Lesson 4 Quiz

A

Figure 1 For prices above $5, demand is price A. elastic, and lowering price will increase total revenue. B. inelastic, and lowering price will increase total revenue. C. elastic, and raising price will increase total revenue. D. inelastic, and raising price will increase total revenue.

C

A good will have a more elastic demand, the A. more broad the definition of the market. B. more it is regarded as a necessity. C. greater the availability of close substitutes. D. shorter the period of time

C

If the cross-price elasticity of two goods is negative, then the two goods are A. normal goods. B. inferior goods. C. complements. D. necessities.

B

If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a A. 10 percent decrease in the quantity demanded. B. 2.5 percent decrease in the quantity demanded. C. 0.1 percent decrease in the quantity demanded. D. 1 percent decrease in the quantity demanded.

C

If the price elasticity of supply is 0.4, and a price increase led to a 5% increase in quantity supplied, then the price increase is about A. 2% B. 1.2% C. 12.5% D. 0.25%

B

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the A. demand for the good is said to be elastic. B. demand for the good is said to be inelastic. C. demand curve for the good shifts only slightly in response to a change in price. D. law of demand does not apply to the good.

A

Last year, Max bought 6 pairs of athletic shoes when his income was $35,000. This year, his income is $42,000, and he purchased 8 pairs of athletic shoes. Holding other factors constant, it follows that Max A. considers athletic shoes to be normal goods. B. considers athletic shoes to be necessities. C. has a low price elasticity of demand for athletic shoes. D. considers athletic shoes to be inferior goods.

B

When demand is elastic, an increase in price will cause A. an increase in total revenue. B. a decrease in total revenue. C. no change in total revenue but an increase in quantity demanded. D. no change in total revenue but a decrease in quantity demanded.

B

When demand is perfectly inelastic, the demand curve will be A. positively sloped, because buyers increase their purchases when price rises. B. vertical, because buyers purchase the same amount as before whenever the price rises or falls. C. negatively sloped, because buyers decrease their purchases when the price rises. D. positively sloped, because buyers increase their total expenditures when price rises.

A

When the price of a good is $5, the quantity demanded is 120 units per month; when the price is $7, the quantity demanded is 100 units per month. Using the midpoint method, the price elasticity of demand is about A. 0.55 B. 2 C. 1.83 D. 10