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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 $9 and $11, the price elasticity of demand is: |
| | A) | .5 |
| | B) | .625 |
| | C) | 1 |
| | D) | 1.6 |
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| 2 | |
Use the following diagram to answer the next question.
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Refer to the diagram. Which of the demand curves illustrated is most inelastic over the $8 to $10 price range ? |
| | A) | D1 |
| | B) | D2 |
| | C) | D3 |
| | D) | D4 |
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| 3 | |
If demand is inelastic: |
| | A) | the coefficient of elasticity is greater than one |
| | B) | the percentage change in quantity demanded exceeds the percentage change in the price |
| | C) | an increase in price will increase total revenue |
| | D) | buyers are relatively sensitive to price changes |
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| 4 | |
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 producer surplus in this market is: |
| | A) | $4 |
| | B) | $7 |
| | C) | $200 |
| | D) | $350 |
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| 5 | |
A manufacturing firm lowers its price by 3% and finds its revenue has decreased. Which of the following best explains this outcome? |
| | A) | Demand elasticity is less than one |
| | B) | Cross price elasticity is positive |
| | C) | Income elasticity is negative |
| | D) | Demand elasticity is positive |
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| 6 | |
Suppose price rises from $15 to $17 and quantity demanded decreases by 20%. We can conclude: |
| | A) | demand is inelastic |
| | B) | the elasticity of demand is 2 |
| | C) | total revenue will decrease |
| | D) | demand is unit elastic |
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| 7 | |
Suppose Stephanie sells a compact disc to Kevin for $5, although he would willingly have paid up to $14. If Stephanie would have accepted as little as $2, then: |
| | A) | Kevin experiences a consumer surplus of $9 |
| | B) | Stephanie experiences a consumer surplus of $3 |
| | C) | Stephanie experiences a producer surplus of $12 |
| | D) | there is an efficiency loss of $12 |
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| 8 | |
Suppose legalization — and subsequent taxation — 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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| 9 | |
Each of two firms willingly supply 25,000 gadgets a month at a price of $13. If the price were to fall to $11, one of the firms would decrease its monthly production by 1,500 and the other would decrease its monthly production by 2,500. If these are the only two producers, the elasticity of supply in this market is: |
| | A) | 0.25 |
| | B) | 0.5 |
| | C) | 1 |
| | D) | 2 |
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| 10 | |
The cross elasticity of demand between root beer and cola is likely to be: |
| | A) | zero |
| | B) | a positive number |
| | C) | a negative number between -1 and 0 |
| | D) | a negative number less than -1 |
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