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Exam 5: Elasticity and Its Application

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Question 81

Multiple Choice

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Figure 5-14 -Refer to Figure 5-14. Over which range is the supply curve in this figure the least elastic?

A) $16 to $40
B) $40 to $100
C) $100 to $220
D) $220 to $430

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Question 82

Multiple Choice

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Moving downward and to the right along a linear demand curve, we know that total revenue

A) first increases, then decreases.
B) first decreases, then increases.
C) always increases.
D) always decreases.

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Question 83

Multiple Choice

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At a price of $1.20, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.40, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

Figure 5-14 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between $16 and $40?

In general, demand curves for luxuries tend to be price elastic.

Figure 5-18 -Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $5 and $6?

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

When studying how some event or policy affects a market, elasticity provides information on the

Suppose the price elasticity of demand for a product is 1.3. If a supplier wants to increase revenue, what change should it make to price, if any?

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

Figure 5-5 -Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of

For a particular good, an 8 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

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

Which of the following is likely to have the most price inelastic demand?

Table 5-10 -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most elastic price elasticity of supply?

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

A linear, downward-sloping demand curve has a constant elasticity but a changing slope.

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

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?