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| 1 | |
The price elasticity of demand measures: |
| | A) | the responsiveness of quantity demanded to a change in price. |
| | B) | how far a demand curve shifts. |
| | C) | a change in price. |
| | D) | a change in quantity demanded |
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| 2 | |
If demand is ___________ then price cuts will __________ spending. |
| | A) | inelastic, increase |
| | B) | elastic, increase |
| | C) | elastic, decrease |
| | D) | none of the above |
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| 3 | |
If I calculate the change in quantity demanded of a product resulting from a change in its price I am calculating: |
| | A) | the income elasticity of demand. |
| | B) | the cross-price elasticity of demand. |
| | C) | the price elasticity of demand. |
| | D) | none of the above. |
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| 4 | |
The price elasticity of demand tends to be larger in the ________ than the _________. |
| | A) | long run, short run |
| | B) | short run, long run |
| | C) | north, south |
| | D) | south, north |
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| 5 | |
If the price of gas increases permanently in real terms the demand for other forms of heating will: |
| | A) | Increase immediately. |
| | B) | Increase in the short run. |
| | C) | Increase in the long run. |
| | D) | Decrease. |
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| 6 | |
Government policy to reduce smoking by increasing the price will be successful if the demand for cigarettes is price elastic. |
| | A) | True |
| | B) | False |
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| 7 | |
The cross-price elasticity of demand measures how the quantity demanded of one good is related to consumer income. |
| | A) | True |
| | B) | False |
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| 8 | |
Positive cross-elasticities suggest that goods are _________ and negative cross-elasticities that goods are ___________. |
| | A) | substitutes, inferior |
| | B) | normal, complements |
| | C) | substitutes, complements |
| | D) | normal, inferior |
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| 9 | |
A 1% increase in the price of butter brings about a 2% increase in the quantity demanded of margarine. This means that the cross price elasticity of margarine is: |
| | A) | 0.5 |
| | B) | 1.5 |
| | C) | 2.0 |
| | D) | 3.0 |
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| 10 | |
A measurement showing how quantity demanded varies with income is the: |
| | A) | price elasticity of demand. |
| | B) | cross-price elasticity of demand. |
| | C) | budget elasticity of demand. |
| | D) | income elasticity of demand. |
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| 11 | |
A luxury good has an income elasticity _____ unity. A necessity has an income elasticity _____ unity. |
| | A) | below, above |
| | B) | below, below |
| | C) | above, below |
| | D) | above, above |
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| 12 | |
Inferior goods have ___________ and luxury goods have ____________. |
| | A) | negative income elasticities, income elasticities greater than 1. |
| | B) | income elasticities greater than 1, negative income elasticities |
| | C) | positive income elasticities, negative income elasticities |
| | D) | none of the above. |
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| 13 | |
If your income doubles and the prices of the goods you buy double, then your demand for these goods will likely: |
| | A) | increase. |
| | B) | not change. |
| | C) | decrease |
| | D) | shift. |
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| 14 | |
The supply elasticity measures the responsiveness of quantity supplied to quantity demanded. |
| | A) | True |
| | B) | False |
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| 15 | |
When we describe who eventually bears the burden of a tax, we are referring to the: |
| | A) | rate of tax. |
| | B) | burden of tax. |
| | C) | incidence of tax. |
| | D) | equity of tax. |
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| 16 | |
A vertical supply curve has an elasticity of supply of ________. |
| | A) | one |
| | B) | infinity |
| | C) | negative one |
| | D) | zero |
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| 17 | |
When a linear demand curve has a price elasticity of infinity it will appear ______. |
| | A) | horizontal |
| | B) | vertical |
| | C) | downward sloping to the left |
| | D) | as a rectangular hyperbola |
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| 18 | |
The incidence of a tax describes: |
| | A) | the frequency of its payment. |
| | B) | the number of married people paying it. |
| | C) | how much is raised by it. |
| | D) | who eventually bears the burden of it. |
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| 19 | |
In a market with a flat supply curve and steep demand curve a tax is borne mainly by: |
| | A) | producers |
| | B) | government |
| | C) | consumers |
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| 20 | |
The incidence of a tax is determined by the relative slopes of supply and demand. |
| | A) | True |
| | B) | False |
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