Question 1

In the market for oil in the short run,demand

Accepted Answer

A)   and supply are both elastic.
B)   and supply are both inelastic.
C)   is elastic and supply is inelastic.
D)   is inelastic and supply is elastic.E) A) and B)
F) All of the above

Question 2

At price of $1.30 per pound,a local apple orchard is willing to supply 150 pounds of apples per day.At a price of $1.50 per pound,the orchard is willing to supply 170 pounds of apples per day.Using the midpoint method,the price elasticity of supply is about

Accepted Answer

A)   1.14.
B)   1.00.
C)   0.875.
D)   0.50.E) None of the above
F) A) and B)

Question 3

Consider the following pairs of goods.For which of the two goods would you expect the demand to be more price elastic? Why?
a.
water or diamonds
b.
insulin or nasal decongestant spray
c.
food in general or breakfast cereal
d.
gasoline over the course of a week or gasoline over the course of a year
e.
personal computers or IBM personal computers

Accepted Answer

a. Diamonds are luxuries,and water is a ...

Question 4

Scenario 5-2
The supply of aged cheddar cheese is inelastic,and the supply of bread is elastic.Both goods are considered to be normal goods by a majority of consumers.Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-2.The equilibrium price will

Accepted Answer

A)   increase in both the aged cheddar cheese and bread markets.
B)   increase in the aged cheddar cheese market and decrease in the bread market.
C)   decrease in the aged cheddar cheese market and increase in the bread market.
D)   decrease in both the aged cheddar cheese and bread markets.E) A) and B)
F) All of the above

Question 5

In which of the following situations will total revenue increase?

Accepted Answer

A)   Price elasticity of demand is 1.2,and the price of the good decreases.
B)   Price elasticity of demand is 0.5,and the price of the good increases.
C)   Price elasticity of demand is 3.0,and the price of the good decreases.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 6

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

Accepted Answer

A)   substitutes,and have a cross-price elasticity of 0.60.
B)   complements,and have a cross-price elasticity of 0.60.
C)   substitutes,and have a cross-price elasticity of 1.67.
D)   complements,and have a cross-price elasticity of 1.67.E) B) and D)
F) B) and C)

Question 7

If soybean farmers know that the demand for soybeans is price inelastic,in order to increase their total revenues they should

Accepted Answer

A)   use more fertilizers and weed killers to increase their yields.
B)   plant additional acres to increase their output.
C)   reduce the number of acres they plant to decrease their output.
D)   Both a and b are correct.E) B) and D)
F) All of the above

Question 8

If the price elasticity of supply is 1.2,and a price increase led to a 5% increase in quantity supplied,then the price increase is about

Accepted Answer

A)   0.24%.
B)   4.2%.
C)   6%.
D)   6.2%.E) A) and B)
F) None of the above

Question 9

Demand is said to be price elastic if

Accepted Answer

A)   the price of the good responds substantially to changes in demand.
B)   demand shifts substantially when income or the expected future price of the good changes.
C)   buyers do not respond much to changes in the price of the good.
D)   buyers respond substantially to changes in the price of the good.E) B) and C)
F) A) and D)

Question 10

As price elasticity of supply increases,the supply curve

Accepted Answer

A)   becomes flatter.
B)   becomes steeper.
C)   becomes downward sloping.
D)   shifts to the right.E) None of the above
F) All of the above

Question 11

If the cross-price elasticity of two goods is positive,then the two goods are

Accepted Answer

A)   substitutes.
B)   complements.
C)   normal goods.
D)   inferior goods.E) All of the above
F) B) and D)

Question 12

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

Accepted Answer

A)   gasoline in the short run
B)   dentist's visits
C)   ice cream
D)   deodorantE) A) and D)
F) C) and D)

Question 13

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Accepted Answer

A) True 
 B)False

Question 14

There are fewer farmers in the United States today than 200 years ago because of

Accepted Answer

A)   improvements in farm technology.
B)   increased government regulations in farming.
C)   an elastic demand for food.
D)   environmental programs designed to reduce soil erosion.E) C) and D)
F) None of the above

Question 15

Holding all other forces constant,if decreasing the price of a good leads to an increase in total revenue,then the demand for the good must be

Accepted Answer

A)   unit elastic.
B)   inelastic.
C)   elastic.
D)   None of the above is correct because a price increase always leads to an increase in total revenue.E) B) and D)
F) All of the above

Question 16

If we observe that when the price of chocolate increases by 10%,total revenue increases by 10%,then the demand for chocolate is unit price elastic.

