Question 1

You are in charge of the local city-owned aquatic center.You need to increase the revenue generated by the aquatic center in order to meet expenses.The mayor advises you to decrease the price of a day pass.The city manager recommends increasing 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.E) A) and C)
F) B) and D)

Question 2

When her income increased from $10,000 to $20,000,Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds.We can conclude that for Heather,macaroni

Accepted Answer

A)   and soy-burgers are both normal goods with income elasticities equal to 1.
B)   is an inferior good and soy-burgers are normal goods; both have income elasticities of 1.
C)   is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.
D)   and soy-burgers are both inferior goods with income elasticities equal to -1.E) A) and C)
F) None of the above

Question 3

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 equilibrium quantity will

Accepted Answer

A)   increase in both the aged cheddar cheese and bread markets.
B)   increase in the aged cheddar cheese market and decrease in the bread market.
C)   decrease in the aged cheddar cheese market and increase in the bread market.
D)   decrease in both the aged cheddar cheese and bread markets.E) All of the above
F) A) and D)

Question 4

Figure 5-7 
-Refer to Figure 5-7.For prices above $8,demand is price

Accepted Answer

A)   elastic,and total revenue will rise as price rises.
B)   inelastic,and total revenue will rise as price rises.
C)   elastic,and total revenue will fall as price rises.
D)   inelastic,and total revenue will fall as price rises.E) B) and C)
F) A) and D)

Question 5

Figure 5-11 
-Refer to Figure 5-11.If the price rises from point D to point C,total revenue

Accepted Answer

A)   increases,and demand is price elastic.
B)   decreases,and demand is price elastic.
C)   increases,and demand is price inelastic.
D)   decreases,and demand is price inelastic.E) A) and C)
F) B) and C)

Question 6

When demand is inelastic,an increase in price will cause

Accepted Answer

A)   an increase in total revenue.
B)   a decrease in total revenue.
C)   no change in total revenue but an increase in quantity demanded.
D)   no change in total revenue but a decrease in quantity demanded.E) B) and D)
F) A) and B)

Question 7

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows.If the demand for milk is relatively inelastic,the discovery will

Accepted Answer

A)   raise both price and total revenues.
B)   lower both price and total revenues.
C)   raise price and lower total revenues.
D)   lower price and raise total revenues.E) None of the above
F) B) and C)

Question 8

Suppose the point (Q = 2,000,P = $60) is the midpoint on a certain downward-sloping,linear demand curve.Then

Accepted Answer

A)   an increase in price from $40 to $42 will increase total revenue.
B)   a decrease in price from $61 to $59 will leave total revenue unchanged.
C)   the maximum value of total revenue is $120,000.
D)   All of the above are correct.E) A) and D)
F) B) and D)

Question 9

Figure 5-14 
-Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points C and D?

Accepted Answer

A)   0.21
B)   0.29
C)   0.73
D)   1.36E) A) and B)
F) A) and C)

Question 10

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Accepted Answer

A) True 
 B)False

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.E) A) and D)
F) All of the above

Question 12

Last year,Joan bought 50 pounds of hamburger when her household's income was $40,000.This year,her household income was only $30,000 and Joan bought 60 pounds of hamburger.All else constant,Joan's income elasticity of demand for hamburger is

Accepted Answer

A)   positive,so Joan considers hamburger to be an inferior good.
B)   positive,so Joan considers hamburger to be a normal good and a necessity.
C)   negative,so Joan considers hamburger to be an inferior good.
D)   negative,so Joan considers hamburger to be a normal good but not a necessity.E) A) and B)
F) A) and C)

Question 13

Table 5-3
The following table shows the demand schedule for a particular good.
 
-Refer to Table 5-3.Using the midpoint method,when price rises from $6 to $9,the price elasticity of demand is

Accepted Answer

A)   0.43
B)   0.67
C)   1.00
D)   1.5E) B) and C)
F) None of the above

Question 14

Suppose that Juan Carlos is filling out a survey that he received in the mail.The survey asks him what he would do if the price of his favorite toothpaste increased.Juan Carlos reports that he would switch to a different brand.The survey asks what he would do if the price of all toothpastes increased.Juan Carlos reports that he must use toothpaste,so he would have to adjust his spending elsewhere.These examples illustrate the importance of

Accepted Answer

A)   changes in total revenue in determining the price elasticity of demand.
B)   a necessity versus a luxury in determining the price elasticity of demand.
C)   the definition of a market in determining the price elasticity of demand.
D)   the time horizon in determining the price elasticity of demand.E) All of the above
F) C) and D)

Question 15

When demand is perfectly inelastic,the demand curve will be

Accepted Answer

A)   negatively sloped,because buyers decrease their purchases when the price rises.
B)   vertical,because buyers purchase the same amount as before whenever the price rises or falls.
C)   positively sloped,because buyers increase their purchases when price rises.
D)   positively sloped,because buyers increase their total expenditures when price rises.E) A) and B)
F) B) and D)

Question 16

Figure 5-4 
-Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 2,000,P = $15) and (Q = 2,400,P = $12) .Then which of the following scenarios is possible?

