ECON-1B Week 2 Quiz

ECON-1B Week 2 Quiz | Cabrillo College

Question 1

Economists use the concept of ________ to measure how one economic variable, such as quantity, responds to a change in another economic variable, such as price.

slope 

efficiency  

elasticity  

relativity

Question 2

The price elasticity of demand is equal to

the value of the slope of the demand curve.  

the change in quantity demanded divided by the change in price.  

the percentage change in quantity demanded divided by the percentage change in price.  

the percentage change in price divided by the percentage change in quantity demanded.

Question 3

In September 2012, the average price of gasoline in the United States was $3.91 per gallon and consumers bought 5 percent less gasoline than they had during September 2011, when the average price was $3.66 per gallon. Based on these numbers, what was the price elasticity of demand for gasoline from September 2011 to September 2012?

-2.96 

-0.76 

-0.33  

-6.75

Question 4

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

1.0  

1.67  

0.53 

0.61

Question 5

When there few close substitutes available for a good, demand tends to be

relatively elastic. 

perfectly elastic. 

relatively inelastic.  

perfectly inelastic.

Question 6

The demand for all carbonated beverages is likely to be ________ the demand for Dr. Pepper.

less elastic than

more elastic than  

perfectly inelastic compared to  

perfectly elastic compared to

Question 7

Rank these three items in terms of the elasticity of the demand for them at any given price, from most elastic to least elastic: hot beverages, coffee and Peet's Coffee.

coffee, hot beverages, Peet's Coffee  

Peet's Coffee, coffee, hot beverages  

hot beverages, coffee, Peet's Coffee  

coffee, Peet's Coffee, hot beverages

Question 8

When demand is elastic, a fall in price causes total revenue to rise because

when price falls, quantity sold increases so total revenue automatically rises.  

the increase in quantity sold is large enough to offset the lower price.  

the percentage increase in quantity demanded is less than the percentage fall in price.   

the demand curve shifts.

Question 9

If a firm wanted to know whether the demand for its product was elastic, unit-elastic, or inelastic, then the firm could

not do anything as there is no way to find an elasticity value. 

change price a little bit and observe what happens to total revenue.  

talk to its customers. 

survey competitors and ask them what they think demand elasticity is for the product.

Question 10

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.

0.5  

1.5  

2  

-0.66

Question 11

Cross-price elasticity of demand is calculated as the  

percentage change in quantity demanded of one good divided by percentage change in price of a different good. 

percentage change in quantity sold divided by percentage change in buyers' incomes.

percentage change in quantity supplied divided by percentage change in price of a good.  

percentage change in quantity demanded divided by percentage change in price of a good.

Question 12

If the cross-price elasticity of demand between Breeze Detergent and Faber Detergent is a relatively large positive number, then it indicates that

consumers have a distinct preference for one brand versus the other. 

the two brands of detergent are close substitutes. 

detergents are necessities. 

the two brands are probably made by the same company.

Question 13

Price elasticity of supply is used to gauge

how responsive suppliers are to changes in future prices. 

how responsive sales are to a change in input prices. 

how responsive suppliers are to price changes.  

how responsive suppliers are to a change in demand.

Question 14

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units. Use the midpoint formula to calculate the price elasticity of supply.

1.22 

1.0  

0.82  

0.07

Question 15

The price elasticity of supply for umbrellas is 2. Suppose you're told that following a price increase, quantity supplied increased by 30 percent. What was the percentage change in price that brought this about?

impossible to determine without additional information

6.7 percent 

60 percent 

15 percent

Question 16

If, for a given percentage increase in price, quantity supplied increases by a proportionately larger percentage, then supply is

elastic. 

unit-elastic.

perfectly elastic.  

relatively inelastic.

Question 17

Bringing oil to the market is a relatively long and costly process. The whole process from exploration to pumping significant amounts of oil can take years. What does this indicate about the price elasticity of supply for oil?

The elasticity coefficient is likely to be low and supply is highly inelastic. 

The elasticity coefficient is likely to be very high and supply is inelastic. 

The elasticity coefficient is likely to be close to zero and supply is perfectly elastic. 

The elasticity coefficient is likely to be low and supply is highly elastic.

Question 18

Over longer periods of time, increases in oil prices provide firms with incentives to explore and recover oil. What does this indicate about the long run price elasticity of supply for oil?

The elasticity coefficient is likely to be higher in the long run than in the short run. 

The elasticity coefficient is unstable in the long run because oil supplies may be depleted. 

The elasticity coefficient approaches 0 in the long run as supplies are depleted. 

The elasticity coefficient is likely to be lower in the long run than in the short run.

Question 19

Suppose the demand curve for a product is represented by a typical downward-sloping curve. Now suppose the demand for this product decreases. Which of the following statements

accurately predicts the resulting decrease in price?

The more elastic the supply curve, the smaller the price decrease. 

The decrease in price will always be proportional to the magnitude of the demand shift. 

The more elastic the supply curve, the greater the price increase.  

The increase in price is not affected by the elasticity of the supply curve.

Question 20

If a supply curve is a horizontal line, supply is said to be

perfectly inelastic. 

inelastic. 

perfectly elastic. 

unit-elastic.