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UNIVERSITY / INSTITUTE: Purdue University

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CLASS / COURSE: Economics

QUESTION DESCRIPTION:

Quiz 6:

1.

(Points: 0.5)

If the cross-price elasticity of demand for goods A and B is a positive value, this means the two goods are:

a. a. substitutes.

b. b. complements.

c. c. inferior.

d. d. normal.

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2.

(Points: 0.5)

Which of the following wood products would have the most elastic demand?

a. a. Toothpicks

b. b. Tomato stakes

c. c. Lawn furniture

d. d. New houses

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3.

(Points: 0.5)

The range of possible values for the elasticity of demand value is:

a. a. zero to infinity.

b. b. positive infinity to negative infinity.

c. c. zero to minus infinity

d. d. minus one to minus infinity.

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4.

(Points: 0.5)

A horizontal demand curve is:

a. a. perfectly inelastic.

b. b. perfectly elastic.

c. c. unit elastic.

d. d. relatively elastic.

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5.

(Points: 0.5)

If a good has a negative income elasticity of demand, this indicates the good is:

a. a. a substitute with another good.

b. b. a complement with another good.

c. c. inferior.

d. d. normal.

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6.

(Points: 0.5)

For a profit-making seller, the best type of demand elasticity would be:

a. a. highly elastic.

b. b. highly inelastic.

c. c. unit elastic.

d. d. any elasticity as demand elasticity does not matter to the seller.

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7.

(Points: 0.5)

If a firm raised its price and discovered that its total revenue fell, then the demand for its product is:

a. a. perfectly inelastic.

b. b. relatively inelastic.

c. c. perfectly elastic.

d. d. relatively elastic.

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8.

(Points: 0.5)

If the cross-price elasticity of demand for goods A and B is a negative value, this means the two goods are:

a. a. substitutes.

b. b. complements.

c. c. inferior.

d. d. normal.

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9.

(Points: 0.5)

Which of the following does NOT affect the price elasticity of demand for a product?

a. a. The number of close substitutes available for the product.

b. b. Expenditures on the product relative to buyers' incomes.

c. c. How long buyers have to respond to any price change.

d. d. How much demand shifts when buyers' incomes change.

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10.

(Points: 0.5)

The elasticity of demand is always negative because:

a. a. of the law of supply.

b. b. of the law of demand.

c. c. it depends on percentages.

d. d. it depends on whether or not demand shifts or not when price changes.

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11.

(Points: 0.5)

When there many good substitutes available for a good, demand tends to be:

a. a. perfectly inelastic.

b. b. perfectly elastic.

c. c. relatively inelastic.

d. d. relatively elastic.

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12.

(Points: 0.5)

Price inelastic supply occurs whenever the elasticity of supply value is:

a. a. negative.

b. b. positive and greater than five.

c. c. positive and greater than one.

d. d. positive and less than one.

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13.

(Points: 0.5)

The price elasticity of demand is equal to:

a. a. the slope value of the supply curve.

b. b. the slope value of the demand curve.

c. c. the percentage change in price divided by the percentage change in quantity demanded.

d. d. the percentage change in quantity demanded divided by the percentage change in price.

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14.

(Points: 0.5)

If a firm raised its price and found that total revenue fell to zero, then the demand for its product is:

a. a. perfectly inelastic.

b. b. relatively inelastic.

c. c. perfectly elastic.

d. d. relatively elastic.

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15.

(Points: 0.5)

Price elasticity of demand measures:

a. a. how responsive to price changes suppliers are.

b. b. how responsive sales are to changes in the price of a related good.

c. c. how responsive quantity demanded is to a change in price.

d. d. how responsive sales are to a change in buyers' incomes.

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16.

(Points: 0.5)

What determines the price elasticity of supply value?

a. a. How quickly firms can change the quantity supplied when price changes

b. b. How quickly firms can change the supply when price changes

c. c. How quickly firms can change quantity demanded when price changes

d. d. All of these

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17.

(Points: 0.5)

If 40 units are sold at a price of $40 and 60 units are sold at a price of $20, then the elasticity of demand calculated using the midpoint formula is:

a. a. minus 1.67.

b. b. minus .6.

c. c. minus 1.

d. d. none of these.

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18.

(Points: 0.5)

If 20 units are sold at a price of $50 and 30 units are sold at a price of $40, then the elasticity of demand calculated using the midpoint formula is:

a. a. minus 0.56.

b. b. minus 1.8.

c. c. minus 1.

d. d. none of these.

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19.

(Points: 0.5)

How does elasticity of demand behave on a down sloping straight line demand curve?

a. a. It is inelastic at high prices and elastic at low prices.

b. b. It is the same value at every point.

c. c. It is elastic at high prices and inelastic at low prices.

d. d. None of these is correct.

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20.

(Points: 0.5)

Income elasticity measures:

a. a. how a good's quantity demanded responds to change in the goods price.

b. b. how a good's quantity demanded responds to change in the price of another good.

c. c. how a good's sales responds to change in buyers' incomes.

d. d. how a good's sales respond to producers' incomes.

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SOLUTION DESCRIPTION:
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SUBJECTS / CATEGORIES:

1. Business Economics

2. Economics

3. Microeconomics

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