Question 1

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

Question 2

Scenario 5-4
Suppose the government is concerned about firms in the United States importing illegal caviar.As a result,the government increases border patrols to catch illegal shipments.U.S.Customs agents perform DNA testing on the caviar to determine if it comes from endangered species of fish.If so,the government destroys the caviar.
-Refer to Scenario 5-4.What would we expect to observe in the caviar market?

Accepted Answer

A)   Equilibrium prices and quantities will increase.
B)   Equilibrium prices will increase by more if the demand for caviar is elastic than if demand is inelastic.
C)   Total revenues to caviar firms will increase if the demand for caviar is inelastic.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 3

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

Accepted Answer

A)   midpoint of the demand curve.
B)   lower end of the demand curve.
C)   upper end of the demand curve.
D)   It is impossible to tell without knowing prices and quantities demanded.E) B) and C)
F) A) and D)

Question 4

Figure 5-8 
-Refer to Figure 5-8.For prices below $5,demand is price

Accepted Answer

A)   elastic,and raising price will increase total revenue.
B)   inelastic,and raising price will increase total revenue.
C)   elastic,and lowering price will increase total revenue.
D)   inelastic,and lowering price will increase total revenue.E) A) and D)
F) All of the above

Question 5

When consumers face rising gasoline prices,they typically

Accepted Answer

A)   reduce their quantity demanded more in the long run than in the short run.
B)   reduce their quantity demanded more in the short run than in the long run.
C)   do not reduce their quantity demanded in the short run or the long run.
D)   increase their quantity demanded in the short run but reduce their quantity demanded in the long run.E) All of the above
F) C) and D)

Question 6

Suppose a producer is able to separate customers into two groups,one having an inelastic demand and the other having an elastic demand.If the producer's objective is to increase total revenue,she should

Accepted Answer

A)   increase the price charged to customers with the elastic demand and decrease the price charged to customers with the inelastic demand.
B)   decrease the price charged to customers with the elastic demand and increase the price charged to customers with the inelastic demand.
C)   decrease the price to both groups of customers.
D)   increase the price for both groups of customers.E) C) and D)
F) A) and D)

Question 7

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 B)
F) C) and D)

Question 8

An increase in price causes an increase in total revenue when demand is

Accepted Answer

A)   elastic.
B)   inelastic.
C)   unit elastic.
D)   All of the above are possible.E) A) and B)
F) All of the above

Question 9

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) None of the above

Question 10

Figure 5-5 
-Refer to Figure 5-5.Using the midpoint method,between prices of $30 and $36,price elasticity of demand is about

Accepted Answer

A)   0.5.
B)   0.82.
C)   1.22.
D)   2.E) A) and D)
F) A) and C)

Question 11

Suppose that 50 ice cream cones are demanded at a particular price.If the price of ice cream cones rises from that price by 4 percent,the number of ice cream cones demanded falls to 46.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Accepted Answer

A)   demand for ice cream cones in this price range is elastic.
B)   demand for ice cream cones in this price range is inelastic.
C)   demand for ice cream cones in this price range is unit elastic.
D)   price elasticity of demand for ice cream cones in this price range is 0.E) C) and D)
F) B) and C)

Question 12

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 $5,000,what is the price elasticity of demand between $8 and $12?

Accepted Answer

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

Question 13

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 14

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 B)

Question 15

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) A) and C)

Question 16

Table 5-2
 
-Refer to Table 5-2.Using the midpoint method,if the price falls from $80 to $60,the absolute value of the price elasticity of demand is

Accepted Answer

A)  2.33.
B)  20.
C)  10.
D)   0.43.E) All of the above
F) A) and C)

Question 17

If the price elasticity of supply for wheat is less than 1,then the supply of wheat is

Accepted Answer

A)   inelastic.
B)   elastic.
C)   unit elastic.
D)   quite sensitive to changes in income.E) B) and C)
F) A) and B)

Question 18

Table 5-4
 
-Refer to Table 5-4.As price rises from $10 to $12,the price elasticity of demand using the midpoint method is approximately

Accepted Answer

A)   0.08.
B)   0.18.
C)   0.42.
D)   0.58.E) A) and D)
F) A) and C)

