Please answer the following questions within 10 minutes. Just write the correct answer number.

1) For electricity, natural gas, or other forms of energy, it is very likely that the price elasticity of demand

A) is zero.B) is infinite.

C) will decrease in magnitude as more time passes after a price change.

D) will increase in magnitude as more time passes after a price change.

2) Which of the following factors will make the demand for a product more elastic?

A) The product has no close substitutes.

B) A very small proportion of income is spent on the good.

C) A long time period has elapsed since the product's price changed.

D) The change in the product's price was unexpected.

3) Of the following, demand is likely to be the least elastic for

A) diamonds.B) insulin for diabetics.C) iceberg lettuce.D) pink grapefruit.

4) The demand for food is most elastic in countries

A) with low income levels.B) with intermediate income levels.

C) with high income levels.D) that are highly urbanized.

5) The demand for a good is less price elastic

A) if closer substitutes are available. B) if the good is a luxury rather than a necessity.

C) if the share of the good in the average consumer's budget is smaller.

D) in the long run than in the short run.

6) Suppose a 10 percent increase in the price of textbooks decreases the quantity demanded by 20 percent. The elasticity of demand for textbooks is

A) 0.2.B) 2.0.C) 5.0. D) 10.0.

7) A rise in the price of a product lowers the total revenue from the product if the

A) income elasticity of demand exceeds 1.B) good is an inferior product.

C) demand for the product is inelastic.D) demand for the product is elastic.

8) If tea and coffee are substitutes, the cross elasticity of coffee with respect to the price of tea will be ________ and an increase in the price of tea will ________ the demand for coffee.

A) positive; increaseB) negative; decrease

C) negative; increaseD) positive; decrease

9) If a price hike of 5 percent increases the quantity demanded of another good by 2 percent, the goods must be ________ and the cross elasticity of demand equals ________.

A) substitutes; 0.4B) substitutes; 2.5C) complements; 0.40D) complements; 2.5

10) The above figure illustrates the demand curve for a good. The good has

A) no substitutes.B) only one substitute.

C) only a few substitutes.D) many substitutes.

11) The elasticity of demand along the demand curve shown in the above figure is constant and equal to 1. Thus,

A) area 0BCF equals area 0AGF.B) area 0BCF equals area FGDE.

C) area 0BCF equals area 0ADE.D) area ABCG equals area 0AGF.

12) The cross elasticity of demand measures the responsiveness of the quantity demanded of a particular good to changes in the prices of

A) its substitutes and its complements.B) its substitutes but not its complements.

C) its complements but not its substitutes.D) neither its substitutes nor its complements.

13) If a rise in the price of good 1 decreases the quantity of good 2 demanded,

A) the cross elasticity of demand is negative. B) the cross elasticity of demand is positive.

C) good 1 is an inferior good.D) good 2 is an inferior good.

14) When the price of milk rose 50 percent, the quantity of milk sold fell 25 percent and the sale of breakfast cereals also fell 25 percent. This set of facts indicates that the

A) demand for milk is price elastic.B) demand for breakfast cereals is price elastic.

C) cross elasticity between milk and cereal is negative so the two are complements.

D) cross elasticity between milk and cereal is positive so the two are complements

15) If the cross elasticity of demand between coffee and tea is positive, an increase in the price of tea will shift the demand curve for

A) tea rightward.B) tea leftward.C) coffee rightward.D) coffee leftward.