Question 1

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the

Accepted Answer

A)   steeper the demand curve will be.
B)   flatter the demand curve will be.
C)   further to the right the demand curve will sit.
D)   closer to the vertical axis the demand curve will sit.

Question 2

Goods with many close substitutes tend to have

Accepted Answer

A)   more elastic demands.
B)   less elastic demands.
C)   price elasticities of demand that are unit elastic.
D)   income elasticities of demand that are negative.

Question 3

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 4

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is

Accepted Answer

A)   ignoring the law of demand.
B)   assuming that the demand for university education is elastic.
C)   assuming that the demand for university education is inelastic.
D)   assuming that the supply of university education is elastid.

Question 5

Table 5-13
Consider the following demand schedule.
 
-Refer to Table 5-13. Using the midpoint method, between which two prices is price elasticity of demand most inelastic?

Accepted Answer

The answer of Table 5-13
Consider the following demand schedule.
 
-Refer...

Question 6

If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

Accepted Answer

A) True 
 B)False

Question 7

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

Accepted Answer

A)   positive, so Joan considers hamburger to be an inferior good.
B)   positive, so Joan considers hamburger to be a normal good and a necessity.
C)   negative, so Joan considers hamburger to be an inferior good.
D)   negative, so Joan considers hamburger to be a normal good but not a necessity.

Question 8

If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is

Accepted Answer

A)   0.50.
B)   1.
C)   1.5.
D)   2.

Question 9

Last year, Max bought 6 pairs of athletic shoes when his income was $35,000. This year, his income is $42,000, and he purchased 8 pairs of athletic shoes. Holding other factors constant, it follows that Max

Accepted Answer

A)   considers athletic shoes to be necessities.
B)   considers athletic shoes to be inferior goods.
C)   considers athletic shoes to be normal goods.
D)   has a low price elasticity of demand for athletic shoes.

Question 10

Suppose that 300 bottles of soda are demanded at a particular price. If the price of a bottle of soda rises from that price by 6 percent, the number of bottles of soda demanded falls to 275. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Accepted Answer

A)   demand for bottles of soda in this price range is perfectly elastic.
B)   price increase will increase the total revenue of soda sellers.
C)   price elasticity of demand for bottles of soda in this price range is about 0.69.
D)   price elasticity of demand for bottles of soda in this price range is about 1.45.

Question 11

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

Accepted Answer

A) True 
 B)False

Question 12

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

Accepted Answer

A) True 
 B)False

Question 13

If the demand for textbooks is inelastic, then a decrease 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.

Question 14

Figure 5-5 
-Refer to Figure 5-5. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

Accepted Answer

A)   0.33.
B)   0.4.
C)   1.33.
D)   3.

Question 15

Elasticity is

Accepted Answer

A)   a measure of how much buyers and sellers respond to changes in market conditions.
B)   the study of how the allocation of resources affects economic well-being.
C)   the maximum amount that a buyer will pay for a good.
D)   the value of everything a seller must give up to produce a good.

Question 16

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A)   0.45
B)   0.90
C)   1.11
D)   2.20

Question 17

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that 50 hot dogs are demanded at a particular price. If the price of hot dogs rises from that price by 5 percent, the number of hot dogs demanded falls to 48. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Accepted Answer

A)   demand for hot dogs in this price range is unit elastic.
B)   price increase will decrease the total revenue of hot dog sellers.
C)   price elasticity of demand for hot dogs in this price range is about 1.22.
D)   price elasticity of demand for hot dogs in this price range is about 0.82.

Question 19

Table 5-12
 
-Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $2 and $4?

Accepted Answer

The price ...

Question 20

Figure 5-4 
-Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 1,000, P= $40)  and (Q = 1,500, P = $30) . Then which of the following scenarios is possible?

Accepted Answer

A)   Both of these points lie on the section of the demand curve from B to C.
B)   The vertical intercept of the demand curve is the point (Q = 0, P = $60) .
C)   The horizontal intercept of the demand curve is the point (Q = 1,800, P = $0) .
D)   Any of these scenarios is possible.

Exam 5: Elasticity and Its Application

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

Correct AnswerverifiedShow Answer

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the

Correct AnswerverifiedShow Answer

Suppose that 50 hot dogs are demanded at a particular price. If the price of hot dogs rises from that price by 5 percent, the number of hot dogs demanded falls to 48. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Correct AnswerverifiedShow Answer

Last year, Max bought 6 pairs of athletic shoes when his income was $35,000. This year, his income is $42,000, and he purchased 8 pairs of athletic shoes. Holding other factors constant, it follows that Max

Correct AnswerverifiedShow Answer

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Correct AnswerverifiedShow Answer

If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is

Correct AnswerverifiedShow Answer

Suppose that 300 bottles of soda are demanded at a particular price. If the price of a bottle of soda rises from that price by 6 percent, the number of bottles of soda demanded falls to 275. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Correct AnswerverifiedShow Answer

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is

Correct AnswerverifiedShow Answer

Goods with many close substitutes tend to have

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

Correct AnswerverifiedShow Answer

Elasticity is

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Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 1,000, P= $40) and (Q = 1,500, P = $30) . Then which of the following scenarios is possible?

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If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

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Table 5-12 -Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $2 and $4?

Correct AnswerverifiedThe price ...View AnswerShow Answer

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

Correct AnswerverifiedShow Answer

In the long run, the quantity supplied of most goods

Correct AnswerverifiedShow Answer

If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

Correct AnswerverifiedShow Answer

Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, between which two prices is price elasticity of demand most inelastic?

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Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

Correct AnswerverifiedShow Answer

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The price ...
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