Question 1

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the

Accepted Answer

A)   steeper the demand curve will be.
B)   flatter the demand curve will be.
C)   further to the right the demand curve will sit.
D)   closer to the vertical axis the demand curve will sit.E) B) and C)
F) All of the above

Question 2

If demand is price inelastic, then when price rises, total revenue

Accepted Answer

A)   will fall.
B)   will rise.
C)   will remain unchanged.
D)   may rise, fall, or remain unchanged. More information is need to determine the change in total revenue with certainty.E) All of the above
F) A) and B)

Question 3

If the price elasticity of demand is equal to 0, then demand is unit elastic.

Accepted Answer

A) True 
 B)False

Question 4

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

Accepted Answer

A)   Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept.
B)   Elasticity provides us with a better rationale for statements such as "an increase in x will lead to a decrease in y" than we would have in the absence of the elasticity concept.
C)   Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus or a shortage.
D)   Without elasticity, it is very difficult to assess the degree of competition within a market.E) B) and C)
F) All of the above

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Figure 5-12 
-Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point Y and point Z is

Accepted Answer

A)   0.5.
B)   0.75.
C)   1.0.
D)   1.3.E) B) and C)
F) All of the above

Question 7

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Accepted Answer

A)   The quantity of the good demanded decreases from 250 to 150.
B)   The quantity of the good demanded decreases from 200 to 100.
C)   The quantity of the good demanded decreases by 0.05 percent.
D)   The quantity of the good demanded decreases by 0.2 percent.E) B) and D)
F) None of the above

Question 8

Figure 5-4 
-Refer to Figure 5-4. The section of the demand curve at point B represents the

Accepted Answer

A)   elastic section of the demand curve.
B)   inelastic section of the demand curve.
C)   unit elastic section of the demand curve.
D)   perfectly elastic section of the demand curve.E) None of the above
F) B) and C)

Question 9

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.

Accepted Answer

If demand is inelastic, then r...

Question 10

Figure 5-11 
-Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

Accepted Answer

A)   increase by $120, so demand must be inelastic in this price range.
B)   increase by $320, so demand must be inelastic in this price range.
C)   decrease by $120, so demand must be elastic in this price range.
D)   decrease by $320, so demand must be elastic in this price range.E) A) and D)
F) A) and B)

Question 11

Income elasticity of demand measures how

Accepted Answer

A)   the quantity demanded changes as consumer income changes.
B)   consumer purchasing power is affected by a change in the price of a good.
C)   the price of a good is affected when there is a change in consumer income.
D)   many units of a good a consumer can buy given a certain income level.E) A) and C)
F) B) and C)

Question 12

Suppose that 300 bottles of soda are demanded at a particular price. If the price of a bottle of soda rises from that price by 6 percent, the number of bottles of soda demanded falls to 275. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Accepted Answer

A)   demand for bottles of soda in this price range is perfectly elastic.
B)   price increase will increase the total revenue of soda sellers.
C)   price elasticity of demand for bottles of soda in this price range is about 0.69.
D)   price elasticity of demand for bottles of soda in this price range is about 1.45.E) None of the above
F) B) and D)

Question 13

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because

Accepted Answer

A)   buyers tend to be much less sensitive to a change in price when given more time to react.
B)   buyers tend to be much more sensitive to a change in price when given more time to react.
C)   buyers will have substantially more real income over a ten-year period.
D)   the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline.E) B) and D)
F) A) and C)

Question 14

If the demand for bananas is elastic, then an increase in the price of bananas will

Accepted Answer

A)   increase total revenue of banana sellers.
B)   decrease total revenue of banana sellers.
C)   not change total revenue of banana sellers.
D)   There is not enough information to answer this question.E) All of the above
F) C) and D)

Question 15

For which of the following goods is the price elasticity of demand most inelastic?

Accepted Answer

A)   pizza
B)   large pizza
C)   large pepperoni pizza
D)   Domino's large pepperoni pizzaE) B) and C)
F) A) and B)

Question 16

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

Accepted Answer

A)   -1.2, and X and Y are complements.
B)   -0.1, and X and Y are complements.
C)   0.1, and X and Y are substitutes.
D)   1.2, and X and Y are substitutes.E) None of the above
F) A) and B)

Question 17

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

Accepted Answer

A)   1.19
B)   0.84
C)   0.61
D)   1.67E) A) and D)
F) All of the above

Question 18

Scenario 5-5
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-5. Total consumer spending on milk will

Accepted Answer

A)   increase, and total consumer spending on beef will increase.
B)   increase, and total consumer spending on beef will decrease.
C)   decrease, and total consumer spending on beef will increase.
D)   decrease, and total consumer spending on beef will decrease.E) B) and C)
F) A) and B)

Question 19

Figure 5-18 
-Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $4 and $5?

Accepted Answer

A)   0.50
B)   0.56
C)   1.80
D)   2.00E) A) and B)
F) A) and C)

Question 20

Table 5-13
Consider the following demand schedule. 
-Refer to Table 5-13. Using the midpoint method, demand is unit elastic when price changes from

Accepted Answer

The answer of Table 5-13
Consider the following demand schedule. 
-Refer...

Exam 5: Elasticity and Its Application

If demand is price inelastic, then when price rises, total revenue

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Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point Y and point Z is

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If the demand for bananas is elastic, then an increase in the price of bananas will

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How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

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Income elasticity of demand measures how

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For which of the following goods is the price elasticity of demand most inelastic?

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Figure 5-11 -Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

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Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, demand is unit elastic when price changes from

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Suppose that 300 bottles of soda are demanded at a particular price. If the price of a bottle of soda rises from that price by 6 percent, the number of bottles of soda demanded falls to 275. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedIf demand is inelastic, then r...View AnswerShow Answer

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because

Correct AnswerverifiedShow Answer

Figure 5-18 -Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $4 and $5?

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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?

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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 price elasticity of demand is equal to 0, then demand is unit elastic.

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Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the

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Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Correct AnswerverifiedShow Answer

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

Correct AnswerverifiedShow Answer

Scenario 5-5 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-5. Total consumer spending on milk will

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve at point B represents the

Correct AnswerverifiedShow Answer

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If demand is inelastic, then r...
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