Question 1

Why was OPEC unable to maintain high oil prices in the long run?

Accepted Answer

A)  Demand and supply are both elastic in the long run compared to the short run.
B)  Demand and supply are both inelastic in the long run compared to the short run.
C)  Demand is elastic and supply is inelastic in the long run compared to the short run.
D)  Demand is inelastic and supply is elastic in the long run compared to the short run.E) C) and D)
F) B) and D)

Question 2

If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a

Accepted Answer

A)  0.015 percent increase in the quantity demanded.
B)  0.6 percent increase in the quantity demanded.
C)  6 percent increase in the quantity demanded.
D)  66 percent increase in the quantity demanded.E) B) and C)
F) B) and D)

Question 3

The price elasticity of demand for a good measures the willingness of

Accepted Answer

A)  consumers to buy less of the good as price rises.
B)  consumers to avoid monopolistic markets in favor of competitive markets.
C)  firms to produce more of a good as price rises.
D)  firms to respond to the tastes of consumers.E) All of the above
F) A) and B)

Question 4

Demand is said to be inelastic if

Accepted Answer

A)  buyers respond substantially to changes in the price of the good.
B)  demand shifts only slightly when the price of the good changes.
C)  the quantity demanded changes only slightly when the price of the good changes.
D)  the price of the good responds only slightly to changes in demand.E) B) and D)
F) C) and D)

Question 5

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

Accepted Answer

A)  laptop computers
B)  tablets
C)  Microsoft® Surface tablets
D)  cell phonesE) A) and C)
F) All of the above

Question 6

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) None of the above
F) A) and B)

Question 7

If a 20% change in price results in a 15% 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) All of the above
F) None of the above

Question 8

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is

Accepted Answer

A)  0.11.
B)  0.47.
C)  1.12.
D)  2.11.E) A) and D)
F) A) and B)

Question 9

If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

Accepted Answer

A)  a 0.1 percent decrease in the price.
B)  a 1 percent decrease in the price.
C)  a 10 percent decrease in the price.
D)  a 19.6 percent decrease in the price.E) A) and C)
F) All of the above

Question 10

A decrease in supply will cause the smallest increase in price when

Accepted Answer

A)  both supply and demand are inelastic.
B)  demand is elastic and supply is inelastic.
C)  both supply and demand are elastic.
D)  demand is inelastic and supply is elastic.E) A) and C)
F) None of the above

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Suppose that good X is a luxury and that good Y is a necessity. Which good would you expect to have more price elastic demand?

Accepted Answer

The answer of Suppose that good X is a luxury...

Question 13

Figure 5-17 
-Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point B and point C?

Accepted Answer

A)  1.44
B)  1.29
C)  0.96
D)  0.69E) A) and D)
F) A) and C)

Question 14

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

Accepted Answer

A)  1.67
B)  1.19
C)  0.84
D)  0.61E) A) and D)
F) A) and C)

Question 15

Suppose the price elasticity of demand for a product is 0.5. If a supplier wants to increase revenue, what change should it make to price, if any?

Accepted Answer

The answer of Suppose the price elasticity of demand for...

Question 16

A good will have a more elastic demand, the

Accepted Answer

A)  greater the availability of close substitutes.
B)  more broad the definition of the market.
C)  shorter the period of time.
D)  more it is regarded as a necessity.E) C) and D)
F) None of the above

Question 17

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) All of the above

Question 18

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

Accepted Answer

A)  inelastic.
B)  elastic.
C)  unit elastic.
D)  quite sensitive to changes in income.E) All of the above
F) A) and B)

Question 19

Scenario 5-4
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 5-4. 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) A) and B)
F) A) and C)

Question 20

If the income elasticity of demand for a good is 0.56, is the good a normal or inferior good?

Accepted Answer

The good i...

Exam 5: Elasticity and Its Application

Suppose the price elasticity of demand for a product is 0.5. If a supplier wants to increase revenue, what change should it make to price, if any?

Correct AnswerverifiedShow Answer

A decrease in supply will cause the smallest increase in price when

Correct AnswerverifiedShow Answer

Scenario 5-4 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 5-4. Total consumer spending on milk will

Correct AnswerverifiedShow Answer

If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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

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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?

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Figure 5-17 -Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point B and point C?

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If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

Correct AnswerverifiedShow Answer

Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Demand is said to be inelastic if

Correct AnswerverifiedShow Answer

If the income elasticity of demand for a good is 0.56, is the good a normal or inferior good?

Correct AnswerverifiedThe good i...View AnswerShow 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

The price elasticity of demand for a good measures the willingness of

Correct AnswerverifiedShow Answer

A good will have a more elastic demand, the

Correct AnswerverifiedShow Answer

Suppose that good X is a luxury and that good Y is a necessity. Which good would you expect to have more price elastic demand?

Correct AnswerverifiedShow Answer

Why was OPEC unable to maintain high oil prices in the long run?

Correct AnswerverifiedShow Answer

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

Correct AnswerverifiedShow Answer

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The good i...
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