Question 1

Danita rescues dogs from her local animal shelter. When Danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. For Danita, the income elasticity of demand for dog biscuits is

Accepted Answer

A)   negative, and dog biscuits are a normal good.
B)   negative, and dog biscuits are an inferior good.
C)   positive, and dog biscuits are an inferior good.
D)   positive, and dog biscuits are a normal good.E) None of the above
F) A) and B)

Question 2

Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

A) True 
 B)False

Question 3

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

Question 4

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should

Accepted Answer

A)   increase the price charged to vacationers and decrease the price charged to business travelers.
B)   decrease the price charged to vacationers and increase the price charged to business travelers.
C)   decrease the price to both groups of customers.
D)   increase the price for both groups of customers.E) All of the above
F) A) and B)

Question 5

Table 5-13
Consider the following demand schedule. 
-Refer to Table 5-13. Using the midpoint method, what is the price elasticity of demand between $12 and $15?

Accepted Answer

The answer of Table 5-13
Consider the following demand schedule. 
-Refer...

Question 6

When a university bookstore prices chemistry textbooks at $200 each, it generally sells 120 books per month. If it lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity of demand for chemistry books is about

Accepted Answer

A)   1.29, and a decrease in price from $200 to $160 results in an increase in total revenue.
B)   1.29, and a decrease in price from $200 to $160 results in a decrease in total revenue.
C)   0.78, and a decrease in price from $200 to $160 results in an increase in total revenue.
D)   0.78, and a decrease in price from $200 to $160 results in a decrease in total revenue.E) A) and B)
F) A) and C)

Question 7

Table 5-1 
-Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Accepted Answer

A)   A is pens and B is pencils.
B)   A is a Snickers bar and B is a Milky Way bar.
C)   A is an airline ticket from Chicago to New York demanded by a vacationer and B is an airline ticket from Chicago to New York demanded by a business traveler.
D)   A is a bottle of water demanded by a tourist in a desert and B is a bottle of water demanded by a tourist in a rain forest.E) All of the above
F) B) and C)

Question 8

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

Accepted Answer

A) True 
 B)False

Question 9

For a horizontal demand curve,

Accepted Answer

A)   the slope is undefined, and the price elasticity of demand is equal to 0.
B)   the slope is equal to 0, and the price elasticity of demand is undefined.
C)   both the slope and price elasticity of demand are undefined.
D)   both the slope and price elasticity of demand are equal to 0.E) None of the above
F) All of the above

Question 10

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Accepted Answer

A) True 
 B)False

Question 11

The federal government is concerned about obesity in the United States. Congress is considering two plans. One will ban the production and sale of "junk food." The other will increase nutrition­education programs and include substantial advertising campaigns to encourage healthy eating habits. The junk-food ban program

Accepted Answer

A)   and the education program will reduce the quantity of junk food sold and raise the price.
B)   and the education program will reduce the quantity of junk food sold and lower the price.
C)   will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price.
D)   will reduce the quantity of junk food sold and lower the price. The education program will reduce the quantity of junk food sold and raise the price.E) A) and B)
F) All of the above

Question 12

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Accepted Answer

A) True 
 B)False

Question 13

Figure 5-12 
-Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Accepted Answer

A)   0.4.
B)   1.
C)   2.
D)   2.5.E) B) and C)
F) A) and D)

Question 14

Which of the following was not a reason OPEC failed to keep the price of oil high?

Accepted Answer

A)   Over the long run, producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity.
B)   Consumers responded to higher prices with greater conservation.
C)   Consumers replaced old inefficient cars with newer efficient ones.
D)   The agreement OPEC members signed allowed each country to produce as much oil as each wanted.E) B) and C)
F) A) and D)

Question 15

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. The equilibrium quantity will

Accepted Answer

A)   increase in both the milk and beef markets.
B)   increase in the milk market and decrease in the beef market.
C)   decrease in the milk market and increase in the beef market.
D)   decrease in both the milk and beef markets.E) B) and D)
F) A) and C)

Question 16

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Accepted Answer

A)   About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars.
B)   About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars.
C)   About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars.
D)   Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.E) B) and D)
F) A) and D)

Question 17

Suppose the price elasticity of demand for a product is 1. If a supplier wants to increase revenue, what change should it make to price, if any?

