Elasticity and Its Application 1117
33.
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
a.
changes in total revenue in determining the price elasticity of demand.
b.
a necessity versus a luxury in determining the price elasticity of demand.
c.
the definition of a market in determining the price elasticity of demand.
d.
the time horizon in determining the price elasticity of demand.
34.
Suppose that gasoline prices increase dramatically this month. Lola commutes 100 miles to work
each weekday.
Over the next few months, Lola drives less on the weekends to try to save money. Within the
year, she sells her
home and purchases one only 10 miles from her place of employment. These
examples illustrate the importance of
a.
the availability of substitutes in determining the price elasticity of demand.
b.
a necessity versus a luxury in determining the price elasticity of demand.
c.
the definition of a market in determining the price elasticity of demand.
d.
the time horizon in determining the price elasticity of demand.
35.
The demand for Godiva mint chocolates is likely quite elastic because
a.
there are many close substitutes.
b.
this particular type of chocolate is viewed as a luxury by many chocolate lovers.
c.
the market is narrowly defined.
d.
All of the above are correct.
36.
The demand for grape-flavored Hubba Bubba bubble gum is likely
a.
inelastic because there are many close substitutes for grape-flavored Hubba Bubba .
b.
elastic because there are many close substitutes for grape-flavored Hubba Bubba.
c.
inelastic because the market is broadly defined.
d.
elastic because the market is broadly defined.
37.
Which of the following statements is correct?
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 clocks in general.
c.
The demand for cardboard is more elastic over a long period of time than over a short period of
time.
d.
All of the above are correct.
38.
Which of the following statements is correct?
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 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.
39.
Which of the following is likely to have the most price elastic demand?
a.
clothing
b.
blue jeans
c.
Tommy Hilfiger jeans
d.
All three would have the same elasticity of demand because they are all related.
40.
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
Elasticity and Its Application 1121
41.
Which of the following is likely to have the most price elastic demand?
a.
lattés
b.
doctor’s visits
c.
eggs
d.
natural gas
42.
Which of the following is likely to have the most price elastic demand?
a.
dental floss
b.
milk
c.
salt
d.
diamond earrings
43.
Which of the following is likely to have the most price elastic demand?
a.
scissors
b.
fruit
c.
music downloads
d.
toothpaste
44.
Which of the following is likely to have the most price inelastic demand?
a.
mint-flavored toothpaste
b.
toothpaste
c.
Colgate mint-flavored toothpaste
d.
a generic mint-flavored toothpaste
45.
Which of the following is likely to have the most price inelastic demand?
a.
white chocolate chip with macadamia nut cookies
b.
Mrs. Field’s chocolate chip cookies
c.
milk chocolate chip cookies
d.
cookies
46.
Which of the following is likely to have the most price inelastic demand?
a.
white chocolate chip with macadamia nut cookies
b.
hardback novels
c.
salt
d.
box seats at a major league baseball game
47.
Which of the following is likely to have the most price inelastic demand?
a.
tablet computers
b.
leather boots
c.
lightbulbs
d.
optional textbooks
48.
Which of the following is likely to have the most price inelastic demand?
a.
strawberry-banana milk shakes
b.
gasoline in the short run
c.
diamond earrings
d.
box seats at a major league baseball game
49.
Which of the following is likely to have the most price inelastic demand?
a.
chocolate
b.
Godiva chocolate
c.
Hershey’s chocolate
d.
All three would have the same elasticity of demand because they are all related.
50.
Which of the following is likely to have the most price inelastic demand?
a.
yoga mats
b.
prescription medicine
c.
protein powder
d.
gym memberships
51.
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
52.
Which of the following is likely to have the most price inelastic demand?
a.
lattés
b.
filet mignon
c.
Grey Goose® vodka
d.
milk
53.
For which of the following goods is the price elasticity of demand most inelastic?
a.
pizza
b.
large pizza
c.
large pepperoni pizza
d.
Domino’s large pepperoni pizza
54.
A person who takes a prescription drug to control high 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.
55.
