Quiz 5 Multiple Choice Question

Quiz 5

MULTIPLE CHOICE.

Choose the one alternative that best completes the statement or answers the question.

1. Jaycee Jeans sold 40 pairs of jeans at a price of $40. When it lowered its price to $20, the quantity 1) sold increased to 60 pairs. Calculate the absolute value of the price elasticity of demand. Use the midpoint formula.

1. 1.67
2. 1.0
3. 0.6
4. 0.53

2. If the demand for a life- saving drug was perfectly inelastic and the price doubled, the quantity 2) demanded would

1. decrease by 50%.
2. remain constant.
3. also double.
4. be cut in half.

3. Which of the following statements is true?

1. The more time that passes the more inelastic the demand for a product becomes.
2. The demand curve for a necessity is more elastic than the demand curve for a luxury.
3. The more narrowly we define a market, the more elastic the demand for a product will be.
4. In general, if a product has few substitutes it will have an elastic demand.

4. If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of 4) demand for the DVD for the movie The Hangover should be

1. greater than 0.8 in absolute value.
2. less then 0.8 in absolute value.
3. equal to 1 in absolute value.
4. equal to zero because the DVD of this movie has been out for several years.

5. Suppose a decrease in the supply of bottled water results in a decrease in revenue. This indicates 5) that

1. the demand for bottled water is elastic in the price range considered.
2. the supply of bottled water is elastic in the price range considered.
3. the demand for bottled water is inelastic in the price range considered.
4. the supply of bottled water is inelastic in the price range considered.

6. Which of the following statements is true? 6)

1. If the price of a good is raised and total revenue does not change, demand is perfectly elastic.
2. If the price of a good is lowered and total revenue increases, demand is inelastic.
3. If the price of a good is raised and total revenue increases, demand is inelastic.
4. If the price of a good is lowered and total revenue decreases, demand is elastic.

7. When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent, 7) and the sale of dips (like salsa and bean dip) fell 8 percent. This set of facts indicates that

1. the cross- price elasticity between tortilla chips and dips is - 8, so the two are complements.
2. the cross- price elasticity between tortilla chips and dips is 0.8, so the two are substitutes.
3. the cross- price elasticity between tortilla chips and dips is 0.4, so the two are substitutes.
4. the cross- price elasticity between tortilla chips and dips is - 4, so the two are complements.

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