Principles of Microeconomics 8th Edition by N. Gregory Mankiw – Test Bank

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Complete Test Bank With Answers

 

 

 

Sample Questions Posted Below

 

 

 

 

True / False

 

1. Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   001.05 – TF – MANK08

 

2. Elasticity measures how responsive quantity is to changes in price.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   002.05 – TF – MANK08

 

3. The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   003.05 – TF – MANK08

 

4. The price elasticity of demand is defined as the percentage change in price divided by the percentage change in quantity demanded.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   004.05 – TF – MANK08

 

5. The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.081 – Determine whether a good is more elastic than another according to the determinants that affect the price elasticity of demand.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   005.05 – TF – MANK08

 

6. In general, demand curves for necessities tend to be price elastic.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   006.05 – TF – MANK08

 

7. In general, demand curves for luxuries tend to be price elastic.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   007.05 – TF – MANK08

 

8. Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.081 – Determine whether a good is more elastic than another according to the determinants that affect the price elasticity of demand.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   008.05 – TF – MANK08

 

9. The demand for Rice Krispies is more elastic than the demand for cereal in general.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.081 – Determine whether a good is more elastic than another according to the determinants that affect the price elasticity of demand.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   009.05 – TF – MANK08

 

10. The demand for soap is more elastic than the demand for Dove soap.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.081 – Determine whether a good is more elastic than another according to the determinants that affect the price elasticity of demand.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   010.05 – TF – MANK08

 

11. Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.081 – Determine whether a good is more elastic than another according to the determinants that affect the price elasticity of demand.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   011.05 – TF – MANK08

 

12. The demand for desserts tends to be more inelastic than the demand for red velvet cake.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.081 – Determine whether a good is more elastic than another according to the determinants that affect the price elasticity of demand.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   012.05 – TF – MANK08

 

13. Demand is inelastic if the price elasticity of demand is greater than 1.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   013.05 – TF – MANK08

 

14. Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   014.05 – TF – MANK08

 

15. Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   015.05 – TF – MANK08

 

16. The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.081 – Determine whether a good is more elastic than another according to the determinants that affect the price elasticity of demand.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   016.05 – TF – MANK08

 

17. Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.081 – Determine whether a good is more elastic than another according to the determinants that affect the price elasticity of demand.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   017.05 – TF – MANK08

 

18. Suppose that when the price rises by 20% for a particular good, the quantity demanded of that good falls by 10%. The price elasticity of demand for this good is equal to 2.0.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Analysis
CUSTOM ID:   018.05 – TF – MANK08

 

19. Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Analysis
CUSTOM ID:   019.05 – TF – MANK08

 

20. If the price of calculators increases by 15% and the quantity demanded per week falls by 45% as a result, then the price elasticity of demand is 3.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   020.05 – TF – MANK08

 

21. If we observe that when the price of chocolate increases by 10%, quantity demanded falls by 5%, then the demand for chocolate is price inelastic.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   021.05 – TF – MANK08

 

22. If we observe that when the price of chocolate decreases by 10%, quantity demanded increases by 25%, then the demand for chocolate is price elastic.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   022.05 – TF – MANK08

 

23. The flatter the demand curve that passes through a given point, the more inelastic the demand.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   023.05 – TF – MANK08

 

24. The flatter the demand curve that passes through a given point, the more elastic the demand.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   024.05 – TF – MANK08

 

25. A linear, downward-sloping demand curve has a constant elasticity but a changing slope.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   025.05 – TF – MANK08

 

26. Price elasticity of demand along a linear, downward-sloping demand curve increases as price falls.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Challenging
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   026.05 – TF – MANK08

 

27. Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Challenging
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   027.05 – TF – MANK08

 

28. The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.256 – Given data on demand, calculate the price elasticity of demand using the midpoint method.
TOPICS:   Elasticity
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   028.05 – TF – MANK08

 

29. An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.256 – Given data on demand, calculate the price elasticity of demand using the midpoint method.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   029.05 – TF – MANK08

 

30. If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   030.05 – TF – MANK08

 

31. If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   031.05 – TF – MANK08

 

32. If the price elasticity of demand is equal to 0, then demand is unit elastic.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   032.05 – TF – MANK08

 

33. If the price elasticity of demand is equal to 1, then demand is unit elastic.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   033.05 – TF – MANK08

 

34. If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.272 – Given data on the price elasticity of demand, identify the effect of a price change on total revenue.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   034.05 – TF – MANK08

 

35. Along the elastic portion of a linear demand curve, total revenue rises as price rises.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Challenging
LEARNING OBJECTIVES:   ECON.MANK.272 – Given data on the price elasticity of demand, identify the effect of a price change on total revenue.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   035.05 – TF – MANK08

