Question 1

The price elasticity of demand for bread

Accepted Answer

A)   is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread.
B)   depends, in part, on the availability of close substitutes for bread.
C)   reflects the many economic, social, and psychological forces that influence consumers' tastes for bread.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 2

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni

Accepted Answer

A)   and soy-burgers are both normal goods with income elasticities equal to 1.
B)   is an inferior good and soy-burgers are normal goods; both have income elasticities of 1.
C)   is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.
D)   and soy-burgers are both inferior goods with income elasticities equal to -1.E) A) and C)
F) B) and C)

Question 3

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

Question 4

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.
 
-Refer to Table 5-7. Using the midpoint method, at a price of $8, what is the income elasticity of demand when income rises from $7,500 to $10,000?

Accepted Answer

A)   0.00
B)   0.41
C)   1.00
D)   2.45E) A) and D)
F) A) and C)

Question 5

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

Accepted Answer

A)   raise both price and total revenues.
B)   lower both price and total revenues.
C)   raise price and lower total revenues.
D)   lower price and raise total revenues.E) A) and B)
F) C) and D)

Question 6

Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase revenue?

Accepted Answer

A)   0
B)   0.4
C)   1
D)   4E) C) and D)
F) None of the above

Question 7

Figure 5-11  P1. In which of the following cases could we possibly find that (i)  demand is elastic and (ii)  a decrease in price from P1 to P2 causes an decrease in total revenue? A)  0 1 2 1 2 $20. C)  P1 > $20. D)  None of the above is correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 5-11. Suppose this demand curve is a straight, downward-sloping line all the way from the horizontal intercept to the vertical intercept. We choose two prices, P1 and P2, and the corresponding quantities demanded, Q1 and Q2, for the purpose of calculating the price elasticity of demand. Also suppose P2 > P1. In which of the following cases could we possibly find that (i)  demand is elastic and (ii)  a decrease in price from P1 to P2 causes an decrease in total revenue?

Accepted Answer

A)   0 1 2 
B)   $10 1 2 $20.
C)   P1 > $20.
D)   None of the above is correct.E) B) and C)
F) A) and D)

Question 8

When demand is perfectly inelastic, the demand curve will be

Accepted Answer

A)   negatively sloped, because buyers decrease their purchases when the price rises.
B)   vertical, because buyers purchase the same amount as before whenever the price rises or falls.
C)   positively sloped, because buyers increase their purchases when price rises.
D)   positively sloped, because buyers increase their total expenditures when price rises.E) A) and B)
F) C) and D)

Question 9

Figure 5-10 
-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) A) and C)
F) A) and B)

Question 10

If the price elasticity of supply for a good is equal to infinity, then the

Accepted Answer

A)   supply curve is vertical.
B)   supply curve is horizontal.
C)   supply curve also has a slope equal to infinity.
D)   quantity supplied is constant regardless of the price.E) All of the above
F) C) and D)

Question 11

Scenario 5-1
Suppose that when the average college student's income is $10,000 per year, the annual quantity demanded of Patty's Pizza is 50 and the annual quantity demanded of Sue's Subs is 80. Suppose that when the price of Patty's Pizza increases from $8 to $10 per pie, the quantity demanded of Sue's Subs increases from 80 to 100. Suppose also that when the average student's income increases to $12,000 per year, the annual quantity demanded of Patty's Pizza increases from 50 to 60.
-Refer to Scenario 5-1. What can you deduce about the type of good Patty's Pizza is and about the relationship between Patty's Pizza and Sue's Subs?

Accepted Answer

A)   Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are substitutes.
B)   Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are complements.
C)   Patty's Pizza is an inferior good and Patty's Pizza and Sue's Subs are substitutes.
D)   Patty's Pizza is an inferior good and Patty's Pizza and Sue's Subs are complements.E) C) and D)
F) A) and B)

Question 12

A key determinant of the price elasticity of supply is the

Accepted Answer

A)   number of close substitutes for the good in question.
B)   extent to which buyers alter their quantities demanded in response to changes in prices.
C)   length of the time period.
D)   extent to which buyers alter their quantities demanded in response to changes in their incomes.E) A) and D)
F) A) and B)

Question 13

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Accepted Answer

A)   cross-price elasticity of demand is negative.
B)   price elasticity of demand is elastic.
C)   income elasticity of demand is negative.
D)   income elasticity of demand is positive.E) B) and D)
F) A) and B)

Question 14

Suppose a market has the demand function Qd=20-0.5P. Between which of the following price ranges is demand most inelastic?

