Question 1

Scenario 5-1
Suppose that when the average college student's income is $10,000 per year, the annual quantity demanded of Patty's Pizza is 50 and the annual quantity demanded of Sue's Subs is 80. Suppose that when the price of Patty's Pizza increases from $8 to $10 per pie, the quantity demanded of Sue's Subs increases from 80 to 100. Suppose also that when the average student's income increases to $12,000 per year, the annual quantity demanded of Patty's Pizza increases from 50 to 60.
-Refer to Scenario 5-1. What can you deduce about the type of good Patty's Pizza is and about the relationship between Patty's Pizza and Sue's Subs?

Accepted Answer

A)   Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are substitutes.
B)   Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are complements.
C)   Patty's Pizza is an inferior good and Patty's Pizza and Sue's Subs are substitutes.
D)   Patty's Pizza is an inferior good and Patty's Pizza and Sue's Subs are complements.E) A) and B)
F) None of the above

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

Question 3

Which of the following statements is correct?

Accepted Answer

A)   The demand for flat-screen computer monitors is more elastic than the demand for monitors in general.
B)   The demand for grandfather clocks is more elastic than the demand for clocks in general.
C)   The demand for cardboard is more elastic over a long period of time than over a short period of time.
D)   All of the above are correct.E) C) and D)
F) None of the above

Question 4

Figure 5-11 
-Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

Accepted Answer

A)   increase by $120, so demand must be inelastic in this price range.
B)   increase by $320, so demand must be inelastic in this price range.
C)   decrease by $120, so demand must be elastic in this price range.
D)   decrease by $320, so demand must be elastic in this price range.E) B) and C)
F) A) and D)

Question 5

At price of $1.20, a local pencil manufacturer is willing to supply 150 boxes per day. At a price of $1.40, the manufacturer is willing to supply 170 boxes per day. Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A)   2.0.
B)   1.23.
C)   1.00.
D)   0.81.E) B) and C)
F) A) and D)

Question 6

As the price elasticity of supply approaches infinity, very small changes in price lead to

Accepted Answer

A)   very large changes in quantity supplied.
B)   very small changes in quantity supplied.
C)   no change in quantity supplied.
D)   None of the above is correct.E) A) and D)
F) C) and D)

Question 7

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Accepted Answer

A)   fall by 200 percent.
B)   fall by 40 percent.
C)   rise by 200 percent.
D)   rise by 40 percent.E) A) and B)
F) B) and C)

Question 8

Figure 5-3 
-Refer to Figure 5-3. Which demand curve is perfectly elastic?

Accepted Answer

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

Question 9

Figure 5-8 
-Refer to Figure 5-8. An increase in price from $15 to $20 would

Accepted Answer

A)   increase total revenue by $500
B)   decrease total revenue by $500.
C)   increase total revenue by $1,000.
D)   decrease total revenue by $1,000.E) A) and D)
F) C) and D)

Question 10

If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

Accepted Answer

A)   increase by 4.2%.
B)   increase by 6%.
C)   decrease by 4.2%.
D)   decrease by 6%.E) A) and D)
F) B) and C)

Question 11

The demand for grape-flavored Hubba Bubba bubble gum is likely

Accepted Answer

A)   inelastic because there are many close substitutes for grape-flavored Hubba Bubba .
B)   elastic because there are many close substitutes for grape-flavored Hubba Bubba.
C)   inelastic because the market is broadly defined.
D)   elastic because the market is broadly defined.E) A) and C)
F) All of the above

Question 12

Table 5-10
 
-Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most inelastic price elasticity of supply?

Accepted Answer

A)   Supply curve X
B)   Supply curve Y
C)   Supply curve Z
D)   There is no difference in the elasticities of the three supply curves.E) All of the above
F) A) and B)

Question 13

Figure 5-6 
-Refer to Figure 5-6. For prices below $8, demand is price

Accepted Answer

A)   elastic, and total revenue will rise as price rises.
B)   inelastic, and total revenue will rise as price rises.
C)   elastic, and total revenue will fall as price rises.
D)   inelastic, and total revenue will fall as price rises.E) C) and D)
F) All of the above

Question 14

Figure 5-21 
-Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $25 and $35?

