Chapter 5

A good tends to have a small price elasticity of demand if

• a. the good is a necessity.

• b. there are many close substitutes.

• c. the market is narrowly defined.

• d. the long-run response is being measured.

An increase in a good’s price reduces the total amountconsumers spend on the good if the _________elasticity of demand is _________ than one

• a. income; less

• b. income; greater

• c. price; less

• d. price; greater

A linear, downward-sloping demand curve is

• a. inelastic.

• b. unit elastic.

• c. elastic.

• d. inelastic at some points, and elastic at others.

the citizens of lilliput spend a higher fractionof their income on food than do the citizens ofBrobdingnag. the reason could be that

• a. lilliput has lower food prices, and the priceelasticity of demand is zero.

• b. lilliput has lower food prices, and the priceelasticity of demand is 0.5.

• c. lilliput has lower income, and the income elasticity of demand is 0.5.

• d. lilliput has lower income, and the incomeelasticity of demand is 1.5.

the price of a good rises from $16 to $24, andthe quantity supplied rises from 90 to 110 units.calculated with the midpoint method, the priceelasticity of supply is

• 1/5

• 1/2

• 2

• 5

if the price elasticity of supply is zero, the supply curve is

• a. upward sloping

• b. horizontal

• c. vertical

• d. fairly flat at low quantities but steeper at largerquantities

the ability of firms to enter and exit a market overtime means that, in the long run,

• a. the demand curve is more elastic.

• b. the demand curve is less elastic.

• c. the supply curve is more elastic.

• d. the supply curve is less elastic.

An increase in the supply of grain will reduce thetotal revenue grain producers receive if

• a. the supply curve is inelastic

• b. the supply curve is elastic

• c. the demand curve is inelastic

• d. the demand curve is elastic

in competitive markets, farmers adopt newtechnologies that will eventually reduce theirrevenue because

• a. each farmer is a price taker

• b. farmers are short-sighted

• c. regulation requires the use of best practices

• d. consumers pressure farmers to lower prices

Because the demand curve for oil is _________elastic in the long run, oPEc’s reduction in thesupply of oil had a _________ impact on the price inthe long run than it did in the short run.

• a. less; smaller

• a. less; smaller

• c. more; smaller

• d. more; larger