Question 1

If the quantity demanded of a certain good responds only slightly to a change in the price of the good,then

Accepted Answer

A)   the demand for the good is said to be elastic.
B)   the demand for the good is said to be inelastic.
C)   the law of demand does not apply to the good.
D)   the demand curve for the good shifts only slightly in response to a change in price.E) A) and C)
F) None of the above

Question 2

If the price elasticity of supply for a good is equal to infinity,then

Accepted Answer

A)   the supply curve is vertical.
B)   the supply curve is horizontal.
C)   the supply curve also has a slope equal to infinity.
D)   the quantity supplied is constant regardless of the price.E) None of the above
F) C) and D)

Question 3

Suppose a producer is able to separate customers into two groups,one having an inelastic demand and the other having an elastic demand.If the producer's objective is to increase total revenue,she should

Accepted Answer

A)   increase the price charged to customers with the elastic demand and decrease the price charged to customers with the inelastic demand.
B)   decrease the price charged to customers with the elastic demand and increase the price charged to customers with the inelastic demand.
C)   decrease the price to both groups of customers.
D)   increase the price for both groups of customers.E) A) and D)
F) All of the above

Question 4

Figure 5-4 
-Refer to Figure 5-4.If the price decreases in the region of the demand curve between points B and C,we can expect total revenue to

Accepted Answer

A)   increase.
B)   stay the same.
C)   decrease.
D)   first increase,then decrease until total revenue is maximized.E) B) and C)
F) None of the above

Question 5

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

Accepted Answer

A)   immediately after the price increase
B)   one month after the price increase
C)   three months after the price increase
D)   one year after the price increaseE) C) and D)
F) B) and C)

Question 6

Alice says that she would buy one banana split a day regardless of the price.If she is telling the truth,

Accepted Answer

A)   Alice's demand for banana splits is perfectly inelastic.
B)   Alice's price elasticity of demand for banana splits is 1.
C)   Alice's income elasticity of demand for banana splits is 0.
D)   None of the above answers is correct.E) A) and C)
F) B) and D)

Question 7

When the price of bubble gum is $0.50,the quantity demanded is 400 packs per day.When the price falls to $0.40,the quantity demanded increases to 600.Given this information and using the midpoint method,we know that the demand for bubble gum is

Accepted Answer

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

Question 8

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 9

Holding all other forces constant,if decreasing the price of a good leads to a decrease 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,since a price increase always leads to an increase in total revenue.E) None of the above
F) B) and C)

Question 10

When we move upward and to the left along a linear,downward-sloping demand curve,price elasticity of demand

Accepted Answer

A)   first becomes smaller,then larger.
B)   always becomes larger.
C)   always becomes smaller.
D)   first becomes larger,then smaller.E) A) and D)
F) A) and B)

Question 11

Figure 5-3 
-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) None of the above
F) C) and D)

Question 12

In January the price of widgets was $1.00,and Wendy's Widgets produced 80 widgets.In February the price of widgets was $1.50,and Wendy's Widgets produced 110 widgets.In March the price of widgets was $2.00,and Wendy's Widgets produced 140 widgets.The price elasticity of supply of Wendy's Widgets was

Accepted Answer

A)   0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.
B)   1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00.
C)   0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00.
D)   1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.E) A) and B)
F) C) and D)

Question 13

Along the elastic portion of a linear demand curve,total revenue rises as price rises.

Accepted Answer

A) True 
 B)False

Question 14

Harry's Barber Shop increased its total monthly revenue from $1,500 to $1,800 when it raised the price of a haircut from $5 to $9.The price elasticity of demand for Harry's Haircuts is

Accepted Answer

A)   0.567.
B)   0.700.
C)   1.429.
D)   2.200.E) A) and C)
F) All of the above

Question 15

Figure 5-4 
-Refer to Figure 5-4.Assume the section of the demand curve from A to B corresponds to prices between $6 and $12.Then,when the price increases from $8 to $10,

Accepted Answer

A)   the percent decrease in the quantity demanded exceeds the percent increase in the price.
B)   the percent increase in the price exceeds the percent decrease in the quantity demanded.
C)   sellers' total revenue increases as a result.
D)   it is possible that the quantity demanded fell from 550 to 500 as a result.E) A) and C)
F) B) and D)

Question 16

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 17

Figure 5-13 
-Refer to Figure 5-13.Along which of these segments of the supply curve is supply most elastic?

Accepted Answer

A)   between A and B
B)   between C and D
C)   between D and H
D)   between G and HE) A) and B)
F) A) and C)

Question 18

Your younger sister needs $50 to buy a new bike.She has opened a lemonade stand to make the money she needs.Your mother is paying for all of the ingredients.She currently is charging 25 cents per cup,but she wants to adjust her price to earn the $50 faster.If you know that the demand for lemonade is elastic,what is your advice to her?

