Question 1

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

Accepted Answer

A)   ice cream
B)   frozen yogurt
C)   vanilla ice cream
D)   Häagen­Dazs® vanilla bean ice creamE) A) and B)
F) A) and C)

Question 2

For which of the following goods is the income elasticity of demand likely highest?

Accepted Answer

A)   natural gas
B)   doctor's visits
C)   hamburgers
D)   boatsE) A) and D)
F) None of the above

Question 3

While in college, John and Bethany each buy five packages of mac-n-cheese per week. After they graduate and have full-time jobs, John buys six packages per week, but Bethany buys only two packages per week. When looking at income elasticity of demand for mac­n­cheese, John's

Accepted Answer

A)   is negative, and Bethany's is positive.
B)   is positive, and Bethany's is negative.
C)   is zero, and Bethany's approaches infinity.
D)   approaches infinity, and Bethany's is zero.E) C) and D)
F) A) and B)

Question 4

In January the price of dark chocolate candy bars was $2.00, and Willy's Chocolate Factory produced 80 pounds. In February the price of dark chocolate candy bars was $2.50, and Willy's produced 110 pounds. In March the price of dark chocolate candy bars was $3.00, and Willy's produced 140 pounds. The price elasticity of supply of Willy's dark chocolate candy bars was about

Accepted Answer

A)   0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00.
B)   0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00.
C)   1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00.
D)   1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00.E) A) and B)
F) A) and C) C

Question 5

When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about

Accepted Answer

A)   0.55.
B)   10.
C)   2.
D)   1.83.E) All of the above
F) A) and B)

Question 6

Scenario 5-4
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 5-4. Total consumer spending on aged cheddar cheese will

Accepted Answer

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

Question 7

Figure 5-3 
-Refer to Figure 5-3. Which demand curve is perfectly inelastic?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) All of the above
F) B) and D)

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) None of the above
F) All of the above

Question 9

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)   The direct impact is on buyers, not sellers.
B)   Successful drug interdiction policies reduce the demand for illegal drugs.
C)   Drug addicts will have an even greater need for quick cash to support their habits.
D)   In the short run, both equilibrium quantities and prices will fall in the markets for illegal drugs.E) A) and C)
F) B) and C)

Question 10

If the cross-price elasticity of demand for two goods is -4.5, then

Accepted Answer

A)   the two goods are substitutes.
B)   the two goods are complements.
C)   one of the goods is normal while the other good is inferior.
D)   one of the goods is a luxury while the other good is a necessity.E) A) and C)
F) B) and C)

Question 11

A key determinant of the price elasticity of supply is the

Accepted Answer

A)   number of close substitutes for the good in question.
B)   extent to which buyers alter their quantities demanded in response to changes in prices.
C)   length of the time period.
D)   extent to which buyers alter their quantities demanded in response to changes in their incomes.E) B) and D)
F) A) and B)

Question 12

If the cross-price elasticity of demand between two goods is negative, what is the relationship between the two goods?

Accepted Answer

The goods ...

Question 13

Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms,

Accepted Answer

A)   market power is substantial.
B)   supply is perfectly inelastic.
C)   supply is more elastic at low levels of output and less elastic at high levels of output.
D)   supply is less elastic at low levels of output and more elastic at high levels of output.E) A) and C)
F) C) and D) C

Question 14

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

Accepted Answer

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

Question 15

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)   1.18.
B)   1.00.
C)   0.85.
D)   0.25.E) B) and C)
F) C) and D)

Question 17

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  False

Question 18

In the case of perfectly inelastic demand,

Accepted Answer

A)   the change in quantity demanded equals the change in price.
B)   the percentage change in quantity demanded equals the percentage change in price.
C)   infinitely-large changes in quantity demanded result from very small changes in the price.
D)   quantity demanded stays the same whenever price changes.E) B) and C)
F) B) and D)

Question 19

The difference between slope and elasticity is that slope

Accepted Answer

A)   is a ratio of two changes, and elasticity is a ratio of two percentage changes.
B)   is a ratio of two percentage changes, and elasticity is a ratio of two changes.
C)   measures changes in quantity demanded more accurately than elasticity.
D)   None of the above is correct; there is no difference between slope and elasticity.E) A) and B)
F) A) and C)

Question 20

When demand is perfectly inelastic, the price elasticity of demand

Accepted Answer

A)   is zero, and the demand curve is vertical.
B)   is zero, and the demand curve is horizontal.
C)   approaches infinity, and the demand curve is vertical.
D)   approaches infinity, and the demand curve is horizontal.E) All of the above
F) B) and C)

Exam 5: Elasticity and Its Application

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

Correct Answer
verified

For which of the following goods is the income elasticity of demand likely highest?

Correct Answer
verified

While in college, John and Bethany each buy five packages of mac-n-cheese per week. After they graduate and have full-time jobs, John buys six packages per week, but Bethany buys only two packages per week. When looking at income elasticity of demand for macncheese, John's

Correct Answer
verified

Correct Answer
verified
C

When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about

Correct Answer
verified

Correct Answer
verified

Figure 5-3 -Refer to Figure 5-3. Which demand curve is perfectly inelastic?

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

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Correct Answer
verified

If the cross-price elasticity of demand for two goods is -4.5, then

Correct Answer
verified

A key determinant of the price elasticity of supply is the

Correct Answer
verified

If the cross-price elasticity of demand between two goods is negative, what is the relationship between the two goods?

Correct Answer
verified
The goods ...
View Answer

Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms,

Correct Answer
verified
C

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

Correct Answer
verified

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Correct Answer
verified

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

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
False

In the case of perfectly inelastic demand,

Correct Answer
verified

The difference between slope and elasticity is that slope

Correct Answer
verified

When demand is perfectly inelastic, the price elasticity of demand

Correct Answer
verified

Exam 5: Elasticity and Its Application

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

Correct AnswerverifiedShow Answer

For which of the following goods is the income elasticity of demand likely highest?

Correct AnswerverifiedShow Answer

While in college, John and Bethany each buy five packages of mac-n-cheese per week. After they graduate and have full-time jobs, John buys six packages per week, but Bethany buys only two packages per week. When looking at income elasticity of demand for mac­n­cheese, John's

Correct AnswerverifiedShow Answer

Correct AnswerverifiedC

When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 5-3 -Refer to Figure 5-3. Which demand curve is perfectly inelastic?

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

Which of the following statements helps to explain why government drug interdiction increases drug-related crime?

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand for two goods is -4.5, then

Correct AnswerverifiedShow Answer

A key determinant of the price elasticity of supply is the

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand between two goods is negative, what is the relationship between the two goods?

Correct AnswerverifiedThe goods ...View AnswerShow Answer

Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms,

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Correct AnswerverifiedShow Answer

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

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 AnswerverifiedFalse

In the case of perfectly inelastic demand,

Correct AnswerverifiedShow Answer

The difference between slope and elasticity is that slope

Correct AnswerverifiedShow Answer

When demand is perfectly inelastic, the price elasticity of demand

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

While in college, John and Bethany each buy five packages of mac-n-cheese per week. After they graduate and have full-time jobs, John buys six packages per week, but Bethany buys only two packages per week. When looking at income elasticity of demand for macncheese, John's

Correct Answer
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Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The goods ...
View Answer

Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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False

Correct Answer
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Correct Answer
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Correct Answer
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