Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A)  clothing
B)  blue jeans
C)  Tommy Hilfiger jeans
D)  All three would have the same elasticity of demand because they are all related.E) None of the above
F) A) and B)

Question 3

Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is

Accepted Answer

A)  perfectly elastic.
B)  unit elastic.
C)  perfectly inelastic.
D)  somewhat inelastic, but not perfectly inelastic.E) None of the above
F) B) and C)

Question 4

Figure 5-13 
-Refer to Figure 5-13. 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.E) B) and C)
F) A) and D)

Question 5

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.E) B) and D)
F) A) and B)

Question 6

Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

Accepted Answer

A)  The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve.
B)  The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve.
C)  Given two prices with which to calculate the price elasticity of supply, that elasticity would be the same for both curves.
D)  A decrease in demand will increase total revenue if the steeper supply curve is relevant, while a decrease in demand will decrease total revenue if the flatter supply cure is relevant.E) A) and D)
F) A) and C)

Question 7

Figure 5-21 
-Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $25 and $35?

Accepted Answer

The price ...

Question 8

The price elasticity of demand changes as we move along a

Accepted Answer

A)  horizontal demand curve.
B)  vertical demand curve.
C)  linear, downward-sloping demand curve.
D)  All of the above are correct.E) B) and D)
F) B) and C)

Question 9

When demand is elastic, an increase in price will cause

Accepted Answer

A)  an increase in total revenue.
B)  a decrease in total revenue.
C)  no change in total revenue but an increase in quantity demanded.
D)  no change in total revenue but a decrease in quantity demanded.E) B) and C)
F) None of the above

Question 10

A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

Accepted Answer

A)  infinity.
B)  zero.
C)  one.
D)  negative one.E) B) and C)
F) A) and D)

Question 11

Demand is said to have unit elasticity if the price elasticity of demand is

Accepted Answer

A)  less than 1.
B)  greater than 1.
C)  equal to 1.
D)  equal to 0.E) A) and D)
F) None of the above

Question 12

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

Accepted Answer

A) True 
 B)False

Question 13

Suppose demand is given by the equation:  Using the midpoint method, what is the price elasticity of demand between $7 and $8?

Accepted Answer

The price ...

Question 14

Demand is inelastic if the price elasticity of demand is

Accepted Answer

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

Question 15

Figure 5-5 
-Refer to Figure 5-5. At a price of $10 per unit, sellers' total revenue equals

Accepted Answer

A)  $100.
B)  $450.
C)  $500.
D)  $1250.E) C) and D)
F) All of the above

Question 16

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the price elasticity of demand for tortilla chips in the given price range is

Accepted Answer

A)  0.33.
B)  0.45.
C)  2.20.
D)  3.00.E) B) and C)
F) A) and D)

Question 17

When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni

Accepted Answer

A)  and soy-burgers are both normal goods with income elasticities equal to 1.
B)  is an inferior good and soy-burgers are normal goods; both have income elasticities of 1.
C)  is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.
D)  and soy-burgers are both inferior goods with income elasticities equal to -1.E) None of the above
F) A) and D)

Question 18

If the cross-price elasticity of demand for two goods is negative, then the two goods are substitutes.

Accepted Answer

A) True 
 B)False

Question 19

OPEC failed to maintain a high price of oil in the long run, partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 20

If the income elasticity of demand for a good is negative, then the good must be an inferior good.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

If the cross-price elasticity of demand for two goods is negative, then the two goods are substitutes.

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Figure 5-13 -Refer to Figure 5-13. Between point A and point B on the graph, demand is

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Demand is said to have unit elasticity if the price elasticity of demand is

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

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

Correct AnswerverifiedShow Answer

Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is

Correct AnswerverifiedShow Answer

Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5. At a price of $10 per unit, sellers' total revenue equals

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A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

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The price elasticity of demand changes as we move along a

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When demand is elastic, an increase in price will cause

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Demand is inelastic if the price elasticity of demand is

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Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the price elasticity of demand for tortilla chips in the given price range is

Correct AnswerverifiedShow Answer

OPEC failed to maintain a high price of oil in the long run, partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

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Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $7 and $8?

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Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $25 and $35?

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Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct?

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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

If the income elasticity of demand for a good is negative, then the good must be an inferior good.

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When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni

Correct AnswerverifiedShow Answer

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The price ...
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The price ...
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