Accepted Answer

A)   Leave the price at 25 cents and be patient.
B)   Raise the price to increase total revenue.
C)   Lower the price to increase total revenue.
D)   There isn't enough information given to answer this question.E) B) and C)
F) None of the above

Question 19

Figure 5-5 
-Refer to Figure 5-5.At a price of $48 per unit,sellers' total revenue amounts to

Accepted Answer

A)   $150.
B)   $200.
C)   $288.
D)   $364.E) B) and C)
F) A) and C)

Question 20

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) A) and C)
F) C) and D)

Exam 5: Elasticity and Its Application

Along the elastic portion of a linear demand curve,total revenue rises as price rises.

Correct Answer
verified

Suppose a producer is able to separate customers into two groups,one having an inelastic demand and the other having an elastic demand.If the producer's objective is to increase total revenue,she should

Correct Answer
verified

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Correct Answer
verified

When we move upward and to the left along a linear,downward-sloping demand curve,price elasticity of demand

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

In January the price of widgets was $1.00,and Wendy's Widgets produced 80 widgets.In February the price of widgets was $1.50,and Wendy's Widgets produced 110 widgets.In March the price of widgets was $2.00,and Wendy's Widgets produced 140 widgets.The price elasticity of supply of Wendy's Widgets was

Correct Answer
verified

When the price of bubble gum is $0.50,the quantity demanded is 400 packs per day.When the price falls to $0.40,the quantity demanded increases to 600.Given this information and using the midpoint method,we know that the demand for bubble gum is

Correct Answer
verified

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

Correct Answer
verified

Figure 5-13 -Refer to Figure 5-13.Along which of these segments of the supply curve is supply most elastic?

Correct Answer
verified

Figure 5-3 -The midpoint method for calculating elasticities is convenient in that it allows us to

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4.If the price decreases in the region of the demand curve between points B and C,we can expect total revenue to

Correct Answer
verified

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

Correct Answer
verified

If the price elasticity of supply for a good is equal to infinity,then

Correct Answer
verified

Harry's Barber Shop increased its total monthly revenue from $1,500 to $1,800 when it raised the price of a haircut from $5 to $9.The price elasticity of demand for Harry's Haircuts is

Correct Answer
verified

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

Correct Answer
verified

Figure 5-5 -Refer to Figure 5-5.At a price of $48 per unit,sellers' total revenue amounts to

Correct Answer
verified

If the quantity demanded of a certain good responds only slightly to a change in the price of the good,then

Correct Answer
verified

Alice says that she would buy one banana split a day regardless of the price.If she is telling the truth,

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4.Assume the section of the demand curve from A to B corresponds to prices between $6 and $12.Then,when the price increases from $8 to $10,

Correct Answer
verified

Exam 5: Elasticity and Its Application

Along the elastic portion of a linear demand curve,total revenue rises as price rises.

Correct AnswerverifiedShow Answer

Suppose a producer is able to separate customers into two groups,one having an inelastic demand and the other having an elastic demand.If the producer's objective is to increase total revenue,she should

Correct AnswerverifiedShow Answer

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Correct AnswerverifiedShow Answer

When we move upward and to the left along a linear,downward-sloping demand curve,price elasticity of demand

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the price of bubble gum is $0.50,the quantity demanded is 400 packs per day.When the price falls to $0.40,the quantity demanded increases to 600.Given this information and using the midpoint method,we know that the demand for bubble gum is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-13 -Refer to Figure 5-13.Along which of these segments of the supply curve is supply most elastic?

Correct AnswerverifiedShow Answer

Figure 5-3 -The midpoint method for calculating elasticities is convenient in that it allows us to

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4.If the price decreases in the region of the demand curve between points B and C,we can expect total revenue to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the price elasticity of supply for a good is equal to infinity,then

Correct AnswerverifiedShow Answer

Harry's Barber Shop increased its total monthly revenue from $1,500 to $1,800 when it raised the price of a haircut from $5 to $9.The price elasticity of demand for Harry's Haircuts is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5.At a price of $48 per unit,sellers' total revenue amounts to

Correct AnswerverifiedShow Answer

If the quantity demanded of a certain good responds only slightly to a change in the price of the good,then

Correct AnswerverifiedShow Answer

Alice says that she would buy one banana split a day regardless of the price.If she is telling the truth,

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4.Assume the section of the demand curve from A to B corresponds to prices between $6 and $12.Then,when the price increases from $8 to $10,

Correct AnswerverifiedShow Answer

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