Question 1

If the price elasticity of supply for a window manufacturer is 1.5,

Accepted Answer

A)  a 10% increase in the price of windows results in a 15% increase in the quantity of windows supplied.
B)  supply is considered to be inelastic.
C)  the manufacturer is likely operating very near capacity.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 2

If the demand for textbooks is inelastic, then an increase in the price of textbooks will

Accepted Answer

A)  increase total revenue of textbook sellers.
B)  decrease total revenue of textbook sellers.
C)  not change total revenue of textbook sellers.
D)  There is not enough information to answer this question.E) C) and D)
F) A) and C)

Question 3

If the cross-price elasticity of demand for two goods is negative, then the two goods are substitutes.

Accepted Answer

A) True 
 B)False

Question 4

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

Question 5

When quantity moves proportionately the same amount as price, demand is

Accepted Answer

A)  elastic, and the price elasticity of demand is 1.
B)  perfectly elastic, and the price elasticity of demand is infinitely large.
C)  perfectly inelastic, and the price elasticity of demand is 0.
D)  unit elastic, and the price elasticity of demand is 1.E) A) and D)
F) A) and C)

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Good news for farming can be bad news for farmers because the

Accepted Answer

A)  supply curve for an individual farmer is usually perfectly elastic.
B)  supply curve for an individual farmer is usually perfectly inelastic.
C)  demand for basic foodstuffs is usually inelastic, meaning that factors that shift supply to the right decrease total revenues to sellers.
D)  demand for basic foodstuffs is usually elastic, meaning that factors that shift supply to the right increase total revenues to sellers.E) B) and C)
F) A) and D)

Question 8

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A)  There are many close substitutes for this good.
B)  The good is a luxury.
C)  The market for the good is broadly defined.
D)  The relevant time horizon is long.E) None of the above
F) A) and D)

Question 9

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Accepted Answer

A)  0.2 percent decrease in the quantity demanded.
B)  5 percent decrease in the quantity demanded.
C)  20 percent decrease in the quantity demanded.
D)  40 percent decrease in the quantity demanded.E) All of the above
F) B) and D)

Question 10

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 11

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A)  The relevant time horizon is short.
B)  The good is a necessity.
C)  The market for the good is broadly defined.
D)  There are many close substitutes for this good.E) B) and D)
F) C) and D)

Question 12

When the price of a bracelet was $28 each, the jewelry shop sold 128 per month. When it raised the price to $32 each, it sold 112 per month. Using the midpoint method, the price elasticity of demand for bracelets is

Accepted Answer

A)  1.14.
B)  1.
C)  0.25.
D)  0.13.E) A) and D)
F) A) and C)

Question 13

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?

Accepted Answer

A)  Supply curves are steeper over long periods of time than over short periods of time.
B)  Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time.
C)  The number of firms in a market tends to be more variable over long periods of time than over short periods of time.
D)  Firms prefer to change their prices in the short run rather than in the long run.E) A) and B)
F) All of the above

Question 14

When the Shaffers had a monthly income of $4,000, they usually ate out 8 times a month. Now that the couple makes $4,500 a month, they eat out 10 times a month. Compute the couple's income elasticity of demand using the midpoint method. Explain your answer. Is a restaurant meal a normal or inferior good to the couple?

Accepted Answer

The income elasticity of deman...

Question 15

Which of the following is not possible?

Accepted Answer

A)  Demand is elastic, and a decrease in price causes an increase in revenue.
B)  Demand is unit elastic, and a decrease in price causes an increase in revenue.
C)  Demand is inelastic, and an increase in price causes an increase in revenue.
D)  Demand is perfectly inelastic, and an increase in price causes an increase in revenue.E) A) and C)
F) A) and B)

Question 16

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%, then ice cream is an inferior good.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following should be held constant when calculating an income elasticity of demand?

Accepted Answer

A)  the quantity of the good demanded
B)  the price of the good
C)  income
D)  All of the above should be held constant.E) None of the above
F) A) and C)

Question 18

The price elasticity of demand measures how much

Accepted Answer

A)  quantity demanded responds to a change in price.
B)  quantity demanded responds to a change in income.
C)  price responds to a change in demand.
D)  demand responds to a change in supply.E) A) and B)
F) B) and D)

Question 19

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

Accepted Answer

A)  Scenario A describes both the short run and the long run.
B)  Scenario D describes both the short run and the long run.
C)  Scenario D describes the short run, whereas scenario A describes the long run.
D)  Scenario C describes the short run, whereas scenario B describes the long run.E) B) and C)
F) All of the above

Question 20

If the cross-price elasticity of demand between two goods is negative, what is the relationship between the two goods?

Accepted Answer

The goods ...

Exam 5: Elasticity and Its Application

Which of the following should be held constant when calculating an income elasticity of demand?

Correct Answer
verified

Good news for farming can be bad news for farmers because the

Correct Answer
verified

When the price of a bracelet was $28 each, the jewelry shop sold 128 per month. When it raised the price to $32 each, it sold 112 per month. Using the midpoint method, the price elasticity of demand for bracelets is

Correct Answer
verified

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Correct Answer
verified

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct Answer
verified

If the demand for textbooks is inelastic, then an increase in the price of textbooks will

Correct Answer
verified

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

If the cross-price elasticity of demand between two goods is negative, what is the relationship between the two goods?

Correct Answer
verified
The goods ...
View Answer

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%, then ice cream is an inferior good.

Correct Answer
verified

If the price elasticity of supply for a window manufacturer is 1.5,

Correct Answer
verified

Which of the following is not possible?

Correct Answer
verified

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?

Correct Answer
verified

When quantity moves proportionately the same amount as price, demand is

Correct Answer
verified

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

Correct Answer
verified

If the cross-price elasticity of demand for two goods is negative, then the two goods are substitutes.

Correct Answer
verified

Correct Answer
verified
The income elasticity of deman...
View Answer

The price elasticity of demand measures how much

Correct Answer
verified

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct Answer
verified

Exam 5: Elasticity and Its Application

Which of the following should be held constant when calculating an income elasticity of demand?

Correct AnswerverifiedShow Answer

Good news for farming can be bad news for farmers because the

Correct AnswerverifiedShow Answer

When the price of a bracelet was $28 each, the jewelry shop sold 128 per month. When it raised the price to $32 each, it sold 112 per month. Using the midpoint method, the price elasticity of demand for bracelets is

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

Correct AnswerverifiedShow Answer

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

If the demand for textbooks is inelastic, then an increase in the price of textbooks will

Correct AnswerverifiedShow Answer

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand between two goods is negative, what is the relationship between the two goods?

Correct AnswerverifiedThe goods ...View AnswerShow Answer

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%, then ice cream is an inferior good.

Correct AnswerverifiedShow Answer

If the price elasticity of supply for a window manufacturer is 1.5,

Correct AnswerverifiedShow Answer

Which of the following is not possible?

Correct AnswerverifiedShow Answer

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?

Correct AnswerverifiedShow Answer

When quantity moves proportionately the same amount as price, demand is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand for two goods is negative, then the two goods are substitutes.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe income elasticity of deman...View AnswerShow Answer

The price elasticity of demand measures how much

Correct AnswerverifiedShow Answer

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

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The goods ...
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The income elasticity of deman...
View Answer

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