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Exam 5: Elasticity and Its Application

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Question 241

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Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points B and C?

A) 1.67
B) 1.19
C) 0.84
D) 0.61

E) A) and C)
F) All of the above

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Question 242

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Figure 5-7 -Refer to Figure 5-7. For prices below $5, demand is price

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) B) and C)
F) B) and D)

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Question 243

Multiple Choice

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Figure 5-5 -Refer to Figure 5-5. At a price of $70 per unit, sellers' total revenue equals

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, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

A government program that reduces land under cultivation can help farmers by raising prices but hurts consumers.

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

If a supply curve is perfectly horizontal, what is the value of the price elasticity of supply?

What is the price elasticity of demand at any point on a perfectly inelastic demand curve?

Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 2,000, P = $15) and (Q = 2,400, P = $12) . Then which of the following scenarios is possible?

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

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

Figure 5-4 -Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is

At price of $1.25, a paper manufacturer is willing to supply 150 spiral notebooks per day. At a price of $1.50, the paper manufacturer is willing to supply 175 spiral notebooks per day. Using the midpoint method, the price elasticity of supply is about

Drug-interdiction policies that reduce the supply of illegal drugs may

Demand is said to be unit elastic if quantity demanded

Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain.

Figure 5-7 -Refer to Figure 5-7. For prices above $5, demand is price

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Last month, sellers of good Y took in $100 in total revenue on sales of 50 units of good Y. This month sellers of good Y raised their price and took in $120 in total revenue on sales of 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. We can conclude that goods X and Y are

A good will have a more inelastic demand, the