Accepted Answer

No change,...

Question 18

For which of the following goods is the income elasticity of demand likely lowest?

Accepted Answer

A)   water
B)   sapphire pendant necklaces
C)   filet mignon steaks
D)   fresh fruitE) C) and D)
F) None of the above

Question 19

Figure 5-4 
-Refer to Figure 5-4. If the price increases 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 decrease, then increase until total revenue is maximized.E) A) and B)
F) None of the above

Question 20

The federal government is concerned about the negative effects of cigarette smoking in the United States. Suppose Congress is considering two plans. One plan would limit the production of cigarettes. The other would require manufacturers to include graphic photos on cigarette packages of people suffering cancer's effects. Which of the following statements is true?

Accepted Answer

A)   Both programs would increase the price of cigarettes.
B)   Both programs would reduce the quantity of cigarettes sold.
C)   Both programs would decrease revenues for cigarette manufacturers.
D)   All of the above are correct.E) A) and C)
F) None of the above

Exam 5: Elasticity and Its Application

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Correct Answer
verified

Danita rescues dogs from her local animal shelter. When Danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. For Danita, the income elasticity of demand for dog biscuits is

Correct Answer
verified

Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, what is the price elasticity of demand between $12 and $15?

Correct Answer
verified

Suppose the price elasticity of demand for a product is 1. If a supplier wants to increase revenue, what change should it make to price, if any?

Correct Answer
verified
No change,...
View Answer

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Correct Answer
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For which of the following goods is the income elasticity of demand likely lowest?

Correct Answer
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Correct Answer
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For a horizontal demand curve,

Correct Answer
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Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Correct Answer
verified

Which of the following was not a reason OPEC failed to keep the price of oil high?

Correct Answer
verified

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. The equilibrium quantity will

Correct Answer
verified

Correct Answer
verified

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Correct Answer
verified

Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Correct Answer
verified

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

Correct Answer
verified

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

Correct Answer
verified

Figure 5-4 -Refer to Figure 5-4. If the price increases in the region of the demand curve between points B and C, we can expect total revenue to

Correct Answer
verified

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should

Correct Answer
verified

Table 5-1 -Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Correct Answer
verified

When a university bookstore prices chemistry textbooks at $200 each, it generally sells 120 books per month. If it lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity of demand for chemistry books is about

Correct Answer
verified

Exam 5: Elasticity and Its Application

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Correct AnswerverifiedShow Answer

Danita rescues dogs from her local animal shelter. When Danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. For Danita, the income elasticity of demand for dog biscuits is

Correct AnswerverifiedShow Answer

Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, what is the price elasticity of demand between $12 and $15?

Correct AnswerverifiedShow Answer

Suppose the price elasticity of demand for a product is 1. If a supplier wants to increase revenue, what change should it make to price, if any?

Correct AnswerverifiedNo change,...View AnswerShow Answer

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

Correct AnswerverifiedShow Answer

For which of the following goods is the income elasticity of demand likely lowest?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For a horizontal demand curve,

Correct AnswerverifiedShow Answer

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

Correct AnswerverifiedShow Answer

Which of the following was not a reason OPEC failed to keep the price of oil high?

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. The equilibrium quantity will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

Correct AnswerverifiedShow Answer

Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

Correct AnswerverifiedShow Answer

Figure 5-4 -Refer to Figure 5-4. If the price increases in the region of the demand curve between points B and C, we can expect total revenue to

Correct AnswerverifiedShow Answer

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should

Correct AnswerverifiedShow Answer

Table 5-1 -Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Correct AnswerverifiedShow Answer

When a university bookstore prices chemistry textbooks at $200 each, it generally sells 120 books per month. If it lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity of demand for chemistry books is about

Correct AnswerverifiedShow Answer

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verified
No change,...
View Answer

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