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| 1 | |
Price elasticity of demand measures |
| | A) | how responsive the price of a good is to a change in its demand |
| | B) | how responsive the demand for a good is to a change in income |
| | C) | how responsive the quantity demanded of a good is to a change in its price |
| | D) | how flexible consumers are in adapting to changes in the quantities of products available. |
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| 2 | |
A tennis racquet falls in price from $150 to $120, causing quantity demanded at a particular sporting goods store to rise from 80 to 120 in a given week. Using the average price and quantity formula, the price elasticity of demand for tennis racquets at this store is |
| | A) | 0.5 |
| | B) | 1 |
| | C) | 1.4 |
| | D) | 1.8 |
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| 3 | |
If a 1% fall in the price of a product causes the quantity demanded of the product to increase 2%, demand is |
| | A) | inelastic |
| | B) | elastic |
| | C) | unit elastic |
| | D) | perfectly elastic |
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| 4 | |
If Dove soap has a price elasticity of demand (Ed) of 0.87, then... |
| | A) | the demand is perfectly inelastic |
| | B) | the demand is unit elastic |
| | C) | the demand is elastic |
| | D) | the demand is inelastic |
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| 5 | |
You are the sales manager for a pizza company and have been informed that the price elasticity of demand for your most popular pizza is greater than 1. To increase total revenue, you should |
| | A) | increase the price of the pizza |
| | B) | decrease the price of the pizza |
| | C) | hold pizza prices constant |
| | D) | decrease demand for your pizza |
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| 6 | |
Moving downward along a linear demand curve |
| | A) | price elasticity of demand is constant |
| | B) | price elasticity of demand is increasing |
| | C) | price elasticity of demand is decreasing |
| | D) | price elasticity of demand can increase or decrease depending on the slope of the curve. |
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| 7 | |
Suppose that the below total revenue curve is derived from a particular linear demand curve. That demand curve must be
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| | A) | inelastic for price declines that increase quantity demanded from 6 units to 7 units. |
| | B) | elastic for price declines that increase quantity demanded from 6 units to 7 units. |
| | C) | inelastic for price increases that reduce quantity demanded from 4 units to 3 units. |
| | D) | elastic for price increases that reduce quantity demanded from 8 units to 7 units. |
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| 8 | |
The chief determinant of the price elasticity of supply is |
| | A) | the number of good substitutes the product has |
| | B) | the length of time sellers have to adjust to a change in price |
| | C) | whether the product is a luxury or a necessity |
| | D) | whether the product is a durable or a non-durable good |
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| 9 | |
If supply is inelastic and demand decreases, the total revenue of sellers will |
| | A) | increase |
| | B) | decrease |
| | C) | decrease only if demand is elastic |
| | D) | increase only if demand is inelastic |
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| 10 | |
If a 5% increase in the price of one good results in a decrease of 2% in the quantity demanded of another good, then it can be concluded that the two goods are |
| | A) | normal goods |
| | B) | substitutes |
| | C) | independent |
| | D) | complements |
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| 11 | |
Most goods can be classified as normal goods rather than inferior goods. This means that |
| | A) | the percentage change in consumer income is greater than the percentage change in price of the normal good |
| | B) | the percentage change in quantity demanded of the normal good is greater than the percentage change in consumer income |
| | C) | as consumer income increases, consumer purchases of a normal good increase |
| | D) | the income elasticity of demand is negative |
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| 12 | |
For which product is the income elasticity of demand most likely to be negative? |
| | A) | automobiles |
| | B) | bus tickets |
| | C) | computers |
| | D) | tennis rackets |
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| 13 | |
Which of the following is true if a tax is levied on the producer of a product that has inelastic demand? |
| | A) | the price increase will be small and the producer will bear most of the tax burden |
| | B) | there will be no price increase for consumers since the tax is on the producer. |
| | C) | the price increase will be large and the producer will bear most of the tax burden. |
| | D) | the price increase will be large and the consumer will bear most of the tax burden |
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| 14 | |
Which of the following would be an example of a price floor? |
| | A) | controls on apartment rent in major cities |
| | B) | limiting interest charged by credit card companies |
| | C) | price controls during World War II |
| | D) | price supports for agricultural products |
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| 15 | |
Deadweight loss is a term used to describe |
| | A) | the reduction in consumer and producer surplus due to over or under production |
| | B) | the loss to producers due to unproductive workers |
| | C) | the difference between what consumers pay, and what they are willing to pay |
| | D) | the difference between the actual price producers receive, and the minimum acceptable price |
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