1.
The price of Good X decreases from $1.10 per unit to $0.90 per unit. As a result, the quantity demanded increases from 800 units per week to 1200 units per week. What is the own-price elasticity of demand for Good X?
A) Zero
B) 0.5
C) 1.0
D) 2.0
E) 2.75
2.
The own-price elasticity of demand for Belgian endive is 1.5. The price of Belgian endive increases by 10%. As a result of the increase in price, what will happen to quantity demanded?
A) Quantity demanded will fall by 1.5%.
B) Quantity demanded will fall by 6.666667%.
C) Quantity demanded will fall by 10%.
D) Quantity demanded will fall by 15%.
E) Quantity demanded will remain unchanged.
3.
The own-price elasticity of demand for motor oil is 0.4. The quantity of motor oil demanded decreases by 8%. What must have happened to the price of motor oil, to lead to this decrease in quantity demanded?
A) Price increased by 20%.
B) Price increased by 8%.
C) Price increased by 4%.
D) Price increased by 10%.
E) Not enough information has been given to answer the question.
4.
The own-price elasticity of demand for toothpicks is 0.6. The price of toothpicks falls by 10%. As a result, what will happen to the total revenue received by sellers of toothpicks?
A) Total revenue will increase.
B) Total revenue will decrease.
C) Total revenue will stay the same.
D) All of the above will occur, at the same time!!!
E) Not enough information has been given to answer the question.
5.
Ezekiels Bar and Grill sells onion rings. In an attempt to increase the total revenue that it receives from selling onion rings, Ezekiels decreases the price of onion rings. What does this imply about Ezekiels beliefs, regarding the own-price elasticity of demand for its onion rings?
A) Demand is elastic.
B) Demand is unit elastic.
C) Demand is inelastic, but not perfectly inelastic.
D) Demand is perfectly inelastic.
E) The own-price elasticity of demand has nothing to do with whether Ezekiels revenues will increase as a result of a change in the price.
6.
In Lower Slobbovia, the government imposes a price floor in the market for zbisznys. The price floor is above the equilibrium price of zbisnys, and the law is enforced. As a result, the quantity that is actually bought and sold will decrease. The decrease in the quantity bought and sold will be larger if
A) the elasticity of supply is larger.
B) the elasticity of supply is smaller.
C) the elasticity of demand is larger.
D) the elasticity of demand is smaller.
E) zbisznys are an inferior good.
7.
The demand for good Y is inelastic. Due to an earthquake, there is a decrease in the supply of good Y (i.e., the supply curve shifts to the left). What will happen to the total revenues of sellers of good Y?
A) Total revenue will increase.
B) Total revenue will decrease.
C) Total revenue will stay the same.
D) None of the above!!!!!
E) Not enough information has been given to answer the question.
8.
The price of tarfsnods increases by 20%. As a result of the price increase, the quantity of tarfsnods demanded falls by 20%. Which of the following is true?
A) Demand is inelastic; the price increase will lead to an increase in total revenue.
B) Demand is unit elastic; total revenue will be unchanged.
C) Demand is elastic; the price increase will lead to a decrease in total revenue.
D) Demand is unit elastic; the price increase will lead to an increase in total revenue.
E) Demand is unit elastic; the price increase will lead to a decrease in total revenue.
9.
The own-price elasticity of demand for good Z is 1.2. The price of good Z goes down. As a result of the price decrease, what will happen to total revenue of the sellers of good Z?
A) Total revenue will increase.
B) Total revenue will stay the same.
C) Total revenue will decrease.
D) All of the above!!!!!
E) Not enough information has been given to answer the question.
10.
Assume that the own-price elasticity of demand for gasoline is 0.5. The price of gasoline goes down. As a result of the price decrease, what will happen to total revenue of the sellers of gasoline?
A) Total revenue will increase.
B) Total revenue will stay the same.
C) Total revenue will decrease.
D) All of the above!!!!!
E) Not enough information has been given to answer the question.
11.
The price of good A increases. As a result of the price increase, there is a decrease in the total revenue received by sellers of good A. What does this imply about the own-price elasticity of demand for good A?
A) Demand is elastic.
B) Demand is unit elastic.
C) Demand is inelastic, but not perfectly inelastic.
