Question 1

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.E) A) and B)
F) B) and C)

Question 2

Figure 5-20 
-Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

Accepted Answer

A)   S1
B)   S2
C)   S3
D)   None of the supply curves is perfectly inelastic.E) B) and D)
F) A) and B)

Question 3

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 decrease never leads to an increase in total revenue.E) A) and B)
F) A) and C)

Question 4

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) A) and B)
F) All of the above

Question 5

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

Accepted Answer

A)   1.89
B)   1.26
C)   0.53
D)   0.34E) None of the above
F) B) and C)

Question 6

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

Accepted Answer

A)   increase the price of every loaf of bread in the store.
B)   look for ways to cut costs and increase profit for the bakery.
C)   determine the price elasticity of demand for the bakery's products.
D)   determine the price elasticity of supply for the bakery's products.E) A) and D)
F) A) and C)

Question 7

Figure 5-4 
-Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is

Accepted Answer

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

Question 8

Scenario 5-7
Suppose the demand function for good X is given by:  where  is the quantity demanded of good X,  is the price of good X, and  is the price of good Y, which is related to good X.
-Refer to Scenario 5-7. Using the midpoint method, if the price of good X is $10 and the price of good Y increases from $8 to $10, the cross price elasticity of demand is about

Accepted Answer

The answer of Scenario 5-7
Suppose the demand function for good...

Question 9

Holding all other factors constant and using the midpoint method, if a tractor manufacturer increases production from 80 to 100 units when price increases by 15 percent, then supply is

Accepted Answer

A)   inelastic, since the price elasticity of supply is equal to 0.68.
B)   inelastic, since the price elasticity of supply is equal to 1.48.
C)   elastic, since the price elasticity of supply is equal to 0.68.
D)   elastic, since the price elasticity of supply is equal to 1.48.E) C) and D)
F) None of the above

Question 10

Which of the following is an illustration of the market for original paintings by deceased artist Vincent Van Gogh? 
a. 
b. 
c. 
d.

Accepted Answer

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

Question 11

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is

Accepted Answer

A)   0.75.
B)   1.25.
C)   1.33.
D)   1.60.E) B) and D)
F) B) and C)

Question 12

Figure 5-5 
-Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of

Accepted Answer

A)   $20.
B)   $50.
C)   $70
D)   $100.E) A) and C)
F) All of the above

Question 13

Figure 5-2 
-Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

Accepted Answer

A)   D1
B)   D2
C)   D3
D)   All of the above are equally elastic.E) A) and B)
F) A) and C)

Question 14

Figure 5-7 
-Refer to Figure 5-7. For prices below $5, demand is price

Accepted Answer

A)   elastic, and raising price will increase total revenue.
B)   inelastic, and raising price will increase total revenue.
C)   elastic, and lowering price will increase total revenue.
D)   inelastic, and lowering price will increase total revenue.E) A) and B)
F) A) and C)

Question 15

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.E) None of the above
F) A) and C)

Question 16

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Accepted Answer

A)   cross-price elasticity of demand is negative.
B)   price elasticity of demand is elastic.
C)   income elasticity of demand is negative.
D)   income elasticity of demand is positive.E) C) and D)
F) A) and D)

Question 17

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

Accepted Answer

A)   1.50, and an increase in price will result in an increase in total revenue for good A.
B)   1.50, and an increase in price will result in a decrease in total revenue for good A.
C)   0.67, and an increase in price will result in an increase in total revenue for good A.
D)   0.67, and an increase in price will result in a decrease in total revenue for good A.E) A) and D)
F) B) and C)

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) C) and D)
F) B) and D)

Question 19

Figure 5-8 
-Refer to Figure 5-8. When price falls from $25 to $20, demand is

Accepted Answer

A)   inelastic, since total revenue decreases from $4,000 to $2,500.
B)   inelastic, since total revenue increases from $2,500 to $4,000.
C)   elastic, since total revenue increases from $2,500 to $4,000.
D)   unit elastic, since total revenue does not change.E) A) and B)
F) A) and D)

Question 20

Figure 5-13 
-Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

Accepted Answer

A)   0.71.
B)   0.85.
C)   1.18.
D)   1.40.E) A) and B)
F) None of the above

Exam 5: Elasticity and Its Application

Correct Answer
verified

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is

Correct Answer
verified

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is

Correct Answer
verified

Which of the following is an illustration of the market for original paintings by deceased artist Vincent Van Gogh? a. b. c. d.

Correct Answer
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Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

Correct Answer
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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 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

Figure 5-20 -Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

Correct Answer
verified

Figure 5-13 -Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

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

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

Correct Answer
verified

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

Correct Answer
verified

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

Correct Answer
verified

Figure 5-5 -Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of

Correct Answer
verified

Figure 5-7 -Refer to Figure 5-7. For prices below $5, demand is price

Correct Answer
verified

Holding all other factors constant and using the midpoint method, if a tractor manufacturer increases production from 80 to 100 units when price increases by 15 percent, then supply is

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

Figure 5-8 -Refer to Figure 5-8. When price falls from $25 to $20, demand is

Correct Answer
verified

Correct Answer
verified

Exam 5: Elasticity and Its Application

Correct AnswerverifiedShow Answer

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is

Correct AnswerverifiedShow Answer

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. Suppose the point labeled B is the "halfway point" on the demand curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is

Correct AnswerverifiedShow Answer

Which of the following is an illustration of the market for original paintings by deceased artist Vincent Van Gogh? a. b. c. d.

Correct AnswerverifiedShow Answer

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

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

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

Figure 5-20 -Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

Correct AnswerverifiedShow Answer

Figure 5-13 -Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

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

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

Correct AnswerverifiedShow Answer

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of

Correct AnswerverifiedShow Answer

Figure 5-7 -Refer to Figure 5-7. For prices below $5, demand is price

Correct AnswerverifiedShow Answer

Holding all other factors constant and using the midpoint method, if a tractor manufacturer increases production from 80 to 100 units when price increases by 15 percent, then supply is

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

Figure 5-8 -Refer to Figure 5-8. When price falls from $25 to $20, demand is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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