Chapter5ElasticityandItsApplicationsMultipleChoice 1. Ingeneral,elasticityisameasureofa. theextenttowhichadvancesintechnologyareadoptedbyproducers.b. theextenttowhichamarketiscompetitive.c. howfastthepriceofagoodrespondstoashiftofthesupplycurveordemandcurve.d. howmuchbuyersandsellersrespondtochangesinmarketconditions.ANS:D PTS:1 DIF:1 REF:5-0TOP:Elasticity MSC:Definitional 2. Whenstudyinghowsomeeventorpolicyaffectsamarket,elasticityprovidesinformationonthea. directionoftheeffectonthemarket.b. magnitudeoftheeffectonthemarket.c. speedofadjustmentofthemarketinresponsetotheeventorpolicy.d. numberofmarketparticipantswhoaredirectlyaffectedbytheeventorpolicy.ANS:B PTS:1 DIF:2 REF:5-0TOP:Elasticity MSC:Interpretive 3. Howdoestheconceptofelasticityallowustoimproveuponourunderstandingofsupplyanddemand?a. Elasticityallowsustoanalyzesupplyanddemandwithgreaterprecisionthanwouldbethecaseintheabsenceoftheelasticityconcept.b. Elasticityprovidesuswithabetterrationaleforstatementssuchas“anincreaseinxwillleadtoadecreaseiny”thanwewouldhaveintheabsenceoftheelasticityconcept.c. Withoutelasticity,wewouldnotbeabletoaddressthedirectioninwhichpriceislikelytomoveinresponsetoasurplusorashortage.d. Withoutelasticity,itisverydifficulttoassessthedegreeofcompetitionwithinamarket.ANS:A PTS:1 DIF:2 REF:5-0TOP:Elasticity MSC:Interpretive 4. Elasticityimprovesourunderstandingofsupplyanddemandbyaddinga. measuresofequity.b. measuresofefficiency.c. aquantitativeelementtoouranalysis.d. aqualitativeelementtoouranalysis.ANS:C PTS:1 DIF:2 REF:5-0TOP:Elasticity MSC:Interpretive 5. Thepriceelasticityofdemandmeasureshowmucha. quantitydemandedrespondstoachangeinprice.b. quantitydemandedrespondstoachangeinincome.c. pricerespondstoachangeindemand.d. demandrespondstoachangeinsupply.ANS:A PTS:1 DIF:1 REF:5-1TOP:Priceelasticityofdemand MSC:Definitional 6. Thepriceelasticityofdemandmeasuresa. buyers’responsivenesstoachangeinthepriceofagood.b. theextenttowhichdemandincreasesasadditionalbuyersenterthemarket.c. howmuchmoreofagoodconsumerswilldemandwhenincomesrise.d. themovementalongasupplycurvewhenthereisachangeindemand.ANS:A PTS:1 DIF:1 REF:5-1TOP:Priceelasticityofdemand MSC:Definitional 7. Demandissaidtobeelasticifa. thepriceofthegoodrespondssubstantiallytochangesindemand.b. demandshiftssubstantiallywhenincomeortheexpectedfuturepriceofthegoodchanges.c. buyersdonotrespondmuchtochangesinthepriceofthegood.d. buyersrespondsubstantiallytochangesinthepriceofthegood.ANS:D PTS:1 DIF:2 REF:5-1TOP:Elasticdemand MSC: Definitional 8. Demandissaidtobeinelasticifa. buyersrespondsubstantiallytochangesinthepriceofthegood.b. demandshiftsonlyslightlywhenthepriceofthegoodchanges.c. thequantitydemandedchangesonlyslightlywhenthepriceofthegoodchanges.d. thepriceofthegoodrespondsonlyslightlytochangesindemand.ANS:C PTS:1 DIF:2 REF:5-1TOP:Inelasticdemand MSC: Definitional 9. Ifdemandisinelastic,thena. buyersdonotrespondmuchtoachangeinprice.b. buyersrespondsubstantiallytoachangeinprice,buttheresponseisveryslow.c. buyersdonotaltertheirquantitiesdemandedmuchinresponsetoadvertising,fads,orgeneralchangesintastes.d. thedemandcurveisveryflat.ANS:A PTS:1 DIF:2 REF:5-1TOP:Inelasticdemand MSC: Definitional 10. Whenquantitydemandedrespondsstronglytochangesinprice,demandissaidtobea. fluid.b. elastic.c. dynamic.d. highlyvariable.ANS:B