Accepted Answer

A) True 
 B)False

Question 17

Scenario 5-3
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 5-3.The change in equilibrium price will be

Accepted Answer

A)   greater in the milk market than in the beef market.
B)   greater in the beef market than in the milk market.
C)   the same in the milk and beef markets.
D)   Any of the above could be correct.E) B) and D)
F) B) and C)

Question 18

Cross-price elasticity is used to determine whether goods are substitutes or complements.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Demand is elastic if the price elasticity of demand is

Accepted Answer

A)   less than 1.
B)   equal to 1.
C)   equal to 0.
D)   greater than 1.E) A) and D)
F) A) and B)

Exam 5: Elasticity and Its Application

Scenario 5-3 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 5-3.The change in equilibrium price will be

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

Correct Answer
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Demand is elastic if the price elasticity of demand is

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

Correct Answer
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In which of the following situations will total revenue increase?

Correct Answer
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If soybean farmers know that the demand for soybeans is price inelastic,in order to increase their total revenues they should

Correct Answer
verified

If the cross-price elasticity of two goods is positive,then the two goods are

Correct Answer
verified

As price elasticity of supply increases,the supply curve

Correct Answer
verified

Correct Answer
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a. Diamonds are luxuries,and water is a ...
View Answer

Correct Answer
verified

Demand is said to be price elastic if

Correct Answer
verified

Cross-price elasticity is used to determine whether goods are substitutes or complements.

Correct Answer
verified

If the price elasticity of supply is 1.2,and a price increase led to a 5% increase in quantity supplied,then the price increase is about

Correct Answer
verified

In the market for oil in the short run,demand

Correct Answer
verified

Correct Answer
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There are fewer farmers in the United States today than 200 years ago because of

Correct Answer
verified

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Correct Answer
verified

At price of $1.30 per pound,a local apple orchard is willing to supply 150 pounds of apples per day.At a price of $1.50 per pound,the orchard is willing to supply 170 pounds of apples per day.Using the midpoint method,the price elasticity of supply is about

Correct Answer
verified

If we observe that when the price of chocolate increases by 10%,total revenue increases by 10%,then the demand for chocolate is unit price elastic.

Correct Answer
verified

Holding all other forces constant,if decreasing the price of a good leads to an increase in total revenue,then the demand for the good must be

Correct Answer
verified

Exam 5: Elasticity and Its Application

Scenario 5-3 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 5-3.The change in equilibrium price will be

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Demand is elastic if the price elasticity of demand is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In which of the following situations will total revenue increase?

Correct AnswerverifiedShow Answer

If soybean farmers know that the demand for soybeans is price inelastic,in order to increase their total revenues they should

Correct AnswerverifiedShow Answer

If the cross-price elasticity of two goods is positive,then the two goods are

Correct AnswerverifiedShow Answer

As price elasticity of supply increases,the supply curve

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Diamonds are luxuries,and water is a ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Demand is said to be price elastic if

Correct AnswerverifiedShow Answer

Cross-price elasticity is used to determine whether goods are substitutes or complements.

Correct AnswerverifiedShow Answer

If the price elasticity of supply is 1.2,and a price increase led to a 5% increase in quantity supplied,then the price increase is about

Correct AnswerverifiedShow Answer

In the market for oil in the short run,demand

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

There are fewer farmers in the United States today than 200 years ago because of

Correct AnswerverifiedShow Answer

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

Correct AnswerverifiedShow Answer

At price of $1.30 per pound,a local apple orchard is willing to supply 150 pounds of apples per day.At a price of $1.50 per pound,the orchard is willing to supply 170 pounds of apples per day.Using the midpoint method,the price elasticity of supply is about

Correct AnswerverifiedShow Answer

If we observe that when the price of chocolate increases by 10%,total revenue increases by 10%,then the demand for chocolate is unit price elastic.

Correct AnswerverifiedShow Answer

Holding all other forces constant,if decreasing the price of a good leads to an increase in total revenue,then the demand for the good must be

Correct AnswerverifiedShow Answer

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a. Diamonds are luxuries,and water is a ...
View Answer

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