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1、169 Chapter 5 Elasticity and Its ApplicationsMultiple Choice 1.In general,elasticity is a measure of a.the extent to which advances in technology are adopted by producers.b.the extent to which a market is competitive.c.how fast the price of a good responds to a shift of the supply curve or demand cu
2、rve.d.how much buyers and sellers respond to changes in market conditions.ANS:D PTS:1 DIF:1 REF:5-0 TOP:Elasticity MSC:Definitional 2.When studying how some event or policy affects a market,elasticity provides information on the a.direction of the effect on the market.b.magnitude of the effect on th
3、e market.c.speed of adjustment of the market in response to the event or policy.d.number of market participants who are directly affected by the event or policy.ANS:B PTS:1 DIF:2 REF:5-0 TOP:Elasticity MSC:Interpretive 3.How does the concept of elasticity allow us to improve upon our understanding o
4、f supply and demand?a.Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept.b.Elasticity provides us with a better rationale for statements such as“an increase in x will lead to a decrease in y”than we would have in t
5、he absence of the elasticity concept.c.Without elasticity,we would not be able to address the direction in which price is likely to move in response to a surplus or a shortage.d.Without elasticity,it is very difficult to assess the degree of competition within a market.ANS:A PTS:1 DIF:2 REF:5-0 TOP:
6、Elasticity MSC:Interpretive 4.Elasticity improves our understanding of supply and demand by adding a.measures of equity.b.measures of efficiency.c.a quantitative element to our analysis.d.a qualitative element to our analysis.ANS:C PTS:1 DIF:2 REF:5-0 TOP:Elasticity MSC:Interpretive 5.The price elas
7、ticity of demand measures how much a.quantity demanded responds to a change in price.b.quantity demanded responds to a change in income.c.price responds to a change in demand.d.demand responds to a change in supply.ANS:A PTS:1 DIF:1 REF:5-1 TOP:Price elasticity of demand MSC:Definitional 6.The price
8、 elasticity of demand measures a.buyers responsiveness to a change in the price of a good.b.the extent to which demand increases as additional buyers enter the market.c.how much more of a good consumers will demand when incomes rise.d.the movement along a supply curve when there is a change in deman
9、d.ANS:A PTS:1 DIF:1 REF:5-1 TOP:Price elasticity of demand MSC:Definitional 170 Chapter 5/Elasticity and Its Applications 7.Demand is said to be elastic if a.the price of the good responds substantially to changes in demand.b.demand shifts substantially when income or the expected future price of th
10、e good changes.c.buyers do not respond much to changes in the price of the good.d.buyers respond substantially to changes in the price of the good.ANS:D PTS:1 DIF:2 REF:5-1 TOP:Elastic demand MSC:Definitional 8.Demand is said to be inelastic if a.buyers respond substantially to changes in the price
11、of the good.b.demand shifts only slightly when the price of the good changes.c.the quantity demanded changes only slightly when the price of the good changes.d.the price of the good responds only slightly to changes in demand.ANS:C PTS:1 DIF:2 REF:5-1 TOP:Inelastic demand MSC:Definitional 9.If deman
12、d is inelastic,then a.buyers do not respond much to a change in price.b.buyers respond substantially to a change in price,but the response is very slow.c.buyers do not alter their quantities demanded much in response to advertising,fads,or general changes in tastes.d.the demand curve is very flat.AN
13、S:A PTS:1 DIF:2 REF:5-1 TOP:Inelastic demand MSC:Definitional 10.When quantity demanded responds strongly to changes in price,demand is said to be a.fluid.b.elastic.c.dynamic.d.highly variable.ANS:B PTS:1 DIF:1 REF:5-1 TOP:Elastic demand MSC:Definitional 11.Which of the following statements about th
14、e price elasticity of demand is correct?a.The price elasticity of demand for a good measures the willingness of buyers of the good to move away from the good as its price increases.b.Price elasticity of demand reflects the many economic,psychological,and social forces that shape consumer tastes.c.Ot
15、her 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.ANS:D PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Interpretive 12.For a good that is a nece
16、ssity,a.quantity demanded tends to respond substantially to a change in price.b.demand tends to be inelastic.c.the law of demand often does not apply.d.All of the above are correct.ANS:B PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Interpretive 13.For a good that is a luxury,demand a.tends
