Question 1

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.

Question 2

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

Accepted Answer

A)  scissors
B)  fruit
C)  music downloads
D)  toothpaste

Question 3

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Accepted Answer

A) True 
 B)False

Question 4

Figure 5-10 2 is represented by the area(s)  A) B + D. B) A + B. C) C + D. D) D." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 5-10. Total revenue when the price is P2 is represented by the area(s)

Accepted Answer

A)  B + D.
B)  A + B.
C)  C + D.
D)  D.

Question 5

If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by

Accepted Answer

A)  1.92%, and apples sellers' total revenue will increase as a result.
B)  1.92%, and apples sellers' total revenue will decrease as a result.
C)  3%, and apples sellers' total revenue will increase as a result.
D)  3%, and apples sellers' total revenue will decrease as a result.

Question 6

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

Accepted Answer

A)  all inferior goods
B)  all normal goods
C)  goods for which there are many complements
D)  luxuries

Question 7

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 8

Food and clothing tend to have

Accepted Answer

A)  small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods.
B)  small income elasticities because consumers buy proportionately more of both goods at higher income levels than they buy at low income levels.
C)  large income elasticities because they are necessities.
D)  large income elasticities because they are relatively inexpensive.

Question 9

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is

Accepted Answer

A)  0.82, and basketball tickets are a normal good.
B)  0.82, and basketball tickets are an inferior good.
C)  1.22, and basketball tickets are a normal good.
D)  1.22, and basketball tickets are an inferior good.

Question 10

Moving downward and to the right along a linear demand curve, we know that total revenue

Accepted Answer

A)  first increases, then decreases.
B)  first decreases, then increases.
C)  always increases.
D)  always decreases.

Question 11

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Accepted Answer

A)  negative, and the good is an inferior good.
B)  negative, and the good is a normal good.
C)  positive, and the good is a normal good.
D)  positive, and the good is an inferior good.

Question 12

Figure 5-1 
-Refer to Figure 5-1. Between point A and point B, the slope is equal to

Accepted Answer

A)  -1/4, and the price elasticity of demand is equal to 2/3.
B)  -1/4, and the price elasticity of demand is equal to 3/2.
C)  -3/2, and the price elasticity of demand is equal to 1/4.
D)  -2/3, and the price elasticity of demand is equal to 3/2.

Question 13

Which of the following statements is correct?

Accepted Answer

A)  The demand for flat-screen computer monitors is more elastic than the demand for monitors in general.
B)  The demand for grandfather clocks is more elastic than the demand for clocks in general.
C)  The demand for cardboard is more elastic over a long period of time than over a short period of time.
D)  All of the above are correct.

Question 14

If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of supply is about

Accepted Answer

A)  1.33, and supply is elastic.
B)  1.33, and supply is inelastic.
C)  0.75, and supply is elastic.
D)  0.75, and supply is inelastic.

Question 15

Figure 5-4 
-Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 1,000, P = $40)  and (Q = 1,500, P = $30) . Then which of the following scenarios is possible?

Accepted Answer

A)  Both of these points lie on the section of the demand curve from B to C.
B)  The vertical intercept of the demand curve is the point (Q = 0, P = $60) .
C)  The horizontal intercept of the demand curve is the point (Q = 1,800, P = $0) .
D)  Any of these scenarios is possible.

Question 16

-Refer to Table 5-2. Using the midpoint method, if the price falls from $150 to $100, the absolute value of the price elasticity of demand is

Accepted Answer

A)  0.4.
B)  0.9.
C)  1.1.
D)  2.

Question 17

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

Accepted Answer

A)  the mayor thinks demand is elastic, and the city manager thinks demand is inelastic.
B)  both the mayor and the city manager think that demand is elastic.
C)  both the mayor and the city manager think that demand is inelastic.
D)  the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.

Question 18

Suppose that when the price of good X falls from $6 to $4, the quantity demanded of good Y rises from 30 units to 40 units. Using the midpoint method, the cross-price elasticity of demand is

Accepted Answer

A)  -0.71, and X and Y are complements.
B)  -1.40, and X and Y are complements.
C)  -0.71, and X and Y are substitutes.
D)  -1.40, and X and Y are substitutes.

Question 19

Figure 5-4 
-Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $8 and $16. Then, when the price changes between $9 and $10,

Accepted Answer

A)  quantity demanded changes proportionately less than the price.
B)  quantity demanded changes proportionately more than the price.
C)  quantity demanded changes the same amount proportionately as price.
D)  the price elasticity of demand equals 1.

Question 20

If marijuana were legalized, it is likely that there would be an increase in the supply of marijuana. Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana. These advocates believe that the

Accepted Answer

A)  supply for marijuana is elastic.
B)  demand for marijuana is elastic.
C)  supply for marijuana is inelastic.
D)  demand for marijuana is inelastic.

Exam 5: Elasticity and Its Application

Correct Answer
verified

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

Correct Answer
verified

-Refer to Table 5-2. Using the midpoint method, if the price falls from $150 to $100, the absolute value of the price elasticity of demand is

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

If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by

Correct Answer
verified

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

Correct Answer
verified

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 Answer
verified

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is

Correct Answer
verified

Food and clothing tend to have

Correct Answer
verified

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 1,000, P = $40) and (Q = 1,500, P = $30) . Then which of the following scenarios is possible?

Correct Answer
verified

If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of supply is about

Correct Answer
verified

Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P₂ is represented by the area(s)

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 $8 and $16. Then, when the price changes between $9 and $10,

Correct Answer
verified

Suppose that when the price of good X falls from $6 to $4, the quantity demanded of good Y rises from 30 units to 40 units. Using the midpoint method, the cross-price elasticity of demand is

Correct Answer
verified

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Correct Answer
verified

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, the slope is equal to

Correct Answer
verified

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

Correct Answer
verified

Moving downward and to the right along a linear demand curve, we know that total revenue

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Exam 5: Elasticity and Its Application

Correct AnswerverifiedShow Answer

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

Correct AnswerverifiedShow Answer

-Refer to Table 5-2. Using the midpoint method, if the price falls from $150 to $100, the absolute value of the price elasticity of demand is

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

If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by

Correct AnswerverifiedShow Answer

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

Correct AnswerverifiedShow 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

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is

Correct AnswerverifiedShow Answer

Food and clothing tend to have

Correct AnswerverifiedShow Answer

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 1,000, P = $40) and (Q = 1,500, P = $30) . Then which of the following scenarios is possible?

Correct AnswerverifiedShow Answer

If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of supply is about

Correct AnswerverifiedShow Answer

Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P2 is represented by the area(s)

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 $8 and $16. Then, when the price changes between $9 and $10,

Correct AnswerverifiedShow Answer

Suppose that when the price of good X falls from $6 to $4, the quantity demanded of good Y rises from 30 units to 40 units. Using the midpoint method, the cross-price elasticity of demand is

Correct AnswerverifiedShow Answer

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Correct AnswerverifiedShow Answer

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, the slope is equal to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Moving downward and to the right along a linear demand curve, we know that total revenue

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P₂ is represented by the area(s)

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