Question 1

The demand for Chocolate Chip Cookie Dough ice cream is likely quite elastic because

Accepted Answer

A)  ice cream must be eaten quickly.
B)  this particular flavor of ice cream is viewed as a necessity by many ice-cream lovers.
C)  the market is broadly defined.
D)  other flavors of ice cream are good substitutes for this particular flavor.E) All of the above
F) A) and B)

Question 2

The midpoint method is used to compute elasticity because it

Accepted Answer

A)  automatically computes a positive number instead of a negative number.
B)  results in an elasticity that is the same as the slope of the demand curve.
C)  gives the same answer regardless of the direction of change.
D)  automatically rounds quantities to the nearest whole unit.E) None of the above
F) All of the above

Question 3

Figure 5-10
 
-Refer to Figure 5-10.The price elasticity of supply between point B and point C,using the midpoint method,is approximately

Accepted Answer

A)  1.44.
B)  1.29.
C)  0.96.
D)  0.78.E) C) and D)
F) A) and B)

Question 4

Your younger sister needs $50 to buy a new bike.She has opened a lemonade stand to make the money she needs.She currently is charging 25 cents per cup,but she wants to adjust her price to earn the $50 faster.If you know that the demand for lemonade is elastic,what is your advice to her?

Accepted Answer

A)  Leave the price at 25 cents and be patient.
B)  Raise the price to increase total revenue.
C)  Lower the price to increase total revenue.
D)  There isn't enough information given to answer this question.E) B) and C)
F) All of the above

Question 5

Figure 5-1
 
-Refer to Figure 5-1.Assume,for the good in question,two specific points on the demand curve are (Q = 2,000,P = $15) and (Q = 2,400,P = $12) .Then which of the following scenarios is possible?

Accepted Answer

A)  Both of these points lie on section C of the demand curve.
B)  The vertical intercept of the demand curve is the point (Q = 0, P = $22) .
C)  The horizontal intercept of the demand curve is the point (Q = 5,000, P = $0) .
D)  Any of these scenarios is possible.E) C) and D)
F) None of the above

Question 6

Other things equal,the demand for a good tends to be more inelastic,the

Accepted Answer

A)  fewer the available substitutes.
B)  longer the time period considered.
C)  more the good is considered a luxury good.
D)  more narrowly defined is the market for the good.E) A) and B)
F) A) and C)

Question 7

The demand for Werthers candy is likely

Accepted Answer

A)  elastic because candy is expensive relative to other snacks.
B)  elastic because there are many close substitutes for Werthers.
C)  elastic because Werthers are regarded as a necessity by many people.
D)  inelastic because it is usually eaten quickly, making the relevant time horizon short.E) C) and D)
F) B) and D)

Question 8

There are very few,if any,good substitutes for motor oil.Therefore,

Accepted Answer

A)  the demand for motor oil would tend to be inelastic.
B)  the demand for motor oil would tend to be elastic.
C)  the demand for motor oil would tend to respond strongly to changes in prices of other goods.
D)  the supply of motor oil would tend to respond strongly to changes in people's tastes for large cars relative to their tastes for small cars.E) A) and D)
F) A) and C)

Question 9

Demand is inelastic if the price elasticity of demand is greater than 1.

Accepted Answer

A) True 
 B)False

Question 10

The difference between slope and elasticity is that

Accepted Answer

A)  slope is a ratio of two changes and elasticity is a ratio of two percentage changes.
B)  slope is a ratio of two percentage changes and elasticity is a ratio of two changes.
C)  slope measures changes in quantity demanded more accurately than elasticity.
D)  none of the above; there is no difference between slope and elasticity.E) None of the above
F) B) and C)

Question 11

Suppose that 50 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 4 percent,the number of candy bars demanded falls to 46.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Accepted Answer

A)  demand for candy bars in this price range is elastic.
B)  demand for candy bars in this price range is inelastic.
C)  demand for candy bars in this price range is unit elastic.
D)  price elasticity of demand for candy bars in this price range is 0.E) A) and B)
F) C) and D)

Question 12

For a vertical demand curve,

Accepted Answer

A)  slope is undefined and price elasticity of demand is equal to 0.
B)  slope is equal to 0 and price elasticity of demand is undefined.
C)  slope and price elasticity of demand both are undefined.
D)  slope and price elasticity of demand both are equal to 0.E) None of the above
F) A) and B)

