Question 1

Figure 5-18 
-Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $4 and $5?

Accepted Answer

A)   0.50
B)   0.56
C)   1.80
D)   2.00E) A) and D)
F) B) and C)

Question 2

Farm programs that pay farmers not to plant crops on all their land

Accepted Answer

A)   hurt farmers by lowering their total revenue and hurt consumers by causing shortages of some food items.
B)   help farmers by cutting costs, which helps consumers by lowering food prices.
C)   help farmers by increasing total revenue in the market but hurt consumers by raising food prices.
D)   help farmers directly since they receive government payments but have no real effects on consumers.E) None of the above
F) B) and D)

Question 3

Scenario 5-6
Suppose the government is concerned about firms in the United States importing illegal caviar. As a result, the government increases border patrols to catch illegal shipments. U.S. Customs agents perform DNA testing on the caviar to determine if it comes from endangered species of fish. If so, the government destroys the caviar.
-Refer to Scenario 5-6. What would we expect to observe in the caviar market?

Accepted Answer

A)   Equilibrium prices and quantities will increase.
B)   Equilibrium prices will increase by more if the demand for caviar is elastic than if demand is inelastic.
C)   Total revenues to caviar firms will increase if the demand for caviar is inelastic.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 4

When a university bookstore prices chemistry textbooks at $200 each, it generally sells 120 books per month. If it lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity of demand for chemistry books is about

Accepted Answer

A)   1.29, and a decrease in price from $200 to $160 results in an increase in total revenue.
B)   1.29, and a decrease in price from $200 to $160 results in a decrease in total revenue.
C)   0.78, and a decrease in price from $200 to $160 results in an increase in total revenue.
D)   0.78, and a decrease in price from $200 to $160 results in a decrease in total revenue.E) A) and B)
F) A) and C)

Question 5

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) C) and D)
F) A) and B)

Question 6

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

Question 7

The demand for soap is more elastic than the demand for Dove soap.

Accepted Answer

A) True 
 B)False

Question 8

Figure 5-1 
-Refer to Figure 5-1. 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 elastid.E) A) and B)
F) B) and C)

Question 9

Table 5-4
The following table shows the demand schedule for a particular good.
 
-Refer to Table 5-4. Using the midpoint method, what is the price elasticity of demand when price rises from $12 to $16?

Accepted Answer

A)   0.43
B)   0.67
C)   2.33
D)   4E) A) and D)
F) B) and C)

Question 10

If a firm is facing inelastic demand, then the firm should decrease price to increase revenue.

Accepted Answer

A) True 
 B)False

Question 11

The price elasticity of supply measures how responsive

Accepted Answer

A)   sellers are to a change in price.
B)   sellers are to a change in buyers' income.
C)   buyers are to a change in production costs.
D)   equilibrium price is to a change in supply.E) A) and B)
F) B) and C)

Question 12

Suppose good X has a negative income elasticity of demand. This implies that good X is

Accepted Answer

A)   a normal good.
B)   a necessity.
C)   an inferior good.
D)   a luxury.E) B) and C)
F) A) and C)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

For which of the following goods is the income elasticity of demand likely lowest?

Accepted Answer

A)   subscriptions to premium movie channels through the local cable television provider
B)   hi-definition DVD players
C)   champagne
D)   housingE) B) and C)
F) All of the above

Question 15

Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to

Accepted Answer

A)   increase by 2.5%, and X is an inferior good.
B)   decrease by 2.5% and X is a normal good.
C)   increase by 10% and X is an inferior good.
D)   decrease by 10% and X is a normal good.E) A) and B)
F) B) and C)

Question 16

Which of the following expressions represents a cross-price elasticity of demand?

Accepted Answer

A)   percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread
B)   percentage change in quantity demanded of bread divided by percentage change in price of butter
C)   percentage change in price of bread divided by percentage change in quantity demanded of bread
D)   percentage change in quantity demanded of bread divided by percentage change in incomeE) A) and B)
F) A) and D)

Question 17

Which of the following is not a determinant of the price elasticity of demand for a good?

