micro test #2

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1. Macroeconomic deals with

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all of the above

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1. Macroeconomic deals with

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household and firms

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3. If the price elasticity of demand is 0.3, it means:

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d. if price increases by $1, demand decreases by 0.3 units.

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4. When the price elasticity of demand is calculated, it is a negative number which means:

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a. as price increases quantity decreases.

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5. Income elasticity of demand measures

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b. the reaction of quantity demanded to changes in income.

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6. The more vertical the demand curve

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a. the lower the elasticity

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7. The more horizontal the demand curve

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a. the higher the elasticity

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8. In general, elasticity is

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b. the reaction of one variable to the changes in other variable.

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9. The price elasticity of supply measures how responsive

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d. sellers are to a change in price.

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10. Demand is said to be inelastic if

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c. buyers do not respond much to changes in the price of the good.

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11. If a good is a luxury item, demand for the good would tend to be

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d. elastic.

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12. Suppose the price of Twinkies is reduced from $1.45 to $1.25 and, as a result, the quantity of Twinkies demanded increases from 2,000 to 2,200. Using the midpoint method, the price elasticity of demand for Twinkies in the given price range is

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d. .64.

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13. Demand is elastic if elasticity is

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d. greater than 1.

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14. According to the above graph, the section of the demand curve labeled B represents the

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d. unit elastic section of the demand curve.

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15. According to the following graph, the total revenue at P2 is represented by area(s)

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A+B

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16. Last year, Joan bought 50 pounds of hamburger when the household income was $40,000. This year, the household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant Joan's income elasticity of demand for hamburger is

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c. negative, so Joan considers hamburger to be an inferior good.

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Suppose that an increase in the price of carrots from $1.20 to $1.40 per pound raises the amount of carrots that carrot farmers produce from 1.2 million pounds to 1.6 million pounds. Using the midpoint method, what would be the elasticity of supply?

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1.86

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18. Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

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d. positive and therefore the good is a normal good.

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20. If the cross-price elasticity of demand is 1.25, then the two goods would be

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d. substitutes.

1 of 19

question

1. Macroeconomic deals with

answer

all of the above

question

1. Macroeconomic deals with

answer

household and firms

question

3. If the price elasticity of demand is 0.3, it means:

answer

d. if price increases by $1, demand decreases by 0.3 units.

question

4. When the price elasticity of demand is calculated, it is a negative number which means:

answer

a. as price increases quantity decreases.

question

5. Income elasticity of demand measures

answer

b. the reaction of quantity demanded to changes in income.

question

6. The more vertical the demand curve

answer

a. the lower the elasticity

question

7. The more horizontal the demand curve

answer

a. the higher the elasticity

question

8. In general, elasticity is

answer

b. the reaction of one variable to the changes in other variable.

question

9. The price elasticity of supply measures how responsive

answer

d. sellers are to a change in price.

question

10. Demand is said to be inelastic if

answer

c. buyers do not respond much to changes in the price of the good.

question

11. If a good is a luxury item, demand for the good would tend to be

answer

d. elastic.

question

answer

d. .64.

question

13. Demand is elastic if elasticity is

answer

d. greater than 1.

question

14. According to the above graph, the section of the demand curve labeled B represents the

answer

d. unit elastic section of the demand curve.

question

15. According to the following graph, the total revenue at P2 is represented by area(s)

answer

A+B

question

answer

c. negative, so Joan considers hamburger to be an inferior good.

question

answer

1.86

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18. Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

answer

d. positive and therefore the good is a normal good.

question

20. If the cross-price elasticity of demand is 1.25, then the two goods would be

answer

d. substitutes.

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micro test #2

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