Question 1

Figure 5-3 
-Refer to Figure 5-3. The demand curve representing the demand for a luxury good with several close substitutes is

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) A) and B)
F) All of the above

Question 2

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A)   There are no 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 short.E) B) and C)
F) A) and D)

Question 3

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

Accepted Answer

A)   athletic shoes
B)   running shoes
C)   Nike running shoes
D)   Nike Shox running shoesE) None of the above
F) C) and D)

Question 4

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 5

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?

Accepted Answer

A)   Both the mayor and city manager would be correct if demand were price elastic.
B)   Both the mayor and city manager would be correct if demand were price inelastic.
C)   The mayor would be correct if demand were price elastic; the city manager would be correct if demand were price inelastic.
D)   The mayor would be correct if demand were price inelastic; the city manager would be correct if demand were price elastid.E) A) and B)
F) B) and C)

Question 6

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

Accepted Answer

A)   dental floss
B)   milk
C)   salt
D)   diamond earringsE) A) and D)
F) A) and C)

Question 7

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

Accepted Answer

A) True 
 B)False

Question 8

Suppose demand is given by the equation:  At what point along this demand curve will total revenue be maximized?

Accepted Answer

Total revenue is con...

Question 9

If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a

Accepted Answer

A)   0.015 percent increase in the quantity demanded.
B)   0.6 percent increase in the quantity demanded.
C)   6 percent increase in the quantity demanded.
D)   66 percent increase in the quantity demanded.E) All of the above
F) A) and B)

Question 10

Accepted Answer

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

Question 11

For which pairs of goods is the cross-price elasticity most likely to be positive?

Accepted Answer

A)   peanut butter and jelly
B)   bicycle frames and bicycle tires
C)   pens and pencils
D)   college textbooks and iPodsE) A) and B)
F) None of the above

Question 12

Scenario 5-4
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-4. The equilibrium price will

Accepted Answer

A)   increase in both the aged cheddar cheese and bread markets.
B)   increase in the aged cheddar cheese market and decrease in the bread market.
C)   decrease in the aged cheddar cheese market and increase in the bread market.
D)   decrease in both the aged cheddar cheese and bread markets.E) None of the above
F) A) and B)

Question 13

Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain.

Accepted Answer

If demand is inelastic, then r...

Question 14

For which of the following goods is the price elasticity of demand most inelastic?

Accepted Answer

A)   pizza
B)   large pizza
C)   large pepperoni pizza
D)   Domino's large pepperoni pizzaE) A) and C)
F) B) and C)

Question 15

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

Accepted Answer

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

Question 16

Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8. You should

Accepted Answer

A)   increase the price of ice cream.
B)   decrease the price of ice cream.
C)   decrease the cost of operating the ice cream shop.
D)   increase the price of bottled water also sold at the ice cream shop because its price elasticity of demand is 1.2.E) A) and B)
F) None of the above

Question 17

An increase in price causes an increase in total revenue when demand is

Accepted Answer

A)   elastic.
B)   inelastic.
C)   unit elastic.
D)   All of the above are possible.E) C) and D)
F) A) and B)

Question 18

Figure 5-15 
-Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points B and C?

Accepted Answer

A)   1.19
B)   1.67
C)   0.84
D)   0.61E) All of the above
F) A) and B)

Question 19

Figure 5-8 
-Refer to Figure 5-8. When the price is $15, total revenue is

Accepted Answer

A)   $1,500.
B)   $2,500.
C)   $3,500.
D)   $4,500.E) A) and B)
F) A) and C)

Question 20

When demand is inelastic, a decrease in price increases total revenue.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

Correct Answer
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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?

Correct Answer
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The price ...
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Figure 5-14 -Refer to Figure 5-14. Over which range is the supply curve in this figure the most elastic?

Correct Answer
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Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8. You should

Correct Answer
verified

Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain.

Correct Answer
verified
If demand is inelastic, then r...
View Answer

Figure 5-8 -Refer to Figure 5-8. When the price is $15, total revenue is

Correct Answer
verified

An increase in price causes an increase in total revenue when demand is

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a

Correct Answer
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For which pairs of goods is the cross-price elasticity most likely to be positive?

Correct Answer
verified

Figure 5-3 -Refer to Figure 5-3. The demand curve representing the demand for a luxury good with several close substitutes is

Correct Answer
verified

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

Correct Answer
verified

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points B and C?

Correct Answer
verified

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

Correct Answer
verified

When demand is inelastic, a decrease in price increases total revenue.

Correct Answer
verified

For which of the following goods is the price elasticity of demand most inelastic?

Correct Answer
verified

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct Answer
verified

Correct Answer
verified

Suppose demand is given by the equation: At what point along this demand curve will total revenue be maximized?

Correct Answer
verified
Total revenue is con...
View Answer

Exam 5: Elasticity and Its Application

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe price ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8. You should

Correct AnswerverifiedShow Answer

Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain.

Correct AnswerverifiedIf demand is inelastic, then r...View AnswerShow Answer

Figure 5-8 -Refer to Figure 5-8. When the price is $15, total revenue is

Correct AnswerverifiedShow Answer

An increase in price causes an increase in total revenue when demand is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a

Correct AnswerverifiedShow Answer

For which pairs of goods is the cross-price elasticity most likely to be positive?

Correct AnswerverifiedShow Answer

Figure 5-3 -Refer to Figure 5-3. The demand curve representing the demand for a luxury good with several close substitutes is

Correct AnswerverifiedShow Answer

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

Correct AnswerverifiedShow Answer

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points B and C?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When demand is inelastic, a decrease in price increases total revenue.

Correct AnswerverifiedShow Answer

For which of the following goods is the price elasticity of demand most inelastic?

Correct AnswerverifiedShow Answer

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose demand is given by the equation: At what point along this demand curve will total revenue be maximized?

Correct AnswerverifiedTotal revenue is con...View AnswerShow Answer

Correct Answer
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The price ...
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If demand is inelastic, then r...
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Correct Answer
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Correct Answer
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Correct Answer
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Total revenue is con...
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