2013 sample MC questions - 90

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1 Class: Date: 2013 sample MC questions - 90 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The price elasticity of demand measures the that results from a. a. change in quantity demanded; change in price b. change in price; change in the quantity demanded c. percentage change in price; percentage change in the quantity demanded d. percentage change in the quantity demanded; percentage change in price e. percentage change in the quantity demanded; change in price 2. To determine the price elasticity of demand, we a. need information on consumers' incomes. b. need to know how much is available. c. compare the percentage change in the quantity demanded to the percentage change in the price. d. compare the change in the quantity to the change in price. e. divided the quantity by the price. 3. Suppose the local university charges $85 per credit hour. If tuition increases from $85 to $93 per credit hour, using the midpoint method, what is the percentage change in price? a percent b percent c percent d percent e percent 4. Using the midpoint method, if the price of an airline ticket from Orlando to Pittsburgh falls from $275 to $238, the percentage change in price is a percent. b percent. c percent. d percent. e percent. 5. Suppose the quantity of surfboards demanded in Santa Monica equals 13,903 in June. If a price increase led to the quantity demanded decreasing to 11,853 in July, using the midpoint method, the percentage change in quantity demanded equals a percent. b percent. c percent. d percent. e percent. 6. If the demand for a good is elastic, then a. people do not change the quantity they demand when the price of the good changes. b. a change in price leads to a smaller percentage change in the quantity demanded. c. people substantially decrease the quantity of the good they buy if its price increases by a small percentage. d. a change in the quantity demanded is smaller than the change in price. e. the quantity demanded divided by the price exceeds

2 7. When the percentage change in the quantity demanded exceeds the percentage change in price, then demand is a. inelastic. b. unit elastic. c. elastic. d. irrelevant. e. undefined. 8. Suppose the Chicago Enforcers football team lowers ticket prices by 13 percent and as a result the quantity of tickets demanded increases by 21 percent. This response means that the demand for Enforcer tickets is a. inelastic. b. elastic. d. perfectly inelastic. e. perfectly elastic. 9. If the price elasticity of demand for moose hunting lessons is 4.23, then the demand for moose hunting lessons is a. elastic. b. unit elastic. c. inelastic. d. perfectly unit elastic. e. perfectly elastic. 10. Suppose the demand for peaches sold from one roadside stand in Georgia is perfectly elastic. As a result, a 7 percent increase in the price charged by the owner of this stand leads to a. zero peaches sold by this stand. b. no change in the quantity demanded at this stand. c. a 7 percent decrease in the quantity demanded at this stand. d. a 7 percent decrease in demand at this stand. e. a virtually infinite increase in the quantity demanded at this stand. 11. When the percentage change in the quantity demanded is less than the percentage change in price, then demand is a. inelastic. b. unit elastic. c. elastic. d. irrelevant. e. undefined. 12. If the price elasticity of demand for razors is 0.32, the demand for razors is a. elastic. b. unit elastic. c. inelastic. d. perfectly inelastic. e. perfectly elastic. 13. When the price elasticity of demand is less than one and larger than zero, then demand is said to be a. elastic. b. inelastic. d. indeterminate. e. semi-inelastic. 2

3 14. Suppose the demand for rescue services in our national parks is perfectly inelastic. This fact would mean that a 31 percent increase in rescue fees leads to a a. 31 percent decrease in the quantity demanded. b. 31 percent increase in demand. c. 31 percent decrease in demand. d. no change in the quantity demanded. e. decrease in the quantity demanded to 0 rescues. 15. Suppose a local photographer increases his prices by 8 percent and quantity demanded decreases by the same percentage. This set of facts indicates that the demand for his services is a. inelastic. b. elastic. d. perfectly elastic. e. perfectly inelastic. 16. The demand for a good is more elastic if the a. good is a necessity. b. good has few substitutes. c. good is narrowly defined. d. supply of the good is plentiful. e. Both answers B and C are correct. 17. Which of the following statements is correct? a. The demand for New Balance shoes is more elastic than the demand for shoes in general. b. The demand for salt is very elastic. c. The demand for luxuries is less elastic than the demand for necessities. d. The demand for a narrowly defined good is less elastic than the demand for a more broadly defined good. e. The larger the proportion of income spent on a good, the smaller the elasticity of demand. 18. If a product is narrowly defined, it is likely to a. have many substitutes and therefore its demand is elastic. b. have few substitutes, and therefore its demand is less elastic. c. be unique, and therefore its demand is inelastic. d. be unique and have many substitutes. e. have a larger proportion of income spent on it. 19. The longer the time that has elapsed since the price of a good changed, the a. more elastic the demand for that good. b. steeper the demand curve. c. less elastic the demand for that good. d. smaller the amount of that good bought. e. fewer substitutes available for the good. 20. The demand for luxury suites at basketball games is elastic because a. these suites are a necessity. b. these suites are a luxury item. c. few close substitutes exist for these suites. d. basketball fans have little time to look for alternative suites. e. poorer fans cannot afford luxury suites. 3

