Ch 5 Econ

Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase revenue? A. 0 B. 0.2 C. 1 D. 2.1

D

For a vertical demand curve, 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.

A

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be A. unit elastic. B. inelastic. C. elastic. D. None of the above is correct because a price increase always leads to an increase in total revenue.

B

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

A decrease in supply will cause the smallest increase in price when A. both supply and demand are inelastic. B. demand is elastic and supply is inelastic. C. both supply and demand are elastic. D. demand is inelastic and supply is elastic.

C

If soybean farmers know that the demand for soybeans is price inelastic, in order to increase their total revenues they should A. use more fertilizers and weed killers to increase their yields. B. plant additional acres to increase their output. C. reduce the number of acres they plant to decrease their output. D. Both a and b are correct.

C

Refer to Figure 5-13. Using the midpoint method, what is the price elasticity of supply between $16 and $40? A. 0.125 B. 0.86 C. 1.0 D. 2.5

C

Refer to Table 5-4. Demand is unit elastic when quantity demanded changes from A. 10 to 9. B. 9 to 8. C. 8 to 7. D. There is not enough information given to determine the correct answer.

C

Refer to Table 5-4. When price is between $10 and $14, demand is A. elastic. B. unit elastic. C. inelastic. D. There is not enough information given to determine whether demand is elastic, unit elastic, or inelastic.

C

The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, she should A. lower the price of the cinnamon rolls. B. leave the price of the cinnamon rolls unchanged. C. raise the price of the cinnamon rolls. D. reduce costs.

C

If the price elasticity of demand for a good is 10.0, then a 4 percent increase in price results in a A. 0.4 percent decrease in the quantity demanded. B. 2.5 percent decrease in the quantity demanded. C. 4 percent decrease in the quantity demanded. D. 40 percent decrease in the quantity demanded.

D

Refer to Figure 5-13. Over which range is the supply curve in this figure the least elastic? A. $16 to $40 B. $40 to $100 C. $100 to $220 D. $220 to $430

D

Refer to Table 5-4. As price rises from $10 to $12, the price elasticity of demand using the midpoint method is approximately A. 0.08. B. 0.18. C. 0.42. D. 0.58.

D

When studying how some event or policy affects a market, elasticity provides information on the A. government expenditures associated with the policy. B. costs and benefits of the effect. C. allocative efficiency of the effect. D. direction and magnitude of the effect.

D

Which of the following statements about the price elasticity of demand is correct? A. The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. B. Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes. C. Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y. D. All of the above are correct.

D