ECON 1030: Chapter 5

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is a. inelastic. b. elastic. c. unit elastic. d. quite sensitive to changes in income

a. inelastic.

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is a. inelastic. b. unit elastic. c. elastic. d. highly responsive to changes in income.

a. inelastic.

The difference between slope and elasticity is that slope a. is a ratio of two changes, and elasticity is a ratio of two percentage changes. b. is a ratio of two percentage changes, and elasticity is a ratio of two changes. c. measures changes in quantity demanded more accurately than elasticity. d. None of the above is correct; there is no difference between slope and elasticity.

a. is a ratio of two changes, and elasticity is a ratio of two percentage changes.

Which of the following is likely to have the most price elastic demand? a. lattés b. doctor's visits c. eggs d. natural gas

a. lattés

When consumers face rising gasoline prices, they typically a. reduce their quantity demanded more in the long run than in the short run. b. reduce their quantity demanded more in the short run than in the long run. c. do not reduce their quantity demanded in the short run or the long run. d. increase their quantity demanded in the short run but reduce their quantity demanded in the long run

a. reduce their quantity demanded more in the long run than in the short run

The smaller the price elasticity of demand, the a. steeper the demand curve will be through a given point. b. flatter the demand curve will be through a given point. c. more strongly buyers respond to a change in price between any two prices P1 and P2. d. smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to S2.

a. steeper the demand curve will be through a given point.

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of a. the availability of close substitutes 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

a. the availability of close substitutes in determining the price elasticity of demand

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about a. 0.63, and supply is elastic. b. 0.63, and supply is inelastic. c. 1.60, and supply is elastic. d. 1.60, and supply is inelastic.

b. 0.63, and supply is inelastic.

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about a. 0.22. b. 0.67. c. 1.33. d. 1.50.

b. 0.67.

When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is a. inelastic. b. elastic. c. unit elastic. d. perfectly inelastic.

b. elastic.

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is a. 0.75. b. 1.25. c. 1.33. d. 1.60.

c. 1.33.

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts, the price elasticity of supply approaches a. zero, and the supply curve is horizontal. b. zero, and the supply curve is vertical. c. infinity, and the supply curve is horizontal. d. infinity, and the supply curve is vertical.

c. infinity, and the supply curve is horizontal.

If the quantity supplied is the same regardless of price, then supply is a. elastic. b. perfectly elastic. c. perfectly inelastic. d. inelastic.

c. perfectly inelastic.

Which of the three supply curves represents the most elastic supply? a. supply curve A b. supply curve B c. supply curve C d. There is no difference in the elasticity of the three supply curves.

c. supply curve C

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about a. 0.45 b. 0.90 c. 1.11 d. 2.20

d. 2.20

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a a. 0.5 percent decrease in the quantity demanded. b. 2 percent decrease in the quantity demanded. c. 5 percent decrease in the quantity demanded. d. 50 percent decrease in the quantity demanded.

d. 50 percent decrease in the quantity demanded.

If rectangle D is larger than rectangle A, then a. demand is elastic between prices P1 and P2. b. a decrease in price from P2 to P1 will cause an increase in total revenue. c. the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded. d. All of the above are correct.

d. All of the above are correct.

The discovery of a new hybrid wheat would increase the supply of wheat. As a result, wheat farmers would realize an increase in total revenue if the a. supply of wheat is elastic. b. supply of wheat is inelastic. c. demand for wheat is inelastic. d. demand for wheat is elastic

d. demand for wheat is elastic.