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| 1 | |
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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| 2 | |
Use the following diagram to answer the next question.
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Refer to the diagram. In this competitive market, joint consumer and producer surplus is maximized at: |
| | A) | price M |
| | B) | price B |
| | C) | output G |
| | D) | output H |
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| 3 | |
The cross price 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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| 4 | |
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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| 5 | |
If a decrease in price increases total revenue: |
| | A) | demand is elastic |
| | B) | demand is inelastic |
| | C) | supply is elastic |
| | D) | supply is inelastic |
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| 6 | |
Answer the next question on the basis of the following diagram:
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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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| 7 | |
The price elasticity of demand for gadgets is 1.20. All else equal, a 2% reduction in the price of gadgets will increase quantity demanded by: |
| | A) | 0.6% |
| | B) | 1.2% |
| | C) | 1.8% |
| | D) | 2.4% |
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| 8 | |
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 sales by 10%, it must lower its price by: |
| | A) | $.40 |
| | B) | $.50 |
| | C) | 2.5% |
| | D) | 4.0% |
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| 9 | |
A perfectly elastic supply curve: |
| | A) | is not possible |
| | B) | has a coefficient of supply elasticity equal to zero |
| | C) | implies that an increase in demand will increase price but leave quantity unchanged |
| | D) | graphs as a horizontal line |
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| 10 | |
The greater the elasticity of supply: |
| | A) | the more an increase in demand will increase price |
| | B) | the more an increase in demand will increase quantity |
| | C) | the steeper the supply curve, all else equal |
| | D) | the more likely the product has no close substitutes |
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