review-questions-6-7-8

review-questions-6-7-8 - 1 ECON 2010 Fall 2010 Study Guide...

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1 ECON 2010 Fall 2010 Study Guide 6-7-8 1. The short-run elasticity of demand for gasoline sold at gasoline stations is 0.20. If terrorism causes the supply of gasoline to fall, resulting in a 5 percent drop in quantity, then if other things remain the same, the price per gallon will increase by: A. 4 percent. B. 5 percent. C. 20 percent. D. 25 percent. 2. A price elasticity of demand for a good or service of 1.8 tells us that: A. the price changes by $1.80 when quantity changes by one unit. B. quantity demanded falls by 1.8% when price rises by 1%. C. the price rises by 1.8% when quantity demanded falls by 1%. D. quantity demanded falls by 1.8 units when price changes by $1. 3. If the price of a good goes up by 5% and, in response, the quantity demanded falls by 15%, the price elasticity of demand would be: A. .05. B. 3. C. 0.3333. D. 0.15. 4. Refer to the graph above. Calculate the approximate elasticity of demand for the line segment BD: A. 3 B. 2 C. ½ D. 3/2
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2 5. Refer to the graph above. The approximate elasticity of segment AC is: A. 1/3 B. 1/2 C. 2/3 D. 3/2 Answer the next question(s) on the basis of the following demand schedule: 6. Refer to the above data. The price elasticity of demand is relatively elastic: A. in the $6-$4 price range. B. over the entire $6-$1 price range. C. in the $3-$1 price range. D. in the $6-$5 price range only.
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3 7. Refer to the above diagram and assume that price increases from $2 to $10. The coefficient of the price elasticity of supply (midpoints formula) relating to this price change is about: A. 5 and supply is elastic. B. 1 and supply is unit elastic. C. .25 and supply is inelastic. D. 2.5 and supply is elastic. 8. A marketing student observes that when the price of ice cream rises by 10%, the quantity of ice cream a supplier is willing to sells rises by 5%. The student correctly concludes that the elasticity of supply for ice cream is: A. .2. B. .5. C. 2. D. 5. 9. Which of the following statements is true about a downward-sloping demand curve that is a straight line? A. The slope and the elasticity are the same at all points. B. The slope remains the same, but elasticity rises as you move down the demand curve. C. The slope remains the same, but elasticity falls as you move down the demand curve. D. The slope and the elasticity fall as you move down the demand curve. 10. Refer to the graph below. The demand curve with the greatest elasticity is: A. A. B. B. C. C. D. D.
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4 11. Refer to the graph below. Elasticity is smallest at which point? A. A. B. B. C. C. D. D. 12. The above diagram shows two product demand curves. On the basis of this diagram we can say that: A. over range P 1 P 2 price elasticity of demand is greater for D 1 than for D 2 . B. over range
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review-questions-6-7-8 - 1 ECON 2010 Fall 2010 Study Guide...

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