There are very few, if any, good substitutes for motor oil. Therefore, the
a.
demand for motor oil would tend to be inelastic.
b.
demand for motor oil would tend to be elastic.
c.
demand for motor oil would tend to respond strongly to changes in prices of other goods.
d.
supply of motor oil would tend to respond strongly to changes in people’s tastes for large cars
relative to their
tastes for small cars.
56.
There are very few, if any, good substitutes for automotive tires. Therefore, the demand for
automotive tires would
tend to be
a.
elastic.
b.
unit elastic.
c.
inelastic.
d.
highly responsive to changes in income as well as changes in prices.
57.
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 quantity demanded divided by the percentage change in price.
d.
percentage change in quantity demanded divided by the percentage change in income.
58.
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 same 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.
59.
The midpoint method for calculating elasticities is convenient in that it allows us to
a.
ignore the percentage change in quantity demanded and instead focus entirely on the
percentage change in
price.
b.
calculate the same value for the elasticity, regardless of whether the price increases or
decreases.
c.
assume that sellers’ total revenue stays constant when the price changes.
d.
restrict all elasticity values to between 0 and 1.
60.
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 = .
61.
Which of the following expressions can be used to compute 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 = • .
62.
When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls
to $0.80, the
quantity demanded increases to 600. Given this information and using the midpoint
method, we know that the
demand for candy bars is
a.
inelastic.
b.
elastic.
c.
unit elastic.
d.
perfectly inelastic.
63.
Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a
result, the quantity of
bags demanded increases from 600 to 800. Using the midpoint method, the
price elasticity of demand for frozen
chicken nuggets in the given price range is
a. 0.35.
b. 0.43.
c. 2.33.
d. 2.89.
64.
Using the midpoint method, the price elasticity of demand for a good is computed to be
approximately 0.75. Which
of the following events is consistent with a 10 percent decrease in the
quantity of the good demanded?
a.
a 7.5 increase in the price of the good
b.
a 13.33 percent increase in the price of the good
c.
an increase in the price of the good from $7.50 to $10
d.
an increase in the price of the good from $10 to $17.50
65.
Using the midpoint method, the price elasticity of demand for a good is computed to be
approximately 2. Which of
the following events is consistent with a 0.1 percent increase in the
price of the good?
a.
The quantity of the good demanded decreases from 250 to 150.
b.
The quantity of the good demanded decreases from 200 to 100.
c.
The quantity of the good demanded decreases by 0.05 percent.
d.
The quantity of the good demanded decreases by 0.2 percent.
66.
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
a. 0.22.
b. 0.67.
c. 1.33.
d. 1.50.
67.
When the price of a good is $5, the quantity demanded is 120 units per month; when the price is
$7, the quantity
demanded is 100 units per month. Using the midpoint method, the price elasticity
of demand is about
a. 0.55.
b. 1.83.
c.
2.
d.
10.
68.
When the price of a bracelet was $28 each, the jewelry shop sold 128 per month. When it raised
the price to $32
each, it sold 112 per month. Using the midpoint method, the price elasticity of
demand for bracelets is
a. 1.14.
b. 1.
c. 0.25.
d. 0.13.
69.
When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the
price falls to
$10.00, the quantity demanded increases to 700. Given this information and using the midpoint
method, we know
that the demand for eBooks is
a.
inelastic.
b.
elastic.
c.
unit elastic.
d.
perfectly inelastic.
70.
Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the
quantity of tortilla
chips demanded increases from 200 bags to 300 bags. Using the midpoint
method, the price elasticity of demand for
tortilla chips in the given price range is
a. 0.33.
b. 0.45.
c. 2.20.
d. 3.00.
71.
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
a.
demand for ice cream cones in this price range is elastic.
b.
demand for ice cream cones in this price range is inelastic.
c.
demand for ice cream cones in this price range is unit elastic.
d.
price elasticity of demand for ice cream cones in this price range is 0.
72.
When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys
30 per month.
Maxine’s demand for chai tea lattés is
a.
elastic, and her demand curve would be relatively flat.
b.
elastic, and her demand curve would be relatively steep.
c.
inelastic, and her demand curve would be relatively flat.
d.
inelastic, and her demand curve would be relatively steep.