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MULTIPLE CHOICE

1. Demand is inelastic if

a. large shifts of the supply curve cause only small changes in price.

b. the good in question has close substitutes.

c. a leftward shift of the supply curve raises total sales revenue.

d. the smaller angle between the vertical axis and the demand curve is less than 45ø.

2. If the supply curve intersects a straight-line downward-sloping demand curve at the midpoint of the demand curve, total sales revenue will

a. rise if the supply curve shifts leftward and also rise if the supply curve shifts rightward.

b. rise if the supply curve shifts leftward but fall if the supply curve shifts rightward.

c. fall if the supply curve shifts leftward but rise if the supply curve shifts rightward.

d. fall if the supply curve shifts leftward and also fall if the supply curve shifts rightward.

3. The elasticity of demand for Zenith computers is probably

a. inelastic and lower than the elasticity of demand for computers overall.

b. elastic and lower than the elasticity of demand for computers overall.

c. inelastic but higher than the elasticity of demand for computers overall.

d. elastic and higher than the elasticity of demand for computers overall.

4. If a leftward shift of the supply curve raises the price by 10 percent and also raises the revenue from sales by 10 percent, the elasticity of demand

a. is 0.

b. is 1.

c. is infinite.

d. equals the elasticity of supply.

5. Figure 5.2 illustrates a linear demand curve. If the price falls from $8 to $6,

a. total revenue will increase.

b. total revenue will decrease.

c. total revenue will remain unchanged.

d. quantity demanded will increase by more than 50 percent.

6. The greater the substitutability between Northwest timber and Southeast timber, the

a. lower is the cross elasticity of demand between timber from the two regions and the lower is the elasticity of demand for Northwest timber.

b. lower is the cross elasticity of demand between timber from the two regions and the higher is the elasticity of demand for Northwest timber.

c. higher is the cross elasticity of demand between timber from the two regions and the lower is the elasticity of demand for Northwest timber.

d. higher is the cross elasticity of demand between timber from the two regions and the higher is the elasticity of demand for Northwest timber.

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7. The cross elasticity of demand between Coca-Cola and Pepsi-Cola is

a. positive ÄÄ that is, Coke and Pepsi are complements.

b. positive ÄÄ that is, Coke and Pepsi are substitutes.

c. negative ÄÄ that is, Coke and Pepsi are complements.

d. negative ÄÄ that is, Coke and Pepsi are substitutes.

8. Monica's income has just risen from $950 per week to $1,050 per week. As a result, she decides to increase the number of movies she attends each month by 5 percent. Her demand for movies is

a. represented by a vertical line.

b. represented by a horizontal line.

c. income elastic.

d. income inelastic.

9. The more easily clothing manufacturers can switch between cotton and synthetic fibers,

a. the less elastic will be the total demand for cotton.

b. the more elastic will be the total demand for cotton.

c. the less elastic will be the total supply of cotton.

d. the more elastic will be the total supply of cotton.

10. A given percentage shift of the demand curve rightward will raise price

by a larger percentage when the elasticity of demand is

a. high and the elasticity of supply is high.

b. high and the elasticity of supply is low.

c. low and the elasticity of supply is high.

d. low and the elasticity of supply is low.

11. The two supply curves in Fig. 5.6 are parallel. In the $7 to $8 price range,

a. S is more elastic than SŽ.

b. S is less elastic than SŽ.

c. S and SŽ have the same elasticity.

d. S is steeper than SŽ.

12. If a 4 percent rise in the price of peanut butter causes total revenue from sales of peanut butter to fall by 4 percent, the demand for peanut butter

a. is elastic.

b. is inelastic.

c. is unit elastic.

d. has an elasticity of 2.0.

13. The supply of new cars increases by 5 percent. If the price elasticity of demand for new cars is 1.25, the price of a new car will

a. fall by 4 percent.

b. fall by 5 percent.

c. fall by 6.25 percent.

d. fall by 1.25 percent.

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14. A 10 percent increase in the price of a Pepsi increases the demand for Coca Cola by 50 percent. Thus the cross elasticity of demand between Pepsi and Coca Cola is

a. 50.

b. 10.

c. 5.

d. 0.20.

15. Figure 5.14 illustrates the market for disks when disks are not taxed. Buyers' total expenditure on disks

a. will fall if the supply curve shifts either leftward or rightward.

b. will rise if the supply curve shifts either leftward or rightward.

c. will fall if the supply curve shifts leftward and rise if the supply curve shifts rightward.

d. will rise if the supply curve shifts rightward and fall if the supply curve shifts leftward.