Question 1

When demand is inelastic, a decrease in price increases total revenue.

Accepted Answer

A) True 
 B)False

Question 2

Figure 5-8 
-Refer to Figure 5-8. An increase in price from $15 to $20 would

Accepted Answer

A)  increase total revenue by $500
B)  decrease total revenue by $500.
C)  increase total revenue by $1,000.
D)  decrease total revenue by $1,000.E) A) and B)
F) None of the above

Question 3

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is

Accepted Answer

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

Question 4

At price of $1.30 per pound, a local apple orchard is willing to supply 150 pounds of apples per day. At a price of $1.50 per pound, the orchard is willing to supply 170 pounds of apples per day. Using the midpoint method, the price elasticity of supply is about

Accepted Answer

A)  1.14.
B)  1.00.
C)  0.875.
D)  0.50.E) None of the above
F) B) and D)

Question 5

Economists compute the price elasticity of demand as the

Accepted Answer

A)  percentage change in price divided by the percentage change in quantity demanded.
B)  change in quantity demanded divided by the change in the price.
C)  percentage change in quantity demanded divided by the percentage change in price.
D)  percentage change in quantity demanded divided by the percentage change in income.E) B) and C)
F) B) and D)

Question 6

Holding all other forces constant, if decreasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Accepted Answer

A)  unit elastic.
B)  inelastic.
C)  elastic.
D)  None of the above is correct because a price decrease never leads to an decrease in total revenue.E) A) and C)
F) B) and C)

Question 7

The supply of a good will be more elastic, the

Accepted Answer

A)  more the good is considered a luxury.
B)  broader is the definition of the market for the good.
C)  larger the number of close substitutes for the good.
D)  longer the time period being considered.E) All of the above
F) B) and C)

Question 8

In which of these instances is demand said to be perfectly inelastic?

Accepted Answer

A)  An increase in price of 2% causes a decrease in quantity demanded of 2%.
B)  A decrease in price of 2% causes an increase in quantity demanded of 0%.
C)  A decrease in price of 2% causes a decrease in total revenue of 0%.
D)  An increase in price of 2% causes a decrease in quantity demanded of 1/2%.E) B) and D)
F) None of the above

Question 9

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by

Accepted Answer

A)  0.4% in the short run and 4.6% in the long run.
B)  1.7% in the short run and 0.7% in the long run.
C)  9% in the short run and 21% in the long run.
D)  25% in the short run and 10.7% in the long run.E) C) and D)
F) A) and C)

Question 10

The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

Accepted Answer

A) True 
 B)False

Question 11

When quantity demanded responds strongly to changes in price, demand is said to be

Accepted Answer

A)  fluid.
B)  elastic.
C)  dynamic.
D)  highly variable.E) B) and D)
F) A) and C)

Question 12

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Accepted Answer

A)  cross-price elasticity of demand is negative.
B)  price elasticity of demand is elastic.
C)  income elasticity of demand is negative.
D)  income elasticity of demand is positive.E) B) and C)
F) All of the above

Question 13

If the price elasticity of demand is equal to 1, then demand is unit elastic.

Accepted Answer

A) True 
 B)False

Question 14

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

Accepted Answer

A)  elastic, and the demand curve will be horizontal.
B)  inelastic, and the demand curve will be horizontal.
C)  elastic, and the demand curve will be vertical.
D)  inelastic, and the demand curve will be vertical.E) A) and B)
F) B) and D)

Question 15

Suppose a freeze in Florida significantly reduces the supply of oranges this year. As a result, would you expect the total revenue from the sale of orange juice to rise or fall? Explain.

Accepted Answer

Since oranges are an input into the prod...

Question 16

When the Shaffers had a monthly income of $4,000, they usually ate out 8 times a month. Now that the couple makes $4,500 a month, they eat out 10 times a month. Compute the couple's income elasticity of demand using the midpoint method. Explain your answer. Is a restaurant meal a normal or inferior good to the couple?

Accepted Answer

The income elasticity of deman...

Question 17

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

Accepted Answer

A) True 
 B)False

Question 18

Figure 5-16 
-Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $4 and $6?

