Multiple Choice Quiz
Multiple Choice Quiz
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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. 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 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 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 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 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. 7 Suppose that the below total revenue curve is derived from a particular linear demand curve. That demand curve must be (315.0K) 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. 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 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 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 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 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 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 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 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