4 21. The demand for a necessity generally is a. very elastic. b. infinitely elastic. c. unaffected by income. d. inelastic. e. unit elastic. 22. If a good is a necessity, it has substitutes and its demand is. a. few; elastic b. few; inelastic c. many; elastic d. many; inelastic e. many; precisely unit elastic 23. We calculate the price elasticity of demand by as the a. ratio of the percentage change in the quantity demanded to the percentage change in price. b. change in quantity divided by the change in price. c. ratio of the percentage change in the price to the percentage change in quantity. d. percentage change in the quantity demanded divided by the percentage change in income. e. equilibrium quantity divided by the equilibrium price. 24. What is the formula for the price elasticity of demand? The percentage change in the a. quantity demanded divided by the percentage change in the price of a substitute or complement. b. quantity supplied divided by the percentage change in price. c. quantity demanded divided by the percentage change in price. d. quantity demanded divided by the percentage change in income. e. equilibrium quantity demanded divided by the equilibrium price. 25. Demand is price inelastic if percentage change in the price leads to a percentage change in the quantity demanded. a. a small; large b. a large; small c. any; large d. Both answers A and B are correct. e. None of the above answers is correct. 26. If the price elasticity of demand for a good is 2, then a 10 percent increase in the price of that good the quantity demanded by percent. a. increases; 20 b. decreases; 2 c. decreases; 10 d. decreases; 20 e. increases; Suppose the price of a ticket to a Lenny Kravitz concert is $41 and at that price, the quantity of tickets demanded is 17,000 per concert. Using the midpoint method of calculating percentage changes, if Mr. Kravitz raises the price to $48 and the quantity demanded decreases to 16,000, the price elasticity of demand for his concert tickets is a b c d e

5 28. If a 4 percent change in the price of a good leads to a 3 percent change in quantity demanded, the price elasticity of demand equals a b c d e. None of the above answers are correct. 29. During January of 2005, the average price of regular unleaded gasoline in Oakland, California increased 11.0 percent. If the price elasticity of demand for gasoline was 0.13, the price hike means that the quantity demanded decreased by a percent. b percent. c percent. d percent. e percent. 30. If the price elasticity of demand for a product is 2.5, then a price increase of 1.5 percent decreases the quantity demanded by a percent. b percent. c percent. d percent. e percent. 31. Suppose the University of Oklahoma increases the price of student football tickets for the 2006 season by 30 percent. If the price elasticity of demand for student tickets is 1.22, the price increase leads to a. a 36.6 percent decrease in the quantity demanded. b. a 30 percent decrease in the quantity demanded. c. a 1.22 percent decrease in the quantity demanded. d percent decrease in the quantity demanded. e. no change in the quantity demanded. 32. Using the data in the table above, when the price of a skirt rises from $20 to $35, what is the price elasticity of demand? (Use the midpoint method.) a b c d e

6 33. Using the data in the table above, when the price of a pizza falls from $10 to $9, what is the percentage change in price? (Use the midpoint method.) a. 8.2 percent b percent c percent d. 5.0 percent e. 1.0 percent 34. Using the data in the table above, when the price of a pizza falls from $10 to $9, what is the percentage change in the quantity demanded? (Use the midpoint method.) a percent b percent c percent d. 5.2 percent e. 25 percent 35. Using the data in the table above, when the price of a pizza falls from $10 to $9, what is the price elasticity of demand? (Use the midpoint method.) a. 0.5 b. 0.6 c. 0.9 d. 2.1 e

