Question 1

If the income elasticity of demand for a good is -1.40, is the good a normal or inferior good?

Accepted Answer

The good i...

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should

Accepted Answer

A)   increase the price charged to vacationers and decrease the price charged to business travelers.
B)   decrease the price charged to vacationers and increase the price charged to business travelers.
C)   decrease the price to both groups of customers.
D)   increase the price for both groups of customers.E) A) and B)
F) All of the above

Question 4

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Accepted Answer

A)   a 0.2 percent increase in the price.
B)   a 2.5 percent increase in the price.
C)   a 5 percent increase in the price.
D)   a 20 percent increase in the price.E) None of the above
F) B) and D)

Question 5

When demand is elastic, a decrease 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) A) and D)
F) None of the above

Question 6

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

Accepted Answer

A)   the equilibrium quantity decreases, and the equilibrium price is unchanged.
B)   the equilibrium price increases, and the equilibrium quantity is unchanged.
C)   the equilibrium quantity and the equilibrium price both are unchanged.
D)   buyers' total expenditure on the good is unchanged.E) B) and C)
F) A) and B)

Question 7

Suppose a market has the demand function Qd=20-0.5P. At what price will total revenue be maximized?

Accepted Answer

The answer of Suppose a market has the demand function...

Question 8

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

Accepted Answer

A)   tablet computers
B)   leather boots
C)   lightbulbs
D)   optional textbooksE) B) and C)
F) C) and D)

Question 9

Figure 5-15 
-Refer to Figure 5-15. Along which of these segments of the supply curve is supply least elastic?

Accepted Answer

A)   GH
B)   CD
C)   AC
D)   ABE) B) and C)
F) None of the above

Question 10

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.E) A) and B)
F) None of the above

Question 11

Accepted Answer

Which of the following expressions can be used to compute the price elasticity of demand?   ) undefined
 ) undefined

Question 12

Which of the following should be held constant when calculating an income elasticity of demand?

Accepted Answer

A)   the quantity of the good demanded
B)   the price of the good
C)   income
D)   All of the above should be held constant.E) C) and D)
F) B) and D)

Question 13

Figure 5-11 
-Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

Accepted Answer

A)   increase by $120, so demand must be inelastic in this price range.
B)   increase by $320, so demand must be inelastic in this price range.
C)   decrease by $120, so demand must be elastic in this price range.
D)   decrease by $320, so demand must be elastic in this price range.E) C) and D)
F) A) and C)

Question 14

Which of the following statements about the price elasticity of demand is correct?

Accepted Answer

A)   The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases.
B)   Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes.
C)   Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y.
D)   All of the above are correct.E) All of the above
F) C) and D)

Question 15

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

A) True 
 B)False

Question 16

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Accepted Answer

A)   The interdiction has the effect of shifting the demand curve for illegal drugs to the right.
B)   The price elasticity of demand for illegal drugs is 1.3.
C)   The price elasticity of supply for illegal drugs is 0.8.
D)   As a result of the interdiction, the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent.E) B) and C)
F) B) and D)

Question 17

In which of these instances is demand said to be perfectly inelastic?

Accepted Answer

A)   An increase in price of 2% causes a decrease in quantity demanded of 2%.
B)   A decrease in price of 2% causes an increase in quantity demanded of 0%.
C)   A decrease in price of 2% causes a decrease in total revenue of 0%.
D)   An increase in price of 2% causes a decrease in quantity demanded of 1/2%.E) All of the above
F) None of the above

Question 18

In the case of perfectly inelastic demand,

Accepted Answer

A)   the change in quantity demanded equals the change in price.
B)   the percentage change in quantity demanded equals the percentage change in price.
C)   infinitely-large changes in quantity demanded result from very small changes in the price.
D)   quantity demanded stays the same whenever price changes.E) A) and D)
F) A) and B)

Question 19

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about

Accepted Answer

A)   0.43, and Jim regards tickets to sporting events as inferior goods.
B)   0.43, and Jim regards tickets to sporting events as normal goods.
C)   2.33, and Jim regards tickets to sporting events as inferior goods.
D)   2.33, and Jim regards tickets to sporting events as normal goods.E) A) and B)
F) B) and C)

Question 20

Table 5-13
Consider the following demand schedule.
 
-Refer to Table 5-13. Using the midpoint method, demand is unit elastic when price changes from

Accepted Answer

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

Exam 5: Elasticity and Its Application

Suppose a market has the demand function Qd=20-0.5P. At what price will total revenue be maximized?

Correct Answer
verified

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Correct Answer
verified

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should

Correct Answer
verified

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about

Correct Answer
verified

Figure 5-11 -Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

When demand is elastic, a decrease in price will cause

Correct Answer
verified

Figure 5-15 -Refer to Figure 5-15. Along which of these segments of the supply curve is supply least elastic?

Correct Answer
verified

If the income elasticity of demand for a good is -1.40, is the good a normal or inferior good?

Correct Answer
verified
The good i...
View Answer

Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, demand is unit elastic when price changes from

Correct Answer
verified

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

Correct Answer
verified

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

Correct Answer
verified

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

Correct Answer
verified

In which of these instances is demand said to be perfectly inelastic?

Correct Answer
verified

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Correct Answer
verified

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

Correct Answer
verified

Which of the following statements about the price elasticity of demand is correct?

Correct Answer
verified

Which of the following should be held constant when calculating an income elasticity of demand?

Correct Answer
verified

In the case of perfectly inelastic demand,

Correct Answer
verified

Exam 5: Elasticity and Its Application

Suppose a market has the demand function Qd=20-0.5P. At what price will total revenue be maximized?

Correct AnswerverifiedShow Answer

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Correct AnswerverifiedShow Answer

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should

Correct AnswerverifiedShow Answer

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about

Correct AnswerverifiedShow Answer

Figure 5-11 -Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When demand is elastic, a decrease in price will cause

Correct AnswerverifiedShow Answer

Figure 5-15 -Refer to Figure 5-15. Along which of these segments of the supply curve is supply least elastic?

Correct AnswerverifiedShow Answer

If the income elasticity of demand for a good is -1.40, is the good a normal or inferior good?

Correct AnswerverifiedThe good i...View AnswerShow Answer

Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, demand is unit elastic when price changes from

Correct AnswerverifiedShow Answer

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

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 demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

Correct AnswerverifiedShow Answer

In which of these instances is demand said to be perfectly inelastic?

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements about the price elasticity of demand is correct?

Correct AnswerverifiedShow Answer

Which of the following should be held constant when calculating an income elasticity of demand?

Correct AnswerverifiedShow Answer

In the case of perfectly inelastic demand,

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The good i...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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