ECON 211 Test banks

Chapter 5 i Elasticity

5.1 PriceiElasticityiofiiDemand
1i MultipleiChoice

Referi toi thei informationi providedi ini Figurei 5.1i belowi toi answeri thei questionsi thati follow.




Figurei 5.1

1) Referi toi Figurei 5.1.i Thei demandi fori ticketsi is
A) perfectlyi pricei elastic. B)i perfectlyi pricei inelastic.
C)iunitipriceielastic.

D)iperfectlyiincomeiinelastic.iAnswer:i B
Diff:i1
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Fact

2) Demandi determinesi pricei entirelyi when
A) demandi isi downwardi sloping. B)i demandi isi perfectlyi inelastic.
C)isupplyiisiperfectlyiinelastic.

D)isupplyiisiperfectlyielastic.iAnswer:i C
Diff:i2
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Definition

3) Ai perfectlyi pricei elastici demandi curvei willi bei ai line.
i

A) horizontal B)i vertical
C)ipositivelyisloped

D)inegativelyislopediAnswer:i A
Diff:i1
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Fact




1

,4) Ai perfectlyi pricei elastici supplyi curvei isi ai iline.
A) horizontal B)i vertical
C)ipositivelyisloped

D)inegativelyislopediAnswer:i B
Diff:i1
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Fact

5) Whenitheipriceiofiradiosidecreasesi5%,iquantityidemandediincreasesi5%.iTheipriceielasticityi ofidemandifori
radiosiisi ianditotalirevenueifromiradioisalesiwilli i.

A) elastic;i decrease B)i elastic;i increase
C)iinelastic;idecrease

D)iunitielastic;inotichangeiAnswer:i D
Diff:i2
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Analytic
AACSB:i AnalyticiSkills

6) Whenitheipriceiofifreshifishiincreasesi10%,iquantityidemandedidecreasesi5%.iTheipriceielasticityiofide
mandiforifreshifishiisi ianditotalirevenueifromifreshifishisalesiwill

i.

A) inelastic;i increase B)i inelastic;i decrease
C)ielastic;idecrease

D)ielastic;iincreaseiAnswer:i A
Diff:i2
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Definition
AACSB:i AnalyticiSkills

7) Whenitheipriceiofifreshifishiincreasesi10%,iquantityidemandediisiunchanged.iTheipriceielasticityiofide
mandiforifreshifishiis
A) perfectlyi inelastic. B)i elastic.
C)i inelastic. D)i unitaryielastic.
Answer:i A
Diff:i2
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Definition
AACSB:i AnalyticiSkills

8) Whenitheipriceioficoffeeiincreasesi5%,iquantityidemandedidecreasesi10%.iTheipriceielasticityi ofidemandifori
coffeeiisi ianditotalirevenueifromicoffeeisalesiwilli i.

A) inelastic;i increase B)i inelastic;i decrease
C)ielastic;iincrease

D)ielastic;idecreaseiAnswer:i D
Diff:i2
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Definition
AACSB:i AnalyticiSkills




2

, 9) TheiABCiComputeriCompanyiwantsitoiincreaseitheiquantityioficomputersiitisellsibyi5%.iIfitheipriceielasticityio
fidemandiisi-2.5,itheicompanyimust
A) increasei pricei byi 2.0%. B)i decreasei pricei byi 2.0%.
C)iincreaseipriceibyi0.5%.

D)idecreaseipriceibyi0.5%.iAnswer:i B
Diff:i2
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Analytic
AACSB:i AnalyticiSkills

10) Aigovernmentiwantsitoireduceielectricityiconsumptionibyi10%.iTheipriceielasticityiofidemandiforielectricityiisi
-5.iTheigovernmentimusti itheipriceiofielectricityibyi .
A) raise;i2.0% B)iraise;i0.5% C)iraise;i1.25%
D)ilower;i0.5%iAnswer:i A
Diff:i2
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Analytic
AACSB:i AnalyticiSkills

11) Aigovernmentiwantsitoireduceielectricityiconsumptionibyi5%.iTheipriceielasticityiofidemandiforielectricityiisi
-0.5.iTheigovernmentimusti itheipriceiofielectricityibyi .
A) raise;i10.0% B)iraise;i1.0% C)iraise;i0.1%
D)ilower;i0.5%iAnswer:i A
Diff:i2
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Analytic
AACSB:i AnalyticiSkills

12) TheipriceielasticityiofidemandiforibottlediwateriiniTexasiisi-2,ianditheipriceielasticityiofidemandiforibottledi
wateriiniCaliforniaiisi-0.5.iIniotheriwords,idemandiiniTexasiisi
iandidemandiiniCaliforniaiisi

.
A) elastic;i inelastic B)i inelastic;i elastic
C)ielastic;iunitielastic

D)iinelastic;iunitiinelasticiAnswer:i A
Diff:i2
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Conceptual
AACSB:i AnalyticiSkills

13) Theipriceielasticityiofidemandiforiheartitransplantsiisiperfectlyiinelastic.i Thus,itheipriceielasticityidema
ndiforiheartitransplantsiis
A) 0.0. B)i 1.0. C)i -1.0. D)i -100.0.
Answer:i A
Diff:i2
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Analytic
AACSB:i AnalyticiSkills




3

, 2i True/False

1) Priceielasticityiofidemandiisicalculatediusingitheichangeiiniquantityidemandedianditheichangeiiniprice.
Answer:i FALSE
Diff:i2
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Definition

2) Theipriceielasticityiofidemandiisigenerallyinegativeitoireflectitheiindirectirelationshipibetweenitheiquantityidem
andediofiaigoodiandiitsiprice.
Answer:i TRUE
Diff:i2
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Definition

3) Perfectlyiinelasticidemandiisirepresentediasiaiverticaliline.iAnswer:i
TRUE
Diff:i1
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Fact

4) Perfectlyielasticidemandiisirepresentediasiaihorizontaliline.iAnswer:i
TRUE
Diff:i1
Topic:i PriceiElasticityiofiiDemandiSk
ill:i Fact




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