Question 1

Whether a good is a luxury or necessity depends on the

Accepted Answer

A)   price of the good.
B)   preferences of the buyer.
C)   intrinsic properties of the good.
D)   scarcity of the good.E) C) and D)
F) B) and D)

Question 2

Figure 5-4 
-Refer to Figure 5-4.The section of the demand curve from B to C represents the

Accepted Answer

A)   elastic section of the demand curve.
B)   perfectly elastic section of the demand curve.
C)   unit elastic section of the demand curve.
D)   inelastic section of the demand curve.E) B) and C)
F) A) and D)

Question 3

Get Smart University is contemplating an increase in tuition to enhance revenue.If GSU feels that raising tuition would enhance revenue,it is

Accepted Answer

A)   ignoring the law of demand.
B)   assuming that the demand for university education is elastic.
C)   assuming that the demand for university education is inelastic.
D)   assuming that the supply of university education is elastic.E) A) and B)
F) A) and C)

Question 4

The price elasticity of supply measures how much

Accepted Answer

A)   the quantity supplied responds to changes in input prices.
B)   the quantity supplied responds to changes in the price of the good.
C)   the price of the good responds to changes in supply.
D)   sellers respond to changes in technology.E) A) and D)
F) A) and C)

Question 5

Figure 5-4 
-Refer to Figure 5-4.Assume the section of the demand curve from B to C corresponds to prices between $0 and $15.Then,when the price changes between $7 and $9,

Accepted Answer

A)   quantity demanded changes proportionately less than the price.
B)   quantity demanded changes proportionately more than the price.
C)   quantity demanded changes the same amount proportionately as price.
D)   the price elasticity of demand equals zero.E) B) and C)
F) B) and D)

Question 6

Figure 5-2 
-Refer to Figure 5-2.As price falls from Pa to Pb,which demand curve represents the most elastic demand?

Accepted Answer

A)   D1
B)   D2
C)   D3
D)   All of the above are equally elastic.E) A) and D)
F) A) and C)

Question 7

The midpoint method for calculating elasticities is convenient in that it allows us to

Accepted Answer

A)   ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price.
B)   calculate the same value for the elasticity,regardless of whether the price increases or decreases.
C)   assume that sellers' total revenue stays constant when the price changes.
D)   restrict all elasticity values to between 0 and 1.E) A) and C)
F) C) and D)

Question 8

At a price of $1.00,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.20,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)   0.45
B)   0.90
C)   1.11
D)   2.20E) All of the above
F) A) and B)

Question 9

When the price of a good is $5,the quantity demanded is 120 units per month; when the price is $7,the quantity demanded is 100 units per month.Using the midpoint method,the price elasticity of demand is about

Accepted Answer

A)   0.55.
B)   1.83.
C)  10.
D)  2.E) A) and B)
F) A) and C)

Question 10

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 11

If the price elasticity of demand for a good is 0.25,then a 20 percent decrease in price results in a

Accepted Answer

A)   0.0125 percent increase in the quantity demanded.
B)   4 percent increase in the quantity demanded.
C)   5 percent increase in the quantity demanded.
D)   80 percent increase in the quantity demanded.E) A) and B)
F) B) and C)

Question 12

If the demand curve is linear and downward sloping,which of the following statements is not correct?

Accepted Answer

A)   Demand is more elastic on the lower part of the demand curve than on the upper part.
B)   Different pairs of points on the demand curve can result in different values of the price elasticity of demand.
C)   Different pairs of points on the demand curve result in identical values of the slope of the demand curve.
D)   Starting from a point on the upper part of the demand curve,an increase in price leads to a decrease in total revenue.E) None of the above
F) C) and D)

Question 13

Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

Accepted Answer

A)   The interdiction has the effect of shifting the demand curve for illegal drugs to the right.
B)   The price elasticity of demand for illegal drugs is 1.3.
C)   The price elasticity of supply for illegal drugs is 0.8.
D)   As a result of the interdiction,the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent.E) All of the above
F) A) and C)

Question 14

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

Accepted Answer

A) True 
 B)False

Question 15

Table 5-5
 
-Refer to Table 5-5.Along which of the supply curves does quantity supplied move proportionately more than the price?

Accepted Answer

A)   along supply curve B only
B)   along supply curves B and C
C)   along all three supply curves
D)   None.Quantity supplied moves proportionately less than the price along all of the three supply curves.E) C) and D)
F) B) and C)

Question 16

If demand is price inelastic,then

Accepted Answer

A)   buyers do not respond much to a change in price.
B)   buyers respond substantially to a change in price,but the response is very slow.
C)   buyers do not alter their quantities demanded much in response to advertising,fads,or general changes in tastes.
D)   the demand curve is very flat.E) A) and C)
F) A) and B)

Question 17

On a certain supply curve,one point is (quantity supplied = 200,price = $4.00) and another point is (quantity supplied = 250,price = $4.50) .Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)   0.22.
B)   0.53.
C)   1.00.
D)   1.89.E) B) and C)
F) B) and D)

Question 18

Figure 5-14 
-Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points A and B?

Accepted Answer

A)   2.33
B)   1.0
C)   0.43
D)   0.1E) A) and B)
F) A) and C)

Question 19

Figure 5-14 
-Refer to Figure 5-14.Along which of these segments of the supply curve is supply least elastic?

Accepted Answer

A)   GH
B)   CD
C)   AC
D)   ABE) All of the above
F) B) and C)

Question 20

Figure 5-11 
-Refer to Figure 5-11.Using the midpoint method,the price elasticity of demand between point A and point B is about

Accepted Answer

A)   0.33.
B)   0.5.
C)   2.0.
D)   3.0.E) A) and C)
F) A) and D)

Exam 5: Elasticity and Its Application

Figure 5-14 -Refer to Figure 5-14.Along which of these segments of the supply curve is supply least elastic?

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Figure 5-4 -Refer to Figure 5-4.Assume the section of the demand curve from B to C corresponds to prices between $0 and $15.Then,when the price changes between $7 and $9,

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Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users?

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On a certain supply curve,one point is (quantity supplied = 200,price = $4.00) and another point is (quantity supplied = 250,price = $4.50) .Using the midpoint method,the price elasticity of supply is about

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If the demand curve is linear and downward sloping,which of the following statements is not correct?

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The midpoint method for calculating elasticities is convenient in that it allows us to

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The price elasticity of supply measures how much

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If the price elasticity of demand for a good is 0.25,then a 20 percent decrease in price results in a

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Figure 5-11 -Refer to Figure 5-11.Using the midpoint method,the price elasticity of demand between point A and point B is about

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Get Smart University is contemplating an increase in tuition to enhance revenue.If GSU feels that raising tuition would enhance revenue,it is

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Figure 5-2 -Refer to Figure 5-2.As price falls from Pa to Pb,which demand curve represents the most elastic demand?

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The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

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Table 5-5 -Refer to Table 5-5.Along which of the supply curves does quantity supplied move proportionately more than the price?

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Figure 5-14 -Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points A and B?

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Whether a good is a luxury or necessity depends on the

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If demand is price inelastic,then

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Figure 5-4 -Refer to Figure 5-4.The section of the demand curve from B to C represents the

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The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

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At a price of $1.00,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.20,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is about

Correct AnswerverifiedShow Answer

When the price of a good is $5,the quantity demanded is 120 units per month; when the price is $7,the quantity demanded is 100 units per month.Using the midpoint method,the price elasticity of demand is about

Correct AnswerverifiedShow Answer

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