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Chapter 5 Test
Indicate the answer choice that best completes the statement or answers the question.
Figure 5-3
Figure 5-2
2. Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?
a. D1
b. D2
c. D3
d. All of the above are equally elastic.
3. Which of the following is likely to have the most price elastic demand?
a. ice cream
b. frozen yogurt
c. vanilla ice cream
d. Häagen-Dazs® vanilla bean ice cream
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Chapter 5 Test
Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.
4. Refer to Table 5-7. Using the midpoint method, at a price of $8, what is the income elasticity of demand when
income rises from $7,500 to $10,000?
a. 0.00
b. 0.41
c. 1.00
d. 2.45
Table 5-4
The following table shows the demand schedule for a particular good.
Price Quantity
$20 0
$16 3
$12 6
$8 9
$4 12
$0 15
6. Refer to Table 5-4. Using the midpoint method, what is the price elasticity of demand when price rises from $12 to
$16?
a. 0.43
b. 0.67
c. 2.33
d. 4
Chapter 5 Test
8. Which of the following expressions is valid for the price elasticity of demand?
a.
Price elasticity of demand = .
b.
Price elasticity of demand = .
c.
Price elasticity of demand = .
d.
Price elasticity of demand = .
Table 5-8
Quantity of Good X Quantity of Good Y
Income Purchased Purchased
$30,000 2 20
$40,000 6 10
9. Refer to Table 5-8. Using the midpoint method, the income elasticity of demand for good Y is
a. 2.33, and good Y is a normal good.
b. -2.33, and good Y is an inferior good.
c. -0.43, and good Y is a normal good.
d. -0.43, and good Y is an inferior good.
Figure 5-19
10. Refer to Figure 5-19. Which of the following statements is not correct?
a. Supply curve A is perfectly inelastic.
b. Supply curve B is perfectly elastic.
c. Supply curve C is unit elastic.
d. Supply curve D is more elastic than supply curve C.
Figure 5-20
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Chapter 5 Test
11. Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?
a. S1
b. S2
c. S3
d. None of the supply curves is perfectly inelastic.
Figure 5-10
12. Refer to Figure 5-10. Total revenue when the price is P1 is represented by the area(s)
a. B + D.
b. A + B.
c. C + D.
d. D.
Figure 5-15
13. Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points B and C?
a. 1.67
b. 1.19
c. 0.84
d. 0.61
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Chapter 5 Test
Figure 5-5
14. Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of
a. $20.
b. $50.
c. $70.
d. $100.
Figure 5-8
15. Refer to Figure 5-8. An increase in price from $15 to $20 would
a. increase total revenue by $500
b. decrease total revenue by $500.
c. increase total revenue by $1,000.
d. decrease total revenue by $1,000.
Figure 5-10
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Chapter 5 Test
17. 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%.
20. 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.
Chapter 5 Test
Figure 5-4
22. Refer to Figure 5-4. The section of the demand curve from A to B represents the
a. elastic section of the demand curve.
b. inelastic section of the demand curve.
c. unit elastic section of the demand curve.
d. perfectly elastic section of the demand curve.
24. 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.
Table 5-7
The following table shows a portion of the demand schedule for a particular good at various levels of income.
Chapter 5 Test
26. Refer to Table 5-7. Using the midpoint method, at a price of $16, what is the income elasticity of demand when
income rises from $5,000 to $10,000?
a. 0.00
b. 0.50
c. 1.00
d. 1.50
27. Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat
would tend to
a. increase the total revenue of wheat farmers.
b. decrease the total revenue of wheat farmers.
c. decrease the demand for wheat.
d. decrease the supply of wheat.
29. For which of the following goods is the income elasticity of demand likely highest?
a. water
b. diamonds
c. hamburgers
d. housing
30. Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded
would fall substantially over a ten-year period because
a. buyers tend to be much less sensitive to a change in price when given more time to react.
b. buyers tend to be much more sensitive to a change in price when given more time to react.
c. buyers will have substantially more real income over a ten-year period.
d. the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline.
31. If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price
increase is about
a. 0.24%.
b. 4.2%.
c. 6%.
d. 6.2%.
Chapter 5 Test
c. unit elastic.
d. All of the above are possible.
34. Which of the following is likely to have the most price inelastic demand?
a. athletic shoes
b. running shoes
c. Nike running shoes
d. Nike Shox running shoes
Figure 5-1
35. Refer to Figure 5-1. Between point A and point B on the graph, demand is
a. perfectly elastic.
b. inelastic.
c. unit elastic.
d. elastic, but not perfectly elastic.
37. If the price of milk rises, when is the price elasticity of demand likely to be the lowest?
a. immediately after the price increase
b. one month after the price increase
c. three months after the price increase
d. one year after the price increase
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Chapter 5 Test
Figure 5-7
38. Refer to Figure 5-7. For prices above $5, demand is price
a. elastic, and raising price will increase total revenue.
b. inelastic, and raising price will increase total revenue.
c. elastic, and lowering price will increase total revenue.
d. inelastic, and lowering price will increase total revenue.
Figure 5-3
41. Which of the following is likely to have the most price elastic demand?
a. clothing
b. blue jeans
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Chapter 5 Test
Figure 5-4
42. Refer to Figure 5-4. The section of the demand curve from B to C represents the
a. elastic section of the demand curve.
b. perfectly elastic section of the demand curve.
c. unit elastic section of the demand curve.
d. inelastic section of the demand curve.