Multiple Choice Identify the
choice that best completes the statement or answers the question.
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1.
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Figure 3.1 shows two markets: for cigarettes and
diamonds. According to these diagrams, which of the following is true?
a. | The demand for cigarettes and diamonds are both unit
elastic. | b. | The demand for cigarettes is inelastic relative to the
demand for diamonds. | c. | The demand for
cigarettes is more inelastic compared to the demand for diamonds. | d. | The demand for cigarettes is perfectly inelastic, while the demand for
diamonds is perfectly elastic. |
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2.
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If a good does not have many substitutes, then the
demand for this good will be
a. | elastic. | b. | inelastic. | c. | unit
elastic. | d. | income elastic. |
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3.
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An inferior good necessarily has
a. | a positive price elasticity of demand. | b. | a negative income elasticity of
demand. | c. | a negative cross-elasticity of demand. | d. | a negative price elasticity of
supply. |
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4.
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To determine whether two goods are substitutes or complements, one would look at
the
a. | Price elasticity of demand. | b. | Price elasticity of supply. | c. | Income elasticity of
demand. | d. | Cross elasticity of demand. |
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5.
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If a 5% increase in price leads to an 8% decrease in quantity demanded, demand
is
a. | perfectly elastic | b. | elastic | c. | unit
elastic | d. | inelastic | e. | perfectly
inelastic |
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6.
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Price elasticity of demand shows how much the demand curve for a good shifts
when the price of this good changes.
a. | True | b. | False | c. | True only if the
elasticity = 1.0 |
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7.
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Price elasticity of demand is the ratio of the percentage change in the quantity
demanded of a good to a given percentage change in .
a. | the price of the good | b. | the consumer’s income | c. | the price of some
other good | d. | the quantity demanded |
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8.
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Based on the information in Exhibit 0060, we can determine that the demand for
the good is __________ and an increase in price from $40 to $60 per unit will __________ total
revenue.
a. | unit elastic; increase | b. | elastic; decrease | c. | unit elastic; not
change | d. | inelastic; increase | e. | elastic;
decrease |
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9.
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If a price reduction leads to larger total revenue, demand is
a. | perfectly inelastic | b. | inelastic | c. | unit
elastic | d. | elastic | e. | perfectly
elastic |
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10.
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When demand is price elastic, total revenue is
a. | directly related to quantity demanded | b. | inversely related to quantity
demanded | c. | directly related to price | d. | directly related to price and inversely
related to quantity demanded | e. | not related to either price or to quantity
demanded |
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11.
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If officials raise tuition on our campus in order to increase revenue, it
will
a. | not be successful if the demand curve slopes downward | b. | be successful if
demand is elastic | c. | be successful if demand is
inelastic | d. | be successful if supply is elastic | e. | be successful if supply is
inelastic |
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12.
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If the demand for a good is elastic, then total revenue
a. | increases as price increases | b. | remains constant as quantity demanded
increases | c. | increases as price decreases | d. | decreases as quantity demanded
increases | e. | decreases as price decreases |
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13.
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The total revenue from selling Elvis Bobble-head dolls would be equal to
a. | the price of Elvis Bobble-head dolls times the quantity sold | b. | the change in
quantity sold divided by the change in price | c. | average cost times quantity
produced | d. | the price of Elvis Bobble-head dolls times the quantity produced | e. | the price of Elvis
Bobble-head dolls times the price elasticity of demand |
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14.
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Recently the Acme Entertainment increased prices for concert tickets from $38 to
$42, an increase of 10.5%. If the demand for the tickets is elastic in this price range, then
the quantity of tickets demanded will
a. | fall by more than 10.5% and revenues from ticket sales will rise. | b. | fall by more than
10.5% and revenues from ticket sales will fall. | c. | fall by less than 10.5% and revenues from
ticket sales will rise. | d. | fall by less than 10.5% and revenues from
ticket sales will fall. |
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True/False Indicate whether the
statement is true or false.
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15.
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If the price elasticity of demand is -1.5, this means that a 1% increase in
price leads to 1.5% decrease in the quantity demanded.
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16.
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When the demand curve is steep, this indicates demand is inelastic.
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17.
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When the demand curve is a flat (horizontal) line, this indicates demand is
perfectly inelastic.
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18.
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The quantity demanded for narrowly defined goods tend to be more responsive to
changes in price.
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19.
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Inelastic demand is more common among broadly defined categories of goods
(compared with narrowly defined specific ones).
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20.
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If the cross price elasticity of demand for two goods is a negative number, this
indicates the two goods are complements.
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21.
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Consumers are more likely to complain loudly but keep buyiing the product when
they encounter price increases on goods with inelastic demand.
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22.
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When the demand for a good is inelastic, then an increase in price of this good
leads to an increase in revenue.
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