Question 1

Food and clothing tend to have

Accepted Answer

A)  small income elasticities because consumers,regardless of their incomes,choose to buy relatively constant quantities of these goods.
B)  small income elasticities because consumers buy proportionately more of both goods at higher income levels than they buy at low income levels.
C)  large income elasticities because they are necessities.
D)  large income elasticities because they are relatively inexpensive.

Question 2

For a particular good,an 8 percent increase in price causes a 4 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.

Question 3

Income elasticity of demand measures how

Accepted Answer

A)  the quantity demanded changes as consumer income changes.
B)  consumer purchasing power is affected by a change in the price of a good.
C)  the price of a good is affected when there is a change in consumer income.
D)  many units of a good a consumer can buy given a certain income level.

Question 4

For which of the following goods is the income elasticity of demand likely lowest?

Accepted Answer

A)  water
B)  sapphire pendant necklaces
C)  filet mignon steaks
D)  fresh fruit

Question 5

Figure 5-5 
-Refer to Figure 5-5.At a price of $70 per unit,sellers' total revenue equals

Accepted Answer

A)  $700.
B)  $1050.
C)  $1250.
D)  $1400.

Question 6

Figure 5-5 
-Refer to Figure 5-5.Using the midpoint method,between prices of $70 and $80,price elasticity of demand is

Accepted Answer

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

Question 7

If the price of natural gas rises,when is the price elasticity of demand likely to be the highest?

Accepted Answer

A)  immediately after the price increase
B)  one month after the price increase
C)  three months after the price increase
D)  one year after the price increase

Question 8

Figure 5-12 
-Refer to Figure 5-12.Sellers' total revenue would increase if the price

Accepted Answer

A)  increased from $12 to $15.
B)  decreased from $39 to $36.
C)  decreased from $27 to $24.
D)  All of the above are correct.

Question 9

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.

Question 10

Studies indicate that the price elasticity of demand for cigarettes is about 0.4.A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6.According to the midpoint method,the government policy should have reduced smoking by

Accepted Answer

A)  30%.
B)  40%.
C)  80%.
D)  250%.

Question 11

Figure 5-8 
-Refer to Figure 5-8.When price falls from $25 to $20,demand is

Accepted Answer

A)  inelastic,since total revenue decreases from $4,000 to $2,500.
B)  inelastic,since total revenue increases from $2,500 to $4,000.
C)  elastic,since total revenue increases from $2,500 to $4,000.
D)  unit elastic,since total revenue does not change.

Question 12

Suppose that when the price of good X falls from $10 to $8,the quantity demanded of good Y rises from 20 units to 25 units.Using the midpoint method,the cross-price elasticity of demand is

Accepted Answer

A)  -1.0,and X and Y are complements.
B)  -1.0,and X and Y are substitutes.
C)  1.0,and X and Y are complements.
D)  1.0,and X and Y are substitutes.

Question 13

How does total revenue change as one moves downward and to the right along a linear demand curve?

Accepted Answer

A)  It always increases.
B)  It always decreases.
C)  It first increases,then decreases.
D)  It is unaffected by a movement along the demand curve.

Question 14

Last month,sellers of good Y took in $100 in total revenue on sales of 50 units of good Y.This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y.At the same time,the price of good X stayed the same,but sales of good X increased from 20 units to 40 units.We can conclude that goods X and Y are

Accepted Answer

A)  substitutes,and have a cross-price elasticity of 0.60.
B)  complements,and have a cross-price elasticity of -0.60.
C)  substitutes,and have a cross-price elasticity of 1.67.
D)  complements,and have a cross-price elasticity of -1.67.

Question 15

Figure 5-1 
-Refer to Figure 5-1.Between point A and point B on the graph,demand is

Accepted Answer

A)  perfectly elastic.
B)  inelastic.
C)  unit elastic.
D)  elastic,but not perfectly elastic.

Question 16

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 0.75.Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Accepted Answer

A)  a 7.5 increase in the price of the good
B)  a 13.33 percent increase in the price of the good
C)  an increase in the price of the good from $7.50 to $10
D)  an increase in the price of the good from $10 to $17.50

Question 17

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 18

Figure 5-4 
-Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 2,000,P = $15) and (Q = 2,400,P = $12) .Then which of the following scenarios is possible?

Accepted Answer

A)  Both of these points lie on section BC of the demand curve.
B)  The vertical intercept of the demand curve is the point (Q = 0,P = $22) .
C)  The horizontal intercept of the demand curve is the point (Q = 5,000,P = $0) .
D)  Any of these scenarios is possible.

