Question 1

Suppose a producer is able to separate customers into two groups,one having an inelastic demand and the other having an elastic demand.If the producer's objective is to increase total revenue,he should

Accepted Answer

A)  increase the price charged to customers with the elastic demand and decrease the price charged to customers with the inelastic demand.
B)  decrease the price charged to customers with the elastic demand and increase the price charged to customers with the inelastic demand.
C)  decrease the price to both groups of customers.
D)  increase the price for both groups of customers.E) B) and D)
F) A) and C)

Question 2

Figure 5-10 
-Refer to Figure 5-10.An increase in price from $20 to $30 would

Accepted Answer

A)  increase total revenue by $2,000.
B)  decrease total revenue by $2,000.
C)  increase total revenue by $1,000.
D)  decrease total revenue by $1,000.E) None of the above
F) C) and D)

Question 3

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 4

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good.The income elasticity of demand for the good is

Accepted Answer

A)  negative,and the good is an inferior good.
B)  negative,and the good is a normal good.
C)  positive,and the good is an inferior good.
D)  positive,and the good is a normal good.E) A) and D)
F) B) and C)

Question 5

Some firms eventually experience problems with their capacity to produce output as their output levels increase.For these firms,

Accepted Answer

A)  market power is substantial.
B)  supply is perfectly inelastic.
C)  supply is more elastic at low levels of output and less elastic at high levels of output.
D)  supply is less elastic at low levels of output and more elastic at high levels of output.E) A) and B)
F) A) and C)

Question 6

If the price elasticity of demand is equal to 0,then demand is unit elastic.

Accepted Answer

A) True 
 B)False

Question 7

Consider the following pairs of goods.For which of the two goods would you expect the demand to be more price elastic?
 Why?
a.water or diamonds
b.insulin or nasal decongestant spray
c.food in general or breakfast cereal
d.gasoline over the course of a week or gasoline over the course of a year
e.personal computers or Sony personal computers

Accepted Answer

a.
Diamonds are luxuries,and water is a...

Question 8

A key determinant of the price elasticity of supply is the

Accepted Answer

A)  number of close substitutes for the good in question.
B)  extent to which buyers alter their quantities demanded in response to changes in prices.
C)  length of the time period.
D)  extent to which buyers alter their quantities demanded in response to changes in their incomes.E) A) and D)
F) B) and C)

Question 9

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 C)

Question 10

Good news for farming can be bad news for farmers because the

Accepted Answer

A)  supply curve for an individual farmer is usually perfectly elastic.
B)  supply curve for an individual farmer is usually perfectly inelastic.
C)  demand for basic foodstuffs is usually inelastic,meaning that factors that shift supply to the right decrease total revenues to sellers.
D)  demand for basic foodstuffs is usually elastic,meaning that factors that shift supply to the right increase total revenues to sellers.E) A) and B)
F) None of the above

Question 11

Table 5-4   Price  Total  Revenue $10$100$12$108$14$112$16$112\begin{array} { | c | c | } \hline 	ext { Price } & \begin{array} { c } 	ext { Total } \	ext { Revenue }\end{array} \\hline \$ 10 & \$ 100 \\hline \$ 12 & \$ 108 \\hline \$ 14 & \$ 112 \\hline \$ 16 & \$ 112 \\hline\end{array} Price $10$12$14$16​ Total  Revenue ​$100$108$112$112​​ 
-Refer to Table 5-4.Demand is unit elastic when quantity demanded changes from

Accepted Answer

A)  10 to 9.
B)  9 to 8.
C)  8 to 7.
D)  There is not enough information given to determine the correct answer. E) A) and B)
F) B) and D)

Question 12

Suppose that quantity demand falls by 30% as a result of a 5% increase in price.The price elasticity of demand for this good is

Accepted Answer

A)  inelastic and equal to 6.
B)  elastic and equal to 6.
C)  inelastic and equal to 0.17.
D)  elastic and equal to 0.17.E) All of the above
F) A) and D)

Question 13

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

Accepted Answer

A) True 
 B)False

Question 14

For a good that is a luxury,demand

Accepted Answer

A)  tends to be inelastic.
B)  tends to be elastic.
C)  has unit elasticity.
D)  cannot be represented by a demand curve in the usual way.E) A) and C)
F) A) and D)

Question 15

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Accepted Answer

A) True 
 B)False

Question 16

If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result,then the price elasticity of demand is 3.