7 36. In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $8 to $7 is equal to a b c d e In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $7 to $6 is equal to a b c d e In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $6 to $5 is equal to a b c d e Total revenue equals a. price quantity sold. b. profit cost. c. price. d. quantity sold cost. e. cost price. 7

8 40. Products X, Y, and Z have price elasticities of 3.0, 0.80, and 1.0 respectively. Total revenue decreases if the price of a. product X falls. b. product Y falls. c. product Z falls. d. product X or product Z fall. e. product Y or product Z fall. 41. If a 2 percent rise in price leads to a 4 percent decrease in quantity demanded, then demand is a. elastic and total revenue decreases. b. elastic and total revenue increases. c. inelastic and total revenue decreases. d. elastic, but we cannot tell what happens to total revenue without more information. e. total revenue decreases but we cannot tell if the demand is elastic or inelastic without more information. 42. The price elasticity of demand for wheat is less than one. If a drought caused the supply curve for wheat to shift leftward, then a. wheat farmers' total revenue will decrease b. wheat farmers' total revenue will increase. c. wheat farmers' total revenue will not change because people will buy the same amount as before. d. the demand curve for wheat also will shift leftward. e. wheat farmers' total revenue will probably change but we need information on whether the price of wheat rises or falls. 43. If the demand for insulin is inelastic, an increase in insulin prices leads to a. less total revenue for insulin makers. b. more total revenue for insulin makers. c. no change in total revenue for insulin makers. d. first a decrease, then an increase in total revenue for insulin makers. e. total revenue probably changes but we need more information about the change in total expenditures on insulin to determine if the total revenue rises, falls, or stays the same. 44. If the price elasticity of demand for gasoline equals 0.3, then an increase in the price of a gallon of gasoline from $1.80 to $1.90 a. decreases total revenue. b. increases total revenue. c. leads to no change in total revenue. d. makes the demand for gasoline elastic. e. Both answers B and D are correct. 45. If an Atlanta bakery raises the price of their rye bread by 11 percent and the quantity demanded decreases by 11 percent, then the demand for the rye bread is and the bakery's total revenue. a. unit elastic; does not change b. unit elastic; increases c. unit elastic; decreases d. elastic; does not change e. inelastic; does not change 8

9 46. Suppose the Oakland Raiders football team increases their ticket prices for the 2006 season and total revenue from ticket sales falls, but not to zero. This fact means that the demand for Raiders tickets is a. inelastic. b. elastic. d. perfectly elastic. e. perfectly inelastic. 47. Suppose a Minnesota snowmobile dealer lowers prices in February by percent and the quantity demanded increases by 2.08 percent. Thus the demand for snowmobiles from this dealer is and the dealer's total revenue will. a. elastic; increase b. elastic; decrease c. inelastic; increase d. inelastic; decrease e. unit elastic; decrease 48. In the figure above, using the midpoint method, what is the price elasticity of demand when the price falls from $8 to $7? a. 4.0 b. 5.0 c. 0.5 d. 0.4 e In the figure above, if the price falls from $8 to $7 demand is a. elastic. b. inelastic. d. income elastic. e. perfectly elastic. 9

10 50. Suppose the price elasticity of demand for addicts of a drug is 0.11 and 3.46 for casual users. If the government legalized the drug and then implemented a tax on it so that its price rose, expenditure by addicts would and expenditure by casual users would. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease e. not change; decrease 51. What is measured by the price elasticity of supply? a. The price elasticity of supply measures how responsive producers are to changes in the price of other goods. b. The price elasticity of supply measures how responsive producers are to changes in income. c. The price elasticity of supply measures how responsive producers are to changes in the price of a product. d. The price elasticity of supply is a measure of the slope of the supply curve. e. The price elasticity of supply measures how responsive producers are to changes in the cost of producing a product. 52. The price elasticity of supply measures the a. percentage change in supply from a percentage change in demand. b. extent to which the quantity supplied of a good changes when the price of a good changes, other things remaining the same. c. the slope of the supply curve. d. how the equilibrium price changes in response to a change in the equilibrium quantity supplied. e. Both answers B and C are correct. 53. The opportunity cost of producing a good rises only slightly as the quantity produced increases. This good has a. an inelastic demand. b. an elastic demand. c. an elastic supply. d. an inelastic supply. e. a perfectly elastic supply. 54. If the price of a scooter increases by 20 percent and the quantity supplied of scooters increases by 30 percent, then supply is a. elastic and the elasticity of supply equals 1.5. b. inelastic and the elasticity of supply equals 1.5. c. elastic and the elasticity of supply equals d. inelastic and the elasticity of supply equals e. either elastic or inelastic but more information about the elasticity of demand is needed to determine which. 55. Suppose the current price of barley is $7 per bushel and at that price 100,000 bushels are grown by a Colorado farmer. If the price of barley rises to $8 and quantity supplied increases to 130,000 bushels, then using the midpoint method, the price elasticity of supply for barley equals a b c d e. Zero. 10