Accepted Answer

A)   $0 to $10
B)   $10 to $20
C)   $20 to $30
D)   $30 to $40E) None of the above
F) B) and C)

Question 15

Which of the following statements is not valid when the market supply curve is vertical?

Accepted Answer

A)   Market quantity supplied does not change when the price changes.
B)   Supply is perfectly inelastic.
C)   An increase in market demand will increase the equilibrium quantity.
D)   An increase in market demand will increase the equilibrium price.E) A) and C)
F) A) and B)

Question 16

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

Accepted Answer

A)   0.35.
B)   0.43.
C)   2.33.
D)   2.89.E) A) and D)
F) B) and C)

Question 17

The demand for Godiva mint chocolates is likely quite elastic because

Accepted Answer

A)   there are many close substitutes.
B)   this particular type of chocolate is viewed as a luxury by many chocolate lovers.
C)   the market is narrowly defined.
D)   All of the above are correct.E) A) and D)
F) None of the above

Question 18

Demand is said to be inelastic if the

Accepted Answer

A)   quantity demanded changes proportionately more than price.
B)   price changes proportionately more than income.
C)   quantity demanded changes proportionately less than price.
D)   quantity demanded changes proportionately the same as price.E) B) and C)
F) A) and C)

Question 19

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Accepted Answer

A)   The quantity of the good demanded decreases from 250 to 150.
B)   The quantity of the good demanded decreases from 200 to 100.
C)   The quantity of the good demanded decreases by 0.05 percent.
D)   The quantity of the good demanded decreases by 0.2 percent.E) B) and C)
F) A) and C)

Question 20

If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

Correct Answer
verified

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni

Correct Answer
verified

Suppose a market has the demand function Qd=20-0.5P. Between which of the following price ranges is demand most inelastic?

Correct Answer
verified

The price elasticity of demand for bread

Correct Answer
verified

Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase revenue?

Correct Answer
verified

When demand is perfectly inelastic, the demand curve will be

Correct Answer
verified

Correct Answer
verified

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

Correct Answer
verified

Correct Answer
verified

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Correct Answer
verified

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Correct Answer
verified

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, at a price of $8, what is the income elasticity of demand when income rises from $7,500 to $10,000?

Correct Answer
verified

Demand is said to be inelastic if the

Correct Answer
verified

The demand for Godiva mint chocolates is likely quite elastic because

Correct Answer
verified

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

Correct Answer
verified

A key determinant of the price elasticity of supply is the

Correct Answer
verified

Which of the following statements is not valid when the market supply curve is vertical?

Correct Answer
verified

If the price elasticity of supply for a good is equal to infinity, then the

Correct Answer
verified

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

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

Exam 5: Elasticity and Its Application

If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

Correct AnswerverifiedShow Answer

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni

Correct AnswerverifiedShow Answer

Suppose a market has the demand function Qd=20-0.5P. Between which of the following price ranges is demand most inelastic?

Correct AnswerverifiedShow Answer

The price elasticity of demand for bread

Correct AnswerverifiedShow Answer

Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase revenue?

Correct AnswerverifiedShow Answer

When demand is perfectly inelastic, the demand curve will be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Correct AnswerverifiedShow Answer

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Correct AnswerverifiedShow Answer

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, at a price of $8, what is the income elasticity of demand when income rises from $7,500 to $10,000?

Correct AnswerverifiedShow Answer

Demand is said to be inelastic if the

Correct AnswerverifiedShow Answer

The demand for Godiva mint chocolates is likely quite elastic because

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A key determinant of the price elasticity of supply is the

Correct AnswerverifiedShow Answer

Which of the following statements is not valid when the market supply curve is vertical?

Correct AnswerverifiedShow Answer

If the price elasticity of supply for a good is equal to infinity, then the

Correct AnswerverifiedShow Answer

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

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

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