Question 1

Last month,sellers of good Y took in $100 in total revenue on sales of 50 units of good Y.This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y.At the same time,the price of good X stayed the same,but sales of good X increased from 20 units to 40 units.We can conclude that goods X and Y are

Accepted Answer

A)   substitutes,and have a cross-price elasticity of 0.60.
B)   complements,and have a cross-price elasticity of 0.60.
C)   substitutes,and have a cross-price elasticity of 1.67.
D)   complements,and have a cross-price elasticity of 1.67.E) A) and B)
F) A) and C)

Question 2

Table 5-4
 
-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) All of the above
F) None of the above

Question 3

OPEC failed to maintain a high price of oil in the long run,partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 4

You are in charge of the local city-owned golf course.You need to increase the revenue generated by the golf course in order to meet expenses.The mayor advises you to increase the price of a round of golf.The city manager recommends reducing the price of a round of golf.You realize that

Accepted Answer

A)   the mayor thinks demand is elastic,and the city manager thinks demand is inelastic.
B)   both the mayor and the city manager think that demand is elastic.
C)   both the mayor and the city manager think that demand is inelastic.
D)   the mayor thinks demand is inelastic,and the city manager thinks demand is elastic.E) A) and B)
F) A) and C)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Accepted Answer

A) True 
 B)False  True

Question 7

Scenario 5-3
Milk has an inelastic demand and beef has an elastic demand.Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-3.The equilibrium quantity will

Accepted Answer

A)   increase in the milk market and increase in the beef market.
B)   increase in the milk market and decrease in the beef market.
C)   decrease in the milk market and increase in the beef market.
D)   decrease in the milk market and decrease in the beef market.E) All of the above
F) C) and D)

Question 8

Get Smart University is contemplating an increase in tuition to enhance revenue.If GSU feels that raising tuition would enhance revenue,it is

Accepted Answer

A)   ignoring the law of demand.
B)   assuming that the demand for university education is elastic.
C)   assuming that the demand for university education is inelastic.
D)   assuming that the supply of university education is elastic.E) A) and B)
F) B) and D)

Question 9

A perfectly elastic demand implies that

Accepted Answer

A)   buyers will not respond to any change in price.
B)   any rise in price above that represented by the demand curve will result in a quantity demanded of zero.
C)   quantity demanded and price change by the same percent as we move along the demand curve.
D)   price will rise by an infinite amount when there is a change in quantity demanded.E) A) and B)
F) All of the above B

Question 10

When demand is elastic,an increase in price will cause

Accepted Answer

A)   an increase in total revenue.
B)   a decrease in total revenue.
C)   no change in total revenue,but an increase in quantity demanded.
D)   no change in total revenue,but a decrease in quantity demanded.E) A) and D)
F) C) and D)

Question 11

The demand for Rice Krispies is more elastic than the demand for cereal in general.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Accepted Answer

A)   -1.3
B)   0
C)   0.2
D)   1.4E) C) and D)
F) All of the above

Question 13

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price,and elastic if the quantity supplied responds only slightly to price.

Accepted Answer

A) True 
 B)False

Question 14

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,

Accepted Answer

A)   the cross-price elasticity of demand is -1.0,and X and Y are complements.
B)   the cross-price elasticity of demand is -1.0,and X and Y are substitutes.
C)   the cross-price elasticity of demand is 1.0,and X and Y are complements.
D)   the cross-price elasticity of demand is 1.0,and X and Y are substitutes.E) A) and C)
F) B) and C)

Question 15

When consumers face rising gasoline prices,they typically

Accepted Answer

A)   reduce their quantity demanded more in the long run than in the short run.
B)   reduce their quantity demanded more in the short run than in the long run.
C)   do not reduce their quantity demanded in the short run or the long run.
D)   increase their quantity demanded in the short run but reduce their quantity demanded in the long run.E) C) and D)
F) B) and D)

Question 16

As price elasticity of supply increases,the supply curve

Accepted Answer

A)   becomes flatter.
B)   becomes steeper.
C)   becomes downward sloping.
D)   shifts to the right.E) A) and D)
F) B) and D)

Question 17

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 0.75.Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Accepted Answer

A)   a 7.5 increase in the price of the good
B)   a 13.33 percent increase in the price of the good
C)   an increase in the price of the good from $7.50 to $10
D)   an increase in the price of the good from $10 to $17.50E) A) and C)
F) B) and C)

Question 18

For a horizontal 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) C) and D)
F) All of the above

Question 19

Figure 5-16 
-Refer to Figure 5-16.Which supply curve represents perfectly inelastic supply?

