 |
| 1 | |
If demand for a product is elastic with respect to price, this means the: |
| | A) | absolute change in quantity demanded will equal the absolute change in price. |
| | B) | percentage change in quantity demanded will be less than the percentage change in price. |
| | C) | percentage change in quantity demanded will be greater than the percentage change in price. |
| | D) | absolute change in quantity demanded will be less than the absolute change in price. |
|
|
|
| 2 | |
Suppose when the price of tennis balls increases by 5%, the quantity demanded decreases by 4%. The price elasticity of demand for tennis balls equals: |
| | A) | 1.25 |
| | B) | 1.0 |
| | C) | 0.8 |
| | D) | 4.0 |
|
|
|
| 3 | |
All of the following characteristics influence the price elasticity of demand for a good except: |
| | A) | the safety of the good. |
| | B) | the number of substitution possibilities. |
| | C) | the budget share. |
| | D) | time. |
|
|
|
| 4 | |
Suppose 40 units of a good are sold when price equals $10. If the good faces a straight-line demand curve with a slope of 2, the price elasticity of demand for this good equals: |
| | A) | (40/10)*(1/2) = 0.5. |
| | B) | (40/10)*(2) = 8. |
| | C) | (10/40)*(1/2) = 0.125. |
| | D) | (40/40)*(1/2) = 0.5. |
|
|
|
| 5 | |
Use the following diagram to answer the following question:
 <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/007723183x/597570/image3.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (9.0K)</a>]]>
Given the straight-line demand curve above at a price of $10, the price elasticity of demand equals: |
| | A) | 1/5. |
| | B) | 5. |
| | C) | 1. |
| | D) | indeterminate. |
|
|
|
| 6 | |
Use the following diagram to answer the following question:
 <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/007723183x/597569/image14.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (15.0K)</a>]]>
For a seller facing the demand curve shown above, as price decreases from $10 to $0: |
| | A) | total revenue is always increasing. |
| | B) | total revenue is always decreasing. |
| | C) | total revenue is initially increasing, then it begins to decrease after it reaches the midpoint. |
| | D) | total revenue is not changing. |
|
|
|
| 7 | |
A firm knows that the price elasticity of demand for the good they are selling equals 1.5. If they increase the price they charge for their good: |
| | A) | total expenditure would increase. |
| | B) | total expenditure would decrease. |
| | C) | total expenditure would not change. |
| | D) | We need more information to determine what will happen to total expenditure. |
|
|
|
| 8 | |
Good A has an income elasticity of demand equal to -0.5 and it has a cross price elasticity with good B equal to +0.5. This indicates that: |
| | A) | Good A is a normal good and it is a complement of good B. |
| | B) | Good A is inferior and it is a complement of good B. |
| | C) | Good A is a normal good and it is a substitute of good B. |
| | D) | Good A is inferior and it is a substitute of good B. |
|
|
|
| 9 | |
A perfectly inelastic supply curve is: |
| | A) | horizontal, and has a price elasticity of supply equal to zero. |
| | B) | vertical, and has a price elasticity of supply equal to zero. |
| | C) | upward sloping, and has a price elasticity of supply equal to infinity. |
| | D) | vertical, and has a price elasticity of supply equal to infinity. |
|
|
|
| 10 | |
Price volatility is common in markets in which: |
| | A) | Demand curves fluctuate sharply and supply curves are highly inelastic. |
| | B) | Supply curves fluctuate sharply and demand curves are highly inelastic. |
| | C) | Supply curves and demand curves do not fluctuate sharply and either curve is highly elastic. |
| | D) | Both a. and b. |
|
|
.