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| 1 | |
Use the following diagram to answer the next question. <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073365955/627563/q1.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>]]>
Refer to the diagram. Between the prices of $10 and $8, the price elasticity of demand is: |
| | A) | .5 |
| | B) | .9 |
| | C) | 1.11 |
| | D) | 2 |
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| 2 | |
Use the following diagram to answer the next question.
 <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073365955/627563/q2.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"> (13.0K)</a>]]>
Refer to the diagram. Suppose total revenue at price P3 is the same as at price P2. Then, over the price range from P2 to P3, demand is: |
| | A) | relatively elastic |
| | B) | relatively inelastic |
| | C) | unit elastic |
| | D) | perfectly elastic |
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| 3 | |
Suppose that a 2% increase in income in the economy decreases the quantity of gadgets demanded by 1% at every possible price. This implies that: |
| | A) | the supply of gadgets is elastic |
| | B) | income elasticity is positive and gadgets are a normal good |
| | C) | income elasticity is negative and gadgets are a normal good |
| | D) | income elasticity is negative and gadgets are an inferior good |
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| 4 | |
The maker of a particular breakfast cereal found that increasing the price from $3.00 to $3.25 per box had no impact on total revenue, but increasing the price further to $3.50 reduced total revenue by 2%. Thus, the demand for the cereal is: |
| | A) | inelastic over the range $3.00 to $3.50 |
| | B) | elastic over the range $3.00 to $3.25 but not over the range $3.25 to $3.50 |
| | C) | unit elastic over the range $3.00 to $3.25 and elastic over the range $3.25 to $3.50 |
| | D) | unit elastic over the range $3.00 to $3.25 and inelastic over the range $3.25 to $3.50 |
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| 5 | |
Use the following diagram to answer the next question.
 <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073365955/627563/q5.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"> (12.0K)</a>]]>
Refer to the diagram. In this competitive market, combined consumer and producer surplus is maximized at: |
| | A) | price M |
| | B) | price B |
| | C) | output G |
| | D) | output H |
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| 6 | |
The cross elasticity of demand between two goods is reported to be +0.2. This implies that: |
| | A) | a 2% increase in the price of one shifts the demand curve for the other to the left by 1% |
| | B) | the two goods are complements |
| | C) | the two goods are substitutes |
| | D) | both goods are normal goods |
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| 7 | |
Which of the following is likely to have the most elastic demand? |
| | A) | Food |
| | B) | Fruit |
| | C) | Bananas |
| | D) | Dole brand bananas |
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| 8 | |
Answer the next question on the basis of the following diagram:
 <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073365955/627563/q8.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"> (10.0K)</a>]]>
Refer to the diagram. At the equilibrium price and quantity, total consumer surplus in this market is: |
| | A) | $3 |
| | B) | $7 |
| | C) | $150 |
| | D) | $350 |
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| 9 | |
Suppose legalization—and subsequent regulation—of heroin and cocaine reduces their prices by 50%. Estimates suggest the total quantity of heroin and cocaine demanded would rise by 83% and 42%, respectively. Consequently, legalization would: |
| | A) | increase total expenditures on both heroine and cocaine |
| | B) | decrease total expenditures on both heroine and cocaine |
| | C) | increase total expenditures on heroine and decrease total expenditures on cocaine |
| | D) | decrease total expenditures on heroine and increase total expenditures on cocaine |
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| 10 | |
Assume that the price of product Y decreases by 5% and the quantity supplied decreases by 2%. The coefficient of price elasticity of supply for good Y is: |
| | A) | negative and therefore Y is an inferior good |
| | B) | less than one and therefore supply is inelastic |
| | C) | more than one and therefore supply is elastic |
| | D) | negative and therefore the supply curve is downward sloping |
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