Accepted Answer

The price ...

Question 15

Table 5-13
Consider the following demand schedule.
 
-Refer to Table 5-13. Using the midpoint method, what is the price elasticity of demand between $12 and $15?

Accepted Answer

The answer of Table 5-13
Consider the following demand schedule.
 
-Refer...

Question 16

In the long run, the quantity supplied of most goods

Accepted Answer

A)   will increase in almost all cases, regardless of what happens to price.
B)   cannot respond at all to a change in price.
C)   can respond to a change in price, but the change is almost always inconsequential.
D)   can respond substantially to a change in price.E) A) and B)
F) None of the above

Question 17

If the income elasticity of demand for a good is -1.40, is the good a normal or inferior good?

Accepted Answer

The good i...

Question 18

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

Question 19

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 D)
F) A) and B)

Question 20

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.
 
-Refer to Table 5-7. 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)   2.45E) C) and D)
F) A) and B)

Exam 5: Elasticity and Its Application

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $25 and $35?

Correct Answer
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The price ...
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As the price elasticity of supply approaches infinity, very small changes in price lead to

Correct Answer
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Figure 5-3 -Refer to Figure 5-3. Which demand curve is perfectly elastic?

Correct Answer
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The demand for grape-flavored Hubba Bubba bubble gum is likely

Correct Answer
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At price of $1.20, a local pencil manufacturer is willing to supply 150 boxes per day. At a price of $1.40, the manufacturer is willing to supply 170 boxes per day. Using the midpoint method, the price elasticity of supply is about

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

Correct Answer
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Figure 5-6 -Refer to Figure 5-6. For prices below $8, demand is price

Correct Answer
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If the income elasticity of demand for a good is -1.40, is the good a normal or inferior good?

Correct Answer
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The good i...
View Answer

In the long run, the quantity supplied of most goods

Correct Answer
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Table 5-10 -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most inelastic price elasticity of supply?

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

Correct Answer
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Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Correct Answer
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Figure 5-8 -Refer to Figure 5-8. An increase in price from $15 to $20 would

Correct Answer
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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
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If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. 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?

Correct Answer
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Figure 5-11 -Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

Correct Answer
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Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, what is the price elasticity of demand between $12 and $15?

Correct Answer
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Exam 5: Elasticity and Its Application

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $25 and $35?

Correct AnswerverifiedThe price ...View AnswerShow Answer

As the price elasticity of supply approaches infinity, very small changes in price lead to

Correct AnswerverifiedShow Answer

Figure 5-3 -Refer to Figure 5-3. Which demand curve is perfectly elastic?

Correct AnswerverifiedShow Answer

The demand for grape-flavored Hubba Bubba bubble gum is likely

Correct AnswerverifiedShow Answer

At price of $1.20, a local pencil manufacturer is willing to supply 150 boxes per day. At a price of $1.40, the manufacturer is willing to supply 170 boxes per day. Using the midpoint method, the price elasticity of supply is about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-6 -Refer to Figure 5-6. For prices below $8, demand is price

Correct AnswerverifiedShow Answer

If the income elasticity of demand for a good is -1.40, is the good a normal or inferior good?

Correct AnswerverifiedThe good i...View AnswerShow Answer

In the long run, the quantity supplied of most goods

Correct AnswerverifiedShow Answer

Table 5-10 -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most inelastic price elasticity of supply?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Correct AnswerverifiedShow Answer

Figure 5-8 -Refer to Figure 5-8. An increase in price from $15 to $20 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 the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

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Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. 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?

Correct AnswerverifiedShow Answer

Figure 5-11 -Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

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Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, what is the price elasticity of demand between $12 and $15?

Correct AnswerverifiedShow Answer

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The good i...
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