Accepted Answer

A)   S1
B)   S2
C)   S3
D)   None of the supply curves is perfectly inelastic.E) C) and D)
F) None of the above A

Question 20

Holding all other factors constant and using the midpoint method,if a pencil manufacturer increases production by 20 percent when the market price of pencils increases from $0.50 to $0.60,then supply is

Accepted Answer

A)   inelastic,since the price elasticity of supply is equal to .91.
B)   inelastic,since the price elasticity of supply is equal to 1.1.
C)   elastic,since the price elasticity of supply is equal to 0.91.
D)   elastic,since the price elasticity of supply is equal to 1.1.E) A) and B)
F) A) and C)

Exam 5: Elasticity and Its Application

Correct Answer
verified

Table 5-4 -Refer to Table 5-4.Demand is unit elastic when quantity demanded changes from

Correct Answer
verified

OPEC failed to maintain a high price of oil in the long run,partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

Correct Answer
verified

You are in charge of the local city-owned golf course.You need to increase the revenue generated by the golf course in order to meet expenses.The mayor advises you to increase the price of a round of golf.The city manager recommends reducing the price of a round of golf.You realize that

Correct Answer
verified

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

Correct Answer
verified

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Correct Answer
verified
True

Scenario 5-3 Milk has an inelastic demand and beef has an elastic demand.Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-3.The equilibrium quantity will

Correct Answer
verified

Get Smart University is contemplating an increase in tuition to enhance revenue.If GSU feels that raising tuition would enhance revenue,it is

Correct Answer
verified

A perfectly elastic demand implies that

Correct Answer
verified
B

When demand is elastic,an increase in price will cause

Correct Answer
verified

The demand for Rice Krispies is more elastic than the demand for cereal in general.

Correct Answer
verified

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Correct Answer
verified

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price,and elastic if the quantity supplied responds only slightly to price.

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,

Correct Answer
verified

When consumers face rising gasoline prices,they typically

Correct Answer
verified

As price elasticity of supply increases,the supply curve

Correct Answer
verified

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 0.75.Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Correct Answer
verified

For a horizontal demand curve,

Correct Answer
verified

Figure 5-16 -Refer to Figure 5-16.Which supply curve represents perfectly inelastic supply?

Correct Answer
verified
A

Holding all other factors constant and using the midpoint method,if a pencil manufacturer increases production by 20 percent when the market price of pencils increases from $0.50 to $0.60,then supply is

Correct Answer
verified

Exam 5: Elasticity and Its Application

Correct AnswerverifiedShow Answer

Table 5-4 -Refer to Table 5-4.Demand is unit elastic when quantity demanded changes from

Correct AnswerverifiedShow Answer

OPEC failed to maintain a high price of oil in the long run,partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

Correct AnswerverifiedShow Answer

You are in charge of the local city-owned golf course.You need to increase the revenue generated by the golf course in order to meet expenses.The mayor advises you to increase the price of a round of golf.The city manager recommends reducing the price of a round of golf.You realize that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Correct AnswerverifiedTrue

Scenario 5-3 Milk has an inelastic demand and beef has an elastic demand.Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-3.The equilibrium quantity will

Correct AnswerverifiedShow Answer

Get Smart University is contemplating an increase in tuition to enhance revenue.If GSU feels that raising tuition would enhance revenue,it is

Correct AnswerverifiedShow Answer

A perfectly elastic demand implies that

Correct AnswerverifiedB

When demand is elastic,an increase in price will cause

Correct AnswerverifiedShow Answer

The demand for Rice Krispies is more elastic than the demand for cereal in general.

Correct AnswerverifiedShow Answer

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Correct AnswerverifiedShow Answer

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price,and elastic if the quantity supplied responds only slightly to price.

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,

Correct AnswerverifiedShow Answer

When consumers face rising gasoline prices,they typically

Correct AnswerverifiedShow Answer

As price elasticity of supply increases,the supply curve

Correct AnswerverifiedShow Answer

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 0.75.Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Correct AnswerverifiedShow Answer

For a horizontal demand curve,

Correct AnswerverifiedShow Answer

Figure 5-16 -Refer to Figure 5-16.Which supply curve represents perfectly inelastic supply?

Correct AnswerverifiedA

Holding all other factors constant and using the midpoint method,if a pencil manufacturer increases production by 20 percent when the market price of pencils increases from $0.50 to $0.60,then supply is

Correct AnswerverifiedShow Answer

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True

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B

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A

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