Question 1

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Accepted Answer

A) True 
 B)False

Question 2

Last year,Sheila bought 6 pairs of shoes when her income was $40,000.This year,her income is $50,000 and she purchased 10 pairs of shoes.Holding other factors constant,it follows that Sheila

Accepted Answer

A)   considers shoes to be a necessity.
B)   considers shoes to be an inferior good.
C)   considers shoes to be a normal good.
D)   has a low price elasticity of demand for shoes.E) B) and C)
F) A) and B)

Question 3

The price elasticity of demand changes as we move along a

Accepted Answer

A)   horizontal demand curve.
B)   vertical demand curve.
C)   linear,downward-sloping demand curve.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 4

Demand is said to be unit elastic if

Accepted Answer

A)   quantity demanded changes by the same percent as the price.
B)   quantity demanded changes by a larger percent than the price.
C)   the demand curve shifts by the same percentage amount as the price.
D)   quantity demanded does not respond to a change in price.E) A) and D)
F) All of the above

Question 5

Figure 5-11 
-Refer to Figure 5-11.An increase in price from $30 to $35 would

Accepted Answer

A)   increase total revenue by $250
B)   decrease total revenue by $250.
C)   increase total revenue by $500.
D)   decrease total revenue by $500.E) A) and D)
F) B) and C)

Question 6

Figure 5-12
The following figure shows the supply curve for a particular good. 
-Refer to Figure 5-12.Over which range is the supply curve in this figure the most elastic?

Accepted Answer

A)   Between $16 and $40
B)   Between $40 and $100
C)   Between $100 and $220
D)   Between $220 and $430E) B) and D)
F) A) and C)

Question 7

Demand is said to be inelastic if

Accepted Answer

A)   buyers respond substantially to changes in the price of the good.
B)   demand shifts only slightly when the price of the good changes.
C)   the quantity demanded changes only slightly when the price of the good changes.
D)   the price of the good responds only slightly to changes in demand.E) A) and B)
F) A) and C)

Question 8

When studying how some event or policy affects a market,elasticity provides information on the

Accepted Answer

A)   equity effects on the market by identifying the winners and losers.
B)   magnitude of the effect on the market.
C)   speed of adjustment of the market in response to the event or policy.
D)   number of market participants who are directly affected by the event or policy.E) All of the above
F) B) and C)

Question 9

In which of the following situations will total revenue increase?

Accepted Answer

A)   Price elasticity of demand is 1.2,and the price of the good decreases.
B)   Price elasticity of demand is 0.5,and the price of the good increases.
C)   Price elasticity of demand is 3.0,and the price of the good decreases.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 10

Necessities tend to have inelastic demands,whereas luxuries have elastic demands.

Accepted Answer

A) True 
 B)False

Question 11

Figure 5-12
The following figure shows the supply curve for a particular good. 
-Refer to Figure 5-12.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) B) and D)
F) None of the above

Question 12

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

Question 13

Necessities such as food and clothing tend to have

Accepted Answer

A)   high price elasticities of demand and high income elasticities of demand.
B)   high price elasticities of demand and low income elasticities of demand.
C)   low price elasticities of demand and high income elasticities of demand.
D)   low price elasticities of demand and low income elasticities of demand.E) A) and B)
F) A) and C)

Question 14

Suppose that 50 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 4 percent,the number of candy bars demanded falls to 46.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Accepted Answer

A)   demand for candy bars in this price range is elastic.
B)   demand for candy bars in this price range is inelastic.
C)   demand for candy bars in this price range is unit elastic.
D)   price elasticity of demand for candy bars in this price range is 0.E) C) and D)
F) None of the above

Question 15

A key determinant of the price elasticity of supply is

Accepted Answer

A)   the ability of sellers to change the price of the good they produce.
B)   the ability of sellers to change the amount of the good they produce.
C)   how responsive buyers are to changes in sellers' prices.
D)   the slope of the demand curve.E) All of the above
F) B) and D)

Question 16

Goods with many close substitutes tend to have

Accepted Answer

A)   more elastic demands.
B)   less elastic demands.
C)   price elasticities of demand that are unit elastic.
D)   income elasticities of demand that are negative.E) B) and C)
F) A) and D)

Question 17

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

Accepted Answer

A)   necessities.
B)   complements.
C)   normal goods.
D)   inferior goods.E) B) and C)
F) None of the above

Question 18

Farm programs that pay farmers not to plant crops on all their land

Accepted Answer

A)   hurt farmers by lowering their total revenue and hurt consumers by causing shortages of some food items.
B)   help farmers by cutting costs,which helps consumers by lowering food prices.
C)   help farmers by increasing total revenue in the market but hurt consumers by raising prices.
D)   help farmers directly since they receive government payments but have no real effects on consumers.E) A) and D)
F) B) and C)

Question 19

There are fewer farmers in the United States today than 200 years ago because of

Accepted Answer

A)   increases in farm technology.
B)   increased government regulations in farming.
C)   an elastic demand for food.
D)   environmental programs designed to reduce soil erosion.E) B) and D)
F) B) and C)

Question 20

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Accepted Answer

A)   The interdiction has the effect of shifting the demand curve for illegal drugs to the right.
B)   The price elasticity of demand for illegal drugs is 1.3.
C)   The price elasticity of supply for illegal drugs is 0.8.
D)   As a result of the interdiction,the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent.E) B) and D)
F) None of the above

Exam 5: Elasticity and Its Application

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

Correct AnswerverifiedShow Answer

Suppose that 50 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 4 percent,the number of candy bars demanded falls to 46.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Correct AnswerverifiedShow Answer

Figure 5-12 The following figure shows the supply curve for a particular good. -Refer to Figure 5-12.Using the midpoint method,what is the price elasticity of supply between $100 and $220?

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Necessities tend to have inelastic demands,whereas luxuries have elastic demands.

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Figure 5-12 The following figure shows the supply curve for a particular good. -Refer to Figure 5-12.Over which range is the supply curve in this figure the most elastic?

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Farm programs that pay farmers not to plant crops on all their land

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Demand is said to be inelastic if

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In which of the following situations will total revenue increase?

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Figure 5-11 -Refer to Figure 5-11.An increase in price from $30 to $35 would

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Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Correct AnswerverifiedShow Answer

Necessities such as food and clothing tend to have

Correct AnswerverifiedShow Answer

Demand is said to be unit elastic if

Correct AnswerverifiedShow Answer

When studying how some event or policy affects a market,elasticity provides information on the

Correct AnswerverifiedShow Answer

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Correct AnswerverifiedShow Answer

There are fewer farmers in the United States today than 200 years ago because of

Correct AnswerverifiedShow Answer

Last year,Sheila bought 6 pairs of shoes when her income was $40,000.This year,her income is $50,000 and she purchased 10 pairs of shoes.Holding other factors constant,it follows that Sheila

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The price elasticity of demand changes as we move along a

Correct AnswerverifiedShow Answer

A key determinant of the price elasticity of supply is

Correct AnswerverifiedShow Answer

Goods with many close substitutes tend to have

Correct AnswerverifiedShow Answer

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