Question 1

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) B) and D)
F) All of the above

Question 2

If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a

Accepted Answer

A)   0.015 percent increase in the quantity demanded.
B)   0.6 percent increase in the quantity demanded.
C)   6 percent increase in the quantity demanded.
D)   66 percent increase in the quantity demanded.E) None of the above
F) A) and B)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by

Accepted Answer

A)   30%.
B)   40%.
C)   60%.
D)   74%.E) None of the above
F) A) and D)

Question 5

For a particular good, a 10 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Accepted Answer

A)   The relevant time horizon is short.
B)   The good is a luxury.
C)   The market for the good is narrowly defined.
D)   There are many close substitutes for this good.E) C) and D)
F) A) and D)

Question 6

Figure 5-3 
-Refer to Figure 5-3. The demand curve representing the demand for a luxury good with several close substitutes is

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) None of the above
F) B) and D)

Question 7

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is

Accepted Answer

A)   elastic, and the price elasticity of supply is 1.74.
B)   elastic, and the price elasticity of supply is 0.57.
C)   inelastic, and the price elasticity of supply is 1.74.
D)   inelastic, and the price elasticity of supply is 0.57.E) A) and C)
F) A) and B)

Question 8

A key determinant of the price elasticity of supply is

Accepted Answer

A)   the ability of sellers to change the price of the good they produce.
B)   the ability of sellers to change the amount of the good they produce.
C)   how responsive buyers are to changes in sellers' prices.
D)   the slope of the demand curve.E) C) and D)
F) B) and D)

Question 9

Table 5-13
Consider the following demand schedule.
 
-Refer to Table 5-13. Using the midpoint method, demand is unit elastic when price changes from

Accepted Answer

The answer of Table 5-13
Consider the following demand schedule.
 
-Refer...

Question 10

Figure 5-3 
-Refer to Figure 5-3. Which demand curve is perfectly elastic?

Accepted Answer

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

Question 11

Scenario 5-4
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-4. The equilibrium quantity will

Accepted Answer

A)   increase in both the aged cheddar cheese and bread markets.
B)   increase in the aged cheddar cheese market and decrease in the bread market.
C)   decrease in the aged cheddar cheese market and increase in the bread market.
D)   decrease in both the aged cheddar cheese and bread markets.E) B) and C)
F) B) and D)

Question 12

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 13

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

Accepted Answer

A)   A is a luxury and B is a necessity.
B)   A is a good after an increase in income and B is that same good after a decrease in income.
C)   A has fewer substitutes than B.
D)   A is a good immediately after a price increase and B is that same good 3 years after the price increase.E) A) and B)
F) All of the above

Question 14

A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each. At a price of $20.00, the t- shirt maker would be willing to supply 100 t-shirts. Using the midpoint method, the price elasticity of supply for t- shirts is about

Accepted Answer

A)   0.37, and supply is elastic.
B)   0.37, and supply is inelastic.
C)   2.71, and supply is elastic.
D)   2.71, and supply is inelastic.E) None of the above
F) All of the above

Question 15

An increase in price causes an increase in total revenue when demand is

Accepted Answer

A)   elastic.
B)   inelastic.
C)   unit elastic.
D)   All of the above are possible.E) B) and C)
F) A) and B)

Question 16

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

Accepted Answer

A)   dental floss
B)   milk
C)   salt
D)   diamond earringsE) C) and D)
F) A) and B)

Question 17

Scenario 5-7
Suppose the demand function for good X is given by:  where  is the quantity demanded of good X,  is the price of good X, and  is the price of good Y, which is related to good X.
-Refer to Scenario 5-7. Using the midpoint method, if the price of good Y is $10 and the price of good X decreases from $5 to $3, what is the price elasticity of demand for good X? Is the demand elastic, unitary elastic, or inelastic?

Accepted Answer

The answer of Scenario 5-7
Suppose the demand function for good...

Question 18

For which of the following goods is the income elasticity of demand likely highest?

Accepted Answer

A)   water
B)   diamonds
C)   hamburgers
D)   housingE) B) and D)
F) None of the above

Question 19

For which of the following goods is the income elasticity of demand likely lowest?

Accepted Answer

A)   water
B)   sapphire pendant necklaces
C)   filet mignon steaks
D)   fresh fruitE) A) and B)
F) All of the above

Question 20

If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

Accepted Answer

A)   a 0.1 percent decrease in the price.
B)   a 1 percent decrease in the price.
C)   a 10 percent decrease in the price.
D)   a 19.6 percent decrease in the price.E) C) and D)
F) All of the above

Exam 5: Elasticity and Its Application

For which of the following goods is the income elasticity of demand likely lowest?

Correct Answer
verified

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

For a particular good, a 10 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct Answer
verified

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

Correct Answer
verified

Figure 5-3 -Refer to Figure 5-3. The demand curve representing the demand for a luxury good with several close substitutes is

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

If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

Correct Answer
verified

An increase in price causes an increase in total revenue when demand is

Correct Answer
verified

A key determinant of the price elasticity of supply is

Correct Answer
verified

If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a

Correct Answer
verified

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

Correct Answer
verified

A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each. At a price of $20.00, the t- shirt maker would be willing to supply 100 t-shirts. Using the midpoint method, the price elasticity of supply for t- shirts is about

Correct Answer
verified

Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, demand is unit elastic when price changes from

Correct Answer
verified

Correct Answer
verified

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is

Correct Answer
verified

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

Correct Answer
verified

Figure 5-3 -Refer to Figure 5-3. Which demand curve is perfectly elastic?

Correct Answer
verified

For which of the following goods is the income elasticity of demand likely highest?

Correct Answer
verified

Exam 5: Elasticity and Its Application

For which of the following goods is the income elasticity of demand likely lowest?

Correct AnswerverifiedShow Answer

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For a particular good, a 10 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-3 -Refer to Figure 5-3. The demand curve representing the demand for a luxury good with several close substitutes is

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

If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

Correct AnswerverifiedShow Answer

An increase in price causes an increase in total revenue when demand is

Correct AnswerverifiedShow Answer

A key determinant of the price elasticity of supply is

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each. At a price of $20.00, the t- shirt maker would be willing to supply 100 t-shirts. Using the midpoint method, the price elasticity of supply for t- shirts is about

Correct AnswerverifiedShow Answer

Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, demand is unit elastic when price changes from

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply 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 5-3 -Refer to Figure 5-3. Which demand curve is perfectly elastic?

Correct AnswerverifiedShow Answer

For which of the following goods is the income elasticity of demand likely highest?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified