1. If price
elasticity of demand is 2.0, this implies that consumers would
a. buy twice as much of the good if price falls by 10
percent.
b. require a 2 percent cut in price to raise quantity
demanded of the good by 1 percent.
c. buy 2 percent more of the good in response to a 1 percent
cut in price.
d. require at least a $2 increase in price before showing
any response to the price increase.
2. If the price
elasticity of demand within the price range from $1 to $1.25 for carrots is
0.79 and for radishes is 1.6, then within that price range
a. carrots are more price elastic than radishes.
b. radishes are more price elastic than carrots.
c. carrots and radishes must be substitute goods.
d. carrots and radishes must be complementary goods.
3. Sue’s Bagel Shop
wants to estimate how responsive bagels are to a change in cream cheese prices.
To accomplish this task, which of the following data would NOT be needed?
a. percentage change in bagel price
b. original price of cream cheese
c. new quantity of bagels sold
d. original quantity of bagels sold
4. If Weiskamp
T-Shirt Co. lowers its price from $6 to $5 and finds that students increase
their quantity demanded from 400 to 600 T-shirts, then the demand for Weiskamp
T-shirts within this price range is
a. price inelastic.
b. price elastic.
c. unit elastic.
d. cross elastic.
5. Demand for which
of the following goods is the most likely to be (nearly) perfectly elastic?
a. emergency surgery
b. Ford automobiles
c. Farmer Ben’s wheat
d. diamonds
6. The slope of the
demand curve is not the same as the price elasticity of demand because the
slope of a demand curve
a. compares percentage changes in quantity demanded and
price.
b. compares absolute changes in quantity demanded and price.
c. obeys the law of demand.
d. is not constant when the demand curve is linear.
7. The cross
elasticity of demand for substitute goods must be
a. greater than one.
b. less than one.
c. zero.
d. greater than zero.
8. A 5 percent
increase in the price of sugar reduces sugar consumption by about 10 percent.
The increase causes households to
a. spend more on sugar.
b. spend less on sugar.
c. spend the same amount on sugar.
d. consume more goods like coffee and tea that are complements
of sugar.
9. In this figure,
the slope of the demand curve
a. has a constant value of –2.
b. is higher between points T and U than between points V
and W.
c. is lower between points T and U than between points V and
W.
d. matches the value of the price elasticity of demand at
each point.
10. In this figure,
the price elasticity of demand between $12 and $6 using the midpoint method is
a. –.5.
b. –.82.
c. –1.22.
d. –2.00.
11. As a result of
heavy spring rains in the Midwestern states, the corn crop declined sharply. If
corn growers experienced an increase in sales revenue, the demand for corn must
be
a. price elastic.
b. price inelastic.
c. unitary elastic.
d. perfectly inelastic.
12. The U.S. Post
Office finds that it now has extra costs associated with decontaminating first
class mail for anthrax. It is considering a rate hike, but it will only be
successful in raising more revenue to pay for these additional costs if
a. there are many substitutes for first class mail service.
b. no anthrax is found on the mail.
c. the demand for first class mail service is inelastic.
d. the rate increase is a very large one.
13. Suppose that the
elasticity of supply of lawn mowers is 1.5. If the price of lawn mowers rises 5
percent, the quantity supplied of lawn mowers would
a. decline 7.5 percent.
b. rise 7.5 percent.
c. rise 1.5 percent.
d. rise 0.3 percent.
14. A decrease in
supply will raise the equilibrium price most when demand is
a. relatively elastic.
b. relatively inelastic.
c. unit elastic.
d. perfectly elastic.
15. In this diagram,
the price elasticity of supply between points A and B is
a. 2.
b. .33.
c. .66.
d. 3.33.
16. In this diagram,
the slope of the supply curve between points A and B is
a. 2.
b. .33.
c. .66.
d. 3.33.
17. A perfectly
inelastic supply curve represents a
a. product supply that is extremely responsive to a price
change.
b. product with a constant price, regardless of the quantity
offered for sale.
c. product in abundant supply.
d. fixed supply of a good.
18. Elasticity of
supply becomes __________ elastic over time because __________.
a. less; of the growing scarcity of resources
b. less; suppliers have more time to acquire additional
resources to achieve desired capacity
c. more; demand becomes more inelastic
d. more; suppliers have more time to acquire additional
resources to achieve desired capacity
19. In which of the
markets listed below would you expect the least elastic response from
suppliers?
a. fast food
b. soft drink
c. road building
d. Picasso paintings
20. If the price
elasticity of supply equals zero, this implies that
a. suppliers can easily change quantity supplied when price
changes.
b. the supply curve is perfectly vertical.
c. the percentage change in price of the good supplied is
zero.
d. the percentage change in quantity supplied equals the
percentage change in price.
21. Elasticity of
supply for the long run is
a. always greater than the long-run price elasticity of
demand.
b. always zero.
c. perfectly inelastic.
d. always greater than the short-run elasticity of supply.
22. The supply of
food
a. is subject to significant technological advance in the
long run.
b. is characterized by a large price elasticity of demand.
c. has been decreasing over the long run.
d. can be represented by a horizontal supply curve.
23. One response to
increased oil prices that reflects long-run elasticity and not short-run
elasticity is
a. gasoline rationing.
b. shorter family vacations.
c. smaller cars.
d. cooler homes and offices in winter.
24. A government
seeking to raise revenue would be most likely to tax a good with a
a. high income elasticity of demand.
b. low cross-price demand elasticity.
c. high price elasticity of demand.
25. When comparing
price elasticities of demand for gasoline in the long run to the short run,
what can we say about the long-run elasticities?
a. Within every price range, the price elasticity of demand
for gasoline is more elastic in the long run.
b. Consumers are less sensitive to changes in the price of
gasoline in the long run.
c. Within every price range, the price elasticity of demand
is less elastic in the long run.
d. The price elasticity of demand for gasoline tends to be
unit elastic in the long run.
26. If the fines and
jail time for dealing illegal drugs were reduced, we would expect
a. an increased
demand for illegal drugs.
b. an increased supply of illegal drugs, a lower price, and
higher quantity traded.
c. a decreased supply of illegal drugs, a higher price, and
lower quantity traded.
d. no change in the market for illegal drugs because buyers
and sellers believe they won’t get caught.
Good
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