Question 13

When demand is inelastic the price elasticity of demand is

Accepted Answer

A)  less than 1, and price and total revenue will move in the same direction.
B)  less than 1, and price and total revenue will move in opposite directions.
C)  greater than 1, and price and total revenue will move in the same direction.
D)  greater than 1, and price and total revenue will move in opposite directions.E) A) and B)
F) B) and C)

Question 14

Whether a good is a luxury or necessity depends on

Accepted Answer

A)  the price of the good.
B)  the preferences of the buyer.
C)  the intrinsic properties of the good.
D)  how scarce the good is.E) All of the above
F) B) and C)

Question 15

If a supply curve is horizontal then supply is said to be perfectly elastic and the price elasticity of supply approaches infinity.

Accepted Answer

A) True 
 B)False

Question 16

The local pizza restaurant makes such great bread sticks that consumers do not respond much at all to a change in the price.If the owner is only interested in increasing revenue,he should

Accepted Answer

A)  lower the price of the bread sticks.
B)  leave the price of the bread sticks alone.
C)  raise the price of the bread sticks.
D)  reduce costs.E) A) and B)
F) C) and D)

Question 17

If demand is inelastic,then

Accepted Answer

A)  buyers do not respond much to a change in price.
B)  buyers respond substantially to a change in price, but the response is very slow.
C)  buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes.
D)  the demand curve is very flat.E) A) and B)
F) A) and C)

Question 18

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,she 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)  charge the same price to both groups of customers.
D)  increase the price for both groups of customers.E) A) and B)
F) A) and C)

Question 19

Jean-Paul says that he will spend exactly 75 cents a day on M&Ms,regardless of the price of M&Ms.Jean-Paul's demand for M&Ms is

Accepted Answer

A)  perfectly elastic.
B)  unit elastic.
C)  perfectly inelastic.
D)  None of the above answers is correct.E) A) and B)
F) C) and D)

Question 20

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

Exam 5: Elasticity and Its Applications

The demand for Werthers candy is likely

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When demand is inelastic the price elasticity of demand is

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

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Jean-Paul says that he will spend exactly 75 cents a day on M&Ms,regardless of the price of M&Ms.Jean-Paul's demand for M&Ms is

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The difference between slope and elasticity is that

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Figure 5-1 -Refer to Figure 5-1.Assume,for the good in question,two specific points on the demand curve are (Q = 2,000,P = $15) and (Q = 2,400,P = $12) .Then which of the following scenarios is possible?

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If a supply curve is horizontal then supply is said to be perfectly elastic and the price elasticity of supply approaches infinity.

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There are very few,if any,good substitutes for motor oil.Therefore,

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Figure 5-10 -Refer to Figure 5-10.The price elasticity of supply between point B and point C,using the midpoint method,is approximately

Correct AnswerverifiedShow Answer

Suppose that 50 candy bars are demanded at a particular price.If the price of candy bars rises from that price by 4 percent,the number of candy bars demanded falls to 46.Using the midpoint approach to calculate the price elasticity of demand,it follows that the

Correct AnswerverifiedShow Answer

The local pizza restaurant makes such great bread sticks that consumers do not respond much at all to a change in the price.If the owner is only interested in increasing revenue,he should

Correct AnswerverifiedShow Answer

Other things equal,the demand for a good tends to be more inelastic,the

Correct AnswerverifiedShow Answer

The midpoint method is used to compute elasticity because it

Correct AnswerverifiedShow Answer

Demand is inelastic if the price elasticity of demand is greater than 1.

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Whether a good is a luxury or necessity depends on

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The demand for Chocolate Chip Cookie Dough ice cream is likely quite elastic because

Correct AnswerverifiedShow Answer

Your younger sister needs $50 to buy a new bike.She has opened a lemonade stand to make the money she needs.She currently is charging 25 cents per cup,but she wants to adjust her price to earn the $50 faster.If you know that the demand for lemonade is elastic,what is your advice to her?

Correct AnswerverifiedShow Answer

If demand is inelastic,then

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,she should

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For a vertical demand curve,

Correct AnswerverifiedShow Answer

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