Question 1

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

Accepted Answer

A) True 
 B)False

Question 2

What can you conclude about the price elasticity of demand in each of the following statements
a.The furnace cleaning business in this city is very competitive.I'd lose half my customers if I raised the price by as little as 10 percent."
b.My economics professor has chosen to use Mankiw's textbook for this class,so I have no choice but to buy it."
c.I spend exactly $10 on coffee every week."
d.Apple prices doubled this year since all flowers were killed in the spring frost; however,the total sales of apples are only decreased by 20 percent."

Accepted Answer

a.Elasticity is 5 so the demand is elast...

Question 3

If the demand for sushi is downward sloping,what will a decrease in the price of sushi do

Accepted Answer

A)  If the elasticity of demand is elastic, it will increase the total revenue of sushi sellers.
B)  If the elasticity of demand is elastic, it will decrease the total revenue of sushi sellers.
C)  If the elasticity of demand is inelastic, it will increase the total revenue of sushi sellers.
D)  If the elasticity of demand is perfectly elastic, it will not change the total revenue of sushi sellers.E) B) and C)
F) A) and B)

Question 4

When is demand said to be inelastic

Accepted Answer

A)  when the quantity demanded changes proportionately more than price
B)  when the quantity demanded changes proportionately more than income
C)  when the quantity demanded changes proportionately less than price
D)  when the quantity demanded changes proportionately less than incomeE) All of the above
F) A) and B)

Question 5

Moving up a linear demand curve,what happens to total revenue

Accepted Answer

A)  It increases, then decreases.
B)  It decreases, then increases.
C)  It increases.
D)  It decreases.E) A) and D)
F) None of the above

Question 6

Which of the following types of goods would have a large income elasticity

Accepted Answer

A)  luxuries
B)  necessities
C)  substitutes
D)  complementsE) All of the above
F) None of the above

Question 7

Holding all else constant,if a pencil manufacturer increases production by 25 percent when the market price of pencils increases from $0.50 to $0.60,what is the price elasticity of supply,using the midpoint method

Accepted Answer

A)  elastic, since elasticity is equal to 1.38
B)  inelastic, since elasticity is equal to 1.381
C)  inelastic, since elasticity is equal to 0.72
D)  elastic, since elasticity is equal to 0.72E) A) and B)
F) A) and D)

Question 8

What happens as elasticity of supply rises

Accepted Answer

A)  The supply curve gets flatter.
B)  The supply curve gets steeper.
C)  Quantity supplied falls.
D)  Quantity supplied increases.E) A) and D)
F) C) and D)

Question 9

When studying how some event or policy affects a market,on what does elasticity provide information

Accepted Answer

A)  the direction and the efficiency of the effect on the market
B)  the direction and the magnitude of the effect on the market
C)  the magnitude and the efficiency of the effect on the market
D)  the efficiency and the equity of the effect on the marketE) None of the above
F) C) and D)

Question 10

Supply tends to be more elastic in the short run and more inelastic in the long run.

Accepted Answer

A) True 
 B)False

Question 11

In general terms,what does elasticity measure

Accepted Answer

A)  how price is determined between buyers and sellers in a market
B)  how much government intervention is prevalent in a market
C)  how competitive a market is
D)  how much buyers and sellers respond to changes in market conditionsE) All of the above
F) A) and B)

Question 12

When demand is elastic,what is the price elasticity,and how will price and total revenue behave

Accepted Answer

A)  greater than 1, and price and total revenue will move in opposite directions
B)  less than 1, and price and total revenue will move in the same direction
C)  less than 1, and price and total revenue will move in opposite directions
D)  greater than 1, and price and total revenue will move in the same directionE) All of the above
F) A) and B)

Question 13

You produce bird houses.If the demand for bird houses is elastic and you want to increase your total revenue,what should you do

Accepted Answer

A)  You should increase the price of your bird houses.
B)  You should decrease the price of your bird houses.
C)  You should not change the price of your bird houses.
D)  You should not change the price of your bird houses but increase the quantity produced.E) A) and B)
F) A) and C)

Question 14

If the cross-price elasticity of demand of two goods is 2.5,what would the two goods be

Accepted Answer

A)  complements
B)  luxuries
C)  normal goods
D)  substitutesE) B) and C)
F) None of the above

Question 15

As elasticity of demand increases,what happens to the demand curve

Accepted Answer

A)  It gets flatter and the price elasticity of demand will eventually be less than 1.
B)  It gets steeper and the price elasticity of demand will eventually be greater than 1.
C)  It gets flatter and the price elasticity of demand will eventually be greater than 1.
D)  It gets steeper and the price elasticity of demand will eventually be less than 1.E) A) and B)
F) All of the above

Question 16

Holding all other factors constant,if raising the price of a good results in less total revenue,what must the demand for the good be

Accepted Answer

A)  unit elastic
B)  inelastic
C)  elastic
D)  perfectly inelasticE) A) and C)
F) B) and D)

Question 17

What happens if sellers respond substantially to changes in price

Accepted Answer

A)  The supply curve will shift substantially when the price rises.
B)  Sellers are considered to be relatively price insensitive.
C)  Sellers are considered to be relatively price sensitive.
D)  The price elasticity of supply equals 1.E) A) and B)
F) None of the above

Question 18

Figure 5-1
 
-Refer to Figure 5-1.If the price decreased from $18 to $6,what would happen to total revenue and what would this imply about demand elasticity