11 56. When the price of a product increases from $35 to $45, the quantity supplied increases from 30 units to 40 units per week. Using the midpoint method, the price elasticity of supply is a b c d e If the price doubles and the quantity supplied also doubles, the price elasticity of supply for the good is a. 1. b. 1. c. 2. d. 2. e. 100 percent. 58. If the price elasticity of supply for a good is 0.75, then a. the percentage change in the quantity supplied is less than the percentage change in price. b. the supply is elastic. c. an increase in the price boosts the quantity supplied by a larger percentage. d. the supply is inelastic so the demand must also be inelastic. e. None of the above answers is correct. 59. If a small percentage change in the price brings a very large percentage change in the quantity supplied, then the supply is almost perfectly and the supply curve is almost. a. elastic; vertical b. elastic; horizontal c. inelastic; horizontal d. inelastic ; vertical e. elastic; 45 degrees 60. The figure above shows the supply curve for a good with a a. perfectly elastic supply. b. perfectly inelastic supply. c. elastic supply. d. inelastic supply. e. unit elastic supply. 11

12 61. If wheat can be produced at a constant opportunity cost, then the supply of wheat is a. elastic. b. inelastic. d. perfectly inelastic. e. perfectly elastic. 62. One reason why the price elasticity of supply for DVD players is greater than one is that a. the cost of producing DVD players is small. b. the storage of DVD players is not possible. c. DVD players can be easily stored. d. the demand for DVD players is fairly large. e. DVD players require relatively advanced technology for their production. 63. When the percentage change in the quantity supplied equals the percentage change in price, the supply is a. elastic. b. inelastic. d. perfectly elastic. e. perfectly inelastic. 64. When the percentage change in the quantity supplied is less than the percentage change in price, the supply is a. elastic. b. inelastic. d. perfectly unit elastic. e. perfectly elastic. 65. The fact that there is a very limited amount of land in Hong Kong means the supply of new apartments in Hong Kong is a. inelastic. b. elastic. d. perfectly elastic. e. limited by the demand. 66. Because the price elasticity of supply for jumbo jets is 0.35, the supply of jumbo jets is a. elastic. b. unit elastic. c. inelastic. d. perfectly elastic. e. perfectly inelastic. 12

13 67. The figure above shows the supply curve for a good with a a. perfectly elastic supply. b. perfectly inelastic supply. c. elastic supply. d. inelastic supply. e. unit elastic supply. 68. The extent to which the demand for a good changes when the price of a substitute or complement changes, other things remaining the same, is measured as the a. income elasticity of demand. b. cross elasticity of demand. c. price elasticity of demand. d. price elasticity of supply. e. cross income elasticity of demand. 69. The cross elasticity of demand is a measure of how a. responsive consumers are to changes in the price of a product. b. responsive suppliers are to changes in the price of a product. c. demand for a product changes when the price of a substitute or complement changes. d. total revenue changes when the price of a product changes. e. demand for a product changes when income changes. 70. If a 1 percent increase in the price of X increases the quantity demanded of Y by 2 percent, then X and Y are a. complements and the cross elasticity of demand equals 2. b. substitutes and the cross elasticity of demand equals 1 2. c. substitutes and the cross elasticity of demand equals 2. d. complements and the income elasticity of demand equals 2. e. normal goods and the income elasticity of demand of each equals The price of coffee rose 40 percent and the quantity of coffee demanded fell by 20 percent. The quantity of doughnuts demanded also fell by 20 percent. From this information, we can conclude that a. the demand for coffee is elastic. b. the demand for coffee is unit elastic. c. coffee is an inferior good. d. the cross elasticity demand between coffee and doughnuts is 0.5. e. the income elasticity of demand for coffee is 2. 13

