Micro+Practice+test+2

Micro+Practice+test+2 - Micro Practice Test 2 1 The basic...

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Micro Practice Test 2 1. The basic formula for the price elasticity of demand coefficient is: A) absolute decline in quantity demanded/absolute increase in price. B) percentage change in quantity demanded/percentage change in price. C) absolute decline in price/absolute increase in quantity demanded. D) percentage change in price/percentage change in quantity demanded. 2. If the demand for product X is inelastic, a 4 percent increase in the price of X will: A) decrease the quantity of X demanded by more than 4 percent. B) decrease the quantity of X demanded by less than 4 percent. C) increase the quantity of X demanded by more than 4 percent. D) increase the quantity of X demanded by less than 4 percent. 3. The price elasticity of demand is: A) negative, but the minus sign is ignored. B) positive, but the plus sign is ignored. C) positive for normal goods and negative for inferior goods. D) positive because price and quantity demanded are inversely related. 4. Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded: A) increased by 7 percent. B) decreased by 7 percent. C) decreased by 9 percent. D) decreased by 12 percent. 5. The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to: A) increase by approximately 12 percent. B) decrease by approximately 12 percent. C) decrease by approximately 32 percent. D) decrease by approximately 26 percent. Page 1
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6. The elasticity of demand: A) is infinitely large for a perfectly inelastic demand curve. B) tends to be inelastic in high-price ranges and elastic in low-price ranges. C) tends to be elastic in high-price ranges and inelastic in low-price ranges. D) is the same at each price-quantity combination on a stable demand curve. 7. The concept of price elasticity of demand measures: A) the slope of the demand curve. B) the number of buyers in a market. C) the extent to which the demand curve shifts as the result of a price decline. D) the sensitivity of consumer purchases to price changes. 8. If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then: A) demand is elastic. B) demand is inelastic. C) demand is of unit elasticity. D) not enough information is given to make a statement about elasticity. 9. In which of the following instances will total revenue decline? A) price rises and supply is elastic B) price falls and demand is elastic C) price rises and demand is inelastic D) price rises and demand is elastic 10. If the price elasticity of demand for a product is unity, a decrease in price will: A) have no effect upon the amount purchased. B)
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Micro+Practice+test+2 - Micro Practice Test 2 1 The basic...

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