Question 1

Last year,Sheila bought 6 pairs of shoes when her income was $40,000.This year,her income is $52,000 and she purchased 7 pairs of shoes.Holding other factors constant and using the midpoint method,it follows that Sheila's income elasticity of demand is about

Accepted Answer

A)   0.59,and Sheila regards shoes as an inferior good.
B)   0.59,and Sheila regards shoes as a normal good.
C)   1.7,and Sheila regards shoes as an inferior good.
D)   1.7,and Sheila regards shoes as a normal good.E) A) and B)
F) None of the above

Question 2

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.Total consumer spending on milk will

Accepted Answer

A)   increase,and total consumer spending on beef will increase.
B)   increase,and total consumer spending on beef will decrease.
C)   decrease,and total consumer spending on beef will increase.
D)   decrease,and total consumer spending on beef will decrease.E) B) and D)
F) B) and C)

Question 3

Last year,Joan bought 50 pounds of hamburger when her household's income was $40,000.This year,her household income was only $30,000 and Joan bought 60 pounds of hamburger.All else constant,Joan's income elasticity of demand for hamburger is

Accepted Answer

A)   positive,so Joan considers hamburger to be an inferior good.
B)   positive,so Joan considers hamburger to be a normal good and a necessity.
C)   negative,so Joan considers hamburger to be an inferior good.
D)   negative,so Joan considers hamburger to be a normal good but not a necessity.E) A) and B)
F) B) and C)

Question 4

For Susie,a 7 percent increase in income results in a 12 percent increase in the quantity demanded of pizza.For Susie,the income elasticity of demand for pizza is

Accepted Answer

A)   negative,and pizza is an normal good.
B)   negative,and pizza is a inferior good.
C)   positive,and pizza is an inferior good.
D)   positive,and pizza is a normal good.E) None of the above
F) All of the above

Question 5

Figure 5-5 
-Refer to Figure 5-5.Using the midpoint method,between prices of $30 and $36,price elasticity of demand is about

Accepted Answer

A)   0.5.
B)   0.82.
C)   1.22.
D)   2.E) B) and C)
F) A) and B)

Question 6

Figure 5-15 
-Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between point B and point C?

Accepted Answer

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

Question 7

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 8

If demand is perfectly inelastic,the demand curve is vertical,and the price elasticity of demand equals 0.

Accepted Answer

A) True 
 B)False

Question 9

Figure 5-6 
-Refer to Figure 5-6.Which of the following price changes would result in no change in sellers' total revenue?

Accepted Answer

A)   The price increases from $6 to $9.
B)   The price increases from $9 to $15.
C)   The price decreases from $12 to $9.
D)   The price decreases from $9 to $5.E) B) and C)
F) A) and B)

Question 10

OPEC successfully raised the world price of oil in the 1970s and early 1980s,primarily due to

Accepted Answer

A)   an inelastic demand for oil and a reduction in the amount of oil supplied.
B)   a reduction in the amount of oil supplied and a world-wide oil embargo.
C)   a world-wide oil embargo and an elastic demand for oil.
D)   a reduction in the amount of oil supplied and an elastic demand for oil.E) A) and B)
F) B) and C)

Question 11

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) All of the above

Question 12

If a 40% change in price results in a 25% change in quantity supplied,then the price elasticity of supply is

Accepted Answer

A)   0.63,and supply is elastic.
B)   0.63,and supply is inelastic.
C)   1.60,and supply is elastic.
D)   1.60,and supply is inelastic.E) A) and B)
F) A) and C)

Question 13

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

Accepted Answer

A)   all inferior goods
B)   all normal goods
C)   goods for which there are many complements
D)   luxuriesE) None of the above
F) All of the above

Question 14

Table 5-1
 
-Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

Accepted Answer

A)   A is a luxury and B is a necessity.
B)   A is a good several years after a price increase,and B is that same good several days after the price increase.
C)   A is a Kit Kat bar and B is candy.
D)   A has fewer substitutes than B.E) A) and B)
F) C) and D)

Question 15

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

Question 16

When demand is elastic,a decrease 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 B)
F) A) and C)

Question 17

Suppose good X has a negative income elasticity of demand.This implies that good X is

Accepted Answer

A)   a normal good.
B)   a necessity.
C)   an inferior good.
D)   a luxury.E) A) and B)
F) B) and C)

Question 18

Knowing that the demand for wheat is inelastic,if all farmers voluntarily did not plant wheat on 10 percent of their land,then

Accepted Answer

A)   consumers of wheat would buy more wheat.
B)   wheat farmers would suffer a reduction in their total revenue.
C)   wheat farmers would experience an increase in their total revenue.
D)   the demand for wheat would decrease.E) B) and C)
F) All of the above

Question 19

Figure 5-16 
-Refer to Figure 5-16.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) None of the above

Question 20

Which of the following is likely to have the most price inelastic demand?

Accepted Answer

A)   white chocolate chip with macadamia nut cookies
B)   Mrs.Field's chocolate chip cookies
C)   milk chocolate chip cookies
D)   cookiesE) None of the above
F) A) and C)

Exam 5: Elasticity and Its Application

Which of the following is likely to have the most price inelastic demand?

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Suppose good X has a negative income elasticity of demand.This implies that good X is

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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

Correct AnswerverifiedShow Answer

When demand is elastic,a decrease in price will cause

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Knowing that the demand for wheat is inelastic,if all farmers voluntarily did not plant wheat on 10 percent of their land,then

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Figure 5-6 -Refer to Figure 5-6.Which of the following price changes would result in no change in sellers' total revenue?

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Last year,Sheila bought 6 pairs of shoes when her income was $40,000.This year,her income is $52,000 and she purchased 7 pairs of shoes.Holding other factors constant and using the midpoint method,it follows that Sheila's income elasticity of demand is about

Correct AnswerverifiedShow Answer

For Susie,a 7 percent increase in income results in a 12 percent increase in the quantity demanded of pizza.For Susie,the income elasticity of demand for pizza is

Correct AnswerverifiedShow Answer

OPEC successfully raised the world price of oil in the 1970s and early 1980s,primarily due to

Correct AnswerverifiedShow Answer

Figure 5-15 -Refer to Figure 5-15.Using the midpoint method,what is the price elasticity of supply between point B and point C?

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For which of the following types of goods would the income elasticity of demand be positive and relatively large?

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If a 40% change in price results in a 25% change in quantity supplied,then the price elasticity of supply is

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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.Total consumer spending on milk will

Correct AnswerverifiedShow Answer

Last year,Joan bought 50 pounds of hamburger when her household's income was $40,000.This year,her household income was only $30,000 and Joan bought 60 pounds of hamburger.All else constant,Joan's income elasticity of demand for hamburger is

Correct AnswerverifiedShow Answer

If demand is perfectly inelastic,the demand curve is vertical,and the price elasticity of demand equals 0.

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Table 5-1 -Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

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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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Figure 5-16 -Refer to Figure 5-16.Which supply curve is most likely relevant over a very long period of time?

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Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,between prices of $30 and $36,price elasticity of demand is about

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