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Exam 5: Elasticity and Its Application

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Question 101

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If the price elasticity of demand is equal to 1, then demand is unit elastic.

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B) False

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Question 102

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Elasticity measures how responsive quantity is to changes in price.

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B) False

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Question 103

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

Table 5-2 ​ $\begin{array} { | c | c | } \hline \begin{array} { c } \text { Price } \\\text { (Dollars per unit) }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { (Units) }\end{array} \\\hline 100 & 0 \\\hline 80 & 50 \\\hline 60 & 100 \\\hline 40 & 150 \\\hline 20 & 200 \\\hline 0 & 250 \\\hline\end{array}$ -Refer to Table 5-2. Using the midpoint method, if the price falls from $80 to $60, the price elasticity of demand is

A manufacturer produces 410 units when the market price is $8 per unit and produces 470 units when the market price is $10 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

If we observe that when the price of chocolate increases by 10%, quantity demanded falls by 5%, then the demand for chocolate is price inelastic.

Suppose that good X is a luxury and that good Y is a necessity. Which good would you expect to have more price elastic demand?

Hailey says that she would smoke one pack of cigarettes each day regardless of the price. If she is telling the truth, Hailey's

If the price elasticity of supply is 0.8, and price increased by 21 percent, quantity supplied would

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

Table 5-5 ​ ​ $\begin{array} { | c | c | } \hline \text { Price } & \text { Quantity Demanded } \\\hline \$ 0 & 50 \\\hline \$ 2 & 40 \\\hline \$ 4 & 30 \\\hline \$ 6 & 20 \\\hline 48 & 10 \\\hline\end{array}$ -Refer to Table 5-5. Between which two quantities listed is demand most elastic?

For which of the following goods would demand be most price elastic: a car, a sedan, a Honda sedan, a Honda Accord, a black Honda Accord?

Which of the following statements is not correct?

Helen's Honey Hut supplies 20 jars of honey per week when the price of honey is $6 per jar and supplies 30 jars per week when the price of is $8 per jar, so the price elasticity of supply over this price range is 1.4.

Figure 5-7 -Refer to Figure 5-7. Using the midpoint method, what is the price elasticity of supply between point B and point C?

If a 23 percent change in price results in a 21 percent change in quantity supplied, then the price elasticity of supply is about

If a firm that produces honey is facing elastic demand, then the firm would decrease price to increase revenue.

If a supply curve is perfectly vertical, what is the value of the price elasticity of supply?

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?