 

36. If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.272 – Given data on the price elasticity of demand, identify the effect of a price change on total revenue.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   036.05 – TF – MANK08

 

37. If a firm is facing inelastic demand, then the firm should decrease price to increase revenue.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.272 – Given data on the price elasticity of demand, identify the effect of a price change on total revenue.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   037.05 – TF – MANK08

 

38. When demand is inelastic, a decrease in price increases total revenue.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.272 – Given data on the price elasticity of demand, identify the effect of a price change on total revenue.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   038.05 – TF – MANK08

 

39. The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Income elasticity of demand
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   039.05 – TF – MANK08

 

40. The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Income elasticity of demand
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   040.05 – TF – MANK08

 

41. Normal goods have negative income elasticities of demand, while inferior goods have positive income elasticities of demand.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.268 – Given data on the income elasticity of demand, classify a good as either normal or inferior.
TOPICS:   Elasticity
Income elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   041.05 – TF – MANK08

 

42. If the income elasticity of demand for a good is negative, then the good must be an inferior good.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.268 – Given data on the income elasticity of demand, classify a good as either normal or inferior.
TOPICS:   Elasticity
Income elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   042.05 – TF – MANK08

 

43. If we observe that when consumers’ incomes rise by 10%, the quantity demanded of ice cream increases by 5%, then ice cream is an inferior good.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Challenging
LEARNING OBJECTIVES:   ECON.MANK.268 – Given data on the income elasticity of demand, classify a good as either normal or inferior.
TOPICS:   Elasticity
Income elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   043.05 – TF – MANK08

 

44. If the cross-price elasticity of demand for two goods is negative, then the two goods are substitutes.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.267 – Given data on the cross-price elasticity of demand, classify two related goods as either substitutes of complements.
TOPICS:   Cross-price elasticity of demand
Elasticity
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   044.05 – TF – MANK08

 

45. If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.267 – Given data on the cross-price elasticity of demand, classify two related goods as either substitutes of complements.
TOPICS:   Cross-price elasticity of demand
Elasticity
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   045.05 – TF – MANK08

 

46. Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Cross-price elasticity of demand
Elasticity
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   046.05 – TF – MANK08

 

47. Cross-price elasticity is used to determine whether goods are inferior or normal goods.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Cross-price elasticity of demand
Elasticity
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   047.05 – TF – MANK08

 

48. Cross-price elasticity is used to determine whether goods are substitutes or complements.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Cross-price elasticity of demand
Elasticity
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   048.05 – TF – MANK08

 

49. The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.267 – Given data on the cross-price elasticity of demand, classify two related goods as either substitutes of complements.
TOPICS:   Cross-price elasticity of demand
Elasticity
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   049.05 – TF – MANK08

 

50. The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.267 – Given data on the cross-price elasticity of demand, classify two related goods as either substitutes of complements.
TOPICS:   Cross-price elasticity of demand
Elasticity
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   050.05 – TF – MANK08

 

51. Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   051.05 – TF – MANK08

 

52. Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.090 – Evaluate the price elasticity of supply.
TOPICS:   Elasticity
Price elasticity of supply
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   052.05 – TF – MANK08

 

53. If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.090 – Evaluate the price elasticity of supply.
TOPICS:   Elasticity
Price elasticity of supply
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   053.05 – TF – MANK08

 

54. Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.090 – Evaluate the price elasticity of supply.
TOPICS:   Elasticity
Price elasticity of supply
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   054.05 – TF – MANK08

 

55. Supply tends to be more elastic in the short run and more inelastic in the long run.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.090 – Evaluate the price elasticity of supply.
TOPICS:   Elasticity
Price elasticity of supply
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   055.05 – TF – MANK08

 

56. When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC’s price elasticity of supply of knee braces is 0.33.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.090 – Evaluate the price elasticity of supply.
TOPICS:   Elasticity
Price elasticity of supply
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   056.05 – TF – MANK08

 

57. If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.090 – Evaluate the price elasticity of supply.
TOPICS:   Elasticity
Price elasticity of supply
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   057.05 – TF – MANK08

 

58. If we observe that when the price of ice cream rises by 10%, ice cream manufacturers increase the quantity supplied of ice cream by 20%, then the price elasticity of supply is 2.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.090 – Evaluate the price elasticity of supply.
TOPICS:   Elasticity
Price elasticity of supply
KEYWORDS:   BLOOM’S: Analysis
CUSTOM ID:   058.05 – TF – MANK08