17、 to be inelastic.b.tends to be elastic.c.has unit elasticity.d.cannot be represented by a demand curve in the usual way.ANS:B PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Interpretive Chapter 5/Elasticity and Its Applications 171 14.If a person only occasionally buys a cup of coffee,his de
18、mand for coffee is probably a.represented by a vertical or nearly-vertical demand curve.b.not easily represented by a demand schedule or demand curve.c.inelastic.d.elastic.ANS:D PTS:1 DIF:2 REF:5-2 TOP:Price elasticity of demand MSC:Interpretive 15.A person who takes a prescription drug to control h
19、igh 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.ANS:A PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Interpretive 16.Other things equal,the demand for a good tends to be more inelastic,the a.fewer th
20、e available substitutes.b.longer the time period considered.c.more the good is considered a luxury good.d.more narrowly defined is the market for the good.ANS:A PTS:1 DIF:2 REF:5-1 TOP:Inelastic demand MSC:Interpretive 17.The demand for Chocolate Chip Cookie Dough ice cream is likely quite elastic b
21、ecause a.ice cream must be eaten quickly.b.this particular flavor of ice cream is viewed as a necessity by many ice-cream lovers.c.the market is broadly defined.d.other flavors of ice cream are good substitutes for this particular flavor.ANS:D PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand|Subst
22、itutes MSC:Interpretive 18.The demand for Werthers candy is likely a.elastic because candy is expensive relative to other snacks.b.elastic because there are many close substitutes for Werthers.c.elastic because Werthers are regarded as a necessity by many people.d.inelastic because it is usually eat
23、en quickly,making the relevant time horizon short.ANS:B PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Interpretive 19.There are very few,if any,good substitutes for motor oil.Therefore,a.the demand for motor oil would tend to be inelastic.b.the demand for motor oil would tend to be elastic.
24、c.the demand for motor oil would tend to respond strongly to changes in prices of other goods.d.the supply of motor oil would tend to respond strongly to changes in peoples tastes for large cars relative to their tastes for small cars.ANS:A PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Inte
25、rpretive 20.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 s
26、ensitive to a change in price when given more time to react.c.buyers will have substantially more 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.ANS:B PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:I
27、nterpretive 172 Chapter 5/Elasticity and Its Applications 21.A good will have a more inelastic demand,a.the greater the availability of close substitutes.b.the broader the definition of the market.c.the longer the period of time.d.the more it is regarded as a luxury.ANS:B PTS:1 DIF:2 REF:5-1 TOP:Pri
28、ce elasticity of demand MSC:Interpretive 22.It is likely that a.the demand for flat-screen computer monitors is more elastic than the demand for monitors in general.b.the demand for grandfather clocks is more elastic than the demand for wristwatches.c.the demand for cardboard is more elastic over a
29、long period of time than over a short period of time.d.All of the above are correct.ANS:D PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Interpretive 23.It is likely that a.the demand for natural gas is more elastic over a short period of time than over a long period of time.b.the demand for
30、 smoke alarms is more elastic than the demand for Persian rugs.c.the demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general.d.All of the above are correct.ANS:C PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Interpretive 24.When the price of bubble gum
31、is$0.50,the quantity demanded is 400 packs per day.When the price falls to$0.40,the quantity demanded increases to 600.Given this information and using the midpoint method,we know that the demand for bubble gum is a.inelastic.b.elastic.c.unit elastic.d.perfectly inelastic.ANS:B PTS:1 DIF:2 REF:5-1 T
32、OP:Price elasticity of demand|Midpoint method MSC:Applicative 25.Economists compute the price elasticity of demand as the a.percentage change in price divided by the percentage change in quantity demanded.b.change in quantity demanded divided by the change in the price.c.percentage change in quantit
33、y demanded divided by the percentage change in price.d.percentage change in quantity demanded divided by the percentage change in income.ANS:C PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Definitional 26.Suppose you calculate the price elasticity of demand for a certain good and you report
