Question 1

Refer to the information provided in Figure 5.4 below to answer the questions that follow.  Figure 5.4
-Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If a store reduces the price of a milkshake from P3 to P4, its total revenue will

Accepted Answer

A)   increase.
B)   decrease.
C)   remain constant.
D)   either increase or decrease.E) B) and C)
F) A) and B)

Question 2

Suppose a 10% increase in the price of steak reduces the consumption of steak by 30%. Such a price rise will induce households to spend

Accepted Answer

A)   less of their income on steak.
B)   more of their income on steak.
C)   the same amount on steak as before.
D)   more on products that are complementary with steak.E) A) and B)
F) All of the above

Question 3

Refer to the information provided in Figure 5.3 below to answer the questions that follow.  Figure 5.3
-Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger is increased from $8 to $10, the price elasticity of demand equals ________ and demand is ________.

Accepted Answer

A)   4.5; elastic
B)   -0.5; inelastic
C)   -4.5; elastic
D)   -9.0; inelasticE) A) and B)
F) B) and C)

Question 4

A perfectly price elastic supply curve will be a(n)  ________ line.

Accepted Answer

A)   horizontal
B)   vertical
C)   upward sloping
D)   downward slopingE) None of the above
F) B) and D)

Question 5

If income increases by 10% and, in response, the quantity of housing demanded increases by 7%, then the income elasticity of demand for housing is

Accepted Answer

A)   -1.
B)   -0.7.
C)   0.7.
D)   1.43.E) None of the above
F) All of the above

Question 6

Demand is more elastic for an item which represents a relatively large part of a person's total budget.

Accepted Answer

A) True 
 B)False

Question 7

Refer to the information provided in Figure 5.2 below to answer the questions that follow.  Figure 5.2
-Refer to Figure 5.2. If the price of a hamburger is increased from $6 to $8, the price elasticity of demand equals ________. Use the midpoint formula.

Accepted Answer

A)   -0.24
B)   -1.0
C)   -1.4
D)   -2.0E) A) and B)
F) A) and C)

Question 8

The income elasticity of demand for education is 3.5. Thus, a 4% increase in income will

Accepted Answer

A)   decrease the quantity of education demanded by 3.5%.
B)   decrease the quantity of education demanded by 14%.
C)   increase the quantity of education demanded by 4%.
D)   increase the quantity of education demanded by 14%.E) B) and C)
F) A) and D)

Question 9

A firm is currently producing in the inelastic portion of its demand curve. What course of action do you recommend for it, assuming it wants to raise revenue?

Accepted Answer

A)   Continue producing at the current output level, because it maximizes its total revenue by producing in the inelastic portion of its demand curve.
B)   Reduce price, because if it reduces price and demand is inelastic, total revenue will increase.
C)   Increase price, because if it increases price and demand is inelastic, total revenue will increase.
D)   Continue selling at the same price, but increase the amount it produces.E) C) and D)
F) B) and D)

Question 10

Refer to the information provided in Figure 5.6 below to answer the question that follows.  Figure 5.6
-Refer to Figure 5.6. The market is initially in equilibrium at Point A and supply shifts from S1 to S2. Which of the following statements is true?

Accepted Answer

A)   Price will still serve as a rationing device causing quantity supplied to exceed 12 thousand pizzas.
B)   There is no need for price to serve as a rationing device in this case because the new equilibrium quantity exceeds the original equilibrium quantity.
C)   Price will still serve as a rationing device causing quantity demanded to fall from 12 to 10 thousand pizzas.
D)   The market cannot move to a new equilibrium until there is also a change in demand.E) B) and D)
F) B) and C)

Question 11

Refer to the information provided in Figure 5.3 below to answer the questions that follow.  Figure 5.3
-Refer to Figure 5.3. Using the midpoint formula, if the price of a gardenburger is decreased from $7 to $6, the price elasticity of demand equals ________, and the decrease results in a(n)  ________ in total revenue.