Accepted Answer

A)  Total revenue would increase by $1200 and demand would be elastic.
B)  Total revenue would increase by $800 and demand would be elastic.
C)  Total revenue would decrease by $1200 and demand would be inelastic.
D)  Total revenue would decrease by $800 and demand would be inelastic.E) A) and D)
F) B) and C)

Question 19

An increase in the price of pure chocolate morsels from $3.25 to $3.45 causes Nestle to increase production from 125 bags per minute to 145 bags per minute.What do we know about the elasticity of supply

Accepted Answer

A)  It is 0.40 and supply is elastic.
B)  It is 2.48 and supply is elastic.
C)  It is 0.40 and supply is inelastic.
D)  It is 2.48 and supply is inelastic.E) B) and D)
F) All of the above

Question 20

Why could the discovery of a new hybrid wheat lower farmers' revenue

Accepted Answer

A)  because the demand for wheat is inelastic
B)  because the demand for wheat is elastic
C)  because the supply of wheat is elastic
D)  because the supply of wheat is inelasticE) B) and C)
F) A) and D)

Exam 5: Elasticity and Its Application

You produce bird houses.If the demand for bird houses is elastic and you want to increase your total revenue,what should you do

Correct Answer
verified

Supply tends to be more elastic in the short run and more inelastic in the long run.

Correct Answer
verified

Moving up a linear demand curve,what happens to total revenue

Correct Answer
verified

If the cross-price elasticity of demand of two goods is 2.5,what would the two goods be

Correct Answer
verified

Correct Answer
verified
a.Elasticity is 5 so the demand is elast...
View Answer

When demand is elastic,what is the price elasticity,and how will price and total revenue behave

Correct Answer
verified

What happens as elasticity of supply rises

Correct Answer
verified

In general terms,what does elasticity measure

Correct Answer
verified

Holding all else constant,if a pencil manufacturer increases production by 25 percent when the market price of pencils increases from $0.50 to $0.60,what is the price elasticity of supply,using the midpoint method

Correct Answer
verified

As elasticity of demand increases,what happens to the demand curve

Correct Answer
verified

What happens if sellers respond substantially to changes in price

Correct Answer
verified

Which of the following types of goods would have a large income elasticity

Correct Answer
verified

When is demand said to be inelastic

Correct Answer
verified

When studying how some event or policy affects a market,on what does elasticity provide information

Correct Answer
verified

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

Correct Answer
verified

An increase in the price of pure chocolate morsels from $3.25 to $3.45 causes Nestle to increase production from 125 bags per minute to 145 bags per minute.What do we know about the elasticity of supply

Correct Answer
verified

Figure 5-1 -Refer to Figure 5-1.If the price decreased from $18 to $6,what would happen to total revenue and what would this imply about demand elasticity

Correct Answer
verified

Holding all other factors constant,if raising the price of a good results in less total revenue,what must the demand for the good be

Correct Answer
verified

Why could the discovery of a new hybrid wheat lower farmers' revenue

Correct Answer
verified

If the demand for sushi is downward sloping,what will a decrease in the price of sushi do

Correct Answer
verified

Exam 5: Elasticity and Its Application

You produce bird houses.If the demand for bird houses is elastic and you want to increase your total revenue,what should you do

Correct AnswerverifiedShow Answer

Supply tends to be more elastic in the short run and more inelastic in the long run.

Correct AnswerverifiedShow Answer

Moving up a linear demand curve,what happens to total revenue

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand of two goods is 2.5,what would the two goods be

Correct AnswerverifiedShow Answer

Correct Answerverifieda.Elasticity is 5 so the demand is elast...View AnswerShow Answer

When demand is elastic,what is the price elasticity,and how will price and total revenue behave

Correct AnswerverifiedShow Answer

What happens as elasticity of supply rises

Correct AnswerverifiedShow Answer

In general terms,what does elasticity measure

Correct AnswerverifiedShow Answer

Holding all else constant,if a pencil manufacturer increases production by 25 percent when the market price of pencils increases from $0.50 to $0.60,what is the price elasticity of supply,using the midpoint method

Correct AnswerverifiedShow Answer

As elasticity of demand increases,what happens to the demand curve

Correct AnswerverifiedShow Answer

What happens if sellers respond substantially to changes in price

Correct AnswerverifiedShow Answer

Which of the following types of goods would have a large income elasticity

Correct AnswerverifiedShow Answer

When is demand said to be inelastic

Correct AnswerverifiedShow Answer

When studying how some event or policy affects a market,on what does elasticity provide information

Correct AnswerverifiedShow Answer

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

Correct AnswerverifiedShow Answer

An increase in the price of pure chocolate morsels from $3.25 to $3.45 causes Nestle to increase production from 125 bags per minute to 145 bags per minute.What do we know about the elasticity of supply

Correct AnswerverifiedShow Answer

Figure 5-1 -Refer to Figure 5-1.If the price decreased from $18 to $6,what would happen to total revenue and what would this imply about demand elasticity

Correct AnswerverifiedShow Answer

Holding all other factors constant,if raising the price of a good results in less total revenue,what must the demand for the good be

Correct AnswerverifiedShow Answer

Why could the discovery of a new hybrid wheat lower farmers' revenue

Correct AnswerverifiedShow Answer

If the demand for sushi is downward sloping,what will a decrease in the price of sushi do

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
a.Elasticity is 5 so the demand is elast...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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