Question 1

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

Accepted Answer

A)  white chocolate chip with macadamia nut cookies
B)  hardback novels
C)  salt
D)  box seats at a major league baseball gameE) B) and C)
F) A) and D)

Question 2

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

Accepted Answer

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 D)
F) None of the above

Question 3

Figure 5-2 
-Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

Accepted Answer

A)  D1
B)  D2
C)  D3
D)  All of the above are equally elastic.E) All of the above
F) A) and D)

Question 4

The demand for Godiva pumpkin truffles is likely quite elastic because

Accepted Answer

A)  truffles melt easily.
B)  this particular type of chocolate is viewed as a necessity by many chocolate lovers.
C)  the market is broadly defined.
D)  other types of chocolate are good substitutes for this particular flavor.E) All of the above
F) C) and D)

Question 5

If the cross-price elasticity of two goods is negative, then the two goods are

Accepted Answer

A)  necessities.
B)  complements.
C)  normal goods.
D)  inferior goods.E) B) and C)
F) All of the above

Question 6

Figure 5-5 
-Refer to Figure 5-5. Using the midpoint method, between prices of $48 and $54, price elasticity of demand is about

Accepted Answer

A)  0.92.
B)  3.89.
C)  4.33.
D)  5.67.E) A) and B)
F) A) and C)

Question 7

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. Your roommate still enjoys Ramen noodles very much and buys even more, but you plan to buy fewer Ramen noodles in favor of foods you prefer 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) C) and D)
F) A) and D)

Question 8

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

Accepted Answer

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

Question 9

Table 5-5
The following table shows a portion of the demand schedule for a particular good at various levels of income.   Price  Quantity Demanded  (Income =$$5,000)  Quantity Demanded  (Income =$7,500)  Quantity Demanded ( Income =$10,000) $24234$20468$166912$1281216$8101520$4121824\begin{array}{|c|c|c|c|}\hline \text { Price } & \begin{array}{c}\text { Quantity Demanded } \\text { (Income }=\$ \mathbf{\$ 5 , 0 0 0}) \end{array} & \begin{array}{c}\text { Quantity Demanded } \\text { (Income }=\mathbf{\$ 7 , 5 0 0}) \end{array} & \begin{array}{c}\text { Quantity Demanded } \(\text { Income }=\mathbf{\$ 1 0 , 0 0 0}) \end{array} \\hline \$ 24 & 2 & 3 & 4 \\hline \$ 20 & 4 & 6 & 8 \\hline \$ 16 & 6 & 9 & 12 \\hline \$ 12 & 8 & 12 & 16 \\hline \$ 8 & 10 & 15 & 20 \\hline \$ 4 & 12 & 18 & 24 \\hline\end{array} Price $24$20$16$12$8$4​ Quantity Demanded  (Income =$$5,000) ​24681012​ Quantity Demanded  (Income =$7,500) ​369121518​ Quantity Demanded ( Income =$10,000) ​4812162024​​

-Refer to Table 5-5. Using the midpoint method, at a price of $8, what is the income elasticity of demand when income rises from $7,500 to $10,000?

Accepted Answer

A)  0.00
B)  0.41
C)  1.00
D)  2.45 E) B) and C)
F) None of the above

Question 10

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)  the mayor
B)  the city manager
C)  The answer depends on the price elasticity of demand.
D)  The answer depends on the costs of construction of the new municipal swimming pool.E) A) and D)
F) A) and C)

Question 11

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni

Accepted Answer

A)  and soy-burgers are both normal goods with income elasticities equal to 1.
B)  is an inferior good and soy-burgers are normal goods; both have income elasticities of 1.
C)  is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.
D)  and soy-burgers are both inferior goods with income elasticities equal to -1.E) A) and C)
F) A) and D)

Question 12

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 D)
F) None of the above

Question 13

If the price elasticity of demand for a good is 4, then a 12 percent decrease in price results in a