Accepted Answer

A)   the time horizon
B)   the steepness or flatness of the supply curve for the good
C)   the definition of the market for the good
D)   the availability of substitutes for the goodE) All of the above
F) A) and D)

Question 18

Income elasticity of demand measures how

Accepted Answer

A)   the quantity demanded changes as consumer income changes.
B)   consumer purchasing power is affected by a change in the price of a good.
C)   the price of a good is affected when there is a change in consumer income.
D)   many units of a good a consumer can buy given a certain income level.E) All of the above
F) None of the above

Question 19

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%.
The price elasticity of demand for this good is equal to 2.0.

Accepted Answer

A) True 
 B)False

Question 20

Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price of ginger ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statements is true?

Accepted Answer

A)   The demand for ginger ale is income inelastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers.
B)   The demand for ginger ale is income elastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers.
C)   The demand for ginger ale is price inelastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers.
D)   The demand for ginger ale is price elastic, so an increase in the price of ginger ale will decrease the total revenue of ginger ale producers.E) A) and B)
F) A) and D)

Exam 5: Elasticity and Its Application

Which of the following expressions represents a cross-price elasticity of demand?

Correct Answer
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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 Answer
verified

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

Correct Answer
verified

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Correct Answer
verified

The price elasticity of supply measures how responsive

Correct Answer
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Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to

Correct Answer
verified

Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, what is the price elasticity of demand when price rises from $12 to $16?

Correct Answer
verified

When a university bookstore prices chemistry textbooks at $200 each, it generally sells 120 books per month. If it lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity of demand for chemistry books is about

Correct Answer
verified

Income elasticity of demand measures how

Correct Answer
verified

If a firm is facing inelastic demand, then the firm should decrease price to increase revenue.

Correct Answer
verified

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

Correct Answer
verified

For which of the following goods is the income elasticity of demand likely lowest?

Correct Answer
verified

Farm programs that pay farmers not to plant crops on all their land

Correct Answer
verified

Figure 5-18 -Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $4 and $5?

Correct Answer
verified

The demand for soap is more elastic than the demand for Dove soap.

Correct Answer
verified

Suppose good X has a negative income elasticity of demand. This implies that good X is

Correct Answer
verified

Correct Answer
verified

Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price of ginger ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statements is true?

Correct Answer
verified

Figure 5-1 -Refer to Figure 5-1. Between point A and point B on the graph, demand is

Correct Answer
verified

Which of the following is not a determinant of the price elasticity of demand for a good?

Correct Answer
verified

Exam 5: Elasticity and Its Application

Which of the following expressions represents a cross-price elasticity of demand?

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

Correct AnswerverifiedShow Answer

The price elasticity of supply measures how responsive

Correct AnswerverifiedShow Answer

Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to

Correct AnswerverifiedShow Answer

Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, what is the price elasticity of demand when price rises from $12 to $16?

Correct AnswerverifiedShow Answer

When a university bookstore prices chemistry textbooks at $200 each, it generally sells 120 books per month. If it lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity of demand for chemistry books is about

Correct AnswerverifiedShow Answer

Income elasticity of demand measures how

Correct AnswerverifiedShow Answer

If a firm is facing inelastic demand, then the firm should decrease price to increase revenue.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

For which of the following goods is the income elasticity of demand likely lowest?

Correct AnswerverifiedShow Answer

Farm programs that pay farmers not to plant crops on all their land

Correct AnswerverifiedShow Answer

Figure 5-18 -Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $4 and $5?

Correct AnswerverifiedShow Answer

The demand for soap is more elastic than the demand for Dove soap.

Correct AnswerverifiedShow Answer

Suppose good X has a negative income elasticity of demand. This implies that good X is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price of ginger ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statements is true?

Correct AnswerverifiedShow Answer

Figure 5-1 -Refer to Figure 5-1. Between point A and point B on the graph, demand is

Correct AnswerverifiedShow Answer

Which of the following is not a determinant of the price elasticity of demand for a good?

Correct AnswerverifiedShow Answer

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