Accepted Answer

A)  0.75
B)  1.00
C)  1.20
D)  1.25E) All of the above
F) A) and D)

Question 19

If the price elasticity of demand for a good is 1, then a 3 percent decrease in price results in a

Accepted Answer

A)  0.1 percent increase in the quantity demanded.
B)  1 percent increase in the quantity demanded.
C)  3 percent increase in the quantity demanded.
D)  4 percent increase in the quantity demanded.E) A) and B)
F) A) and C)

Question 20

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

Accepted Answer

A)  tennis lessons
B)  allergy medication
C)  clothing
D)  cell phone contractsE) C) and D)
F) B) and C)

Exam 5: Elasticity and Its Application

Suppose a freeze in Florida significantly reduces the supply of oranges this year. As a result, would you expect the total revenue from the sale of orange juice to rise or fall? Explain.

Correct Answer
verified
Since oranges are an input into the prod...
View Answer

Correct Answer
verified
The income elasticity of deman...
View Answer

The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

Correct Answer
verified

When demand is inelastic, a decrease in price increases total revenue.

Correct Answer
verified

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

Correct Answer
verified

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is

Correct Answer
verified

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

Correct Answer
verified

When quantity demanded responds strongly to changes in price, demand is said to be

Correct Answer
verified

At price of $1.30 per pound, a local apple orchard is willing to supply 150 pounds of apples per day. At a price of $1.50 per pound, the orchard is willing to supply 170 pounds of apples per day. Using the midpoint method, the price elasticity of supply is about

Correct Answer
verified

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by

Correct Answer
verified

Economists compute the price elasticity of demand as the

Correct Answer
verified

The supply of a good will be more elastic, the

Correct Answer
verified

If the price elasticity of demand is equal to 1, then demand is unit elastic.

Correct Answer
verified

Figure 5-8 -Refer to Figure 5-8. An increase in price from $15 to $20 would

Correct Answer
verified

Figure 5-16 -Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $4 and $6?

Correct Answer
verified

In which of these instances is demand said to be perfectly inelastic?

Correct Answer
verified

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Correct Answer
verified

Holding all other forces constant, if decreasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Correct Answer
verified

If the price elasticity of demand for a good is 1, then a 3 percent decrease in price results in a

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

Suppose a freeze in Florida significantly reduces the supply of oranges this year. As a result, would you expect the total revenue from the sale of orange juice to rise or fall? Explain.

Correct AnswerverifiedSince oranges are an input into the prod...View AnswerShow Answer

Correct AnswerverifiedThe income elasticity of deman...View AnswerShow Answer

The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

Correct AnswerverifiedShow Answer

When demand is inelastic, a decrease in price increases total revenue.

Correct AnswerverifiedShow Answer

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

Correct AnswerverifiedShow Answer

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is

Correct AnswerverifiedShow Answer

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

Correct AnswerverifiedShow Answer

When quantity demanded responds strongly to changes in price, demand is said to be

Correct AnswerverifiedShow Answer

At price of $1.30 per pound, a local apple orchard is willing to supply 150 pounds of apples per day. At a price of $1.50 per pound, the orchard is willing to supply 170 pounds of apples per day. Using the midpoint method, the price elasticity of supply is about

Correct AnswerverifiedShow Answer

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by

Correct AnswerverifiedShow Answer

Economists compute the price elasticity of demand as the

Correct AnswerverifiedShow Answer

The supply of a good will be more elastic, the

Correct AnswerverifiedShow Answer

If the price elasticity of demand is equal to 1, then demand is unit elastic.

Correct AnswerverifiedShow Answer

Figure 5-8 -Refer to Figure 5-8. An increase in price from $15 to $20 would

Correct AnswerverifiedShow Answer

Figure 5-16 -Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $4 and $6?

Correct AnswerverifiedShow Answer

In which of these instances is demand said to be perfectly inelastic?

Correct AnswerverifiedShow Answer

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Correct AnswerverifiedShow Answer

Holding all other forces constant, if decreasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 1, then a 3 percent decrease in price results in a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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verified
Since oranges are an input into the prod...
View Answer

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verified
The income elasticity of deman...
View Answer

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verified

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