INSTRUCTION: Select the BEST answer for each question by marking the circle next to your selection
1.
A perfectly inelastic demand schedule:
A.
rises upward and to the right, but has a constant slope.
B.
can be represented by a line parallel to the vertical axis.
C.
cannot be shown on a two-dimensional graph.
D.
can be represented by a line parallel to the horizontal axis.
2.
If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will:
decrease the amount demanded by more than 10 percent.
increase the amount demanded by more than 10 percent.
decrease the amount demanded by less than 10 percent.
increase the amount demanded by less than 10 percent.
3.
The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to:
increase by approximately 12 percent.
decrease by approximately 12 percent.
decrease by approximately 32 percent.
decrease by approximately 26 percent.
4.
R-1 REF 20-34
Refer to the above diagram and assume a single good. If the price of the good increased from $5.70 to $6.30 along D1, the price elasticity of demand along this portion of the demand curve would be:
0.8.
1.0.
1.2.
2.0.
5.
Suppose the price elasticity of demand for bread is 0.20. If the price of bread falls by 10 percent, the quantity demanded will increase by:
2 percent and total expenditures on bread will rise.
2 percent and total expenditures on bread will fall.
20 percent and total expenditures on bread will fall.
20 percent and total expenditures on bread will rise.
6.
Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is:
decreasing.
relatively elastic.
perfectly elastic.
relatively inelastic.
7.
We would expect:
the demand for Coca-Cola to be less elastic than the demand for soft drinks in general.
the demand for Coca-Cola to be more elastic than the demand for soft drinks in general.
no relationship between the elasticity of demand for Coca-Cola and the elasticity of demand for soft drinks in general.
none of the above to hold true.
8.
Which of the following generalizations is not correct?
The larger an item is in one's budget, the greater the price elasticity of demand.
The price elasticity of demand is greater for necessities than it is for luxuries.
The larger the number of close substitutes available, the greater will be the price elasticity of demand for a particular product.
The price elasticity of demand is greater the longer the time period under consideration.
9.
Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that:
farm products are normal goods.
farm products are inferior goods.
the price elasticity of demand for farm products is less than 1.
the price elasticity of demand for farm products is greater than 1.
10.
The price elasticity of supply measures how:
easily labor and capital can be substituted for one another in the production process.
responsive the quantity supplied of X is to changes in the price of X.
responsive the quantity supplied of Y is to changes in the price of X.
responsive quantity supplied is to a change in incomes.
11.
Assume that the price of product X rises by 5 percent and the quantity supplied of X increases by 15 percent. The coefficient of price elasticity of supply for good X is:
negative and therefore X is an inferior good.
positive and therefore X is a normal good.
less than 1 and therefore supply is inelastic.
more than 1 and therefore supply is elastic.
12.
R-2 REF 20-113
Refer to the above diagram and assume that price increases from $2 to $10. The coefficient of the price elasticity of supply (midpoints formula) relating to this price change is about:
5 and supply is elastic.
1 and supply is unit elastic.
.25 and supply is inelatic.
2.5 and supply is elastic.
13.
If the income elasticity of demand for lard is -3.00, this means that:
lard is a substitute for butter.
lard is a normal good.
lard is an inferior good.
more lard will be purchased when its price falls.
14.
We would expect the cross elasticity of demand between dress shirts and ties to be:
positive, indicating normal goods.
positive, indicating inferior goods.
negative, indicating substitute goods.
negative, indicating complementary goods.
15.
The price elasticity of demand is:
negative, but the minus sign is ignored.
positive, but the plus sign is ignored.
positive for normal goods and negative for inferior goods.
positive because price and quantity demanded are inversely related.