PTS:1 DIF:1 REF:5-1TOP:Elasticdemand MSC: Definitional 11. Whichofthefollowingstatementsaboutthepriceelasticityofdemandiscorrect?a. Thepriceelasticityofdemandforagoodmeasuresthewillingnessofbuyersofthegoodtomoveawayfromthegoodasitspriceincreases.b. Priceelasticityofdemandreflectsthemanyeconomic,psychological,andsocialforcesthatshapeconsumertastes.c. Otherthingsequal,ifgoodxhasclosesubstitutesandgoodydoesnothaveclosesubstitutes,thenthedemandforgoodxwillbemoreelasticthanthedemandforgoody.d. Alloftheabovearecorrect.ANS:D PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 12. Foragoodthatisanecessity,a. quantitydemandedtendstorespondsubstantiallytoachangeinprice.b. demandtendstobeinelastic.c. thelawofdemandoftendoesnotapply.d. Alloftheabovearecorrect.ANS:B PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 13. Foragoodthatisaluxury,demanda. tendstobeinelastic.b. tendstobeelastic.c. hasunitelasticity.d. cannotberepresentedbyademandcurveintheusualway.ANS:B PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 14. Ifapersononlyoccasionallybuysacupofcoffee,hisdemandforcoffeeisprobablya. representedbyaverticalornearly-verticaldemandcurve.b. noteasilyrepresentedbyademandscheduleordemandcurve.c. inelastic.d. elastic.ANS:D PTS:1 DIF:2 REF:5-2TOP:Priceelasticityofdemand MSC:Interpretive 15. Apersonwhotakesaprescriptiondrugtocontrolhighcholesterolmostlikelyhasademandforthatdrugthatisa. inelastic.b. unitelastic.c. elastic.d. highlyresponsivetochangesinincome.ANS:A PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 16. Otherthingsequal,thedemandforagoodtendstobemoreinelastic,thea. fewertheavailablesubstitutes.b. longerthetimeperiodconsidered.c. morethegoodisconsideredaluxurygood.d. morenarrowlydefinedisthemarketforthegood.ANS:A PTS:1 DIF:2 REF:5-1TOP:Inelasticdemand MSC: Interpretive 17. ThedemandforChocolateChipCookieDoughicecreamislikelyquiteelasticbecausea. icecreammustbeeatenquickly.b. thisparticularflavoroficecreamisviewedasanecessitybymanyice-creamlovers.c. themarketisbroadlydefined.d. otherflavorsoficecreamaregoodsubstitutesforthisparticularflavor.ANS:D PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand|Substitutes MSC: Interpretive 18. ThedemandforWertherscandyislikelya. elasticbecausecandyisexpensiverelativetoothersnacks.b. elasticbecausetherearemanyclosesubstitutesforWerthers.c. elasticbecauseWerthersareregardedasanecessitybymanypeople.d. inelasticbecauseitisusuallyeatenquickly,makingtherelevanttimehorizonshort.ANS:B PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 19. Thereareveryfew,ifany,goodsubstitutesformotoroil.Therefore,a. thedemandformotoroilwouldtendtobeinelastic.b. thedemandformotoroilwouldtendtobeelastic.c. thedemandformotoroilwouldtendtorespondstronglytochangesinpricesofothergoods.d. thesupplyofmotoroilwouldtendtorespondstronglytochangesinpeople’stastesforlargecarsrelativetotheirtastesforsmallcars.ANS:A PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 20. Holdingallotherforcesconstant,whenthepriceofgasolinerises,thenumberofgallonsofgasolinedemandedwouldfallsubstantiallyoveraten-yearperiodbecausea. buyerstendtobemuchlesssensitivetoachangeinpricewhengivenmoretimetoreact.b. buyerstendtobemuchmoresensitivetoachangeinpricewhengivenmoretimetoreact.c. buyerswillhavesubstantiallymoreincomeoveraten-yearperiod.d. thequantitysuppliedofgasolineincreasesverylittleinresponsetoanincreaseinthepriceofgasoline.ANS:B PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 21. Agoodwillhaveamoreinelasticdemand,a. thegreatertheavailabilityofclosesubstitutes.b. thebroaderthedefinitionofthemarket.c. thelongertheperiodoftime.d. themoreitisregardedasaluxury.ANS:B PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 22. Itislikelythata. thedemandforflat-screencomputermonitorsismoreelasticthanthedemandformonitorsingeneral.b. thedemandforgrandfatherclocksismoreelasticthanthedemandforwristwatches.c. thedemandforcardboardismoreelasticoveralongperiodoftimethanoverashortperiodoftime.d. Alloftheabovearecorrect.ANS:D PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 23. Itislikelythata. thedemandfornaturalgasismoreelasticoverashortperiodoftimethanoveralongperiodoftime.b. thedemandforsmokealarmsismoreelasticthanthedemandforPersianrugs.c. thedemandforbourbonwhiskeyismoreelasticthanthedemandforalcoholicbeveragesingeneral.d. Alloftheabovearecorrect.ANS:C PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 24. Whenthepriceofbubblegumis$0.50,thequantitydemandedis400packsperday.Whenthepricefallsto$0.40,thequantitydemandedincreasesto600.Giventhisinformationandusingthemidpointmethod,weknowthatthedemandforbubblegumisa. inelastic.b. elastic.c. unitelastic.d. perfectlyinelastic.ANS:B PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand|Midpointmethod MSC:Applicative 25. Economistscomputethepriceelasticityofdemandasthea. percentagechangeinpricedividedbythepercentagechangeinquantitydemanded.b. changeinquantitydemandeddividedbythechangeintheprice.c. percentagechangeinquantitydemandeddividedbythepercentagechangeinprice.d. percentagechangeinquantitydemandeddividedbythepercentagechangeinincome.ANS:C PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Definitional 26. Supposeyoucalculatethepriceelasticityofdemandforacertaingoodandyoureportthattheelasticityis0.8.Thefactthattheelasticityisapositivenumbermeansthata. whenthepriceofthegoodincreases,thequantitydemandedincreasesinresponse.b. demandforthegoodiselastic.c. youhavedroppedtheminussignandreportedtheabsolutevalueoftheelasticity.d. thegoodhasclosesubstitutesand/orthegoodisaluxury.ANS:C PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 27. Themidpointmethodisusedtocomputeelasticitybecauseita. automaticallycomputesapositivenumberinsteadofanegativenumber.b. resultsinanelasticitythatisthesameastheslopeofthedemandcurve.c. givesthesameanswerregardlessofthedirectionofchange.d. automaticallyroundsquantitiestothenearestwholeunit.ANS:C PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand|Midpointmethod MSC:Interpretive 28. Themainreasonforusingthemidpointmethodtocalculateanelasticityisthatita. givesthesameanswerregardlessofwhetherthepriceincreasesordecreases.b. recognizesthatpricesareusuallyincreasing,notdecreasing.c. roundspricestothenearestdollarandquantitiestothenearestwholeunit.d. usesfewernumbersthanalternativemethods.ANS:A PTS:1 DIF:2 REF:5-1TOP:Midpointmethod MSC: Interpretive 29. Whichofthefollowingisnotadeterminantofthepriceelasticityofdemandforagood?a. thetimehorizonb. thesteepnessorflatnessofthesupplycurveforthegoodc. thedefinitionofthemarketforthegoodd. theavailabilityofsubstitutesforthegoodANS:B PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 30. Thepriceelasticityofdemandforagoodmeasuresthewillingnessofa. consumerstomoveawayfromthegoodaspricerises.b. consumerstoavoidmonopolisticmarketsinfavorofcompetitivemarkets.c. firmstoproducemoreofagoodaspricerises.d. firmstocatertothetastesofconsumers.ANS:A PTS:1 DIF:1 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 31. Ifthequantitydemandedofacertaingoodrespondsonlyslightlytoachangeinthepriceofthegood,thena. thedemandforthegoodissaidtobeelastic.b. thedemandforthegoodissaidtobeinelastic.c. thelawofdemanddoesnotapplytothegood.d. thedemandcurveforthegoodshiftsonlyslightlyinresponsetoachangeinprice.ANS:B PTS:1 DIF:1 REF:5-1TOP:Inelasticdemand MSC: Definitional 32. Thegreaterthepriceelasticityofdemand,thea. morelikelytheproductisanecessity.b. smallertheresponsivenessofquantitydemandedtoachangeinprice.c. greaterthepercentagechangeinpriceoverthepercentagechangeinquantitydemanded.d. greatertheresponsivenessofquantitydemandedtoachangeinprice.ANS:D PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 33. Thevalueofthepriceelasticityofdemandforagoodwillberelativelylargewhena. therearenogoodsubstitutesavailableforthegood.b. thetimeperiodinquestionisrelativelyshort.c. thegoodisaluxuryasopposedtoanecessity.d. Alloftheabovearecorrect.ANS:C PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 34. Supposethereisa6percentincreaseinthepriceofgoodXandaresulting6percentdecreaseinthequantityofXdemanded.PriceelasticityofdemandforXisa. 0.b. 1.c. 6.d. 36.ANS:B PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Applicative 35. SupposethepriceofTwinkiesdecreasesfrom$1.45to$1.25and,asaresult,thequantityofTwinkiesdemandedincreasesfrom2,000to2,200.Usingthemidpointmethod,thepriceelasticityofdemandforTwinkiesinthegivenpricerangeisa. 2.00.b. 1.55.c. 1.00.d. 0.64.ANS:D PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Applicative 36. Ifthepriceelasticityofdemandforagoodis4.0,thena10percentincreaseinpriceresultsinaa. 0.4percentdecreaseinthequantitydemanded.b. 2.5percentdecreaseinthequantitydemanded.c. 4percentdecreaseinthequantitydemanded.d. 40percentdecreaseinthequantitydemanded.ANS:D PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Applicative 37. Ifthepriceelasticityofdemandforagoodis1.65,thena3percentdecreaseinpriceresultsinaa. 0.55percentincreaseinthequantitydemanded.b. 1.82percentincreaseinthequantitydemanded.c. 4.95percentincreaseinthequantitydemanded.d. 5.55percentincreaseinthequantitydemanded.ANS:C PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Applicative 38. Ifthepriceelasticityofdemandforagoodis0.94,thenwhichofthefollowingeventsisconsistentwitha4percentdecreaseinthequantityofthegooddemanded?a. a0.235percentincreaseinthepriceofthegoodb. a2.350percentincreaseinthepriceofthegoodc. a3.760percentincreaseinthepriceofthegoodd. a4.255percentincreaseinthepriceofthegoodANS:D PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Applicative 39. Usingthemidpointmethod,thepriceelasticityofdemandforagoodiscomputedtobeapproximately0.78.Whichofthefollowingeventsisconsistentwitha4.68percentdecreaseinthequantityofthegooddemanded?a. a3.65increaseinthepriceofthegoodb. a16.67percentincreaseinthepriceofthegoodc. anincreaseinthepriceofthegoodfrom$48.00to$50.97d. anincreaseinthepriceofthegoodfrom$65.00to$66.98ANS:C