Question 1

Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about

Accepted Answer

A)  1.43, and an increase in the price will cause hotels' total revenue to decrease.
B)  1.43, and an increase in the price will cause hotels' total revenue to increase.
C)  0.70, and an increase in the price will cause hotels' total revenue to decrease.
D)  0.70, and an increase in the price will cause hotels' total revenue to increase.E) A) and C)
F) A) and D)

Question 2

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 change in equilibrium price will be

Accepted Answer

A)  greater in the aged cheddar cheese market than in the bread market.
B)  greater in the bread market than in the aged cheddar cheese market.
C)  the same in the aged cheddar cheese and bread markets.
D)  Any of the above could be correct.E) B) and C)
F) All of the above

Question 3

Kevin tunes pianos. If the demand for piano-tuning services is elastic, Kevin could increase his total revenue by

Accepted Answer

A)  increasing the price of his piano-tuning services.
B)  decreasing the price of his piano-tuning services.
C)  leaving the price of his piano-tuning services unchanged.
D)  None of the above is correct.E) None of the above
F) B) and D)

Question 4

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

Accepted Answer

A)  increase total revenue of textbook sellers.
B)  decrease total revenue of textbook sellers.
C)  not change total revenue of textbook sellers.
D)  There is not enough information to answer this question.E) A) and C)
F) None of the above

Question 5

A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

Accepted Answer

A)  infinity.
B)  zero.
C)  one.
D)  negative one.E) None of the above
F) B) and C)

Question 6

When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.

Accepted Answer

A) True 
 B)False

Question 7

Farm programs that pay farmers not to plant crops on all their land

Accepted Answer

A)  hurt farmers by lowering their total revenue and hurt consumers by causing shortages of some food items.
B)  help farmers by cutting costs, which helps consumers by lowering food prices.
C)  help farmers by increasing total revenue in the market but hurt consumers by raising food prices.
D)  help farmers directly since they receive government payments but have no real effects on consumers.E) C) and D)
F) B) and C)

Question 8

To determine whether a good is considered normal or inferior, one could examine the value of the

Accepted Answer

A)  income elasticity of demand for that good.
B)  price elasticity of demand for that good.
C)  price elasticity of supply for that good.
D)  cross-price elasticity of demand for that good.E) B) and D)
F) A) and D)

Question 9

Table 5-6
   Income  Quantity of Good X  Purchased  Quantity of Good Y  Purchased $30,000220$40,000610\begin{array}{|l|l|l|}\hline 	ext { Income } & \begin{array}{l}	ext { Quantity of Good X } \	ext { Purchased }\end{array} & \begin{array}{l}	ext { Quantity of Good Y } \	ext { Purchased }\end{array} \\hline \$ 30,000 & 2 & 20 \\hline \$ 40,000 & 6 & 10 \\hline\end{array} Income $30,000$40,000​ Quantity of Good X  Purchased ​26​ Quantity of Good Y  Purchased ​2010​​

-Refer to Table 5-6. Using the midpoint method, what is the income elasticity of demand for good X?

Accepted Answer

A)  -3.5
B)  -0.29
C)  0.29
D)  3.5 E) A) and C)
F) A) and D)

Question 10

When a supply curve is relatively flat, the

Accepted Answer

A)  sellers are not at all responsive to a change in price.
B)  equilibrium price changes substantially when the demand for the good changes.
C)  supply is relatively elastic.
D)  supply is relatively inelastic.E) B) and C)
F) A) and D)

Question 11

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

Accepted Answer

A) True 
 B)False

Question 12

Other things equal, the demand for a good tends to be more inelastic, the

Accepted Answer

A)  fewer the available substitutes.
B)  longer the time period considered.
C)  more the good is considered a luxury good.
D)  more narrowly defined is the market for the good.E) B) and C)
F) None of the above

Question 13

The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

Accepted Answer

A) True 
 B)False

Question 14

If the price elasticity of demand is equal to 1, then demand is unit elastic.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Accepted Answer

A)  The demand for illegal drugs is inelastic.
B)  Interdiction results in drug addicts having a greater need for quick cash.
C)  Interdiction results in an increase in the amount of money needed to buy the same amount of drugs.
D)  Government drug programs are more lenient now with drug offenders than they were in the 1980s.E) All of the above
F) A) and D)

Question 16

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

Accepted Answer

A)  elastic, and the demand curve will be horizontal.
B)  inelastic, and the demand curve will be horizontal.
C)  elastic, and the demand curve will be vertical.
D)  inelastic, and the demand curve will be vertical.E) All of the above
F) B) and D)

Question 17

For which pairs of goods is the cross-price elasticity most likely to be negative?

Accepted Answer

A)  peanut butter and jelly
B)  automobile tires and coffee
C)  pens and pencils
D)  paperback novels and electronic books for e-readersE) All of the above
F) A) and B)

Question 18

If a change in the price of a good results in no change in total revenue, then

Accepted Answer

A)  the demand for the good must be elastic.
B)  the demand for the good must be inelastic.
C)  the demand for the good must be unit elastic.
D)  buyers must not respond very much to a change in price.E) A) and C)
F) B) and C)

Question 19

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

Accepted Answer

A)  demand for the good is said to be elastic.
B)  demand for the good is said to be inelastic.
C)  law of demand does not apply to the good.
D)  demand curve for the good shifts only slightly in response to a change in price.E) B) and D)
F) All of the above

Question 20

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 because a price increase always leads to an increase in total revenue.E) All of the above
F) B) and D)

Exam 5: Elasticity and Its Application

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

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

Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about

Correct Answer
verified

Kevin tunes pianos. If the demand for piano-tuning services is elastic, Kevin could increase his total revenue by

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

Correct Answer
verified

Other things equal, the demand for a good tends to be more inelastic, the

Correct Answer
verified

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

Correct Answer
verified

To determine whether a good is considered normal or inferior, one could examine the value of the

Correct Answer
verified

For which pairs of goods is the cross-price elasticity most likely to be negative?

Correct Answer
verified

When a supply curve is relatively flat, the

Correct Answer
verified

Correct Answer
verified

If the price elasticity of demand is equal to 1, then demand is unit elastic.

Correct Answer
verified

A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

Correct Answer
verified

Farm programs that pay farmers not to plant crops on all their land

Correct Answer
verified

When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.

Correct Answer
verified

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Correct Answer
verified

If a change in the price of a good results in no change in total revenue, then

Correct Answer
verified

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

Correct Answer
verified

Exam 5: Elasticity and Its Application

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

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

Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about

Correct AnswerverifiedShow Answer

Kevin tunes pianos. If the demand for piano-tuning services is elastic, Kevin could increase his total revenue by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

Correct AnswerverifiedShow Answer

Other things equal, the demand for a good tends to be more inelastic, the

Correct AnswerverifiedShow Answer

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

Correct AnswerverifiedShow Answer

To determine whether a good is considered normal or inferior, one could examine the value of the

Correct AnswerverifiedShow Answer

For which pairs of goods is the cross-price elasticity most likely to be negative?

Correct AnswerverifiedShow Answer

When a supply curve is relatively flat, the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the price elasticity of demand is equal to 1, then demand is unit elastic.

Correct AnswerverifiedShow Answer

A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

Correct AnswerverifiedShow Answer

Farm programs that pay farmers not to plant crops on all their land

Correct AnswerverifiedShow Answer

When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.

Correct AnswerverifiedShow Answer

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Correct AnswerverifiedShow Answer

If a change in the price of a good results in no change in total revenue, then

Correct AnswerverifiedShow Answer

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

Correct AnswerverifiedShow Answer

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