Question 1

If the quantity supplied responds only slightly to changes in price,then

Accepted Answer

A)   supply is said to be elastic.
B)   supply is said to be inelastic.
C)   an increase in price will not shift the supply curve very much.
D)   even a large decrease in demand will change the equilibrium price only slightly.E) B) and C)
F) A) and D)

Question 2

Normal goods have negative income elasticities of demand,while inferior goods have positive income elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 3

Table 5-5
The following table shows a portion of the demand schedule for a particular good at various levels of income.
 
-Refer to Table 5-5.Using the midpoint method,at a price of $12,what is the income elasticity of demand when income rises from $5,000 to $10,000?

Accepted Answer

A)   0.00
B)   0.41
C)   1.00
D)   2.45E) A) and B)
F) A) and C)

Question 4

Figure 5-13 
-Refer to Figure 5-13.Using the midpoint method,what is the price elasticity of supply between $16 and $40?

Accepted Answer

A)   0.125
B)   0.86
C)   1.0
D)   2.5E) B) and D)
F) All of the above

Question 5

Figure 5-8 
-Refer to Figure 5-8.For prices above $5,demand is price

Accepted Answer

A)   elastic,and raising price will increase total revenue.
B)   inelastic,and raising price will increase total revenue.
C)   elastic,and lowering price will increase total revenue.
D)   inelastic,and lowering price will increase total revenue.E) All of the above
F) A) and C)

Question 6

For which pairs of goods is the cross-price elasticity most likely to be negative?

Accepted Answer

A)   peanut butter and jelly
B)   automobile tires and coffee
C)   pens and pencils
D)   paperback novels and electronic books for e-readersE) A) and C)
F) B) and D)

Question 7

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12,the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 8

For a particular good,a 2 percent increase in price causes a 12 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A)   There are no close substitutes for this good.
B)   The good is a luxury.
C)   The market for the good is broadly defined.
D)   The relevant time horizon is short.E) A) and D)
F) All of the above

Question 9

Good news for farming can be bad news for farmers because the

Accepted Answer

A)   supply curve for an individual farmer is usually perfectly elastic.
B)   supply curve for an individual farmer is usually perfectly inelastic.
C)   demand for basic foodstuffs is usually inelastic,meaning that factors that shift supply to the right decrease total revenues to sellers.
D)   demand for basic foodstuffs is usually elastic,meaning that factors that shift supply to the right increase total revenues to sellers.E) A) and B)
F) C) and D)

Question 10

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 C)
F) A) and D)

Question 11

A manufacturer produces 1,000 units,regardless of the market price.For this firm,the price elasticity of supply is

Accepted Answer

A)   infinity.
B)   zero.
C)   one.
D)   negative one.E) All of the above
F) A) and D)

Question 12

Goods with many close substitutes tend to have

Accepted Answer

A)   more elastic demands.
B)   less elastic demands.
C)   price elasticities of demand that are unit elastic.
D)   income elasticities of demand that are negative.E) None of the above
F) A) and B)

Question 13

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)   clothing
B)   blue jeans
C)   Tommy Hilfiger jeans
D)   All three would have the same elasticity of demand because they are all related.E) A) and B)
F) A) and C)

Question 15

The supply of oil is likely to be

Accepted Answer

A)   inelastic in both the short run and long run.
B)   elastic in both the short run and long run.
C)   elastic in the short run and inelastic in the long run.
D)   inelastic in the short run and elastic in the long run.E) B) and C)
F) A) and C)

Question 16

Elasticity measures how responsive quantity is to changes in price.

Accepted Answer

A) True 
 B)False

Question 17

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000.Charles's income elasticity of demand for basketball ticket is

Accepted Answer

A)   0.82,and basketball tickets are a normal good.
B)   0.82,and basketball tickets are an inferior good.
C)   1.22,and basketball tickets are a normal good.
D)   1.22,and basketball tickets are an inferior good.E) C) and D)
F) None of the above

Question 18

Which of the following statements is valid when the market supply curve is vertical?

Accepted Answer

A)   Market quantity supplied does not change when the price changes.
B)   Supply is perfectly elastic.
C)   An increase in market demand will increase the equilibrium quantity.
D)   An increase in market demand will not increase the equilibrium price.E) C) and D)
F) B) and D)

Question 19

When demand is elastic,a decrease in price will cause

Accepted Answer

A)   an increase in total revenue.
B)   a decrease in total revenue.
C)   no change in total revenue but an increase in quantity demanded.
D)   no change in total revenue but a decrease in quantity demanded.E) A) and B)
F) C) and D)

Question 20

Figure 5-5 
-Refer to Figure 5-5.Using the midpoint method,between prices of $12 and $18,price elasticity of demand is

Accepted Answer

A)   0.33.
B)   0.67.
C)   1.33.
D)   1.89.E) A) and C)
F) B) and C)

Exam 5: Elasticity and Its Application

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

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Goods with many close substitutes tend to have

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Figure 5-13 -Refer to Figure 5-13.Using the midpoint method,what is the price elasticity of supply between $16 and $40?

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For which pairs of goods is the cross-price elasticity most likely to be negative?

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Figure 5-5 -Refer to Figure 5-5.Using the midpoint method,between prices of $12 and $18,price elasticity of demand is

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Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000.Charles's income elasticity of demand for basketball ticket is

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For a particular good,a 2 percent increase in price causes a 12 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

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

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Elasticity measures how responsive quantity is to changes in price.

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Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

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If the quantity supplied responds only slightly to changes in price,then

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Normal goods have negative income elasticities of demand,while inferior goods have positive income elasticities of demand.

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Which of the following statements is valid when the market supply curve is vertical?

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A manufacturer produces 1,000 units,regardless of the market price.For this firm,the price elasticity of supply is

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Figure 5-8 -Refer to Figure 5-8.For prices above $5,demand is price

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Good news for farming can be bad news for farmers because the

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The supply of oil is likely to be

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If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12,the price elasticity of supply is 2.

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When demand is elastic,a decrease in price will cause

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Table 5-5 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-5.Using the midpoint method,at a price of $12,what is the income elasticity of demand when income rises from $5,000 to $10,000?

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