PTS:1 DIF:3 REF:5-1TOP:Priceelasticityofdemand MSC:Applicative 40. Usingthemidpointmethod,thepriceelasticityofdemandforagoodiscomputedtobeapproximately1.5.Whichofthefollowingeventsisconsistentwitha3.5percentincreaseinthepriceofthegood?a. Thequantityofthegooddemandeddecreasesfrom25,294to24,000.b. Thequantityofthegooddemandeddecreasesfrom50,000to48,847.c. Thequantityofthegooddemandeddecreasesby2.33percent.d. Thequantityofthegooddemandeddecreasesby4.29percent.ANS:A PTS:1 DIF:3 REF:5-1TOP:Priceelasticityofdemand MSC:Applicative 41. Themidpointmethodforcalculatingelasticitiesisconvenientinthatitallowsustoa. ignorethepercentagechangeinquantitydemandedandinsteadfocusentirelyonthepercentagechangeinprice.b. calculatethesamevaluefortheelasticity,regardlessofwhetherthepriceincreasesordecreases.c. assumethatsellers'totalrevenuestaysconstantwhenthepricechanges.d. restrictallelasticityvaluestobetween0and1.ANS:B PTS:1 DIF:2 REF:5-1TOP:Midpointmethod MSC: Interpretive 42. Thepriceelasticityofdemandforbreada. iscomputedasthepercentagechangeinquantitydemandedofbreaddividedbythepercentagechangeinpriceofbread.b. depends,inpart,ontheavailabilityofclosesubstitutesforbread.c. reflectsthemanyeconomic,social,andpsychologicalforcesthatinfluenceconsumers'tastesforbread.d. Alloftheabovearecorrect.ANS:D PTS:1 DIF:1 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 43. Whenthepriceofagoodis$5,thequantitydemandedis100unitspermonth;whenthepriceis$7,thequantitydemandedis80unitspermonth.Usingthemidpointmethod,thepriceelasticityofdemandisabouta. 0.22.b. 0.67.c. 1.33.d. 1.50.ANS:B PTS:1 DIF:1 REF:5-1TOP:Priceelasticityofdemand MSC:Applicative 44. ConsiderairfaresonflightsbetweenNewYorkandMinneapolis.Whentheairfareis$250,thequantitydemandedofticketsis2,000perweek.Whentheairfareis$280,thequantitydemandedofticketsis1,700perweek.Usingthemidpointmethod,a. thepriceelasticityofdemandisabout1.43andanincreaseintheairfarewillcauseairlines'totalrevenuetodecrease.b. thepriceelasticityofdemandisabout1.43andanincreaseintheairfarewillcauseairlines'totalrevenuetoincrease.c. thepriceelasticityofdemandisabout0.70andanincreaseintheairfarewillcauseairlines'totalrevenuetodecrease.d. thepriceelasticityofdemandisabout0.70andanincreaseintheairfarewillcauseairlines'totalrevenuetoincrease.ANS:A PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand|Totalrevenue MSC: Applicative 45. Foraparticulargood,a2percentincreaseinpricecausesa12percentdecreaseinquantitydemanded.Whichofthefollowingstatementsismostlikelyapplicabletothisgood?a. Therearenoclosesubstitutesforthisgood.b. Thegoodisaluxury.c. Themarketforthegoodisbroadlydefined.d. Therelevanttimehorizonisshort.ANS:B PTS:1 DIF:3 REF:5-1TOP:Priceelasticityofdemand MSC:Analytical 46. Foraparticulargood,a3percentincreaseinpricecausesa10percentdecreaseinquantitydemanded.Whichofthefollowingstatementsismostlikelyapplicabletothisgood?a. Therelevanttimehorizonisshort.b. Thegoodisanecessity.c. Themarketforthegoodisbroadlydefined.d. Therearemanyclosesubstitutesforthisgood.ANS:D PTS:1 DIF:3 REF:5-1TOP:Priceelasticityofdemand MSC:Analytical 47. Demandiselasticifelasticityisa. lessthan1.b. equalto1.c. equalto0.d. greaterthan1.ANS:D PTS:1 DIF:1 REF:5-1TOP:Elasticdemand MSC: Definitional 48. Demandisinelasticifelasticityisa. lessthan1.b. equalto1.c. greaterthan1.d. equalto0.ANS:A