Micro Practice Test (Chapter 4)

Suppose, while rummaging through your uncle's closet, you found the original painting of Dogs Playing Poker, a valuable piece of art. You decide to set up a display in your uncle's garage. The demand curve to see this valuable piece of art is as shown in the diagram below. What price should you charge if your goal is to maximize your revenues from tickets sold?

$6 per visit

If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is:

(P/Q) × (1/slope)

Which of the following goods will have the most inelastic demand?

(not a can of generic peaches) dining hall food?

If the percentage change in the price of a good is less than the resulting percentage change in the quantity demanded of that good, then the demand for that good is:

(not inelastic)

At point A on the demand curve shown, what percentage change in quantity would result from a 2.5 percentage increase in the price of the product? Change in quantity:_________ In response to this price and quantity change, total expenditure should __________ from its current value of $___

-5.0% decrease 24

When the price of hot dogs is $1.50 each, 500 hot dogs are sold every day. After the price falls to $1.35 each, 510 hot dogs are sold every day. At the original price, what is the price elasticity of demand for hot dogs?

0.2

A perfectly elastic demand curve has a slope of ______ while a perfectly inelastic demand curve has a slope of ______.

0; infinity

Refer to the accompanying figure. When P = 4, the price elasticity of demand for the demand curve D1 is ______ and D2 is ______.

1/3;2/3

Refer to the accompanying figure. When the price is equal to 8, the price elasticity of demand for the demand curve D1 is ______ and for D2 the price elasticity of demand is _____.

1;4

If a 10 percent decrease in the price of a good leads to a 20 percent increase in the quantity demanded, then what is the price elasticity of demand?

2

Refer to the accompanying figure. The absolute value of the slope of the demand curve D1 is ______, and the absolute value of the slope of demand curve D2 is ______.

2; 1/2

Refer to the accompanying figure. For demand curve D1, what is the price elasticity of demand when P = 12?

3

If the price elasticity of demand for pineapples is 0.75, then a 4 percent increase in the price of pineapples will lead to a:

3 percent decrease in the quantity of pineapples demanded.

Calculate the price elasticity of demand (in absolute value) at points A, B, C, D, and E on the demand curve below.

A: Infinity B: 3 C: 1 D: 1/3 or 0.33 E: 0

Refer to the accompanying figure. At P = 4, how does the price elasticity of demand for D1 compare to that for D2?

It will be lower for D1 than D2.

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

Elastic

Suppose that Chris had been charging $1.00 per pound for potatoes. When Chris lowered the price to $0.90 per pound, his total revenue fell. When Chris raised the price to $1.10, total revenue also fell. Which of the following could explain this?

The price elasticity of demand for potatoes is 1 at a price of $1.00 per pound.

Which of the following factors would make the price elasticity of demand more elastic?

The purchase of the good is a major expense for you. There are many competitors providing essentially identical variations of the good.

The campus bookstore at No Name U usually charges $8 for a license plate holder displaying the school insignia, selling 160 holders per week. During homecoming week, the bookstore changes the price to $10 per plate, selling 140 of them. a. What is the price elasticity of demand for license plate holders? b. As a result of the price change, the total revenue from selling license plate holders will ____________ c. The price elasticity of demand for license plate holders is ___________ at the original price.

a. 0.5 b. (not decrease) c. inelastic

As one moves down along a linear demand curve (i.e., from high price, low quantity pairs to low price, high quantity pairs), demand:

becomes less elastic

If the price elasticity of demand for a good is greater than one, then the demand for that good is:

elastic

When the price of NBA tickets is $25 each, 30,000 tickets are sold. After the price rises to $30 each, 20,000 tickets are sold. At the original price, the demand for NBA ticket is:

elastic

Suppose that the demand for electricity has been found to be price inelastic. The most likely explanation for this finding is that:

few substitutes for electricity exist.

Suppose a 10% increase in the price of aspirin leads to a 5% decrease in the quantity demanded of aspirin. The demand for aspirin, therefore, is

inelastic

Demand tends to be ______ in the short run than in the long run.

less elastic

Suppose two demand curves intersect and so have a point in common. At that point, demand shown by the steeper curve will be _______ the flatter curve.

less elastic than

Suppose the price of a Snickers candy bar is $2.00 at both the airport and the grocery store. The price elasticity of demand for a Snickers candy bar at an airport is likely to be ______ the price elasticity of demand for a Snickers candy bar at the grocery store.

less than

Refer to the accompanying figure. At P = 8 and Q = 4, D1 is ______ elastic than D2, which is shown graphically as D1 being _____ D2.

less; steeper than

On a given linear demand curve, as price increases demand becomes:

more elastic

If the demand curve for a good is a vertical line at Q = 1, then a decrease in the price of that good will:

not change the quantity demanded.

If the demand curve is horizontal, then demand is:

perfectly elastic

When Taylor raised the price of earrings at Taylor's Boutique, her total revenue from selling earrings increased. This suggests that:

the demand for Taylor's earrings at the original price was inelastic.

The owner of a pizza shop observes that when she raises the price of a large pizza, her total revenue decreases, and when she lowers the price of a large pizza, her total revenue increases. This suggests that:

the demand for her large pizzas is elastic with respect to price.

A demand curve that is drawn as a vertical line has a price elasticity of demand equal to:

zero

If the slope of a demand curve is infinite, then the price elasticity of demand is:

zero