1.If you are in business and you want to increase your total revenue, should you raise your prices or lower them?

a.	You should raise them.
b.	You should lower them.
c.	You should keep them the same.
d.	It depends on what you are selling.

____ 2. For a particular good, a 12 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

a.	The relevant time horizon for consumers of this good is long.
b.	There are many substitutes for this good.
c.	The good is a necessity.
d.	The market for the good is narrowly defined.

____ 3. Which of the following is likely to have the lowest price elasticity?

a.	vanilla ice cream
b.	ice cream
c.	food
d.	Ben and Jerry's Cherry Garcia ice cream

____ 4. Suppose firm has a 25% sale and that quantity demand rises by 10%. The price elasticity of demand for this good is

a.	inelastic and equal to 0.4.
b.	elastic and equal to 1.50.
c.	elastic and equal to 0.4.
d.	inelastic and equal to 1.50.

____ 5. When the price of a concert ticket is $50, the theater sells 500 tickets. The theater owner experiments by raising ticket prices to $70, and discovers she then sells 400 tickets. Using the midpoint method, the price elasticity of demand for good A is

a.	0.67, and an increase in price will result in a decrease in total revenue for the theatre owner.
b.	1.50, and an increase in price will result in an increase in total revenue the theatre owner.
c.	0.67, and an increase in price will result in an increase in total revenue for the theatre owner.
d.	1.50, and an increase in price will result in a decrease in total revenue for the theatre owner.

Figure 1

____ 6. Refer to Figure 1. Using the midpoint method, between prices of $12 and $18, price elasticity of demand is about

a.	1.22.
b.	.33
c.	6.00.
d.	.82.

____ 7. As discussed in the textbook, Amazon fought for ___________ eBook prices because they thought the price elasticity of demand was _____________.

a.	Higher, inelastic.
b.	Higher, elastic.
c.	Lower, inelastic.
d.	Lower, elastic.

Figure 2

____ 8. Refer to Figure 2. Which supply curve is like the supply of Picasso paintings?

a.	S1
b.	S2
c.	S3
d.	None of these answers is correct.

____ 9. In my notes, I discuss how good news for farming is often bad news for farmers.The economic reason why this is true is

a.	the demand for farm products is inelastic, and new technologies are constantly raising the price of those products.	c.	the demand for farm products is inelastic, and new technologies are constantly lowering the price of those products.
b.	The demand for farm products is elastic, and new technologies are constantly raising the price of those products.	d.	the demand for farm products is elastic, and new technologies are constantly lowering the price of those products.

____ 10. As discussed in my notes, over time, as supplies increased and prices fell, the Asian spice trade proved to be far less lucrative for the Dutch than did the Asian textile trade for the British because, as trade improved over time and prices fell,

a.	the supply for spices like pepper is less elastic than the supply for clothing.	c.	the demand for spices like pepper is less elastic than the demand for clothing.
b.	the supply for spices like pepper is more elastic than the supply for clothing.	d.	the demand for spices like pepper is more elastic than the demand for clothing.

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