Question 1

When demand is inelastic, a decrease 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) All of the above
F) B) and D)

Question 2

If the price of gasoline rises, when is the price elasticity of demand likely to be the highest?

Accepted Answer

A)  immediately after the price increases
B)  one month after the price increase
C)  three months after the price increase
D)  one year after the price increaseE) C) and D)
F) B) and D)

Question 3

Figure 5-4 
-Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 2,000, P = $15)  and (Q = 2,400, P = $12) . Then which of the following scenarios is possible?

Accepted Answer

A)  Both of these points lie on section BC of the demand curve.
B)  The vertical intercept of the demand curve is the point (Q = 0, P = $22) .
C)  The horizontal intercept of the demand curve is the point (Q = 5,000, P = $0) .
D)  Any of these scenarios is possible.E) All of the above
F) None of the above

Question 4

Figure 5-10 
-Refer to Figure 5-10. An increase in price from $20 to $30 would

Accepted Answer

A)  increase total revenue by $2,000.
B)  decrease total revenue by $2,000.
C)  increase total revenue by $1,000.
D)  decrease total revenue by $1,000.E) All of the above
F) B) and D)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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

Question 7

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is

Accepted Answer

A)  ignoring the law of demand.
B)  assuming that the demand for university education is elastic.
C)  assuming that the demand for university education is inelastic.
D)  assuming that the supply of university education is elastic.E) B) and C)
F) C) and D)

Question 8

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

Accepted Answer

A)  mint-flavored toothpaste
B)  toothpaste
C)  Colgate mint-flavored toothpaste
D)  a generic mint-flavored toothpasteE) B) and D)
F) B) and C)

Question 9

The smaller the price elasticity of demand, the

Accepted Answer

A)  steeper the demand curve will be through a given point.
B)  flatter the demand curve will be through a given point.
C)  more strongly buyers respond to a change in price between any two prices P1 and P2.
D)  smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2.E) All of the above
F) C) and D)

Question 10

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A)  0.63, and supply is elastic.
B)  0.63, and supply is inelastic.
C)  1.60, and supply is elastic.
D)  1.60, and supply is inelastic.E) A) and B)
F) C) and D)

Question 11

Table 5-5
 
-Refer to Table 5-5. Which of the three supply curves represents the most elastic supply?

Accepted Answer

A)  supply curve A
B)  supply curve B
C)  supply curve C
D)  There is no difference in the elasticity of the three supply curves.E) A) and C)
F) C) and D)

Question 12

If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

Accepted Answer

A) True 
 B)False

Question 13

Figure 5-4 
-Refer to Figure 5-4. The section of the demand curve from B to C represents the

Accepted Answer

A)  elastic section of the demand curve.
B)  perfectly elastic section of the demand curve.
C)  unit elastic section of the demand curve.
D)  inelastic section of the demand curve.E) A) and C)
F) All of the above

Question 14

Which of the following is not a determinant of the price elasticity of demand for a good?

Accepted Answer

A)  the time horizon
B)  the steepness or flatness of the supply curve for the good
C)  the definition of the market for the good
D)  the availability of substitutes for the goodE) All of the above
F) B) and C)

Question 15

When demand is perfectly inelastic, the demand curve will be

Accepted Answer

A)  negatively sloped, because buyers decrease their purchases when the price rises.
B)  vertical, because buyers purchase the same amount as before whenever the price rises or falls.
C)  positively sloped, because buyers increase their purchases when price rises.
D)  positively sloped, because buyers increase their total expenditures when price rises.E) A) and D)
F) None of the above

Question 16

Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is

Accepted Answer

A)  inelastic, since the price elasticity of supply is equal to .91.
B)  inelastic, since the price elasticity of supply is equal to 1.1.
C)  elastic, since the price elasticity of supply is equal to 0.91.
D)  elastic, since the price elasticity of supply is equal to 1.1.E) A) and D)
F) A) and B)

Question 17

The difference between slope and elasticity is that slope

Accepted Answer

A)  is a ratio of two changes, and elasticity is a ratio of two percentage changes.
B)  is a ratio of two percentage changes, and elasticity is a ratio of two changes.
C)  measures changes in quantity demanded more accurately than elasticity.
D)  none of the above; there is no difference between slope and elasticity.E) A) and B)
F) None of the above

Question 18

Suppose that Juan Carlos is filling out a survey that he received in the mail. The survey asks him what he would do if the price of his favorite toothpaste increased. Juan Carlos reports that he would switch to a different brand. The survey asks what he would do if the price of all toothpastes increased. Juan Carlos reports that he must use toothpaste, so he would have to adjust his spending elsewhere. These examples illustrate the importance of

Accepted Answer

A)  changes in total revenue 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) B) and D)
F) B) and C)

Question 19

Figure 5-8 
-Refer to Figure 5-8. For prices above $5, demand is price

Accepted Answer

A)  elastic, and raising price will increase total revenue.
B)  inelastic, and raising price will increase total revenue.
C)  elastic, and lowering price will increase total revenue.
D)  inelastic, and lowering price will increase total revenue.E) B) and C)
F) C) and D)

Question 20

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

Accepted Answer

A)  lattés
B)  doctor's visits
C)  eggs
D)  natural gasE) A) and C)
F) B) and D)

Exam 5: Elasticity and Its Application

The smaller the price elasticity of demand, the

Correct Answer
verified

Figure 5-10 -Refer to Figure 5-10. An increase in price from $20 to $30 would

Correct Answer
verified

Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is

Correct Answer
verified

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

Correct Answer
verified

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

Correct Answer
verified

If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

Correct Answer
verified

Figure 5-8 -Refer to Figure 5-8. For prices above $5, demand is price

Correct Answer
verified

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is

Correct Answer
verified

The difference between slope and elasticity is that slope

Correct Answer
verified

If the price of gasoline rises, when is the price elasticity of demand likely to be the highest?

Correct Answer
verified

Which of the following is not a determinant of the price elasticity of demand for a good?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

When demand is inelastic, a decrease in price will cause

Correct Answer
verified

Table 5-5 -Refer to Table 5-5. Which of the three supply curves represents the most elastic supply?

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 2,000, P = $15) and (Q = 2,400, P = $12) . Then which of the following scenarios is possible?

Correct Answer
verified

When demand is perfectly inelastic, the demand curve will be

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from B to C represents the

Correct Answer
verified

Correct Answer
verified

Exam 5: Elasticity and Its Application

The smaller the price elasticity of demand, the

Correct AnswerverifiedShow Answer

Figure 5-10 -Refer to Figure 5-10. An increase in price from $20 to $30 would

Correct AnswerverifiedShow Answer

Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is

Correct AnswerverifiedShow Answer

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

Correct AnswerverifiedShow Answer

Figure 5-8 -Refer to Figure 5-8. For prices above $5, demand is price

Correct AnswerverifiedShow Answer

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is

Correct AnswerverifiedShow Answer

The difference between slope and elasticity is that slope

Correct AnswerverifiedShow Answer

If the price of gasoline rises, when is the price elasticity of demand likely to be the highest?

Correct AnswerverifiedShow Answer

Which of the following is not a determinant of the price elasticity of demand for a good?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When demand is inelastic, a decrease in price will cause

Correct AnswerverifiedShow Answer

Table 5-5 -Refer to Table 5-5. Which of the three supply curves represents the most elastic supply?

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 2,000, P = $15) and (Q = 2,400, P = $12) . Then which of the following scenarios is possible?

Correct AnswerverifiedShow Answer

When demand is perfectly inelastic, the demand curve will be

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from B to C represents the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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