7. If a 10 percent reduction in price causes a 5 percent increase in the quantity of a commodity that people buy, then in this region of the demand curve, price elasticity of demand is:

a. elastic.b. unit-elastic.c. inelastic, although not perfectly so.d. perfectly inelastic.

8. Which of the following observations would indicate that demand for a good is price-inelastic?

a. The good in question is more of a necessity than a luxury for most people.b. There do not exist good substitutes for this good.c. The time period allowed for responding to a change in price is very small.d. All or any of the above.

9. The law of diminishing marginal utility states that:

a. as the amount of a good consumed increases, the total utility of that good tends to diminish.b. as the amount of a good consumed decreases, the total utility of that good tends to diminish.c. as income increases, marginal utility tends to diminish.d. as the amount of a good consumed increases, the marginal utility of that good tends to diminish.e. when the price of a good increases, marginal utility tends to diminish.

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10. If total utility reaches its maximum, then:

a. marginal utility is at its maximum. b. marginal utility is zero. c. marginal utility is negative. d. this is always the amount the consumer should buy.

11. A demand function for a good is given by Q = 100 - 10P, where Q = quantity demanded per unit of time and P = the price per unit. At a price of $4, the absolute value of the price elasticity of demand is approximately equal to which of the following?

a. b. 2/5c. 2/3d. 1/15e. 3/2

12.Refer to the information in Question 11. When P increases from $4 to $5, what happens to total revenue?

a. Increase b. Decrease c. Unchanged