QUESTION 1

If cola and iced tea are good substitutes for consumers, then it is likely that:

1. their cross price elasticities are greater than zero.
2. their price elasticities of demand are less than one.
3. their income elasticities are less than zero.
4. their price elasticities of supply are less than one .

QUESTION 2

Youth smoking seems to be more __________ than adult smoking?that is, the quantity of youth smoking will fall by a greater percentage than the quantity of adult smoking in response to a given percentage increase in price.

1. unitary elastic
2. inelastic
3. elastic
4. cross-price elastic

QUESTION 3

When economists are sketching examples of demand and supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as _________.

1. inelastic
2. elastic
3. unitary elasticity
4. income elasticity

QUESTION 4

When economists are sketching examples of a demand or supply curve that is close to horizontal, they refer to that demand or supply curve as ____________.

1. elastic
2. inelastic
3. having zero elasticity
4. price inelasticity

QUESTION 5

Demand is said to be ___________ when the quantity demanded is very responsive to changes in price.

1. elastic
2. unit elastic
3. inelastic
4. independent

QUESTION 6

Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve?

1. 0.1
2. 0.8
3. 1.0
4. 10.0

QUESTION 7

Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased.What is the elasticity of demand facing Billy Bob's Barber Shop?

1. 0.15
2. 3.0
3. 0.10
4. 0.05

QUESTION 8

If the demand curve is perfectly elastic, then an increase in supply will:

1. decrease the price but result in no change in the quantity exchanged.
2. increase the quantity exchanged but result in no change in the price.
3. increase the price but result in no change in the quantity exchanged.
4. increase both the price and the quantity exchanged.

QUESTION 9

A 10 percent increase in income leads to a 15% decrease in the quantity of macaroni and cheese demanded but no change in the price of macaroni and cheese. From this information, we can assume:

1. macaroni is a normal good and price elasticity of demand is greater than 1.
2. macaroni is an inferior good and price elasticity of supply is equal to zero.
3. macaroni is an inferior good and price elasticity of supply is infinite.
4. macaroni is an inferior good and price elasticity of demand is less than 1.

QUESTION 10

The price elasticity of demand measures the:

1. responsiveness of quantity demanded to a change in quantity supplied.
2. responsiveness of price to a change in quantity demanded.
3. responsiveness of quantity demanded to a change in price.
4. responsiveness of quantity demanded to a change in income.

QUESTION 11

A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:

1. total revenue will decrease.
2. total revenue will increase.
3. total revenue will remain constant.
4. the elasticity of demand will increase.

QUESTION 12

If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:

1. rise and the equilibrium quantity to fall.
2. rise and the equilibrium quantity to stay the same.
3. rise and the equilibrium quantity to rise.
4. stay the same and the equilibrium quantity to fall.

QUESTION 13

Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price.

1. independent
2. inelastic
3. unit elastic
4. elastic

QUESTION 14

If the supply curve for aspirin is perfectly elastic, then a reduction in demand will cause the equilibrium price to:

1. stay the same and the equilibrium quantity to fall.
2. fall and the equilibrium quantity to fall.
3. rise and the equilibrium quantity to stay the same.
4. rise and the equilibrium quantity to fall.

QUESTION 15

Refer to Figure 5-1. With reference to Graph A, at a price of $5, total revenue equals:

1. $200.
2. $400.
3. $500.
4. $1,000.

QUESTION 16

If the supply curve for housing is perfectly inelastic, then a reduction in demand will cause the equilibrium price to:

1. rise and the equilibrium quantity to fall.
2. rise and the equilibrium quantity to stay the same.
3. fall and the equilibrium quantity to fall.
4. fall and the equilibrium quantity to stay the same.

QUESTION 17

Refer to Figure 5-1. Graph B represents a demand curve that is relatively __________. Total revenue __________ as the price decreases from $10 to $5.

1. inelastic; decreases
2. elastic; decreases
3. elastic; increases
4. inelastic; increases

QUESTION 18

Demand is said to be __________ when the quantity demanded changes at the same proportion as the price.

1. elastic
2. unit elastic
3. inelastic
4. independent

QUESTION 19

Refer to Figure 5-1. With reference to Graph A, at a price of $10, total revenue equals:

1. $1,000.
2. $500.
3. $400.
4. $200.

QUESTION 20

Price elasticity of demand is defined as:

1. the slope of the demand curve.
2. the slope of the demand curve divided by the price.
3. the percentage change in price divided by the percentage change in quantity demanded.
4. the percentage change in quantity demanded divided by the percentage change in price.