Question 1

If the quantity demanded of a certain good responds only slightly to a change in the price of the good,then the

Accepted Answer

A)   demand for the good is said to be elastic.
B)   demand for the good is said to be inelastic.
C)   law of demand does not apply to the good.
D)   demand curve for the good shifts only slightly in response to a change in price.E) None of the above
F) A) and C)

Question 2

Cross-price elasticity of demand measures how

Accepted Answer

A)   the price of one good changes in response to a change in the price of another good.
B)   the quantity demanded of one good changes in response to a change in the quantity demanded of another good.
C)   the quantity demanded of one good changes in response to a change in the price of another good.
D)   strongly normal or inferior a good is.E) A) and B)
F) A) and C)

Question 3

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.E) None of the above
F) C) and D)

Question 4

If a 30 percent change in price causes a 15 percent change in quantity supplied,then the price elasticity of supply is about

Accepted Answer

A)   0.5,and supply is elastic.
B)   0.5,and supply is inelastic.
C)   2,and supply is inelastic.
D)   2,and supply is elastic.E) A) and B)
F) B) and C)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

The midpoint method is used to compute elasticity because it

Accepted Answer

A)   automatically computes a positive number instead of a negative number.
B)   results in an elasticity that is the same as the slope of the demand curve.
C)   gives the same answer regardless of the direction of change.
D)   automatically rounds quantities to the nearest whole unit.E) A) and B)
F) None of the above

Question 7

Table 5-1
 
-Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

Accepted Answer

A)   A is root beer,and B is carbonated beverages.
B)   A is bicycles,and B is mopeds.
C)   A is airline tickets in the short run,and B is airline tickets in the long run.
D)   A is gourmet coffee,and B is dentist's visits.E) A) and B)
F) B) and D)

Question 8

If two goods are substitutes,their cross-price elasticity will be

Accepted Answer

A)   positive.
B)   negative.
C)   zero.
D)   equal to the difference between the income elasticities of demand for the two goods.E) C) and D)
F) A) and B)

Question 9

The flatter the demand curve through a given point,the

Accepted Answer

A)   greater the price elasticity of demand at that point.
B)   smaller the price elasticity of demand at that point.
C)   closer the price elasticity of demand will be to the slope of the curve.
D)   greater the absolute value of the change in total revenue when there is a movement from that point upward and to the left along the demand curve.E) C) and D)
F) B) and D)

Question 10

Necessities tend to have inelastic demands,whereas luxuries tend to have elastic demands.

Accepted Answer

A) True 
 B)False

Question 11

If the price elasticity of supply is 0.2,and a price increase led to a 3% increase in quantity supplied,then the price increase is about

Accepted Answer

A)   0.07%.
B)   0.60%.
C)   6%.
D)   15%.E) A) and C)
F) B) and D)

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

A decrease in supply will cause the largest increase in price when

Accepted Answer

A)   both supply and demand are inelastic.
B)   both supply and demand are elastic.
C)   demand is elastic and supply is inelastic.
D)   demand is inelastic and supply is elastic.E) A) and D)
F) A) and C)

Question 14

If we observe that when the price of ice cream rises by 10%,ice cream manufacturers increase the quantity supplied of ice cream by 20%,then the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 15

The case of perfectly elastic demand is illustrated by a demand curve that is

Accepted Answer

A)   vertical.
B)   horizontal.
C)   downward-sloping but relatively steep.
D)   downward-sloping but relatively flat.E) C) and D)
F) B) and C)

Question 16

Because the demand for wheat tends to be inelastic,the development of a new,more productive hybrid wheat would tend to

Accepted Answer

A)   increase the total revenue of wheat farmers.
B)   decrease the total revenue of wheat farmers.
C)   decrease the demand for wheat.
D)   decrease the supply of wheat.E) All of the above
F) None of the above

Question 17

Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

Accepted Answer

A)   raises prices and total revenue in the drug market.
B)   can increase drug-related crime.
C)   shifts the demand curve for drugs to the left.
D)   shifts the supply curve of drugs to the left.E) A) and B)
F) A) and C)

Question 18

The smaller the price elasticity of demand,the

Accepted Answer

A)   steeper the demand curve will be through a given point.
B)   flatter the demand curve will be through a given point.
C)   more strongly buyers respond to a change in price between any two prices P1 and P2.
D)   smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2.E) A) and B)
F) A) and C)

Question 19

Which of the following expressions is valid for the price elasticity of demand?

Accepted Answer

The answer of Which of the following expressions is valid...

Question 20

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

Exam 5: Elasticity and Its Application

A decrease in supply will cause the largest increase in price when

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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.

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If a 30 percent change in price causes a 15 percent change in quantity supplied,then the price elasticity of supply is about

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Because the demand for wheat tends to be inelastic,the development of a new,more productive hybrid wheat would tend to

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Food and clothing tend to have

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If the quantity demanded of a certain good responds only slightly to a change in the price of the good,then the

Correct AnswerverifiedShow Answer

If two goods are substitutes,their cross-price elasticity will be

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Cross-price elasticity of demand measures how

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If the price elasticity of supply is 0.2,and a price increase led to a 3% increase in quantity supplied,then the price increase is about

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Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction

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The midpoint method is used to compute elasticity because it

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Which of the following expressions is valid for the price elasticity of demand?

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The flatter the demand curve through a given point,the

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

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The case of perfectly elastic demand is illustrated by a demand curve that is

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Table 5-1 -Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

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The smaller the price elasticity of demand,the

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

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Necessities tend to have inelastic demands,whereas luxuries tend to have elastic demands.

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If we observe that when the price of ice cream rises by 10%,ice cream manufacturers increase the quantity supplied of ice cream by 20%,then the price elasticity of supply is 2.

Correct AnswerverifiedShow Answer

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