PE2 - Practice exam 2 Multiple Choice Identify the letter...

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Practice exam 2 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. In general, elasticity is a. a measure of the competitive nature of a market. b. the friction that develops between buyer and seller in a market. c. a measure of how much government intervention is prevalent in a market. d. a measure of how much buyers and sellers respond to changes in market conditions. ____ 2. Demand is said to be elastic if a. the price of the good responds substantially to changes in demand. b. the quantity demanded responds substantially to changes in the price of the good. c. buyers don't respond much to changes in the price of the good. d. demand shifts substantially when the price of the good changes. ____ 3. Demand for a good would tend to be more elastic, the a. longer the period of time considered. b. greater the availability of complements. c. broader the definition of the market. d. fewer substitutes there are. ____ 4. Economists compute the price elasticity of demand as a. percentage change in the price divided by the percentage change in quantity demanded. b. change in quantity demanded divided by the change in the price. c. percentage change in the quantity demanded divided by the percentage change in price. d. percentage change in the quantity demanded divided by the percentage change in income. ____ 5. If there are very few, if any, good substitutes for good A, then a. supply of good A would tend to be price elastic. b. demand for good A would tend to be price inelastic. c. demand for good A would tend to be price elastic. d. demand for good A would tend to be income elastic. ____ 6. Suppose the price of product X is reduced from $1.45 to $1.25 and, as a result, the quantity of X demanded increases from 2,000 to 2,200. Using the midpoint method, the price elasticity of demand for X in the given price range is a. 0.64. b. 1.00. c. 1.55. d. 2.00. ____ 7. The main reason for using the midpoint method is that it a. uses fewer numbers. b. rounds prices to the nearest dollar. c. gives the same answer regardless of the direction of change. d. rounds quantities to the nearest whole unit.
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____ 8. If the demand curve is linear and downward sloping, which of the following would NOT be correct? a. Elasticity will change with a movement down the curve. b. The upper part of the demand curve is more elastic than the lower part. c. The lower part of the demand curve would be less elastic than the upper part. d. Elasticity and slope would both remain constant along the curve. ____ 9. Demand is elastic if elasticity is a. equal to 0. b. equal to 1. c. less than 1. d. greater than 1. ____ 10. Refer to Graph 5-1. In the graph shown, the section of the demand curve labeled A represents the a. elastic section of the demand curve. b.
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This note was uploaded on 05/16/2010 for the course ECO BA 521 taught by Professor Dr.bridges during the Spring '10 term at Andrew Jackson.

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PE2 - Practice exam 2 Multiple Choice Identify the letter...

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