0 (0 out oI 20 correct)

1. II the price oI hand calculators Ialls Irom $10 to $9 and, as a result, the quantity
demanded increases Irom 100 to 125, then:
A. demand is elastic.
B. demand is inelastic.
C. demand is oI unit elasticity.
D. not enough inIormation is given to make a statement about elasticity.




2. An antidrug policy which reduces the supply oI heroin might:
A. increase street crime because the addict's demand Ior heroin is highly inelastic.
B. reduce street crime because the addict's demand Ior heroin is highly elastic.
C. reduce street crime because the addict's demand Ior heroin is highly inelastic.
D. increase street crime because the addict's demand Ior heroin is highly elastic.




3. When the percentage change in price is greater than the resulting percentage change in
quantity demanded:
A. a decrease in price will increase total revenue.
B. demand may be either elastic or inelastic.
C. an increase in price will increase total revenue.
D. demand is elastic.




4. Assume that the price oI product X rises by 5 percent and the quantity supplied oI X
increases by 15 percent. The coeIIicient oI price elasticity oI supply Ior good X is:
A. negative and thereIore X is an inIerior good.
B. positive and thereIore X is a normal good.
C. less than 1 and thereIore supply is inelastic.
D. more than 1 and thereIore supply is elastic.




. The Iarther a ceiling price is below the equilibrium price, the smaller will be the
shortage oI the product.
A. True
B. False




6
.
R-1 REF 20-34
ReIer to the above diagram and assume a single good. II the price oI the good decreases
Irom $6.30 to $5.70, consumer spending would:
A. decrease iI demand were
1
only.
B. decrease iI demand were
2
only.
C. decrease iI demand were either
1
or
2
.
D. increase iI demand were either
1
or
2
.




. An increase in demand will increase equilibrium price to a greater extent:
A. iI the product is a normal good.
B. iI the product is an inIerior good.
C. the less elastic the supply curve.
D. the more elastic the supply curve.




8. Assume that a 4 percent increase in income in the economy produces an 8 percent
increase in the quantity demanded oI good X. The coeIIicient oI income elasticity oI
demand is:
A. negative and thereIore X is an inIerior good.
B. negative and thereIore X is a normal good.
C. positive and thereIore X is an inIerior good.
D. positive and thereIore X is a normal good.




9. A supply curve that is a vertical straight line indicates that:
A. production costs Ior this product cannot be calculated.
B. the relationship between price and quantity supplied is inverse.
C. a change in price will have no eIIect on the quantity supplied.
D. an unlimited amount oI the product will be supplied at a constant price.




10. It takes a considerable amount oI time to increase the production oI pork. This
implies that:
A. a change in the demand Ior pork will not aIIect its price in the short run.
B. the short-run supply curve Ior pork is less elastic than the long-run supply
curve Ior pork.
C. an increase in the demand Ior pork will elicit a larger supply response in the
short run than in the long run.
D. the long-run supply curve Ior pork is less elastic than the short-run supply
curve Ior pork.




11. The Iormula Ior cross elasticity oI demand is percentage change in:
A. quantity demanded oI X/percentage change in price oI X.
B. quantity demanded oI X/percentage change in income.
C. quantity demanded oI X/percentage change in price oI Y.
D. price oI X/percentage change in quantity demanded oI Y.




12. The higher a price Iloor is above the equilibrium price, the greater will be the surplus
output.
A. True
B. False




13.

R-2 F20052
ReIer to the above diagram which is a rectangular hyperbola, that is, a curve such
that each rectangle drawn Irom any point on the curve will be oI identical area. In
comparing the price elasticity and the slope oI this demand curve we can conclude
that the:
A. slope oI a demand curve measures its elasticity.
B. elasticity oI a demand curve measures its slope.
C. slope and elasticity oI the curve are both constant throughout.
D. slope oI the curve varies, but its elasticity is constant.




14.


R-3 F20156
ReIer to the above diagram. A government-set maximum permissible interest rate is
best illustrated by:
A. price B.
B. quantity E.
C. price C.
D. price A.




1. II the coeIIicient oI income elasticity oI demand is positive, the product is an inIerior
good.
A. True
B. False




16. II a Iirm's demand Ior labor is elastic, a union-negotiated wage increase will:
A. necessarily be inIlationary.
B. cause the Iirm's total payroll to increase.
C. cause the Iirm's total payroll to decline.
D. cause a shortage oI labor.




1. II the price elasticity oI demand Ior gasoline is 0.20:
A. the demand Ior gasoline is linear.
B. a rise in the price oI gasoline will reduce total revenue.
C. a 10 percent rise in the price oI gasoline will decrease the amount purchased by
2 percent.
D. a 10 percent Iall in the price oI gasoline will increase the amount purchased by
20 percent.




18. II the demand Ior bacon is relatively elastic, a 10 percent decline in the price oI
bacon will:
A. decrease the amount demanded by more than 10 percent.
B. increase the amount demanded by more than 10 percent.
C. decrease the amount demanded by less than 10 percent.
D. increase the amount demanded by less than 10 percent.




19. Suppose that a 10 percent increase in the price oI normal good Y causes a 20 percent
increase in the quantity demanded oI normal good X. The coeIIicient oI cross
elasticity oI demand is:
A. negative and thereIore these goods are substitutes.
B. negative and thereIore these goods are complements.
C. positive and thereIore these goods are substitutes.
D. positive and thereIore these goods are complements.




20. The basic Iormula Ior the price elasticity oI demand coeIIicient is:
A. absolute decline in quantity demanded/absolute increase in price.
B. percentage change in quantity demanded/percentage change in price.
C. absolute decline in price/absolute increase in quantity demanded.
D. percentage change in price/percentage change in quantity demanded.



Retake Test