Accepted Answer

A)   -.13; decrease
B)   -.69; increase
C)   -1.44; increase
D)   -13; increaseE) None of the above
F) B) and D)

Question 12

The price elasticity of demand is generally negative to reflect the indirect relationship between the quantity demanded of a good and its price.

Accepted Answer

A) True 
 B)False

Question 13

The determinants of elasticity include

Accepted Answer

A)   availability of substitutes.
B)   price relative to income.
C)   time.
D)   all of the aboveE) A) and D)
F) None of the above

Question 14

A perfectly price elastic demand curve will be a ________ line.

Accepted Answer

A)   horizontal
B)   vertical
C)   positively sloped
D)   negatively slopedE) A) and C)
F) A) and D)

Question 15

The cross-price elasticity of demand between good X and good Y is 0.5. Given this information, which of the following statements is true?

Accepted Answer

A)   The demand for goods X and Y is inelastic.
B)   Goods X and Y are substitutes.
C)   Goods X and Y are complements.
D)   The demand for goods X and Y is income inelastic.E) B) and D)
F) B) and C)

Question 16

A government wants to reduce electricity consumption by 10%. The price elasticity of demand for electricity is -5. The government must ________ the price of electricity by ________.

Accepted Answer

A)   raise; 2.0%
B)   raise; 0.5%
C)   raise; 1.25%
D)   lower; 0.5%E) C) and D)
F) None of the above

Question 17

In order to discourage consumers from eating unhealthy fast food, the government is considering placing a tax on all fast food sales. Which of the following statements is true?

Accepted Answer

A)   Given the numerous alternatives, consumers' demand for fast food is relatively elastic and the tax will likely work to discourage fast food consumption.
B)   The tax on fast food will likely raise considerable revenue but will be unlikely to reduce the consumption of fast food by consumers.
C)   The tax on fast food will likely increase the demand for home cooked meals.
D)   Both A and C are true.E) All of the above
F) C) and D)

Question 18

When the slope of a demand curve is constant, price elasticity of demand is constant as well.

Accepted Answer

A) True 
 B)False

Question 19

If government officials are mainly interested in generating tax revenue, then they should tax goods for which demand is price elastic.

Accepted Answer

A) True 
 B)False

Question 20

A demand curve with continuously changing slope over all quantity values will always have a constant price elasticity of demand.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity

A government wants to reduce electricity consumption by 10%. The price elasticity of demand for electricity is -5. The government must the price of electricity by .

Correct Answer
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The determinants of elasticity include

Correct Answer
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Refer to the information provided in Figure 5.2 below to answer the questions that follow. Figure 5.2 -Refer to Figure 5.2. If the price of a hamburger is increased from $6 to $8, the price elasticity of demand equals ________. Use the midpoint formula.

Correct Answer
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A firm is currently producing in the inelastic portion of its demand curve. What course of action do you recommend for it, assuming it wants to raise revenue?

Correct Answer
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If income increases by 10% and, in response, the quantity of housing demanded increases by 7%, then the income elasticity of demand for housing is

Correct Answer
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When the slope of a demand curve is constant, price elasticity of demand is constant as well.

Correct Answer
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Demand is more elastic for an item which represents a relatively large part of a person's total budget.

Correct Answer
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In order to discourage consumers from eating unhealthy fast food, the government is considering placing a tax on all fast food sales. Which of the following statements is true?

Correct Answer
verified

The price elasticity of demand is generally negative to reflect the indirect relationship between the quantity demanded of a good and its price.

Correct Answer
verified

Suppose a 10% increase in the price of steak reduces the consumption of steak by 30%. Such a price rise will induce households to spend

Correct Answer
verified

The cross-price elasticity of demand between good X and good Y is 0.5. Given this information, which of the following statements is true?

Correct Answer
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A perfectly price elastic demand curve will be a ________ line.

Correct Answer
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A demand curve with continuously changing slope over all quantity values will always have a constant price elasticity of demand.

