Question 1

Heath's income elasticity of demand for concerts is 2. All else equal, this means that if his income increases by 10 percent, he will purchase tickets for

Accepted Answer

A)  2 percent more concerts.
B)  5 percent more concerts.
C)  10 percent more concerts.
D)  20 percent more concerts.E) A) and D)
F) B) and D)

Question 2

A decrease in supply will cause the largest increase in price when

Accepted Answer

A)  both supply and demand are inelastic.
B)  both supply and demand are elastic.
C)  demand is elastic and supply is inelastic.
D)  demand is inelastic and supply is elastic.E) B) and C)
F) A) and C)

Question 3

Which of the following statements about the price elasticity of demand is correct?

Accepted Answer

A)  The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases.
B)  Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes.
C)  Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y.
D)  All of the above are correct.E) None of the above
F) A) and D)

Question 4

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

Question 5

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

Question 6

How did the farm population in the United States change between 1950 and today?

Accepted Answer

A)  It dropped from 10 million to fewer than 3 million people.
B)  It dropped from 20 million to fewer than 5 million people.
C)  It dropped from 30 million to just over 6 million people.
D)  It increased from 10 million to almost 13 million people.E) A) and C)
F) B) and D)

Question 7

Drug-interdiction policies that reduce the supply of illegal drugs

Accepted Answer

A)  are likely to be more effective in the short run than in the long run.
B)  are proven to reduce illegal drug use faster than drug-education programs designed to reduce demand.
C)  may increase drug-related crimes.
D)  All of the above are correct.E) C) and D)
F) B) and D)

Question 8

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A)  0.45
B)  0.90
C)  1.11
D)  2.20E) C) and D)
F) B) and C)

Question 9

Total revenue

Accepted Answer

A)  always increases as price increases.
B)  increases as price increases, as long as demand is elastic.
C)  decreases as price increases, as long as demand is inelastic.
D)  remains unchanged as price increases when demand is unit elastic.E) None of the above
F) B) and D)

Question 10

Table 5-11 
-Refer to Table 5-11. Which scenario describes the market for oil in the short run?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) None of the above
F) C) and D)

Question 11

Which of the following statements about agriculture in the U.S. is correct?

Accepted Answer

A)  Technological improvements typically increase both supply and revenue for individual farmers.
B)  Technological improvements that increased supply, coupled with inelastic demand for foodstuffs, explain why the number of farmers has decreased dramatically over the last century.
C)  Because technological improvements increase the supply of a product for which demand is inelastic, an individual farmer would be better off not adopting the new technology.
D)  All of the above are correct.E) All of the above
F) A) and D)

Question 12

If the quantity supplied is exactly the same regardless of the price, supply is

Accepted Answer

perfectly ...

Question 13

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Question 14

A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

Suppose demand is given by the equation:  Using the midpoint method, what is the price elasticity of demand between $2 and $4?

Accepted Answer

The price ...

Question 17

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

Accepted Answer

A)  chocolate
B)  Godiva chocolate
C)  Hershey's chocolate
D)  All three would have the same elasticity of demand because they are all related.E) B) and C)
F) All of the above

Question 18

If the cross-price elasticity of demand for two goods is 1.25, then

Accepted Answer

A)  the two goods are luxuries.
B)  the two goods are substitutes.
C)  one of the goods is normal and the other good is inferior.
D)  the demand for one of the goods conforms to the law of demand, but the demand for the other good violates the law of demand.E) A) and C)
F) B) and D)

Question 19

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) None of the above
F) All of the above

Question 20

Figure 5-10 1 and P2. B) a decrease in price from P2 to P1 will cause an increase in total revenue. C) the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded. D) All of the above are correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 5-10. If rectangle D is larger than rectangle A, then

Accepted Answer

A)  demand is elastic between prices P1 and P2.
B)  a decrease in price from P2 to P1 will cause an increase in total revenue.
C)  the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded.
D)  All of the above are correct.E) B) and D)
F) B) and C)

Exam 5: Elasticity and Its Application

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 the quantity supplied is exactly the same regardless of the price, supply is

Correct Answerverifiedperfectly ...View AnswerShow Answer

Figure 5-10 -Refer to Figure 5-10. If rectangle D is larger than rectangle A, then

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Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $2 and $4?

Correct AnswerverifiedThe price ...View AnswerShow Answer

If the cross-price elasticity of demand for two goods is 1.25, then

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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

Table 5-11 -Refer to Table 5-11. Which scenario describes the market for oil in the short run?

Correct AnswerverifiedShow Answer

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

Correct AnswerverifiedShow Answer

Which of the following statements about the price elasticity of demand is correct?

Correct AnswerverifiedShow Answer

Which of the following statements about agriculture in the U.S. is correct?

Correct AnswerverifiedShow Answer

Heath's income elasticity of demand for concerts is 2. All else equal, this means that if his income increases by 10 percent, he will purchase tickets for

Correct AnswerverifiedShow Answer

A linear, upward-sloping supply curve has

Correct AnswerverifiedShow Answer

How did the farm population in the United States change between 1950 and today?

Correct AnswerverifiedShow Answer

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

A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

Correct AnswerverifiedShow Answer

A decrease in supply will cause the largest increase in price when

Correct AnswerverifiedShow Answer

Drug-interdiction policies that reduce the supply of illegal drugs

Correct AnswerverifiedShow Answer

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Correct AnswerverifiedShow Answer

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

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Total revenue

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