Question 1

What income elasticities do food and clothing tend to have,and why

Accepted Answer

A)  small income elasticities because consumers, regardless of their incomes, choose to buy these goods
B)  small income elasticities because consumers will buy proportionately more at higher income levels than they will at low income levels
C)  large income elasticities because they are necessities
D)  large income elasticities because they are relatively cheapE) None of the above
F) A) and D)

Question 2

What is the slope of a perfectly inelastic demand curve,and why

Accepted Answer

A)  negatively sloped, because buyers decrease their purchases when the price rises
B)  vertical, because buyers purchase the same amount whether the price rises or falls
C)  positively sloped, because buyers respond by increasing their purchases when price rises
D)  horizontal, because buyers increase their purchases by huge amounts with slight changes in priceE) A) and B)
F) None of the above

Question 3

Last month,sellers of good Y took in $150 and sold 50 units of good Y.This month sellers of good Y raised their price,took in $160 and sold 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.What can we conclude about goods X and Y

Accepted Answer

A)  They are substitutes, and have a cross-price elasticity of 0.43.
B)  They are complements, and have a cross-price elasticity of 0.43.
C)  They are substitutes, and have a cross-price elasticity of 2.33.
D)  They are complements, and have a cross-price elasticity of 2.33.E) B) and C)
F) None of the above

Question 4

Drug interdiction,which reduces the supply of drugs,may decrease drug-related crime because the demand for drugs is inelastic.

Accepted Answer

A) True 
 B)False

Question 5

In the short run,how responsive is the quantity supplied to price changes

Accepted Answer

A)  very responsive
B)  not very responsive
C)  indifferent
D)  totally responsiveE) B) and D)
F) None of the above

Question 6

What would be the absolute value of the elasticity if demand is unit elastic

Accepted Answer

A)  less than 1
B)  greater than 1
C)  equal to 1
D)  equal to 0E) A) and B)
F) None of the above

Question 7

If an increase in income results in a decrease in the quantity demanded of a good,what is the good called

Accepted Answer

A)  an inferior good
B)  a necessity
C)  a normal good
D)  a luxuryE) C) and D)
F) B) and C)

Question 8

There are very few,if any,good substitutes for motor oil.What does this imply

Accepted Answer

A)  The supply of motor oil would tend to be price elastic.
B)  The demand for motor oil would tend to be price elastic.
C)  The demand for motor oil would tend to be price inelastic.
D)  The demand for motor oil would tend to be income elastic.E) A) and D)
F) All of the above

Question 9

When a supply curve is relatively flat,what do we know

Accepted Answer

A)  The supply is relatively elastic.
B)  The supply is relatively inelastic.
C)  Quantity supplied changes in the same proportion that price changes.
D)  Quantity supplied changes slightly when the price changes.E) C) and D)
F) None of the above

Question 10

You have just been hired as a business consultant to determine what pricing policy would be appropriate in order to increase the total revenue of an online clothing store.What would your first step be

Accepted Answer

A)  Increase the price of everything in the store.
B)  Look for ways to cut costs and increase profit for the store.
C)  Determine the elasticity of demand for the store's products.
D)  Suggest that the store purchase an entirely new line of clothing that they could sell more cheaply.E) A) and B)
F) B) and C)

Question 11

When small changes in price lead to infinite changes in quantity demanded,can be said of demand

Accepted Answer

A)  Demand is perfectly elastic and will be horizontal.
B)  Demand is perfectly inelastic and will be horizontal.
C)  Demand is perfectly elastic and will be vertical.
D)  Demand is perfectly inelastic and will be vertical.E) A) and C)
F) A) and B)

Question 12

Table 5-2 
-Refer to Table 5-2.Which of the following best describes good X

Accepted Answer

A)  very price elastic
B)  an inferior good
C)  underpriced
D)  a normal goodE) A) and D)
F) B) and D)

Question 13

Figure 5-2
 
-Refer to Figure 5-2.As price falls from PA to PB,which demand curve is least elastic

Accepted Answer

A)  D₁
B)  D₂
C)  D₃
D)  D₄E) All of the above
F) A) and D)

Question 14

To determine whether a good is considered normal or inferior,what would one consider

Accepted Answer

A)  the good's income elasticity of demand
B)  the good's price elasticity of demand
C)  the good's price elasticity of supply
D)  the good's cross-price elasticity of demandE) B) and D)
F) None of the above

Question 15

Which of the following categories of goods would have the most elastic demand

Accepted Answer

A)  beverages
B)  soda pop
C)  colas
D)  PepsiE) A) and D)
F) All of the above

Question 16

If demand is perfectly inelastic,the demand curve is vertical,and elasticity is equal to 0.