 

59. If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.090 – Evaluate the price elasticity of supply.
TOPICS:   Elasticity
Price elasticity of supply
KEYWORDS:   BLOOM’S: Analysis
CUSTOM ID:   059.05 – TF – MANK08

 

60. A government program that reduces land under cultivation hurts farmers but helps consumers.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.071 – Determine the effects of an event using the supply and demand model.
TOPICS:   Supply and demand
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   060.05 – TF – MANK08

 

61. A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.083 – Determine which basic supply terminology complements the given scenario.
TOPICS:   Supply and demand
KEYWORDS:   BLOOM’S: Analysis
CUSTOM ID:   061.05 – TF – MANK08

 

62. A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.272 – Given data on the price elasticity of demand, identify the effect of a price change on total revenue.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Analysis
CUSTOM ID:   062.05 – TF – MANK08

 

63. A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.272 – Given data on the price elasticity of demand, identify the effect of a price change on total revenue.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Analysis
CUSTOM ID:   063.05 – TF – MANK08

 

64. OPEC failed to maintain a high price of oil in the long run, partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   064.05 – TF – MANK08

 

65. The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.090 – Evaluate the price elasticity of supply.
TOPICS:   Elasticity
Price elasticity of supply
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   065.05 – TF – MANK08

 

66. Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   066.05 – TF – MANK08

 

67. Drug interdiction, which reduces the supply of drugs, will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.071 – Determine the effects of an event using the supply and demand model.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   067.05 – TF – MANK08

 

68. A “Just Say No” drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.071 – Determine the effects of an event using the supply and demand model.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   068.05 – TF – MANK08

 

69. Necessities tend to have elastic demands, whereas luxuries tend to have inelastic demands.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.081 – Determine whether a good is more elastic than another according to the determinants that affect the price elasticity of demand.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   069.05 – TF – MANK08

 

70. Demand is elastic if the price elasticity of demand is greater than 1.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Knowledge
CUSTOM ID:   070.05 – TF – MANK08

 

71. If we observe that when the price of chocolate candy bars increases by 10%, quantity demanded decreases total by 10%, then the demand for chocolate candy bars is unit price elastic.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.091 – Evaluate various demand elasticities.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   071.05 – TF – MANK08

 

72. If a firm that produces honey is facing elastic demand, then the firm would decrease price to increase revenue.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.272 – Given data on the price elasticity of demand, identify the effect of a price change on total revenue.
TOPICS:   Elasticity
Price elasticity of demand
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   072.05 – TF – MANK08

 

73. Normal goods have positive income elasticities of demand, while inferior goods have negative income elasticities of demand.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.268 – Given data on the income elasticity of demand, classify a good as either normal or inferior.
TOPICS:   Elasticity
Income elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   073.05 – TF – MANK08

 

74. If we observe that when a consumer’s income rises by 10%, the quantity demanded of chocolate candy bars increases by 15%, then chocolate candy bars are are a normal good for that consumer.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.268 – Given data on the income elasticity of demand, classify a good as either normal or inferior.
TOPICS:   Elasticity
Income elasticity of demand
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   074.05 – TF – MANK08

 

75. If the cross-price elasticity of demand for two goods is negative, then the two goods are substitutes.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.267 – Given data on the cross-price elasticity of demand, classify two related goods as either substitutes of complements.
TOPICS:   Cross-price elasticity of demand
Elasticity
KEYWORDS:   BLOOM’S: Comprehension
CUSTOM ID:   075.05 – TF – MANK08

 

76. If the price elasticity of supply is 0.5 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

  a. True
  b. False

 

ANSWER:   False
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.090 – Evaluate the price elasticity of supply.
TOPICS:   Elasticity
Price elasticity of supply
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   076.05 – TF – MANK08

 

77. Helen’s Honey Hut supplies 20 jars of honey per week when the price of honey is $6 per jar and supplies 30 jars per week when the price of is $8 per jar, so the price elasticity of supply over this price range is 1.4.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.090 – Evaluate the price elasticity of supply.
TOPICS:   Elasticity
Price elasticity of supply
KEYWORDS:   BLOOM’S: Analysis
CUSTOM ID:   077.05 – TF – MANK08

 

78. A government program that reduces land under cultivation can help farmers by raising prices but hurts consumers.

  a. True
  b. False

 

ANSWER:   True
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   ECON.MANK.071 – Determine the effects of an event using the supply and demand model.
TOPICS:   Supply and demand
KEYWORDS:   BLOOM’S: Application
CUSTOM ID:   078.05 – TF – MANK08

 

 

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