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| 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 |
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| 2 | |
Suppose that as the price of a good rises from $3.90 to $4.10, the quantity demanded falls from 210 to 190. Then the price elasticity of demand is: |
| | A) | .5 |
| | B) | .8 |
| | C) | 1.25 |
| | D) | 2 |
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| 3 | |
While it is relatively easy to shift land from production from 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 |
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| 4 | |
If the short run supply of good X is perfectly inelastic: |
| | A) | the price elasticity coefficient of supply is infinite |
| | B) | the price elasticity coefficient of supply is one |
| | C) | the short-run supply curve graphs as a vertical line |
| | D) | the short-run supply curve graphs as a horizontal line |
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| 5 | |
Use the following diagram to answer the next question.
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Refer to the diagram. If total revenue at price P3 is the same at price P2, the in the P2P3 price range, demand is: |
| | A) | relatively elastic |
| | B) | relatively inelastic |
| | C) | of unit elasticity |
| | D) | perfectly elastic |
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| 6 | |
An increase in demand for a product whose supply is perfectly elastic will: |
| | A) | increase quantity but leave price unchanged |
| | B) | increase quantity and price proportionally |
| | C) | increase price but leave quantity unchanged |
| | D) | leave both price and quantity unchanged |
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| 7 | |
Suppose there is an inverse relationship between the price of one good and the quantity demanded of another. We could conclude that: |
| | A) | the demand for one is elastic while the demand for the other is inelastic |
| | B) | the cross elasticity of demand is negative and the two goods are complements |
| | C) | the two goods are inferior |
| | D) | the cross elasticity of demand is negative and the two goods are substitutes |
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| 8 | |
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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| 9 | |
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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| 10 | |
After his car broke down on a hot day, Jack walked more than a mile to the nearest convenience store and paid $1 for a bottle of water. Considering his thirst, he would willingly have paid $3. Jack's consumer surplus is: |
| | A) | $1 |
| | B) | $2 |
| | C) | $3 |
| | D) | $4 |
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