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Exam 5: Elasticity and Its Application

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Question 51

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There are fewer farmers in the United States today than 200 years ago because of

A) improvements in farm technology.
B) increased government regulations in farming.
C) an elastic demand for food.
D) environmental programs designed to reduce soil erosion.

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

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Question 52

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If soybean farmers know that the demand for soybeans is 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.

E) A) and D)
F) A) and C)

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Question 53

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For which of the following goods would demand be most price elastic: a car, a sedan, a Honda sedan, a Honda Accord, a black Honda Accord?

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

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

Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice cream cones rises from that price by 4 percent, the number of ice cream cones demanded falls to 46. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Last year, Max bought 6 pairs of athletic shoes when his income was $35,000. This year, his income is $42,000, and he purchased 8 pairs of athletic shoes. Holding other factors constant, it follows that Max

If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of supply is about

Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P₁ is represented by the area(s)

How does total revenue change as one moves downward and to the right along a linear demand curve?

Suppose that Juan Carlos is filling out a survey that he received in the mail. The survey asks him what he would do if the price of his favorite toothpaste increased. Juan Carlos reports that he would switch to a different brand. The survey asks what he would do if the price of all toothpastes increased. Juan Carlos reports that he must use toothpaste, so he would have to adjust his spending elsewhere. These examples illustrate the importance of

-Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the price elasticity of demand is

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

Figure 5-13 -Refer to Figure 5-13. Between point A and point B, price elasticity of demand using the midpoint method is equal to

Figure 5-6 -Refer to Figure 5-6. For prices below $8, demand is price

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

Cross-price elasticity is used to determine whether goods are substitutes or complements.

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Table 5-3 Consider the following demand schedule. -Refer to Table 5-3. Using the midpoint method, what is the price elasticity of demand between $0 and $3?

Necessities tend to have elastic demands, whereas luxuries tend to have inelastic demands.