Accepted Answer

A)   Both of these points lie on section BC of the demand curve.
B)   The vertical intercept of the demand curve is the point (Q = 0,P = $22) .
C)   The horizontal intercept of the demand curve is the point (Q = 5,000,P = $0) .
D)   Any of these scenarios is possible.E) A) and B)
F) A) and C)

Question 17

If we observe that when consumers' incomes rise by 10%,the quantity demanded of ice cream increases by 5%,then ice cream is an inferior good.

Accepted Answer

A) True 
 B)False

Question 18

Figure 5-5 
-Refer to Figure 5-5.At a price of $48 per unit,sellers' total revenue equals

Accepted Answer

A)   $150.
B)   $200.
C)   $288.
D)   $364.E) B) and C)
F) A) and D)

Question 19

There are very few,if any,good substitutes for automotive tires.Therefore,the demand for automotive tires would tend to be

Accepted Answer

A)   elastic.
B)   unit elastic.
C)   inelastic.
D)   highly responsive to changes in income as well as changes in prices.E) B) and C)
F) All of the above

Question 20

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Accepted Answer

A) True 
 B)False

Exam 5: Elasticity and Its Application

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

Correct Answer
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Correct Answer
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Figure 5-14 -Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points C and D?

Correct Answer
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There are very few,if any,good substitutes for automotive tires.Therefore,the demand for automotive tires would tend to be

Correct Answer
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Table 5-3 The following table shows the demand schedule for a particular good. -Refer to Table 5-3.Using the midpoint method,when price rises from $6 to $9,the price elasticity of demand is

Correct Answer
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Figure 5-4 -Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 2,000,P = $15) and (Q = 2,400,P = $12) .Then which of the following scenarios is possible?

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Figure 5-7 -Refer to Figure 5-7.For prices above $8,demand is price

Correct Answer
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The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Correct Answer
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Last year,Joan bought 50 pounds of hamburger when her household's income was $40,000.This year,her household income was only $30,000 and Joan bought 60 pounds of hamburger.All else constant,Joan's income elasticity of demand for hamburger is

Correct Answer
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Correct Answer
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When her income increased from $10,000 to $20,000,Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds.We can conclude that for Heather,macaroni

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 5-11 -Refer to Figure 5-11.If the price rises from point D to point C,total revenue

Correct Answer
verified

Figure 5-5 -Refer to Figure 5-5.At a price of $48 per unit,sellers' total revenue equals

Correct Answer
verified

When demand is inelastic,an increase in price will cause

Correct Answer
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When demand is perfectly inelastic,the demand curve will be

Correct Answer
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Suppose the point (Q = 2,000,P = $60) is the midpoint on a certain downward-sloping,linear demand curve.Then

Correct Answer
verified

If we observe that when consumers' incomes rise by 10%,the quantity demanded of ice cream increases by 5%,then ice cream is an inferior good.

Correct Answer
verified

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Correct Answer
verified

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows.If the demand for milk is relatively inelastic,the discovery will

Correct Answer
verified

Exam 5: Elasticity and Its Application

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 5-14 -Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points C and D?

Correct AnswerverifiedShow Answer

There are very few,if any,good substitutes for automotive tires.Therefore,the demand for automotive tires would tend to be

Correct AnswerverifiedShow Answer

Table 5-3 The following table shows the demand schedule for a particular good. -Refer to Table 5-3.Using the midpoint method,when price rises from $6 to $9,the price elasticity of demand is

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 = 2,000,P = $15) and (Q = 2,400,P = $12) .Then which of the following scenarios is possible?

Correct AnswerverifiedShow Answer

Figure 5-7 -Refer to Figure 5-7.For prices above $8,demand is price

Correct AnswerverifiedShow Answer

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

Correct AnswerverifiedShow Answer

Last year,Joan bought 50 pounds of hamburger when her household's income was $40,000.This year,her household income was only $30,000 and Joan bought 60 pounds of hamburger.All else constant,Joan's income elasticity of demand for hamburger is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When her income increased from $10,000 to $20,000,Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds.We can conclude that for Heather,macaroni

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 5-11 -Refer to Figure 5-11.If the price rises from point D to point C,total revenue

Correct AnswerverifiedShow Answer

Figure 5-5 -Refer to Figure 5-5.At a price of $48 per unit,sellers' total revenue equals

Correct AnswerverifiedShow Answer

When demand is inelastic,an increase in price will cause

Correct AnswerverifiedShow Answer

When demand is perfectly inelastic,the demand curve will be

Correct AnswerverifiedShow Answer

Suppose the point (Q = 2,000,P = $60) is the midpoint on a certain downward-sloping,linear demand curve.Then

Correct AnswerverifiedShow Answer

If we observe that when consumers' incomes rise by 10%,the quantity demanded of ice cream increases by 5%,then ice cream is an inferior good.

Correct AnswerverifiedShow Answer

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Correct AnswerverifiedShow Answer

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows.If the demand for milk is relatively inelastic,the discovery will

Correct AnswerverifiedShow Answer

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