Midterm Chapter 3 Test Bank – Real
Prac ce Ques ons to Help You Pass
20 pages
A- ANSWER 1) Assume that the price elas city of demand is -2 for a certain firm's
product. If the firm raises price, the firm's managers can expect total revenue to:
a) Decrease
b) Increase
c) Remain constant
d) Either increase or remain constant depending upon the size of the price increase.
C- ANSWER 2) A price elas city of zero corresponds to a demand curve that is:
a) Horizontal
b) Downward sloping with a slope always equal to 1.
c) Ver cal
d) Either ver cal or horizontal.
B- ANSWER 3) As we move down along a linear demand curve, the price elas city of
demand becomes more
a) Elas c
b) Inelas c
c) Log-linear
d) Variable
,C- ANSWER 4) Suppose the demand for a product is Q xd = 5000 Px-1 then this Power
func on, own price elas city for product x is
a) Elas c.
b) Inelas c.
c) Unitary elas c.
d) Cannot be determined without more informa on.
E- ANSWER 5) The demand for good X has been es mated by Q xd =12 - 3Px + 4Py.
Suppose that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate the own price
elas city. { Point Ed = (dQ/dP)*(P/Q), so you need the value of the first deriva ve mes the P/Q
ra o.}
a) -0.2.
b) -0.3.
c) -0.4.
d) -0.5.
e) -0.6.
D- ANSWER 6) The own-price elas city of demand for apples is -1.2. If the price of apples
falls by 5%, what will happen to the quan ty of apples demanded?
a) It will increase 5%.
b) It will fall 4.3%.
c) It will increase 4.2%.
d) It will increase 6%.
C- ANSWER 7) If apples have an own-price elas city of -1.2 we know the demand is:
a) unitary.
b) indeterminate.
, c) elas c.
d) inelas c.
B- ANSWER 8) If quan ty demanded for sneakers falls by 10% when price increases 25%
we know that the absolute value of the own-price elas city of sneakers is:
a) 2.5.
b) 0.4.
c) 2.
d) 0.27.
D- ANSWER 9) The quan ty consumed of a good is rela vely unresponsive to changes in
price whenever demand is:
a) elas c.
b) unitary.
c) falling.
d) inelas c.
A- ANSWER 10) If the absolute value of the own-price elas city of steak is .4, a decrease
in price will lead to:
a) a reduc on in total revenue.
b) an increase in total revenue.
c) no change in total revenue.
d) none of the above.
B- ANSWER 11) If a price increase from $5 to $7 causes quan ty demanded to fall from
150 to 100, what is the absolute value of the own-price elas city at a price of $7?
a) 0.57.
Prac ce Ques ons to Help You Pass
20 pages
A- ANSWER 1) Assume that the price elas city of demand is -2 for a certain firm's
product. If the firm raises price, the firm's managers can expect total revenue to:
a) Decrease
b) Increase
c) Remain constant
d) Either increase or remain constant depending upon the size of the price increase.
C- ANSWER 2) A price elas city of zero corresponds to a demand curve that is:
a) Horizontal
b) Downward sloping with a slope always equal to 1.
c) Ver cal
d) Either ver cal or horizontal.
B- ANSWER 3) As we move down along a linear demand curve, the price elas city of
demand becomes more
a) Elas c
b) Inelas c
c) Log-linear
d) Variable
,C- ANSWER 4) Suppose the demand for a product is Q xd = 5000 Px-1 then this Power
func on, own price elas city for product x is
a) Elas c.
b) Inelas c.
c) Unitary elas c.
d) Cannot be determined without more informa on.
E- ANSWER 5) The demand for good X has been es mated by Q xd =12 - 3Px + 4Py.
Suppose that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate the own price
elas city. { Point Ed = (dQ/dP)*(P/Q), so you need the value of the first deriva ve mes the P/Q
ra o.}
a) -0.2.
b) -0.3.
c) -0.4.
d) -0.5.
e) -0.6.
D- ANSWER 6) The own-price elas city of demand for apples is -1.2. If the price of apples
falls by 5%, what will happen to the quan ty of apples demanded?
a) It will increase 5%.
b) It will fall 4.3%.
c) It will increase 4.2%.
d) It will increase 6%.
C- ANSWER 7) If apples have an own-price elas city of -1.2 we know the demand is:
a) unitary.
b) indeterminate.
, c) elas c.
d) inelas c.
B- ANSWER 8) If quan ty demanded for sneakers falls by 10% when price increases 25%
we know that the absolute value of the own-price elas city of sneakers is:
a) 2.5.
b) 0.4.
c) 2.
d) 0.27.
D- ANSWER 9) The quan ty consumed of a good is rela vely unresponsive to changes in
price whenever demand is:
a) elas c.
b) unitary.
c) falling.
d) inelas c.
A- ANSWER 10) If the absolute value of the own-price elas city of steak is .4, a decrease
in price will lead to:
a) a reduc on in total revenue.
b) an increase in total revenue.
c) no change in total revenue.
d) none of the above.
B- ANSWER 11) If a price increase from $5 to $7 causes quan ty demanded to fall from
150 to 100, what is the absolute value of the own-price elas city at a price of $7?
a) 0.57.