D) Demand is perfectly inelastic.
E) Not enough information has been given to answer the question.
12.
Which of the following is true for BOTH the own-price elasticity of demand and the elasticity of supply?
A) If the demand curve or supply curve is vertical, we say that demand or supply is perfectly inelastic.
B) If the demand curve or supply curve is horizontal, we say that demand or supply is perfectly elastic.
C) Both demand and supply are likely to have a larger elasticity, if there is more time for people to adjust to a change in price.
D) All of the above.
E) (a) and (c) only.
13.
The income elasticity of demand for good B is 0.5. Based on this information, which of the following is true?
A) Good B is a normal good.
B) Good B is an inferior good.
C) The demand for good B is inelastic.
D) (a) and (c).
E) Not enough information has been given to answer the question.
14.
The cross-price elasticity of demand for good C with respect to the price of good D is -0.2. On the basis of this information, which of the following is true?
A) Good C and good D are both inferior goods.
B) Good C and good D are substitutes.
C) Good C and good D are complements.
D) Good C and good D both have a supply curve that does not obey the Law of Supply.
E) Without knowing whether C stands for cashews or cummerbunds, it is impossible to figure out the answer to this question.
15.
Assume that the demand curve for good E is a straight line. As we move downward and to the right along the demand curve, what happens to the own-price elasticity of demand?
A) The elasticity increases.
B) The elasticity stays the same.
C) The elasticity decreases.
D) The elasticity increases at first, and then decreases.
E) Its impossible to answer this question, unless more information is given.
16.
Michelangelos Pieta is in St. Peters Basilica in Rome. The Roman Catholic Church is unlikely to offer this sculpture for sale. However, if they were to put it on the market, its supply curve would be a vertical line, since the sculpture cannot be reproduced. In a case like this, what is the elasticity of supply?
A) Zero
B) 0.5
C) 1.0
D) 2.0
E) As we approach a vertical supply curve, the limit of the supply elasticity is infinity.
1. D
2. D
3. A
4. B
5. A
6. A
7. C
8. E
9. A
10. C
11. A
12. E
13. D
14. C
15. B
16. A
The price of Good X decreases from $1.10 per unit to $0.90 per unit. As a result, the quantity demanded increases from 800 units per week to 1200 units per week. What is the own-price elasticity of demand for Good X?
A) Zero
B) 0.5
C) 1.0
D) 2.0
E) 2.75
2.
The own-price elasticity of demand for Belgian endive is 1.5. The price of Belgian endive increases by 10%. As a result of the increase in price, what will happen to quantity demanded?
A) Quantity demanded will fall by 1.5%.
B) Quantity demanded will fall by 6.666667%.
C) Quantity demanded will fall by 10%.
D) Quantity demanded will fall by 15%.
E) Quantity demanded will remain unchanged.
3.
The own-price elasticity of demand for motor oil is 0.4. The quantity of motor oil demanded decreases by 8%. What must have happened to the price of motor oil, to lead to this decrease in quantity demanded?
A) Price increased by 20%.
B) Price increased by 8%.
C) Price increased by 4%.
D) Price increased by 10%.
E) Not enough information has been given to answer the question.
4.
The own-price elasticity of demand for toothpicks is 0.6. The price of toothpicks falls by 10%. As a result, what will happen to the total revenue received by sellers of toothpicks?
A) Total revenue will increase.
B) Total revenue will decrease.
C) Total revenue will stay the same.
D) All of the above will occur, at the same time!!!
E) Not enough information has been given to answer the question.
5.
Ezekiels Bar and Grill sells onion rings. In an attempt to increase the total revenue that it receives from selling onion rings, Ezekiels decreases the price of onion rings. What does this imply about Ezekiels beliefs, regarding the own-price elasticity of demand for its onion rings?
A) Demand is elastic.
B) Demand is unit elastic.
C) Demand is inelastic, but not perfectly inelastic.
D) Demand is perfectly inelastic.
E) The own-price elasticity of demand has nothing to do with whether Ezekiels revenues will increase as a result of a change in the price.
6.
In Lower Slobbovia, the government imposes a price floor in the market for zbisznys. The price floor is above the equilibrium price of zbisnys, and the law is enforced. As a result, the quantity that is actually bought and sold will decrease. The decrease in the quantity bought and sold will be larger if
A) the elasticity of supply is larger.
