FVCC Microeconomics Take Home Test 2B - Case-Faire-Oster - Spring 2011

# FVCC Microeconomics Take Home Test 2B - Case-Faire-Oster - Spring 2011

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Principles of Microeconomics Take Home Test #2B - Chapters 5 – 8 (Case Spring 2011) Choose the one alternative that best completes the statement or best answers the question. 1) If demand is elastic, then A) a ten percent increase in price leads to a one percent decrease in quantity demanded. B) the change in quantity demanded equals the change in price. C) a two percent increase in price leads to a two percent decrease in quantity demanded. D) an increase in price of any amount leads to quantity demanded falling to zero. E) a one percent increase in price leads to a ten percent decrease in quantity demanded. 2) A firm believes it can increase its profits if it increases its revenues. If the price elasticity of demand is 0.88, the firm should A) increase its price. B) decrease its price. C) change price by 88 percent. D) leave price unchanged. E) change output by 88 percent. 3) The most important determinant of price elasticity of demand is A) whether the good is necessity or not. B) whether the good has many good, close substitutes or not. C) the slope of the demand curve. D) the importance of the good in the budget of the consumer. E) price elasticity. 2 4 6 8 10 12 14 16 0 1 2 3 4 5 6 7 8 9 10 Quantity Revenue in thousand of dollars D C B A E F G 4) Refer to the graph above. Between points E and F, demand is: A) inelastic. B) elastic. C) unit elastic. D) perfectly elastic. E) perfectly inelastic. 1

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Price Per Unit Quantity Demanded Per Week \$10.00 25 9.50 30 9.00 35 8.50 40 8.00 45 7.50 50 7.00 55 6.50 60 6.00 65 5.50 70 5.00 75 5) Refer to the table above. What is the price elasticity of demand if a price falls from \$9 to \$8.50? A) 4.58 B) 0.21 C) 2.25 D) 2.52 E) cannot be determined with the information given. 6) Refer to the table above. The price elasticity of demand is most price elastic at a price of A) \$10.00. B) \$8.00. C) \$7.50. D) \$6.00. E) \$5.00. 7) Refer to the table above. When a price rises from \$7.00 to \$7.50, price elasticity of demand is ______, and becomes ______, when a price rises further. A) 7.00: 7.50 B) 0.73; larger C) 0.73; smaller D) 1.38; larger E) 1.38; smaller 8) Suppose in the short-run the price elasticity of demand for gasoline is 0.92. Then, we know in the long-run the price elasticity of demand will be A) greater than 0.92. B) less than 0.92. C) 0.92. D) 0. E) inelastic. 2
25 50 75 100 0 1 2 3 4 5 6 7 8 Quantity Price 9) Refer to the graph above. Raising the price from \$3 to \$4 would result in: A) an increase in total revenue, an increase in total cost, and an unknown change in profit. B) an increase in total revenue, a decrease in total cost, and an increase in profit. C) a decrease in total revenue, an increase in total cost, and a decrease in profit. D) a decrease in total revenue, a decrease in total cost, and an unknown change in profit.

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## This note was uploaded on 02/19/2011 for the course ECON 201 taught by Professor Smith during the Spring '11 term at fvcc.edu.

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FVCC Microeconomics Take Home Test 2B - Case-Faire-Oster - Spring 2011

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