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Exam 5: Elasticity and Its Application

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Question 121

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If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about

A) 0.67%.
B) 0.83%.
C) 1.20%.
D) 2.70%.

E) B) and D)
F) A) and D)

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Question 122

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The case of perfectly elastic demand is illustrated by a demand curve that is

A) vertical.
B) horizontal.
C) downward-sloping but relatively steep.
D) downward-sloping but relatively flat.

E) None of the above
F) A) and D)

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Question 123

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Which of the following is likely to have the most price inelastic demand?

Figure 5-6 -Refer to Figure 5-6. Using the midpoint method, the price elasticity of demand between point B and point C is

If the quantity supplied responds only slightly to changes in price, then

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is

A bakery would be willing to supply 500 donuts per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 donuts. Using the midpoint method, the price elasticity of supply for donuts is about

Figure 5-14 -Refer to Figure 5-14. Along which of these segments of the supply curve is supply least elastic?

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Scenario 5-4 Suppose the government is concerned about firms in the United States importing illegal caviar. As a result, the government increases border patrols to catch illegal shipments. U.S. Customs agents perform DNA testing on the caviar to determine if it comes from endangered species of fish. If so, the government destroys the caviar. -Refer to Scenario 5-4. What would we expect to observe in the caviar market?

Table 5-2 $\begin{array} { | l | l | } \hline \text { Priea } & \text { Quintit } \\\hline \$ 100 & 0 \\\hline \$ 80 & 10 \\\hline \$ 60 & 20 \\\hline \$ 40 & 30 \\\hline \$ 20 & 40 \\\hline \$ 0 & 50 \\\hline\end{array}$ -Refer to Table 5-2. Using the midpoint method, if the price falls from $80 to $60, the absolute value of the price elasticity of demand is

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $30 and $36, price elasticity of demand is about

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

Frequently, in the short run, the quantity supplied of a good is

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Which of the following statements is valid when supply is perfectly elastic at a price of $4?

Pierre says that he will spend exactly 75 cents a day on candy bars, regardless of the price of candy bars. Pierre's demand for candy bars is

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between $6 and $8?

Table 5-6 $\begin{array}{|l|l|l|}\hline \text { Income } & \begin{array}{l}\text { Quantity of Good X } \\\text { Purchased }\end{array} & \begin{array}{l}\text { Quantity of Good Y } \\\text { Purchased }\end{array} \\\hline \$ 30,000 & 2 & 20 \\\hline \$ 40,000 & 6 & 10 \\\hline\end{array}$ -Refer to Table 5-6. Using the midpoint method, the income elasticity of demand for good Y is