Question 19

Figure 5-12 
-Refer to Figure 5-12.Using the midpoint method,the price elasticity of demand between point X and point Y is

Accepted Answer

A)  0.4.
B)  1.
C)  2.
D)  2.5.

Question 20

Demand is said to be unit elastic if quantity demanded

Accepted Answer

A)  changes by the same percent as the price.
B)  changes by a larger percent than the price.
C)  changes by a smaller percent than the price.
D)  does not respond to a change in price.

Exam 5: Elasticity and Its Applications: The Elasticity of Demand

If the price of natural gas rises,when is the price elasticity of demand likely to be the highest?

Correct Answer
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Income elasticity of demand measures how

Correct Answer
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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 Answer
verified

Studies indicate that the price elasticity of demand for cigarettes is about 0.4.A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6.According to the midpoint method,the government policy should have reduced smoking by

Correct Answer
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Food and clothing tend to have

Correct Answer
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When demand is perfectly inelastic,the demand curve will be

Correct Answer
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Figure 5-12 -Refer to Figure 5-12.Using the midpoint method,the price elasticity of demand between point X and point Y is

Correct Answer
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How does total revenue change as one moves downward and to the right along a linear demand curve?

Correct Answer
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Figure 5-4 -Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 2,000,P = $15) and (Q = 2,400,P = $12) .Then which of the following scenarios is possible?

Correct Answer
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Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,between prices of $70 and $80,price elasticity of demand is

Correct Answer
verified

Demand is said to be unit elastic if quantity demanded

Correct Answer
verified

Figure 5-1 -Refer to Figure 5-1.Between point A and point B on the graph,demand is

Correct Answer
verified

Figure 5-12 -Refer to Figure 5-12.Sellers' total revenue would increase if the price

Correct Answer
verified

For a particular good,an 8 percent increase in price causes a 4 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Correct Answer
verified

Correct Answer
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Figure 5-5 -Refer to Figure 5-5.At a price of $70 per unit,sellers' total revenue equals

Correct Answer
verified

Suppose that when the price of good X falls from $10 to $8,the quantity demanded of good Y rises from 20 units to 25 units.Using the midpoint method,the cross-price elasticity of demand is

Correct Answer
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For which of the following goods is the income elasticity of demand likely lowest?

Correct Answer
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Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 0.75.Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Correct Answer
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Figure 5-8 -Refer to Figure 5-8.When price falls from $25 to $20,demand is

Correct Answer
verified

Exam 5: Elasticity and Its Applications: The Elasticity of Demand

If the price of natural gas rises,when is the price elasticity of demand likely to be the highest?

Correct AnswerverifiedShow Answer

Income elasticity of demand measures how

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

Studies indicate that the price elasticity of demand for cigarettes is about 0.4.A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6.According to the midpoint method,the government policy should have reduced smoking by

Correct AnswerverifiedShow Answer

Food and clothing tend to have

Correct AnswerverifiedShow Answer

When demand is perfectly inelastic,the demand curve will be

Correct AnswerverifiedShow Answer

Figure 5-12 -Refer to Figure 5-12.Using the midpoint method,the price elasticity of demand between point X and point Y is

Correct AnswerverifiedShow Answer

How does total revenue change as one moves downward and to the right along a linear demand curve?

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 = 2,000,P = $15) and (Q = 2,400,P = $12) .Then which of the following scenarios is possible?

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,between prices of $70 and $80,price elasticity of demand is

Correct AnswerverifiedShow Answer

Demand is said to be unit elastic if quantity demanded

Correct AnswerverifiedShow Answer

Figure 5-1 -Refer to Figure 5-1.Between point A and point B on the graph,demand is

Correct AnswerverifiedShow Answer

Figure 5-12 -Refer to Figure 5-12.Sellers' total revenue would increase if the price

Correct AnswerverifiedShow Answer

For a particular good,an 8 percent increase in price causes a 4 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5.At a price of $70 per unit,sellers' total revenue equals

Correct AnswerverifiedShow Answer

Suppose that when the price of good X falls from $10 to $8,the quantity demanded of good Y rises from 20 units to 25 units.Using the midpoint method,the cross-price elasticity of demand is

Correct AnswerverifiedShow Answer

For which of the following goods is the income elasticity of demand likely lowest?

Correct AnswerverifiedShow Answer

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 0.75.Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Correct AnswerverifiedShow Answer

Figure 5-8 -Refer to Figure 5-8.When price falls from $25 to $20,demand is

Correct AnswerverifiedShow Answer

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