1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

1. If the price of gasoline rises, when is the price elasticity of demand likely
to be the highest?
a. immediately after the price increases.
b. one month after the price increase.
c. three months after the price increase.
d. one year after the price increase.
2. If the price of milk rises, when is the price elasticity of demand likely to
be the lowest?
a. immediately after the price increase.
b. one month after the price increase.
c. three months after the price increase.
d. one year after the price increase
3. For a particular good, a 10 percent increase in price causes a 5 percent
decrease in quantity demanded. Which of the following statements is
most likely applicable to this good?
a. There are many close substitutes for this good.
b. The good is a necessity.
c. The market for the good is narrowly defined.
d. The relevant time horizon is long.
4. Which of the following is likely to have the most price inelastic demand?
a. White chocolate chip with macadamia nut cookies.
b. Mrs. Field’s chocolate chip cookies.
c. Milk chocolate chip cookies.
d. Cookies.
e. Suppose that when the price of wheat is $2 per bushel,
farmers can sell 10 million bushels. When the
f. price of wheat is $3 per bushel, farmers can sell 8 million
bushels. Which of the following statements is
g. true? The demand for wheat is
h. Suppose that when the price of wheat is $2 per bushel,
farmers can sell 10 million bushels. When the
i. price of wheat is $3 per bushel, farmers can sell 8 million
bushels. Which of the following statements is
j. true? The demand for wheat is
k. Suppose that when the price of wheat is $2 per bushel,
farmers can sell 10 million bushels. When the
l. price of wheat is $3 per bushel, farmers can sell 8 million
bushels. Which of the following statements is
m. true? The demand for wheat is
 n. Suppose that when the price of wheat is $2 per bushel,
farmers can sell 10 million bushels. When the
o. price of wheat is $3 per bushel, farmers can sell 8 million
bushels. Which of the following statements is
p. true? The demand for wheat is
q. 
5. Suppose that when the price of wheat is $2 per bushel, farmers can sell
10 million bushels. When the price of wheat is $3 per bushel, farmers
can sell 8 million bushels. Which of the following statements is true? The
demand for wheat is
a. income inelastic, so an increase in the price of wheat will increase the
total revenue of wheat farmers.
b. income elastic, so an increase in the price of wheat will increase the
total revenue of wheat farmers.
c. price inelastic, so an increase in the price of wheat will increase the
total revenue of wheat farmers.
d. price elastic, so an increase in the price of wheat will increase the
total revenue of wheat farmers.
6. Suppose that when the price of ginger ale is $2 per bottle, firms can sell
4 million bottles. When the price of ginger ale is $3 per bottle, firms can
sell 2 million bottles. Which of the following statements is true?
a. The demand for ginger ale is income inelastic, so an increase in the
price of ginger ale will increase the total revenue of ginger ale
producers.
b. The demand for ginger ale is income elastic, so an increase in the
price of ginger ale will increase the total revenue of ginger ale
producers.
c. The demand for ginger ale is price inelastic, so an increase in the
price of ginger ale will increase the total revenue of ginger ale
producers.
d. The demand for ginger ale is price elastic, so an increase in the price
of ginger ale will decrease the total revenue of ginger ale producers.
7. Which of the following statements is not valid when the market supply
curve is vertical?
a. Market quantity supplied does not change when the price changes.
b. Supply is perfectly inelastic.
c. An increase in market demand will increase the equilibrium quantity.
d. An increase in market demand will increase the equilibrium price.
8. The price elasticity of supply for candles is 0.3 in the short run and 1.2 in
the long run. If an increase in the demand for candles causes the price of
candles to increase by 36%, then the quantity supplied of candles will
increase by about
a. 0.8% in the short run and 3.3% in the long run.
b. 1.2% in the short run and 0.3% in the long run.
c. 10.8% in the short run and 43.2% in the long run.
 d. 120% in the short run and 30% in the long run.
9. Holding all other factors constant and using the midpoint method, if a
candy manufacturer increases production by 20 percent when the
market price of candy increases from $0.50 to $0.60, then supply is
a. inelastic, since the price elasticity of supply is equal to .91.
b. inelastic, since the price elasticity of supply is equal to 1.1.
c. elastic, since the price elasticity of supply is equal to 0.91.
d. elastic, since the price elasticity of supply is equal to 1.1.
10. If sellers do not adjust their quantity supplied at all in response to
a change in price, the price elasticity of supply is
a. Zero, and the supply curve is horizontal.
b. Zero, and the supply curve is vertical.
c. Infinity, and the supply is horizontal.
d. Infinity, and the supply is vertical.

TABLE 5-5

11. Refer to Table 5-5. Which of the three supply curves represents
the least elastic supply?
a. supply curve A
b. supply curve B
c. supply curve C
d. There is no difference in the elasticity of the three supply curves.
12. Refer to Table 5-5. Which of the three supply curves represents
the most elastic supply?
a. supply curve A
b. supply curve B
c. supply curve C
d. There is no difference in the elasticity of the three supply curves.
13. Which of the following is an illustration of the market for original
paintings by deceased artist Vincent Van Gogh?
 a b
price
. price
price . S
S S

DD
D

Quantity
Quantity

c d price
price
. . D
D S

Quantity
Quantity

a. A b. B c. C d. D

Scenario 5-1

The supply of aged cheddar cheese is inelastic, and the supply of bread is
elastic. Both goods are considered to be normal goods by a majority of
consumers. Suppose that a large income tax increase decreases the demand
for both goods by 10%.

14. Refer to Scenario 5-1. The price elasticity of supply for aged
cheddar cheese could be
a. -1 b. 0 c. 0.5 d. 1.5
15. Refer to Scenario 5-1. The price elasticity of supply for bread
could be
a. -1 b. 0 c. 0.5 d. 1.5

Student’s Name:.........................................................................................................................

Grader’s Name: ..........................................................................................................................