Accepted Answer

A) True 
 B)False

Question 17

Suppose that when the price of good X falls from $10 to $8,the quantity demanded of good Y rises from 20 units to 25 units.Using the midpoint method,the cross-price elasticity of demand is

Accepted Answer

A)  -1.0,and X and Y are complements.
B)  -1.0,and X and Y are substitutes.
C)  1.0,and X and Y are complements.
D)  1.0,and X and Y are substitutes.E) A) and D)
F) A) and C)

Question 18

If the price elasticity of supply is 1.2,and price increased by 5%,quantity supplied would

Accepted Answer

A)  increase by 4.2%.
B)  increase by 6%.
C)  decrease by 4.2%.
D)  decrease by 6%.E) None of the above
F) All of the above

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Some firms eventually experience problems with their capacity to produce output as their output levels increase.For these firms,

Correct Answer
verified

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

Correct Answer
verified

If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result,then the price elasticity of demand is 3.

Correct Answer
verified

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

Correct Answer
verified

Suppose that quantity demand falls by 30% as a result of a 5% increase in price.The price elasticity of demand for this good is

Correct Answer
verified

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Correct Answer
verified

Correct Answer
verified
a.
Diamonds are luxuries,and water is a...
View Answer

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good.The income elasticity of demand for the good is

Correct Answer
verified

Suppose that when the price of good X falls from $10 to $8,the quantity demanded of good Y rises from 20 units to 25 units.Using the midpoint method,the cross-price elasticity of demand is

Correct Answer
verified

A key determinant of the price elasticity of supply is the

Correct Answer
verified

If the price elasticity of supply is 1.2,and price increased by 5%,quantity supplied would

Correct Answer
verified

If the price elasticity of demand is equal to 0,then demand is unit elastic.

Correct Answer
verified

Good news for farming can be bad news for farmers because the

Correct Answer
verified

Suppose a producer is able to separate customers into two groups,one having an inelastic demand and the other having an elastic demand.If the producer's objective is to increase total revenue,he should

Correct Answer
verified

Figure 5-10 -Refer to Figure 5-10.An increase in price from $20 to $30 would

Correct Answer
verified

For a good that is a luxury,demand

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

Exam 5: Elasticity and Its Application

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Some firms eventually experience problems with their capacity to produce output as their output levels increase.For these firms,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result,then the price elasticity of demand is 3.

Correct AnswerverifiedShow Answer

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

Correct AnswerverifiedShow Answer

Suppose that quantity demand falls by 30% as a result of a 5% increase in price.The price elasticity of demand for this good is

Correct AnswerverifiedShow Answer

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Diamonds are luxuries,and water is a...View AnswerShow Answer

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good.The income elasticity of demand for the good is

Correct AnswerverifiedShow Answer

Suppose that when the price of good X falls from $10 to $8,the quantity demanded of good Y rises from 20 units to 25 units.Using the midpoint method,the cross-price elasticity of demand is

Correct AnswerverifiedShow Answer

A key determinant of the price elasticity of supply is the

Correct AnswerverifiedShow Answer

If the price elasticity of supply is 1.2,and price increased by 5%,quantity supplied would

Correct AnswerverifiedShow Answer

If the price elasticity of demand is equal to 0,then demand is unit elastic.

Correct AnswerverifiedShow Answer

Good news for farming can be bad news for farmers because the

Correct AnswerverifiedShow Answer

Suppose a producer is able to separate customers into two groups,one having an inelastic demand and the other having an elastic demand.If the producer's objective is to increase total revenue,he should

Correct AnswerverifiedShow Answer

Figure 5-10 -Refer to Figure 5-10.An increase in price from $20 to $30 would

Correct AnswerverifiedShow Answer

For a good that is a luxury,demand

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

Correct Answer
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Correct Answer
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a.
Diamonds are luxuries,and water is a...
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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