ElasticityTest

ElasticityTest - PRINCIPLES OF MICROECONOMICS 0511-211...

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PRINCIPLES OF MICROECONOMICS 0511-211 Department of Economics Rochester Institute of Technology Sample Examination # 2 SOLUTIONS Instructor: Dr. Bríd Gleeson Hanna 48 Multiple choice questions relating to (i) elasticity and (ii) government policies. There will be 50 multiple choice questions in your actual exam. 1. Demand is said to be elastic if a. the price of the good responds substantially to changes in demand. b. demand shifts substantially when income or the expected future price of the good changes. c. buyers do not respond much to changes in the price of the good. d. buyers respond substantially to changes in the price of the good. ANS: D 2. For a good that is a necessity, a. quantity demanded tends to respond substantially to a change in price. b. demand tends to be inelastic. c. the law of demand often does not apply. d. All of the above are correct. ANS: B 3. The demand for Chocolate Chip Cookie Dough ice cream is likely quite elastic because a. ice cream must be eaten quickly. b. this particular flavor of ice cream is viewed as a necessity by many ice-cream lovers. c. the market is broadly defined. d. other flavors of ice cream are good substitutes for this particular flavor. ANS: D 4. Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because a. buyers tend to be much less sensitive to a change in price when given more time to react. b. buyers tend to be much more sensitive to a change in price when given more time to react. c. buyers will have substantially more income over a ten-year period. d. the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline. ANS: B 5. It is likely that a. the demand for flat-screen computer monitors is more elastic than the demand for monitors in general. b. the demand for grandfather clocks is more elastic than the demand for wristwatches. c. the demand for cardboard is more elastic over a long period of time than over a short period of time. d. All of the above are correct. ANS: D 6. When the price of bubble gum is $0.50, the quantity demanded is 400 packs per day. When the price falls to $0.40, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for bubble gum is a. inelastic. b. elastic. c. unit elastic. d. perfectly inelastic. ANS: B
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7. The value of the price elasticity of demand for a good will be relatively large when a. there are no good substitutes available for the good. b. the time period in question is relatively short. c. the good is a luxury as opposed to a necessity. d. All of the above are correct. ANS: C
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This note was uploaded on 10/26/2008 for the course ECON 0511-211 taught by Professor Gleeson during the Winter '08 term at RIT.

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ElasticityTest - PRINCIPLES OF MICROECONOMICS 0511-211...

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