Question 19

Economists compute the price elasticity of demand as the

Accepted Answer

A)   percentage change in price divided by the percentage change in quantity demanded.
B)   change in quantity demanded divided by the change in the price.
C)   percentage change in quantity demanded divided by the percentage change in price.
D)   percentage change in quantity demanded divided by the percentage change in income.E) All of the above
F) A) and B)

Question 20

Figure 5-4 
-Refer to Figure 5-4.If the price decreases in the region of the demand curve between points A and B,we can expect total revenue to

Accepted Answer

A)   increase.
B)   stay the same.
C)   decrease.
D)   first decrease,then increase until total revenue is maximized.E) A) and C)
F) B) and D)

Exam 5: Elasticity and Its Application

Suppose that 50 ice cream cones are demanded at a particular price.If the price of ice cream cones rises from that price by 4 percent,the number of ice cream cones demanded falls to 46.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Correct Answer
verified

Suppose a producer is able to separate customers into two groups,one having an inelastic demand and the other having an elastic demand.If the producer's objective is to increase total revenue,she should

Correct Answer
verified

Table 5-4 -Refer to Table 5-4.As price rises from $10 to $12,the price elasticity of demand using the midpoint method is approximately

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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 $5,000,what is the price elasticity of demand between $8 and $12?

Correct Answer
verified

Economists compute the price elasticity of demand as the

Correct Answer
verified

A key determinant of the price elasticity of supply is the

Correct Answer
verified

An increase in price causes an increase in total revenue when demand is

Correct Answer
verified

Figure 5-8 -Refer to Figure 5-8.For prices below $5,demand is price

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

Correct Answer
verified

The price elasticity of demand measures how much

Correct Answer
verified

Table 5-2 -Refer to Table 5-2.Using the midpoint method,if the price falls from $80 to $60,the absolute value of the price elasticity of demand is

Correct Answer
verified

Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,between prices of $30 and $36,price elasticity of demand is about

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4.If the price decreases in the region of the demand curve between points A and B,we can expect total revenue to

Correct Answer
verified

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

Correct Answer
verified

When consumers face rising gasoline prices,they typically

Correct Answer
verified

Which of the following is not possible?

Correct Answer
verified

If the price elasticity of supply for wheat is less than 1,then the supply of wheat is

Correct Answer
verified

Exam 5: Elasticity and Its Application

Suppose that 50 ice cream cones are demanded at a particular price.If the price of ice cream cones rises from that price by 4 percent,the number of ice cream cones demanded falls to 46.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Correct AnswerverifiedShow Answer

Suppose a producer is able to separate customers into two groups,one having an inelastic demand and the other having an elastic demand.If the producer's objective is to increase total revenue,she should

Correct AnswerverifiedShow Answer

Table 5-4 -Refer to Table 5-4.As price rises from $10 to $12,the price elasticity of demand using the midpoint method is approximately

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 $5,000,what is the price elasticity of demand between $8 and $12?

Correct AnswerverifiedShow Answer

Economists compute the price elasticity of demand as the

Correct AnswerverifiedShow Answer

A key determinant of the price elasticity of supply is the

Correct AnswerverifiedShow Answer

An increase in price causes an increase in total revenue when demand is

Correct AnswerverifiedShow Answer

Figure 5-8 -Refer to Figure 5-8.For prices below $5,demand is price

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

Correct AnswerverifiedShow Answer

The price elasticity of demand measures how much

Correct AnswerverifiedShow Answer

Table 5-2 -Refer to Table 5-2.Using the midpoint method,if the price falls from $80 to $60,the absolute value of the price elasticity of demand is

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,between prices of $30 and $36,price elasticity of demand is about

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4.If the price decreases in the region of the demand curve between points A and B,we can expect total revenue to

Correct AnswerverifiedShow Answer

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

Correct AnswerverifiedShow Answer

When consumers face rising gasoline prices,they typically

Correct AnswerverifiedShow Answer

Which of the following is not possible?

Correct AnswerverifiedShow Answer

If the price elasticity of supply for wheat is less than 1,then the supply of wheat is

Correct AnswerverifiedShow Answer

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