Question 1

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

Question 2

Suppose the price of potato chips decreases from $1.45 to $1.25 and,as a result,the quantity of potato chips demanded increases from 2,000 to 2,200.Using the midpoint method,the price elasticity of demand for potato chips in the given price range is

Accepted Answer

A)   2.00.
B)   1.55.
C)   1.00.
D)   0.64.E) A) and B)
F) None of the above

Question 3

Figure 5-4 
-Refer to Figure 5-4.Assume the section of the demand curve from A to B corresponds to prices between $6 and $12.Then,when the price increases from $8 to $10,

Accepted Answer

A)   the percent decrease in the quantity demanded exceeds the percent increase in the price.
B)   the percent increase in the price exceeds the percent decrease in the quantity demanded.
C)   sellers' total revenue increases as a result.
D)   it is possible that the quantity demanded fell from 550 to 500 as a result.E) A) and B)
F) C) and D)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

If the price elasticity of demand for a good is 0.25,then a 20 percent decrease in price results in a

Accepted Answer

A)   0.0125 percent increase in the quantity demanded.
B)   4 percent increase in the quantity demanded.
C)   5 percent increase in the quantity demanded.
D)   80 percent increase in the quantity demanded.E) B) and C)
F) A) and C)

Question 6

A linear,upward-sloping supply curve has

Accepted Answer

A)   a constant slope and a changing price elasticity of supply.
B)   a changing slope and a constant price elasticity of supply.
C)   both a constant slope and a constant price elasticity of supply.
D)   both a changing slope and a changing price elasticity of supply.E) C) and D)
F) B) and D)

Question 7

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

A) True 
 B)False

Question 8

Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

Accepted Answer

A) True 
 B)False

Question 9

In the early 1970s,OPEC's goal was to

Accepted Answer

A)   decrease the world-wide price of oil so that the quantity demanded increased,thus raising total revenues for OPEC members.
B)   increase the world-wide price of oil by reducing the quantity of oil supplied.
C)   increase the world-wide price of oil by increasing the quantity of oil supplied,thus raising total revenues for OPEC members.
D)   decrease the world-wide price of oil so that quantity demanded increased.E) All of the above
F) A) and B)

Question 10

When the price of a bracelet was $25 each,the jewelry shop sold 20 per month.When it raised the price to $35 each,it sold 14 per month.Using the midpoint method,the price elasticity of demand for bracelets is about

Accepted Answer

A)   1.66.
B)   1.06.
C)   0.94.
D)   0.60.E) A) and B)
F) A) and C)

Question 11

When the price of good A is $50,the quantity demanded of good A is 500 units.When the price of good A rises to $70,the quantity demanded of good A falls to 400 units.Using the midpoint method,the price elasticity of demand for good A is

Accepted Answer

A)   1.50,and an increase in price will result in an increase in total revenue for good A.
B)   1.50,and an increase in price will result in a decrease in total revenue for good A.
C)   0.67,and an increase in price will result in an increase in total revenue for good A.
D)   0.67,and an increase in price will result in a decrease in total revenue for good A.E) C) and D)
F) A) and B)

Question 12

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Accepted Answer

A) True 
 B)False

Question 13

Figure 5-6 
-Refer to Figure 5-6.Which of the following price changes would result in no change in sellers' total revenue?

Accepted Answer

A)   The price increases from $6 to $9.
B)   The price increases from $9 to $15.
C)   The price decreases from $12 to $9.
D)   The price decreases from $9 to $5.E) All of the above
F) C) and D)

Question 14

When quantity demanded responds strongly to changes in price,demand is said to be

Accepted Answer

A)   fluid.
B)   elastic.
C)   dynamic.
D)   highly variable.E) B) and C)
F) A) and D)

Question 15

Table 5-4
 
-Refer to Table 5-4.Demand is unit elastic when quantity demanded changes from

Accepted Answer

A)   10 to 9.
B)   9 to 8.
C)   8 to 7.
D)   There is not enough information given to determine the correct answer.E) A) and B)
F) A) and C)

Question 16

Figure 5-3 
-Refer to Figure 5-3.Using the midpoint method,what is the price elasticity of supply between $25 and $35?

Accepted Answer

The price ...

Question 17

Which of the following was not a reason OPEC failed to keep the price of oil high?

Accepted Answer

A)   Over the long run,producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity.
B)   Consumers responded to higher prices with greater conservation.
C)   Consumers replaced old inefficient cars with newer efficient ones.
D)   The agreement OPEC members signed allowed each country to produce as much oil as each wanted.E) A) and B)
F) B) and C)

Question 18

Suppose that 50 hot dogs are demanded at a particular price.If the price of hot dogs rises from that price by 5 percent,the number of hot dogs demanded falls to 48.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Accepted Answer

A)   demand for hot dogs in this price range is unit elastic.
B)   price increase will decrease the total revenue of hot dog sellers.
C)   price elasticity of demand for hot dogs in this price range is about 1.22.
D)   price elasticity of demand for hot dogs in this price range is about 0.82.E) All of the above
F) A) and B)

Question 19

Table 5-5
The following table shows a portion of the demand schedule for a particular good at various levels of income.
 
-Refer to Table 5-5.Using the midpoint method,when income equals $7,500,what is the price elasticity of demand between $16 and $20?

Accepted Answer

A)   0.56
B)   0.75
C)   1.33
D)   1.80E) A) and B)
F) B) and D)

Question 20

Income elasticity of demand measures how

Accepted Answer

A)   the quantity demanded changes as consumer income changes.
B)   consumer purchasing power is affected by a change in the price of a good.
C)   the price of a good is affected when there is a change in consumer income.
D)   many units of a good a consumer can buy given a certain income level.E) All of the above
F) B) and C)

Exam 5: Elasticity and Its Application

Figure 5-4 -Refer to Figure 5-4.Assume the section of the demand curve from A to B corresponds to prices between $6 and $12.Then,when the price increases from $8 to $10,

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If the price elasticity of demand for a good is 0.25,then a 20 percent decrease in price results in a

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When the price of good A is $50,the quantity demanded of good A is 500 units.When the price of good A rises to $70,the quantity demanded of good A falls to 400 units.Using the midpoint method,the price elasticity of demand for good A is

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Figure 5-6 -Refer to Figure 5-6.Which of the following price changes would result in no change in sellers' total revenue?

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Suppose that 50 hot dogs are demanded at a particular price.If the price of hot dogs rises from that price by 5 percent,the number of hot dogs demanded falls to 48.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

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A linear,upward-sloping supply curve has

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Suppose the price of potato chips decreases from $1.45 to $1.25 and,as a result,the quantity of potato chips demanded increases from 2,000 to 2,200.Using the midpoint method,the price elasticity of demand for potato chips in the given price range is

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Figure 5-3 -Refer to Figure 5-3.Using the midpoint method,what is the price elasticity of supply between $25 and $35?

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In the early 1970s,OPEC's goal was to

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Table 5-4 -Refer to Table 5-4.Demand is unit elastic when quantity demanded changes from

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

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Which of the following was not a reason OPEC failed to keep the price of oil high?

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A government program that reduces land under cultivation hurts farmers but helps consumers.

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Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

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Table 5-5 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-5.Using the midpoint method,when income equals $7,500,what is the price elasticity of demand between $16 and $20?

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Income elasticity of demand measures how

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When the price of a bracelet was $25 each,the jewelry shop sold 20 per month.When it raised the price to $35 each,it sold 14 per month.Using the midpoint method,the price elasticity of demand for bracelets is about

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Goods with many close substitutes tend to have

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Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

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When quantity demanded responds strongly to changes in price,demand is said to be

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The price ...
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