B) the elasticity of supply is smaller.
C) the elasticity of demand is larger.
D) the elasticity of demand is smaller.
E) zbisznys are an inferior good.
7.
The demand for good Y is inelastic. Due to an earthquake, there is a decrease in the supply of good Y (i.e., the supply curve shifts to the left). What will happen to the total revenues of sellers of good Y?
A) Total revenue will increase.
B) Total revenue will decrease.
C) Total revenue will stay the same.
D) None of the above!!!!!
E) Not enough information has been given to answer the question.
8.
The price of tarfsnods increases by 20%. As a result of the price increase, the quantity of tarfsnods demanded falls by 20%. Which of the following is true?
A) Demand is inelastic; the price increase will lead to an increase in total revenue.
B) Demand is unit elastic; total revenue will be unchanged.
C) Demand is elastic; the price increase will lead to a decrease in total revenue.
D) Demand is unit elastic; the price increase will lead to an increase in total revenue.
E) Demand is unit elastic; the price increase will lead to a decrease in total revenue.
9.
The own-price elasticity of demand for good Z is 1.2. The price of good Z goes down. As a result of the price decrease, what will happen to total revenue of the sellers of good Z?
A) Total revenue will increase.
B) Total revenue will stay the same.
C) Total revenue will decrease.
D) All of the above!!!!!
E) Not enough information has been given to answer the question.
10.
Assume that the own-price elasticity of demand for gasoline is 0.5. The price of gasoline goes down. As a result of the price decrease, what will happen to total revenue of the sellers of gasoline?
A) Total revenue will increase.
B) Total revenue will stay the same.
C) Total revenue will decrease.
D) All of the above!!!!!
E) Not enough information has been given to answer the question.
11.
The price of good A increases. As a result of the price increase, there is a decrease in the total revenue received by sellers of good A. What does this imply about the own-price elasticity of demand for good A?
A) Demand is elastic.
B) Demand is unit elastic.
C) Demand is inelastic, but not perfectly inelastic.
D) Demand is perfectly inelastic.
E) Not enough information has been given to answer the question.
12.
Which of the following is true for BOTH the own-price elasticity of demand and the elasticity of supply?
A) If the demand curve or supply curve is vertical, we say that demand or supply is perfectly inelastic.
B) If the demand curve or supply curve is horizontal, we say that demand or supply is perfectly elastic.
C) Both demand and supply are likely to have a larger elasticity, if there is more time for people to adjust to a change in price.
D) All of the above.
E) (a) and (c) only.
13.
The income elasticity of demand for good B is 0.5. Based on this information, which of the following is true?
A) Good B is a normal good.
B) Good B is an inferior good.
C) The demand for good B is inelastic.
D) (a) and (c).
E) Not enough information has been given to answer the question.
14.
The cross-price elasticity of demand for good C with respect to the price of good D is -0.2. On the basis of this information, which of the following is true?
A) Good C and good D are both inferior goods.
B) Good C and good D are substitutes.
C) Good C and good D are complements.
D) Good C and good D both have a supply curve that does not obey the Law of Supply.
E) Without knowing whether C stands for cashews or cummerbunds, it is impossible to figure out the answer to this question.
15.
Assume that the demand curve for good E is a straight line. As we move downward and to the right along the demand curve, what happens to the own-price elasticity of demand?
A) The elasticity increases.
B) The elasticity stays the same.
C) The elasticity decreases.
D) The elasticity increases at first, and then decreases.
E) Its impossible to answer this question, unless more information is given.
16.
Michelangelos Pieta is in St. Peters Basilica in Rome. The Roman Catholic Church is unlikely to offer this sculpture for sale. However, if they were to put it on the market, its supply curve would be a vertical line, since the sculpture cannot be reproduced. In a case like this, what is the elasticity of supply?
A) Zero
B) 0.5
C) 1.0
D) 2.0
E) As we approach a vertical supply curve, the limit of the supply elasticity is infinity.
1. D
2. D
3. A
4. B
5. A
6. A
7. C
8. E
9. A
10. C
11. A
12. E
13. D
14. C
15. B
16. A
