Multiple Choice Questions:
1. An increase in demand will increase the price but not the quantity sold in a market if
a. Supply is perfectly elastic.
b. Supply is perfectly inelastic.
c. Supply is relatively elastic.
d. Supply is relatively inelastic.
2. A straight-line demand curve would
a. Have the same elasticity along its entire length.
b. Have a higher elasticity of demand near its top than near its bottom.
c. Have a lower elasticity of demand near its bottom than near its top.
d. Be relatively inelastic at high prices, but relatively elastic at low prices.
3. The longer the time horizon, a permanent increase in demand will tend to increase the quantity traded _____________ , and increases the price _____________.
a. More; more
b. More; less
c. Less; more
d. Less; less
4. If you observed that price increased 20 percent when the quantity traded increased by 10 percent, then
a. The elasticity of demand is 2.0.
b. The elasticity of demand is 0.5.
c. The elasticity of supply is 2.0.
d. The elasticity of supply is 0.5.
5. If the cross-price elasticity of demand between two goods is negative, we know that
a. They are substitutes.
b. They are complements.
c. They are both inferior goods.
d. They are both normal goods.
6. If the income elasticity of demand for good A is 0.5 and the income elasticity of demand for good B is 1.5, then
a. Both A and B are normal goods.
b. Both A and B are inferior goods.
c. A is a normal good, but B is an inferior good.
d. A is an inferior good, but B is a normal good.
7. If good X has a negative cross-price elasticity of demand with good Y and good X also has a negative income elasticity of demand, then
a. X is a substitute for Y, and X is a normal good.
b. X is a substitute for Y, and X is an inferior good.
c. X is a complement for Y, and X is a normal good.
d. X is a complement for Y, and X is an inferior good.