Accepted Answer

A) True 
 B)False

Question 17

Your younger sister needs $80 to buy a new longboard.She has opened a lemonade stand to make the money she needs.She currently is charging $1 per cup,but wants to adjust her price to earn the money faster.What is your advice to her

Accepted Answer

A)  If the demand for lemonade is perfectly elastic, leave the price the same and be patient.
B)  If the demand for lemonade is elastic, raise the price to increase total revenue.
C)  If the demand for lemonade is elastic, lower the price to increase total revenue.
D)  If the demand for lemonade is inelastic, lower the price to increase total revenue.E) B) and C)
F) A) and D)

Question 18

At the midpoint of a downward-sloping linear demand curve,what would price elasticity be

Accepted Answer

A)  inelastic
B)  elastic
C)  unit elastic
D)  perfectly elasticE) B) and D)
F) A) and C)

Question 19

If a demand curve is horizontal,what are its slope and elasticity

Accepted Answer

A)  undefined and elasticity equals 0
B)  0 and elasticity is undefined
C)  undefined, as is elasticity
D)  0, as is elasticityE) B) and D)
F) None of the above

Question 20

What is the difference between slope and elasticity

Accepted Answer

A)  Slope measures actual changes and elasticity measures percentage changes.
B)  Slope measures percentage changes and elasticity measures actual changes.
C)  Slope and elasticity both measure actual changes.
D)  Slope and elasticity both measure percentage changes.E) None of the above
F) A) and B)

Exam 5: Elasticity and Its Application

When a supply curve is relatively flat,what do we know

Correct Answer
verified

Which of the following categories of goods would have the most elastic demand

Correct Answer
verified

If a demand curve is horizontal,what are its slope and elasticity

Correct Answer
verified

There are very few,if any,good substitutes for motor oil.What does this imply

Correct Answer
verified

Figure 5-2 -Refer to Figure 5-2.As price falls from PA to PB,which demand curve is least elastic

Correct Answer
verified

When small changes in price lead to infinite changes in quantity demanded,can be said of demand

Correct Answer
verified

Table 5-2 -Refer to Table 5-2.Which of the following best describes good X

Correct Answer
verified

In the short run,how responsive is the quantity supplied to price changes

Correct Answer
verified

Your younger sister needs $80 to buy a new longboard.She has opened a lemonade stand to make the money she needs.She currently is charging $1 per cup,but wants to adjust her price to earn the money faster.What is your advice to her

Correct Answer
verified

Drug interdiction,which reduces the supply of drugs,may decrease drug-related crime because the demand for drugs is inelastic.

Correct Answer
verified

What is the slope of a perfectly inelastic demand curve,and why

Correct Answer
verified

At the midpoint of a downward-sloping linear demand curve,what would price elasticity be

Correct Answer
verified

Correct Answer
verified

If demand is perfectly inelastic,the demand curve is vertical,and elasticity is equal to 0.

Correct Answer
verified

What would be the absolute value of the elasticity if demand is unit elastic

Correct Answer
verified

You have just been hired as a business consultant to determine what pricing policy would be appropriate in order to increase the total revenue of an online clothing store.What would your first step be

Correct Answer
verified

To determine whether a good is considered normal or inferior,what would one consider

Correct Answer
verified

If an increase in income results in a decrease in the quantity demanded of a good,what is the good called

Correct Answer
verified

What income elasticities do food and clothing tend to have,and why

Correct Answer
verified

What is the difference between slope and elasticity

Correct Answer
verified

Exam 5: Elasticity and Its Application

When a supply curve is relatively flat,what do we know

Correct AnswerverifiedShow Answer

Which of the following categories of goods would have the most elastic demand

Correct AnswerverifiedShow Answer

If a demand curve is horizontal,what are its slope and elasticity

Correct AnswerverifiedShow Answer

There are very few,if any,good substitutes for motor oil.What does this imply

Correct AnswerverifiedShow Answer

Figure 5-2 -Refer to Figure 5-2.As price falls from PA to PB,which demand curve is least elastic

Correct AnswerverifiedShow Answer

When small changes in price lead to infinite changes in quantity demanded,can be said of demand

Correct AnswerverifiedShow Answer

Table 5-2 -Refer to Table 5-2.Which of the following best describes good X

Correct AnswerverifiedShow Answer

In the short run,how responsive is the quantity supplied to price changes

Correct AnswerverifiedShow Answer

Your younger sister needs $80 to buy a new longboard.She has opened a lemonade stand to make the money she needs.She currently is charging $1 per cup,but wants to adjust her price to earn the money faster.What is your advice to her

Correct AnswerverifiedShow Answer

Drug interdiction,which reduces the supply of drugs,may decrease drug-related crime because the demand for drugs is inelastic.

Correct AnswerverifiedShow Answer

What is the slope of a perfectly inelastic demand curve,and why

Correct AnswerverifiedShow Answer

At the midpoint of a downward-sloping linear demand curve,what would price elasticity be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If demand is perfectly inelastic,the demand curve is vertical,and elasticity is equal to 0.

Correct AnswerverifiedShow Answer

What would be the absolute value of the elasticity if demand is unit elastic

Correct AnswerverifiedShow Answer

You have just been hired as a business consultant to determine what pricing policy would be appropriate in order to increase the total revenue of an online clothing store.What would your first step be

Correct AnswerverifiedShow Answer

To determine whether a good is considered normal or inferior,what would one consider

Correct AnswerverifiedShow Answer

If an increase in income results in a decrease in the quantity demanded of a good,what is the good called

Correct AnswerverifiedShow Answer

What income elasticities do food and clothing tend to have,and why

Correct AnswerverifiedShow Answer

What is the difference between slope and elasticity

Correct AnswerverifiedShow Answer

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