Accepted Answer

A)  0.33 percent increase in the quantity demanded.
B)  3 percent increase in the quantity demanded.
C)  30 percent increase in the quantity demanded.
D)  48 percent increase in the quantity demanded.E) None of the above
F) A) and B)

Question 14

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

Accepted Answer

A)  0.6 percent increase in the quantity demanded.
B)  1.5 percent increase in the quantity demanded.
C)  2 percent increase in the quantity demanded.
D)  6 percent increase in the quantity demanded.E) A) and C)
F) A) and D)

Question 15

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts, the price elasticity of supply approaches

Accepted Answer

A)  zero, and the supply curve is horizontal.
B)  zero, and the supply curve is vertical.
C)  infinity, and the supply curve is horizontal.
D)  infinity, and the supply curve is vertical.E) A) and B)
F) C) and D)

Question 16

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Accepted Answer

A) True 
 B)False

Question 17

The price elasticity of demand measures how much

Accepted Answer

A)  quantity demanded responds to a change in price.
B)  quantity demanded responds to a change in income.
C)  price responds to a change in demand.
D)  demand responds to a change in supply.E) None of the above
F) A) and D)

Question 18

Figure 5-13 
-Refer to Figure 5-13. Using the midpoint method, what is the price elasticity of supply between $100 and $220?

Accepted Answer

A)  0.58
B)  0.67
C)  1.00
D)  1.73E) None of the above
F) B) and C)

Question 19

If the demand curve is linear and downward sloping, which of the following statements is not correct?

Accepted Answer

A)  Demand is more elastic on the lower part of the demand curve than on the upper part.
B)  Different pairs of points on the demand curve can result in different values of the price elasticity of demand.
C)  Different pairs of points on the demand curve result in identical values of the slope of the demand curve.
D)  Starting from a point on the upper part of the demand curve, an increase in price leads to a decrease in total revenue.E) B) and C)
F) A) and B)

Question 20

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)  The direct impact is on buyers, not sellers.
B)  Successful drug interdiction policies reduce the demand for illegal drugs.
C)  Drug addicts will have an even greater need for quick cash to support their habits.
D)  In the short run, both equilibrium quantities and prices will fall in the markets for illegal drugs.E) A) and D)
F) A) and B)

Exam 5: Elasticity and Its Application

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $48 and $54, price elasticity of demand is about

Correct Answer
verified

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

Correct Answer
verified

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

Correct Answer
verified

If the price elasticity of demand for a good is 4, then a 12 percent decrease in price results in a

Correct Answer
verified

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts, the price elasticity of supply approaches

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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If the cross-price elasticity of two goods is negative, then the two goods are

Correct Answer
verified

The price elasticity of demand measures how much

Correct Answer
verified

Correct Answer
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Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

Correct Answer
verified

If the demand curve is linear and downward sloping, which of the following statements is not correct?

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

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

Correct Answer
verified

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Correct Answer
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If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Correct Answer
verified

The demand for Godiva pumpkin truffles is likely quite elastic because

Correct Answer
verified

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni

Correct Answer
verified

Correct Answer
verified

Figure 5-13 -Refer to Figure 5-13. Using the midpoint method, what is the price elasticity of supply between $100 and $220?

Correct Answer
verified

Exam 5: Elasticity and Its Application

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $48 and $54, price elasticity of demand is about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 4, then a 12 percent decrease in price results in a

Correct AnswerverifiedShow Answer

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts, the price elasticity of supply approaches

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the cross-price elasticity of two goods is negative, then the two goods are

Correct AnswerverifiedShow Answer

The price elasticity of demand measures how much

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

Correct AnswerverifiedShow Answer

If the demand curve is linear and downward sloping, which of the following statements is not correct?

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

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

Correct AnswerverifiedShow Answer

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Correct AnswerverifiedShow Answer

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Correct AnswerverifiedShow Answer

The demand for Godiva pumpkin truffles is likely quite elastic because

Correct AnswerverifiedShow Answer

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 5-13 -Refer to Figure 5-13. Using the midpoint method, what is the price elasticity of supply between $100 and $220?

Correct AnswerverifiedShow Answer

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