-sloping demand curve has a constant elasticity but a changing slope.

Accepted Answer

A) True 
 B)False

Question 5

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Question 6

If we observe that when the price of chocolate increases by 10%, quantity demanded falls by 5%, then the demand for chocolate is price inelastic.

Accepted Answer

A) True 
 B)False

Question 7

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) B) and D)
F) A) and D)

Question 8

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

Accepted Answer

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

Question 9

Table 5-1 
-Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Accepted Answer

A)  A is a luxury and B is a necessity.
B)  A is a good after an increase in income and B is that same good after a decrease in income.
C)  A has fewer substitutes than B.
D)  A is a good immediately after a price increase and B is that same good 3 years after the price increase.E) B) and D)
F) None of the above

Question 10

Last year, Max bought 6 pairs of athletic shoes when his income was $35,000. This year, his income is $42,000, and he purchased 8 pairs of athletic shoes. Holding other factors constant, it follows that Max

Accepted Answer

A)  considers athletic shoes to be necessities.
B)  considers athletic shoes to be inferior goods.
C)  considers athletic shoes to be normal goods.
D)  has a low price elasticity of demand for athletic shoes.E) B) and C)
F) A) and B)

Question 11

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

Between 1950 and today there was a

Accepted Answer

A)  20 percent drop in the number of farmers, but farm output increased by more than ten times.
B)  30 percent drop in the number of farmers, but farm output more than tripled.
C)  40 percent drop in the number of farmers, but farm output more than doubled.
D)  70 percent drop in the number of farmers, but farm output increased by about five times.E) All of the above
F) A) and C)

Question 15

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds. Using the midpoint method, what is the approximate value of the price elasticity of supply?

Accepted Answer

A)  0.67
B)  0.89
C)  1.00
D)  1.13E) A) and B)
F) A) and C)

Question 16

Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase revenue?

Accepted Answer

A)  0
B)  0.4
C)  1
D)  4E) B) and C)
F) All of the above

Question 17

If a change in the price of a good results in no change in total revenue, then

Accepted Answer

A)  the demand for the good must be elastic.
B)  the demand for the good must be inelastic.
C)  the demand for the good must be unit elastic.
D)  buyers must not respond very much to a change in price.E) B) and D)
F) B) and C)

Question 18

There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be

Accepted Answer

A)  elastic.
B)  unit elastic.
C)  inelastic.
D)  highly responsive to changes in income as well as changes in prices.E) A) and B)
F) None of the above

Question 19

If a supply curve is perfectly horizontal, what is the value of the price elasticity of supply?

Accepted Answer

The answer of If a supply curve is perfectly horizontal,...

Question 20

The price elasticity of supply along a typical supply curve is

Accepted Answer

A)  constant.
B)  equal to zero.
C)  higher at low levels of quantity supplied and lower at high levels of quantity supplied.
D)  lower at low levels of quantity supplied and higher at high levels of quantity supplied.E) A) and D)
F) None of the above

Exam 5: Elasticity and Its Application

Last year, Max bought 6 pairs of athletic shoes when his income was $35,000. This year, his income is $42,000, and he purchased 8 pairs of athletic shoes. Holding other factors constant, it follows that Max

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Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

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If a supply curve is perfectly horizontal, what is the value of the price elasticity of supply?

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When demand is elastic, an increase in price will cause

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Scenario 5-4 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 5-4. The change in equilibrium price will be

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There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be

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Table 5-1 -Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

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

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If a change in the price of a good results in no change in total revenue, then

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For a good that is a necessity,

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The price elasticity of supply along a typical supply curve is

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The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

Correct AnswerverifiedShow Answer

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds. Using the midpoint method, what is the approximate value of the price elasticity of supply?

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Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase revenue?

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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

A perfectly inelastic demand implies that buyers

Correct AnswerverifiedShow Answer

Between 1950 and today there was a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A linear, downward-sloping demand curve has a constant elasticity but a changing slope.

Correct AnswerverifiedShow Answer

If we observe that when the price of chocolate increases by 10%, quantity demanded falls by 5%, then the demand for chocolate is price inelastic.

Correct AnswerverifiedShow Answer

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