American Military University ECON 201 / ECON201 Quiz 3

ECON 201 – Quiz 3 Question 1 of 16 Demand is price inelastic if: A. the price of the good responds slightly to a quantity change. B. the demand curve shifts very little when a demand shifter changes. C. the percentage change in quantity demanded is relatively small in response to a relatively large percentage change in price. D. all of the above are true. Question 2 of 16 If the absolute value of price elasticity is greater than 1, this means the demand curve in that region is: A. price elastic. B. price inelastic. C. unit price elastic. D. upward sloping. Question 3 of 16 Which of the following will lead to a decrease in total revenue? A. price goes up and demand is perfectly inelastic B. price goes up and demand is price inelastic C. price declines and demand is price elastic D. price increases and demand is price elastic Question 4 of 16 If total revenue goes up when price falls, the price elasticity of demand is said to be: A. price inelastic. B. unit price elastic. C. price elastic. D. positive. Price elasticity of demand measures the responsiveness of the change in: A. quantity demanded to a change in price. B. price to a change in quantity demanded. C. slope of the demand curve to a change in price. D. slope of the demand curve to a change in quantity demanded. Question 6 of 16 The price elasticity of demand is: A. always positive. B. always greater than 1. C. usually equal to 1. D. always negative. Question 7 of 16 A men's tie store sold an average of 30 ties per day when the price was $5 per tie but sold 50 of the same ties per day when the price was $3 per tie. Hence, the absolute value of the price elasticity of demand is: A. greater than zero but less than 1. B. equal to 1. C. greater than 1 but less than 3. D. greater than 3. Question 8 of 16 If the total revenue received by a firm does not change when it raises its price, this indicates that the demand for the firm's product is: A. unstable. B. price inelastic. C. price elastic. D. unit price elastic. The ratio of the percentage change in a dependent variable to the percentage change in an independent variable, all other things unchanged, is: A. total revenue. B. production possibilities. C. elasticity. D. slope. Question 10 of 16 The price elasticity of a good will tend to be greater: A. the longer the relevant time period. B. the fewer number of substitute goods available. C. if it is a staple or necessity with few substitutes. D. All of the above are true. Question 11 of 16 Exhibit: Supply and Demand in Agriculture) To help farmers: A. a price floor would be set at P4, causing a surplus of Q3 - Q0. B. a price floor would be set at P2, causing a surplus of Q2 - Q0. C. a price ceiling would be set at P4, causing a surplus of Q2 - Q1. D. a price floor would be set at P1, causing a shortage of Q3 - Q0. Exhibit: Supply and Demand in Agriculture) If a price floor at P4 is set to help farmers in terms of income and government wants to assure farmers that their output will be purchased, the government would have to purchase an amount of output equal to: A. Q3 - Q0. B. Q3 - Q1. C. Q2 - Q1. D. none of the above are correct. (Exhibit: Supply and Demand in Agriculture) If the government set an effective price floor at one of the prices shown on the vertical axis: A. with this much wheat on the market, the price would fall to P1. B. Q3 bushels of wheat would be supplied. C. the resulting shortage would be made up by the government out of its accumulated stocks. D. all of the above would be true. Question 14 of 16 (Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $2.50 and $2.25? A. -9 B. -19 C. indeterminate D. none of the above (Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $2.25 and $2.00? A. -5.67 B. -4.00 C. -9.00 D. -17.6 Question 16 of 16 (Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $1.75 and $1.50? A. -0.42 B. -1.5 C. -1.86 D. none of the above