PTS:1 DIF:1 REF:5-1TOP:Inelasticdemand MSC: Definitional 49. Demandissaidtohaveunitelasticityifelasticityisa. lessthan1.b. greaterthan1.c. equalto1.d. equalto0.ANS:C PTS:1 DIF:1 REF:5-1TOP:Priceelasticityofdemand MSC:DefinitionalFigure5-1 50. RefertoFigure5-1.ThesectionofthedemandcurvelabeledArepresentsthea. elasticsectionofthedemandcurve.b. inelasticsectionofthedemandcurve.c. unitelasticsectionofthedemandcurve.d. perfectlyelasticsectionofthedemandcurve.ANS:A PTS:1 DIF:2 REF:5-1TOP:Elasticdemand MSC: Interpretive 51. RefertoFigure5-1.SupposethepointlabeledBisthe“halfwaypoint”onthedemandcurveanditcorrespondstoapriceof$5.00.Then,betweenpricesof$4.90and$5.10,a. thepriceelasticityofdemandislessthan1.b. thepriceelasticityofdemandisequalto1.c. thepriceelasticityofdemandisgreaterthan1.d. anyoftheabovecouldbecorrect,dependingonthequantitiesdemandedatpricesof$4.90and$5.10.ANS:B PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Interpretive 52. RefertoFigure5-1.ThesectionofthedemandcurvelabeledCrepresentsthea. elasticsectionofthedemandcurve.b. perfectlyelasticsectionofthedemandcurve.c. unitelasticsectionofthedemandcurve.d. inelasticsectionofthedemandcurve.ANS:D PTS:1 DIF:2 REF:5-1TOP:Inelasticdemand MSC: Interpretive 53. RefertoFigure5-1.AssumethesectionofthedemandcurvelabeledAcorrespondstopricesbetween$8and$16.Then,whenthepricechangesbetween$9and$10,a. quantitydemandedchangesproportionatelylessthantheprice.b. quantitydemandedchangesproportionatelymorethantheprice.c. quantitydemandedchangesthesameamountproportionatelyasprice.d. thepriceelasticityofdemandislessthan1.ANS:B PTS:1 DIF:2 REF:5-1TOP:Elasticdemand MSC: Applicative 54. RefertoFigure5-1.AssumethesectionofthedemandcurvelabeledCcorrespondstopricesbetween$0and$15.Then,whenthepricechangesbetween$7and$9,a. quantitydemandedchangesproportionatelylessthantheprice.b. quantitydemandedchangesproportionatelymorethantheprice.c. quantitydemandedchangesthesameamountproportionatelyasprice.d. thepriceelasticityofdemandisgreaterthan1.ANS:A PTS:1 DIF:2 REF:5-1TOP:Inelasticdemand MSC: Applicative 55. RefertoFigure5-1.AssumethesectionofthedemandcurvelabeledAcorrespondstopricesbetween$6and$12.Then,whenthepriceincreasesfrom$8to$10,a. thepercentdecreaseinthequantitydemandedexceedsthepercentincreaseintheprice.b. thepercentincreaseinthepriceexceedsthepercentdecreaseinthequantitydemanded.c. sellers’totalrevenueincreasesasaresult.d. itispossiblethatthequantitydemandedfellfrom550to500asaresult.ANS:A PTS:1 DIF:3 REF:5-1TOP:Elasticdemand MSC: Applicative 56. RefertoFigure5-1.Assume,forthegoodinquestion,twospecificpointsonthedemandcurveare(Q

=1,000,P=$40)and(Q=1,500,P=$30).Thenwhichofthefollowingscenariosispossible?a. BothofthesepointslieonsectionCofthedemandcurve.b. Theverticalinterceptofthedemandcurveisthepoint(Q=0,P=$60).c. Thehorizontalinterceptofthedemandcurveisthepoint(Q=1,800,P=$0).d. Anyofthesescenariosispossible.ANS:B PTS:1 DIF:3 REF:5-1TOP:Elasticdemand MSC: Analytical 57. RefertoFigure5-1.Assume,forthegoodinquestion,twospecificpointsonthedemandcurveare(Q