14 72. Based on the data in the table above, ice cream and cake are goods. a. inferior b. normal c. substitute d. complementary e. Both answers B and D are correct. 73. The cross elasticity of demand for butter and margarine is likely to be a. positive because they are substitutes. b. positive because they are complements. c. negative because they are substitutes. d. negative because they are complements. e. positive because they are normal goods. 74. If the cross elasticity of demand between Coke and Pepsi is 2.02, then Coke and Pepsi are a. complements. b. substitutes. c. normal goods. d. inferior goods. e. Both answers B and C are correct. 75. If Pepsi goes on sale and decreases its price by 10 percent, and as a result, the quantity demanded of Coca Cola decreases by 5 percent, then Pepsi and Coke are goods. a. inferior b. normal c. substitute d. complementary e. unrelated 76. Tacos and pizza are substitutes. If a 2 percent change in the price of a taco leads to a 4 percent change in the demand for pizza, the cross elasticity of demand equals a b c. 2. d. 2. e The cross elasticity between computers and software is a. negative because they are substitutes. b. positive because they are substitutes. c. negative because they are complements. d. positive because they are complements. e. positive because they are normal goods. 14

15 78. The cross elasticity of demand for film cameras and film is likely to be a. positive because they are substitutes. b. positive because they are complements. c. negative because they are substitutes. d. negative because they are complements. e. negative because with the advent of digital cameras, film and film cameras are inferior goods 79. If the cross elasticity of demand for DVD players and DVDs equals -2, then the products are a. unrelated. b. complements. c. inferior goods. d. substitutes. e. normal goods. 80. The income elasticity of demand is a. positive for a normal good. b. zero for an inferior good. c. less than one for an income elastic normal good. d. Only answers A and B are correct. e. Answers A, B, and C are correct. 81. Which of the following statements is correct? The a. income elasticity of demand for inferior goods is positive. b. cross elasticity of demand for substitutes is negative. c. income elasticity of demand for normal goods is positive. d. cross elasticity of demand for complements is positive. e. income elasticity of demand for inferior goods is zero. 82. What is an inferior good? a. a product of low quality that we do not want to purchase b. a product for which demand increases when income increases, and demand decreases when income decreases c. a product for which demand increases when income decreases, and demand decreases when income increases d. a product that is complementary e. a product that is a substitute for another, better good 83. If a product is an inferior good, then its income elasticity of demand is a. zero. b. positive. c. negative. d. indeterminate. e. undefined. 84. If a 10 percent increase in income leads to a 5 percent decrease in the demand for a good, the income elasticity of demand equals and the good is good. a. 1/2; a normal b. 1 ; an inferior 2 c. 2; a normal d. 2; a normal e. 5; an inferior 15

16 85. If a 5 percent decrease in income leads to a 15 percent decrease in the demand for a good, the income elasticity of demand equals a. 1 and the good is an inferior good. 3 b. 1/3 and demand for the good is income elastic. c. 3 and the good is a normal good. d. 3 and the demand for the good is income inelastic. e. 3 and the good is an inferior good 86. The income elasticity of demand for foreign travel a. is likely to be smaller than the income elasticity of demand for food. b. is likely to be larger than the income elasticity of demand for food. c. cannot be compared to the income elasticity of demand for food. d. is likely to be inelastic. e. is likely to be negative. 87. Suppose an increase in supply lowers the price from $10 to $8 and increases the quantity demanded from 100 units to 130 units. Using the midpoint method, the elasticity of demand equals a b c d e. None of the above answers is correct. 88. Suppose a decrease in supply raises the price from $4.00 to $5.50 and decreases the quantity demanded from 2,000 to 1,500. Using the midpoint method, the elasticity of demand equals a b c d e. None of the above answers is correct. 89. The total revenue test says that if a price decrease leads to a. an increase in total revenue, demand is income elastic. b. a decrease in total revenue, demand is income inelastic. c. a decrease in total revenue, demand is price inelastic. d. a decrease in total revenue, supply is price inelastic. e. a decrease in total revenue, supply is price elastic. 90. The total revenue test says that if a price decrease leads to a. an increase in total revenue, supply is elastic. b. a decrease in total revenue, supply is unit elastic. c. a decrease in total revenue, supply is inelastic. d. an increase in total revenue, supply is inelastic e. None of the above answers is correct. 16