Economics (McConnell) AP Edition, 19th Edition

Chapter 4: Elasticity

Quiz

1
Use the following diagram to answer the next question.

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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
2
Use the following diagram to answer the next question.

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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
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
4
The maker of a particular breakfast cereal found that increasing the price from $4.00 to $4.25 per box had no impact on total revenue, but increasing the price further to $4.50 reduced total revenue by 2%. Thus, the demand for the cereal is:
A)inelastic over the range $4.00 to $4.50
B)elastic over the range $4.00 to $4.25 but not over the range $4.25 to $4.50
C)unit elastic over the range $4.00 to $4.25 and elastic over the range $4.25 to $4.50
D)unit elastic over the range $4.00 to $4.25 and inelastic over the range $4.25 to $4.50
5
A firm finds that its price elasticity of demand is 4.0. Currently, the firm is selling 2000 units per month at $5 per unit. If it wishes to increases its quantity sold by 10%, it must lower its price by:
A)$.40
B)$.50
C)2.5%
D)4.0%
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
7
Which of the following is likely to have the most elastic demand?
A)Food
B)Fruit
C)Bananas
D)Dole brand bananas
8
While it is often relatively easy to shift land from production of one type of grain to another, the process takes a considerable amount of time. This implies that:
A)a change in the demand for wheat will not affect its price in the short run
B)the long run supply of oats is more elastic than the long run supply of wheat
C)a change in the demand for corn will change quantity supplied more in the short run than the long run
D)the supply of barley is more elastic in the long run than the short run
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
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 downsloping
McConnell Economics Nineteenth Edition Large Cover Image
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