Question 1

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a therapeutic massage spa. The first step you would take would be to

Accepted Answer

A)  increase the price of all massages.
B)  reduce staff in order to reduce operating costs.
C)  determine the price elasticity of supply for massages.
D)  determine the price elasticity of demand for massages.E) B) and C)
F) A) and B)

Question 2

Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's

Accepted Answer

A)  demand for cigarettes is perfectly inelastic.
B)  price elasticity of demand for cigarettes is infinite.
C)  income elasticity of demand for cigarettes is 0.
D)  More than one of the above is correct.E) B) and C)
F) A) and D)

Question 3

The value of the price elasticity of demand for a good will be relatively large when

Accepted Answer

A)  there are no good substitutes available for the good.
B)  the time period in question is relatively short.
C)  the good is a luxury rather than a necessity.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 4

Scenario 5-3
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 5-3. The change in equilibrium quantity will be

Accepted Answer

A)  greater in the aged cheddar cheese market than in the bread market.
B)  greater in the bread market than in the aged cheddar cheese market.
C)  the same in the aged cheddar cheese and bread markets.
D)  Any of the above could be correct.E) A) and B)
F) All of the above

Question 5

Demand is elastic if the price elasticity of demand is

Accepted Answer

A)  less than 1.
B)  equal to 1.
C)  equal to 0.
D)  greater than 1.E) B) and C)
F) A) and D)

Question 6

The difference between slope and elasticity is that slope

Accepted Answer

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

Question 7

Suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. When the price of wheat is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The demand for wheat is

Accepted Answer

A)  income inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.
B)  income elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.
C)  price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.
D)  price elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.E) A) and B)
F) C) and D)

Question 8

Figure 5-12 
-Refer to Figure 5-12. Sellers' total revenue would increase if the price

Accepted Answer

A)  increased from $12 to $15.
B)  decreased from $39 to $36.
C)  decreased from $27 to $24.
D)  All of the above are correct.E) B) and C)
F) None of the above

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

Accepted Answer

A)  immediately after the price increase
B)  one month after the price increase
C)  three months after the price increase
D)  one year after the price increaseE) None of the above
F) A) and D)

Question 11

Which of the following expressions represents a cross-price elasticity of demand?

Accepted Answer

A)  percentage change in quantity demanded of bread divided by percentage change in quantity supplied of bread
B)  percentage change in quantity demanded of bread divided by percentage change in price of butter
C)  percentage change in price of bread divided by percentage change in quantity demanded of bread
D)  percentage change in quantity demanded of bread divided by percentage change in incomeE) A) and D)
F) B) and C)

Question 12

Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income. 
-Refer to Table 5-7. Using the midpoint method, when income equals $7,500, what is the price elasticity of demand between $16 and $20?

Accepted Answer

A)  0.56
B)  0.75
C)  1.33
D)  1.80E) A) and B)
F) C) and D)

Question 13

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Accepted Answer

A) True 
 B)False

Question 14

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

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 D)
F) B) and C)

Question 15

A decrease in supply will cause the largest increase in price when

Accepted Answer

A)  both supply and demand are inelastic.
B)  both supply and demand are elastic.
C)  demand is elastic and supply is inelastic.
D)  demand is inelastic and supply is elastic.E) None of the above
F) B) and C)

Question 16

The price elasticity of demand for bread

Accepted Answer

A)  is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread.
B)  depends, in part, on the availability of close substitutes for bread.
C)  reflects the many economic, social, and psychological forces that influence consumers' tastes for bread.
D)  All of the above are correct.E) C) and D)
F) A) and B)

Question 17

If the cross-price elasticity of demand between two goods is positive, what is the relationship between the two goods?

Accepted Answer

The goods ...

Question 18

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

Accepted Answer

A)  increase the price of every loaf of bread in the store.
B)  look for ways to cut costs and increase profit for the bakery.
C)  determine the price elasticity of demand for the bakery's products.
D)  determine the price elasticity of supply for the bakery's products.E) C) and D)
F) A) and D)

Question 19

Food and clothing tend to have

Accepted Answer

A)  small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods.
B)  small income elasticities because consumers buy proportionately more of both goods at higher income levels than they buy at low income levels.
C)  large income elasticities because they are necessities.
D)  large income elasticities because they are relatively inexpensive.E) B) and D)
F) A) and C)

Question 20

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the price elasticity of demand for tortilla chips in the given price range is

Accepted Answer

A)  0.33.
B)  0.45.
C)  2.20.
D)  3.00.E) A) and B)
F) A) and C)

Exam 5: Elasticity and Its Application

Which of the following expressions represents a cross-price elasticity of demand?

Correct Answer
verified

The value of the price elasticity of demand for a good will be relatively large when

Correct Answer
verified

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

Correct Answer
verified

Demand is elastic if the price elasticity of demand is

Correct Answer
verified

If the cross-price elasticity of demand between two goods is positive, what is the relationship between the two goods?

Correct Answer
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The goods ...
View Answer

Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's

Correct Answer
verified

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

Correct Answer
verified

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

Correct Answer
verified

Food and clothing tend to have

Correct Answer
verified

The difference between slope and elasticity is that slope

Correct Answer
verified

Correct Answer
verified

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

Correct Answer
verified

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Correct Answer
verified

Suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. When the price of wheat is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The demand for wheat is

Correct Answer
verified

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a therapeutic massage spa. The first step you would take would be to

Correct Answer
verified

A decrease in supply will cause the largest increase in price when

Correct Answer
verified

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the price elasticity of demand for tortilla chips in the given price range is

Correct Answer
verified

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, when income equals $7,500, what is the price elasticity of demand between $16 and $20?

Correct Answer
verified

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

Correct Answer
verified

The price elasticity of demand for bread

Correct Answer
verified

Exam 5: Elasticity and Its Application

Which of the following expressions represents a cross-price elasticity of demand?

Correct AnswerverifiedShow Answer

The value of the price elasticity of demand for a good will be relatively large when

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Demand is elastic if the price elasticity of demand is

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand between two goods is positive, what is the relationship between the two goods?

Correct AnswerverifiedThe goods ...View AnswerShow Answer

Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's

Correct AnswerverifiedShow Answer

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Food and clothing tend to have

Correct AnswerverifiedShow Answer

The difference between slope and elasticity is that slope

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

Correct AnswerverifiedShow Answer

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Correct AnswerverifiedShow Answer

Suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. When the price of wheat is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The demand for wheat is

Correct AnswerverifiedShow Answer

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a therapeutic massage spa. The first step you would take would be to

Correct AnswerverifiedShow Answer

A decrease in supply will cause the largest increase in price when

Correct AnswerverifiedShow Answer

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the price elasticity of demand for tortilla chips in the given price range is

Correct AnswerverifiedShow Answer

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, when income equals $7,500, what is the price elasticity of demand between $16 and $20?

Correct AnswerverifiedShow Answer

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

Correct AnswerverifiedShow Answer

The price elasticity of demand for bread

Correct AnswerverifiedShow Answer

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The goods ...
View Answer

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