Question 1

If the quantity demanded of a certain good responds only slightly to a change in the price of the good,then

Accepted Answer

A)  the demand for the good is said to be elastic.
B)  the demand for the good is said to be inelastic.
C)  the law of demand does not apply to the good.
D)  the demand curve for the good shifts only slightly in response to a change in price.

Question 2

A perfectly elastic demand implies that

Accepted Answer

A)  buyers will not respond to any change in price.
B)  any rise in price above that represented by the demand curve will result in a quantity demanded of zero.
C)  quantity demanded and price change by the same percent as we move along the demand curve.
D)  price will rise by an infinite amount when there is a change in quantity demanded.

Question 3

Price elasticity of demand along a linear,downward-sloping demand curve increases as price falls.

Accepted Answer

A) True 
 B)False

Question 4

Figure 5-8. A demand curve is shown on the graph below. On the graph, Q represents quantity demanded and P represents price.
 
-Refer to Figure 5-8.At a price of $48 per unit,sellers' total revenue amounts to

Accepted Answer

A)  $150.
B)  $200.
C)  $288.
D)  $364.

Question 5

Which of the following would be true as the price elasticity of supply approaches infinity?

Accepted Answer

A)  Very small changes in price lead to very large changes in quantity supplied.
B)  Very large changes in price lead to very small changes in quantity supplied.
C)  Very small changes in price lead to no change in quantity supplied.
D)  Very large changes in price lead to no change in quantity supplied.

Question 6

For a good that is a luxury,demand

Accepted Answer

A)  tends to be inelastic.
B)  tends to be elastic.
C)  has unit elasticity.
D)  cannot be represented by a demand curve in the usual way.

Question 7

Figure 5-12
 
-Refer to Figure 5-12.Along which of these segments of the supply curve is supply most elastic?

Accepted Answer

A)  between A and B
B)  between C and D
C)  between D and F
D)  between E and F

Question 8

Supply tends to be more elastic in the short run and more inelastic in the long run.

Accepted Answer

A) True 
 B)False

Question 9

A key determinant of the price elasticity of supply is

Accepted Answer

A)  the ability of sellers to change the price of the good they produce.
B)  the ability of sellers to change the amount of the good they produce.
C)  how responsive buyers are to changes in sellers' prices.
D)  the slope of the demand curve.

Question 10

In the long run,the quantity supplied of most goods

Accepted Answer

A)  will increase in almost all cases, regardless of what happens to price.
B)  cannot respond at all to a change in price.
C)  can respond to a change in price, but the change is almost always inconsequential.
D)  can respond substantially to a change in price.

Question 11

If the price elasticity of demand for a good is 4.0,then a 10 percent increase in price results in a

Accepted Answer

A)  0.4 percent decrease in the quantity demanded.
B)  2.5 percent decrease in the quantity demanded.
C)  4 percent decrease in the quantity demanded.
D)  40 percent decrease in the quantity demanded.

Question 12

Demand is said to have unit elasticity if elasticity is

Accepted Answer

A)  less than 1.
B)  greater than 1.
C)  equal to 1.
D)  equal to 0.

Question 13

Necessities tend to have inelastic demands,whereas luxuries have elastic demands.

Accepted Answer

A) True 
 B)False

Question 14

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 0.78.Which of the following events is consistent with a 4.68 percent decrease in the quantity of the good demanded?

Accepted Answer

A)  a 3.65 increase in the price of the good
B)  a 16.67 percent increase in the price of the good
C)  an increase in the price of the good from $48.00 to $50.97
D)  an increase in the price of the good from $65.00 to $66.98

Question 15

The supply of a good will be more elastic,the

Accepted Answer

A)  more the good is considered a luxury.
B)  broader is the definition of the market for the good.
C)  larger the number of close substitutes for the good.
D)  longer the time period being considered.

Question 16

Figure 5-5
 
-Refer to Figure 5-5.An increase in price from $30 to $35 would

Accepted Answer

A)  increase total revenue by $250
B)  decrease total revenue by $250.
C)  increase total revenue by $500.
D)  decrease total revenue by $500.

Question 17

Demand is said to be elastic if

Accepted Answer

A)  the price of the good responds substantially to changes in demand.
B)  demand shifts substantially when income or the expected future price of the good changes.
C)  buyers do not respond much to changes in the price of the good.
D)  buyers respond substantially to changes in the price of the good.

Question 18

According to a Los Angeles Times article published in May 2005,recent estimates indicate that

Accepted Answer

A)  the short-run and long-run price elasticities of demand for gasoline are 0.1 and 0.5, respectively.
B)  the short-run and long-run price elasticities of demand for gasoline are 0.1 and 1.0, respectively.
C)  the short-run and long-run price elasticities of demand for gasoline are 0.2 and 1.5, respectively.
D)  the short-run and long-run price elasticities of demand for gasoline are 0.5 and 1.5, respectively.

Question 19

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.

Question 20

Figure 5-7
 
-Refer to Figure 5-7.Total revenue when the price is P₂ is represented by the area(s)

Accepted Answer

A)  B + D.
B)  A + B.
C)  C + D.
D)  D.

Exam 5: Elasticity and Its Applications

Which of the following would be true as the price elasticity of supply approaches infinity?

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Figure 5-12 -Refer to Figure 5-12.Along which of these segments of the supply curve is supply most elastic?

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If the quantity demanded of a certain good responds only slightly to a change in the price of the good,then

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If the price elasticity of demand for a good is 4.0,then a 10 percent increase in price results in a

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The supply of a good will be more elastic,the

Correct AnswerverifiedShow Answer

A perfectly elastic demand implies that

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A key determinant of the price elasticity of supply is

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Necessities tend to have inelastic demands,whereas luxuries have elastic demands.

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In the long run,the quantity supplied of most goods

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Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 0.78.Which of the following events is consistent with a 4.68 percent decrease in the quantity of the good demanded?

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Figure 5-8. A demand curve is shown on the graph below. On the graph, Q represents quantity demanded and P represents price. -Refer to Figure 5-8.At a price of $48 per unit,sellers' total revenue amounts to

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Demand is said to have unit elasticity if elasticity is

Correct AnswerverifiedShow Answer

Demand is said to be elastic if

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Price elasticity of demand along a linear,downward-sloping demand curve increases as price falls.

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Figure 5-5 -Refer to Figure 5-5.An increase in price from $30 to $35 would

Correct AnswerverifiedShow Answer

According to a Los Angeles Times article published in May 2005,recent estimates indicate that

Correct AnswerverifiedShow Answer

The price elasticity of demand for bread

Correct AnswerverifiedShow Answer

Supply tends to be more elastic in the short run and more inelastic in the long run.

Correct AnswerverifiedShow Answer

Figure 5-7 -Refer to Figure 5-7.Total revenue when the price is P₂ is represented by the area(s)

Correct AnswerverifiedShow Answer

For a good that is a luxury,demand

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