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Chapter 6 - Extra Practice Questions

This document contains 16 multiple choice questions that test understanding of concepts related to price elasticity of demand and supply, including: - Calculating price elasticity from scenarios of price changes and resulting quantity changes. - Identifying elastic, inelastic, unit elastic and perfectly elastic/inelastic demand. - Factors that influence whether a price increase will increase total revenue. - Properties of horizontal and vertical supply curves.

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64 views4 pages

Chapter 6 - Extra Practice Questions

This document contains 16 multiple choice questions that test understanding of concepts related to price elasticity of demand and supply, including: - Calculating price elasticity from scenarios of price changes and resulting quantity changes. - Identifying elastic, inelastic, unit elastic and perfectly elastic/inelastic demand. - Factors that influence whether a price increase will increase total revenue. - Properties of horizontal and vertical supply curves.

Uploaded by

professorkactus2
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) If a 10 percent rise in price leads to an 8 percent decrease in quantity demanded, the price elasticity of demand is
A) 0.8. B) 8. C) 0.125. D) 80. E) 1.25.

2) The price of plums falls by 7 percent and quantity of plums demanded increases by 6.75 percent. We conclude that the
demand for plums is
A) perfectly elastic.
B) inelastic.
C) perfectly inelastic.
D) unit elastic.
E) elastic.

3) If a 10 percent rise in the price of goods leads to a 10 percent decrease in quantity demanded, the demand curve for this
good

A) has slope equal to 1.


B) is vertical.
C) is horizontal.
D) is a straight line with slope equal to 10.
E) none of the above.

4) Suppose the quantity of root beer demanded decreases from 105,000 litres per week to 95,000 litres per week when the
price rises by 5 percent. The price elasticity of demand
A) is 10.
B) is 2.0.
C) is inelastic.
D) is 0.5.
E) cannot be computed unless we know the original price and the new price.

Use the table below to answer the following question.

Table 4.1.2

Price Quantity
per Volleyball Demanded
$19 55
$21 45

7) Refer to Table 4.1.2. The table shows two points on the demand curve for volleyballs. What is the price elasticity of
demand between these two points?
A) 2.5.
B) 0.4.
C) 2.0.
D) 0.5.
E) none of the above

8) Suppose that Simon Fraser University decides to raise tuition fees to increase the total revenue it receives from
1
students. This policy works only if the demand for a Simon Fraser University education is
A) perfectly elastic.
B) elastic.
C) inelastic.
D) greater than the demand for a University of Western Ontario education.
E) unit elastic.

9) Total revenue is more likely to rise when the price rises if


A) some extended period of time passes.
B) there are few substitutes for the good.
C) a high proportion of income is spent on the good.
D) all of the above.
E) none of the above.

10) The price elasticity of demand for purses is measured in


A) dollars per purse.
B) purses.
C) purses per dollar.
D) dollars.
E) none of the above.

11) Which one of the following must be true if demand is income elastic?
A) A large percentage increase in income will result in a small percentage increase in quantity demanded.
B) A small percentage increase in income will result in a large percentage increase in quantity demanded.
C) A percentage change in price will lead to a larger percentage change in quantity demanded.
D) An increase in income will decrease the quantity demanded.
E) The good is an inferior good.

12) Fred's income increases from $800 per week to $1,200 per week. As a result, he decides to purchase 40 percent more
bubble gum each week. The income elasticity of Fred's demand for bubble gum is
A) 0.12. B) 1.0. C) 10. D) 40. E) 0.40.

13) If the cross elasticity of demand between goods A and B is positive, then
A) A and B are complements.
B) the demands for A and B are both price elastic.
C) the demands for A and B are both price inelastic.
D) A and B are substitutes.
E) A and B are independent goods.

14) If a 10 percent increase in price results in an 18 percent increase in quantity supplied, the elasticity of supply is

A) 1.8. B) 0.3. C) 1.2. D) 0.6. E) 9.0.

15) A vertical supply curve


A) implies an elasticity of supply equal to infinity.
B) implies an elasticity of supply equal to zero.
C) indicates that suppliers are unwilling to produce the good.
D) is impossible except in the long run.
E) indicates a shortage of the good.

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16) If the supply curve is horizontal, then the price elasticity of supply is ________.
A) -1
B) greater than -1 and less than 1
C) zero
D) less than 1 but greater than zero
E) infinity

3
1) A
2) B
3) E
4) B
5) D
6) E
7) C
8) C
9) B
10) E
11) B
12) B
13) D
14) A
15) B
16) E

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