Question 1

If the cross-price elasticity of two goods is negative,then the two goods are

Accepted Answer

A)   necessities.
B)   complements.
C)   normal goods.
D)   inferior goods.E) All of the above
F) None of the above

Question 2

Figure 5-3 
-Refer to Figure 5-3.Which demand curve is perfectly elastic?

Accepted Answer

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

Question 3

Figure 5-16 
-Refer to Figure 5-16.If,holding the supply curve fixed,there were an increase in demand that caused the equilibrium price to increase from $6 to $8,then sellers' total revenue would

Accepted Answer

A)   increase.
B)   decrease.
C)   remain unchanged.
D)   The effect on total revenue cannot be determined from the given information.E) A) and B)
F) B) and C)

Question 4

Figure 5-18 
-Refer to Figure 5-18.Which supply curve is most likely relevant over a very long period of time?

Accepted Answer

A)   S1
B)   S2
C)   S3
D)   All of the above are equally likely to be relevant over a very long period of time.E) A) and B)
F) All of the above

Question 5

Figure 5-5 
-Refer to Figure 5-5.Using the midpoint method,between prices of $48 and $54,price elasticity of demand is about

Accepted Answer

A)   0.92.
B)   3.89.
C)   4.33.
D)   5.67.E) None of the above
F) All of the above

Question 6

How does total revenue change as one moves downward and to the right along a linear demand curve?

Accepted Answer

A)   It always increases.
B)   It always decreases.
C)   It first increases,then decreases.
D)   It is unaffected by a movement along the demand curve.E) None of the above
F) A) and D)

Question 7

Figure 5-16 
-Refer to Figure 5-16.Using the midpoint method,what is the price elasticity of supply between point A and point B?

Accepted Answer

A)   0.58
B)   0.71
C)   1.06
D)   1.4E) None of the above
F) A) and C)

Question 8

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

Question 9

Table 5-2
 
-Refer to Table 5-2.Using the midpoint method,if the price falls from $60 to $40,the price elasticity of demand is

Accepted Answer

A)   zero.
B)   inelastic.
C)   unit elastic.
D)   elastic.E) A) and C)
F) B) and C)

Question 10

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 11

At a price of $1.20,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.40,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)   0.15
B)   0.375
C)   2.5
D)   2.60E) A) and B)
F) C) and D)

Question 12

The value of the price elasticity of demand for a good will be relatively large when

Accepted Answer

A)   there are no good substitutes available for the good.
B)   the time period in question is relatively short.
C)   the good is a luxury rather than a necessity.
D)   All of the above are correct.E) A) and D)
F) A) and C)

Question 13

Price elasticity of demand along a linear,downward-sloping demand curve increases as price falls.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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

Accepted Answer

A) True 
 B)False

Question 16

Along the elastic portion of a linear demand curve,total revenue rises as price rises.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)   natural gas
B)   doctor's visits
C)   hamburgers
D)   boatsE) C) and D)
F) A) and D)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

If the price elasticity of demand for a good is 6,then a 3 percent decrease in price results in

Accepted Answer

A)   a 20 percent increase in the quantity demanded.
B)   an 18 percent increase in the quantity demanded.
C)   a 2 percent increase in the quantity demanded.
D)   a 1.8 percent increase in the quantity demanded.E) All of the above
F) C) and D)

Question 20

If a 15% change in price results in a 20% change in quantity supplied,then the price elasticity of supply is about

Accepted Answer

A)   1.33,and supply is elastic.
B)   1.33,and supply is inelastic.
C)   0.75,and supply is elastic.
D)   0.75,and supply is inelastic.E) A) and B)
F) None of the above

Exam 5: Elasticity and Its Application

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

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Price elasticity of demand along a linear,downward-sloping demand curve increases as price falls.

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

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Figure 5-3 -Refer to Figure 5-3.Which demand curve is perfectly elastic?

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

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At a price of $1.20,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.40,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is about

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Figure 5-16 -Refer to Figure 5-16.Using the midpoint method,what is the price elasticity of supply between point A and point B?

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

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

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Along the elastic portion of a linear demand curve,total revenue rises as price rises.

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

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Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,between prices of $48 and $54,price elasticity of demand is about

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Figure 5-16 -Refer to Figure 5-16.If,holding the supply curve fixed,there were an increase in demand that caused the equilibrium price to increase from $6 to $8,then sellers' total revenue would

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If the cross-price elasticity of two goods is negative,then the two goods are

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Figure 5-18 -Refer to Figure 5-18.Which supply curve is most likely relevant over a very long period of time?

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Table 5-2 -Refer to Table 5-2.Using the midpoint method,if the price falls from $60 to $40,the price elasticity of demand is

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If the price elasticity of demand for a good is 6,then a 3 percent decrease in price results in

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The value of the price elasticity of demand for a good will be relatively large when

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If a 15% change in price results in a 20% change in quantity supplied,then the price elasticity of supply is about

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How does total revenue change as one moves downward and to the right along a linear demand curve?

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