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Unformatted text preview: Chapter 5 Elasticity and Its Applications Multiple 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 curve. 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 the 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 of 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 the 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: 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 elasticity 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 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 demand. ANS: A PTS: 1 DIF: 1 REF: 5-1 TOP: Price elasticity of demand MSC: Definitional 169 170 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....
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- Summer '08