=2,000,P=$15)and(Q=2,400,P=$12).Thenwhichofthefollowingscenariosispossible?a. BothofthesepointslieonsectionCofthedemandcurve.b. Theverticalinterceptofthedemandcurveisthepoint(Q=0,P=$22).c. Thehorizontalinterceptofthedemandcurveisthepoint(Q=5,000,P=$0).d. Anyofthesescenariosispossible.ANS:A PTS:1 DIF:3 REF:5-1TOP:Inelasticdemand MSC: AnalyticalFigure5-2 58. RefertoFigure5-2.ThepriceelasticityofdemandbetweenpointAandpointB,usingthemidpointmethod,isa. 1.b. 1.5.c. 2.d. 2.5.ANS:D PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Applicative 59. RefertoFigure5-2.TheelasticityofdemandbetweenpointBandpointC,usingthemidpointmethod,isa. 0.5.b. 0.75.c. 1.0.d. 1.3.ANS:B PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Applicative 60. RefertoFigure5-2.Ifthepricedecreasedfrom$18to$6,a. totalrevenuewouldincreaseby$1,200anddemandiselasticbetweenpointsAandC.b. totalrevenuewouldincreaseby$800anddemandiselasticbetweenpointsAandC.c. totalrevenuewoulddecreaseby$1,200anddemandisinelasticbetweenpointsAandC.d. totalrevenuewoulddecreaseby$800anddemandisinelasticbetweenpointsAandC.ANS:A PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand|Totalrevenue MSC: Applicative 61. RefertoFigure5-2.Sellers’totalrevenuewouldincreaseifthepricea. increasedfrom$4to$6.b. increasedfrom$16to$18.c. decreasedfrom$8to$6.d. Alloftheabovearecorrect.ANS:A PTS:1 DIF:2 REF:5-1TOP:Totalrevenue MSC: Applicative 62. RefertoFigure5-2.Sellers’totalrevenuewouldincreaseifthepricea. increasedfrom$6to$8.b. decreasedfrom$18to$16.c. decreasedfrom$16to$15.d. Alloftheabovearecorrect.ANS:D PTS:1 DIF:2 REF:5-1TOP:Totalrevenue MSC: Applicative 63. RefertoFigure5-2.Whichofthefollowingpricechangeswouldresultinnochangeinsellers’totalrevenue?a. Thepriceincreasesfrom$6to$9.b. Thepriceincreasesfrom$9to$15.c. Thepricedecreasesfrom$12to$9.d. Thepricedecreasesfrom$9to$5.ANS:C PTS:1 DIF:3 REF:5-1TOP:Totalrevenue MSC: Applicative 64. Whenthepriceofkittenswas$25each,thepetshopsold20permonth.Whentheyraisedthepriceto$35each,theysold14permonth.Thepriceelasticityofdemandforkittensisabouta. 1.66.b. 1.06.c. 0.94.d. 0.60.ANS:B PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Applicative 65. Whenthelocalusedbookstorepriceseconomicsbooksat$15.00each,theygenerallysell70bookspermonth.Iftheylowerthepriceto$7.00,salesincreaseto90bookspermonth.Giventhisinformation,weknowthatthepriceelasticityofdemandforeconomicsbooksisabouta. 2.91,andanincreaseinpricefrom$7.00to$15.00resultsinanincreaseintotalrevenue.b. 2.91,andanincreaseinpricefrom$7.00to$15.00resultsinadecreaseintotalrevenue.c. 0.34,andanincreaseinpricefrom$7.00to$15.00resultsinanincreaseintotalrevenue.d. 0.34,andanincreaseinpricefrom$7.00to$15.00resultsinadecreaseintotalrevenue.ANS:C PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand|Totalrevenue MSC: Applicative 66. Demandissaidtobeinelasticifthea. quantitydemandedchangesproportionatelymorethanprice.b. pricechangesproportionatelymorethanincome.c. quantitydemandedchangesproportionatelylessthanprice.d. quantitydemandedchangesproportionatelythesameasprice.ANS:C PTS:1 DIF:2 REF:5-1TOP:Inelasticdemand MSC: Definitional 67. Demandissaidtobeunitelasticifa. quantitydemandedchangesbythesamepercentastheprice.b. quantitydemandedchangesbyalargerpercentthantheprice.c. thedemandcurveshiftsbythesamepercentageamountastheprice.d. quantitydemandeddoesnotrespondtoachangeinprice.ANS:A PTS:1 DIF:2 REF:5-1TOP:Priceelasticityofdemand MSC:Definitional 68. Elasticityofdemandiscloselyrelatedtotheslopeofthedemandcurve.Themore