34、 that the elasticity is 0.8.The fact that the elasticity is a positive number means that a.when the price of the good increases,the quantity demanded increases in response.b.demand for the good is elastic.c.you have dropped the minus sign and reported the absolute value of the elasticity.d.the good
35、has close substitutes and/or the good is a luxury.ANS:C PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Interpretive 27.The midpoint method is used to compute elasticity because it a.automatically computes a positive number instead of a negative number.b.results in an elasticity that is the s
36、ame as the slope of the demand curve.c.gives the same answer regardless of the direction of change.d.automatically rounds quantities to the nearest whole unit.ANS:C PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand|Midpoint method MSC:Interpretive Chapter 5/Elasticity and Its Applications 173 28.Th
37、e main reason for using the midpoint method to calculate an elasticity is that it a.gives the same answer regardless of whether the price increases or decreases.b.recognizes that prices are usually increasing,not decreasing.c.rounds prices to the nearest dollar and quantities to the nearest whole un
38、it.d.uses fewer numbers than alternative methods.ANS:A PTS:1 DIF:2 REF:5-1 TOP:Midpoint method MSC:Interpretive 29.Which of the following is not a determinant of the price elasticity of demand for a good?a.the time horizon b.the steepness or flatness of the supply curve for the good c.the definition
39、 of the market for the good d.the availability of substitutes for the good ANS:B PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Interpretive 30.The price elasticity of demand for a good measures the willingness of a.consumers to move away from the good as price rises.b.consumers to avoid mon
40、opolistic markets in favor of competitive markets.c.firms to produce more of a good as price rises.d.firms to cater to the tastes of consumers.ANS:A PTS:1 DIF:1 REF:5-1 TOP:Price elasticity of demand MSC:Interpretive 31.If the quantity demanded of a certain good responds only slightly to a change in
41、 the price of the good,then a.the demand for the good is said to be elastic.b.the demand for the good is said to be inelastic.c.the law of demand does not apply to the good.d.the demand curve for the good shifts only slightly in response to a change in price.ANS:B PTS:1 DIF:1 REF:5-1 TOP:Inelastic d
42、emand MSC:Definitional 32.The greater the price elasticity of demand,the a.more likely the product is a necessity.b.smaller the responsiveness of quantity demanded to a change in price.c.greater the percentage change in price over the percentage change in quantity demanded.d.greater the responsivene
43、ss of quantity demanded to a change in price.ANS:D PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Interpretive 33.The value of the price elasticity of demand for a good will be relatively large when a.there are no good substitutes available for the good.b.the time period in question is relat
44、ively short.c.the good is a luxury as opposed to a necessity.d.All of the above are correct.ANS:C PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Interpretive 34.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
45、 elasticity of demand for X is a.0.b.1.c.6.d.36.ANS:B PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Applicative 174 Chapter 5/Elasticity and Its Applications 35.Suppose the price of Twinkies decreases from$1.45 to$1.25 and,as a result,the quantity of Twinkies demanded increases from 2,000 t
46、o 2,200.Using the midpoint method,the price elasticity of demand for Twinkies in the given price range is a.2.00.b.1.55.c.1.00.d.0.64.ANS:D PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Applicative 36.If the price elasticity of demand for a good is 4.0,then a 10 percent increase in price re
47、sults 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.ANS:D PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Applicative 37.If the price elasticity
48、of demand for a good is 1.65,then a 3 percent decrease in price results in a a.0.55 percent increase in the quantity demanded.b.1.82 percent increase in the quantity demanded.c.4.95 percent increase in the quantity demanded.d.5.55 percent increase in the quantity demanded.ANS:C PTS:1 DIF:2 REF:5-1 T
49、OP:Price elasticity of demand MSC:Applicative 38.If the price elasticity of demand for a good is 0.94,then which of the following events is consistent with a 4 percent decrease in the quantity of the good demanded?a.a 0.235 percent increase in the price of the good b.a 2.350 percent increase in the
50、price of the good c.a 3.760 percent increase in the price of the good d.a 4.255 percent increase in the price of the good ANS:D PTS:1 DIF:2 REF:5-1 TOP:Price elasticity of demand MSC:Applicative 39.Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 0.