Correct Answer
verified

The income elasticity of demand for education is 3.5. Thus, a 4% increase in income will

Correct Answer
verified

Refer to the information provided in Figure 5.3 below to answer the questions that follow. Figure 5.3 -Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger is increased from $8 to $10, the price elasticity of demand equals and demand is .

Correct Answer
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Refer to the information provided in Figure 5.4 below to answer the questions that follow. Figure 5.4 -Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If a store reduces the price of a milkshake from P3 to P4, its total revenue will

Correct Answer
verified

Refer to the information provided in Figure 5.6 below to answer the question that follows. Figure 5.6 -Refer to Figure 5.6. The market is initially in equilibrium at Point A and supply shifts from S1 to S2. Which of the following statements is true?

Correct Answer
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A perfectly price elastic supply curve will be a(n) ________ line.

Correct Answer
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Correct Answer
verified

If government officials are mainly interested in generating tax revenue, then they should tax goods for which demand is price elastic.

Correct Answer
verified

Exam 5: Elasticity

A government wants to reduce electricity consumption by 10%. The price elasticity of demand for electricity is -5. The government must ________ the price of electricity by ________.

Correct AnswerverifiedShow Answer

The determinants of elasticity include

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 5.2 below to answer the questions that follow. Figure 5.2 -Refer to Figure 5.2. If the price of a hamburger is increased from $6 to $8, the price elasticity of demand equals ________. Use the midpoint formula.

Correct AnswerverifiedShow Answer

A firm is currently producing in the inelastic portion of its demand curve. What course of action do you recommend for it, assuming it wants to raise revenue?

Correct AnswerverifiedShow Answer

If income increases by 10% and, in response, the quantity of housing demanded increases by 7%, then the income elasticity of demand for housing is

Correct AnswerverifiedShow Answer

When the slope of a demand curve is constant, price elasticity of demand is constant as well.

Correct AnswerverifiedShow Answer

Demand is more elastic for an item which represents a relatively large part of a person's total budget.

Correct AnswerverifiedShow Answer

In order to discourage consumers from eating unhealthy fast food, the government is considering placing a tax on all fast food sales. Which of the following statements is true?

Correct AnswerverifiedShow Answer

The price elasticity of demand is generally negative to reflect the indirect relationship between the quantity demanded of a good and its price.

Correct AnswerverifiedShow Answer

Suppose a 10% increase in the price of steak reduces the consumption of steak by 30%. Such a price rise will induce households to spend

Correct AnswerverifiedShow Answer

The cross-price elasticity of demand between good X and good Y is 0.5. Given this information, which of the following statements is true?

Correct AnswerverifiedShow Answer

A perfectly price elastic demand curve will be a ________ line.

Correct AnswerverifiedShow Answer

A demand curve with continuously changing slope over all quantity values will always have a constant price elasticity of demand.

Correct AnswerverifiedShow Answer

The income elasticity of demand for education is 3.5. Thus, a 4% increase in income will

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 5.3 below to answer the questions that follow. Figure 5.3 -Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger is increased from $8 to $10, the price elasticity of demand equals ________ and demand is ________.

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 5.4 below to answer the questions that follow. Figure 5.4 -Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If a store reduces the price of a milkshake from P3 to P4, its total revenue will

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 5.6 below to answer the question that follows. Figure 5.6 -Refer to Figure 5.6. The market is initially in equilibrium at Point A and supply shifts from S1 to S2. Which of the following statements is true?

Correct AnswerverifiedShow Answer

A perfectly price elastic supply curve will be a(n) ________ line.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If government officials are mainly interested in generating tax revenue, then they should tax goods for which demand is price elastic.

Correct AnswerverifiedShow Answer

A government wants to reduce electricity consumption by 10%. The price elasticity of demand for electricity is -5. The government must the price of electricity by .

Correct Answer
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Refer to the information provided in Figure 5.3 below to answer the questions that follow. Figure 5.3 -Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger is increased from $8 to $10, the price elasticity of demand equals and demand is .

Correct Answer
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