Enter your answer to each of the questions in the blank to the left of the question. Be sure to use lowercase letters only!
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1. The price elasticity of demand measures:
a. the change in quantity demanded of a good given a change in income.
b. the change in quantity demanded of a good given a change in the price of another good.
c. the change in the quantity demanded of a good given a change in the price of the good.
d. the change in the quantity demanded of a good given a change in the price elasticity of supply.
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2. If a good has price-inelastic demand,
a. a 1 percent increase in price produces less than a 1 percent decrease in the quantity demanded.
b. a 1 percent increase in price produces less than a 1 percent increase in the quantity demanded.
c. a 1 percent increase in price produces more than a 1 percent increase in the quantity demanded.
d. a 1 percent increase in price produces more than a 1 percent decrease in the quantity demanded.
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3. When the price is 5, the quantity demanded is 10. When the price is 7, the quantity demanded is 5. What is the price elasticity of demand?
a. 1
b. 0.5
c. 0.33
d. 2
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4. A perfectly inelastic demand curve will be ______ on a graph while a perfectly elastic demand curve will be ______ on a graph.
a. vertical; horizontal
b. horizontal; vertical
c. vertical; vertical
d. horizontal; horizontal
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5. P x Q =
a. MC
b. TR
c. MR
d. TC
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6. When demand is price-inelastic, a price decrease will result in:
a. an increase in total cost.
b. an increase in total revenue.
c. a decrease in total cost.
d. a decrease in total revenue.
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7. The practice of charging different prices to different buyers is called:
a. total revenue.
b. price discrimination.
c. price elasticity.
d. an increase in demand.
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8. A percentage change in quantity supplied divided by a percentage change in price is called:
a. income elasticity.
b. price elasticity of demand.
c. price elasticity of supply.
d. elasticity of substitution.
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9. When the price is 5, the quantity supplied is 10. When the price is 10, the quantity supplied is 20. What is the price elasticity of supply?
a. 1
b. 0.5
c. 0.33
d. 2
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10. When governments restrict agricultural production, the supply curve to shifts to the _______, the equilibrium price ______, and the result is ______ revenue for farmers.
a. right; decreases; higher
b. left; decreases; higher
c. left; increases; lower
d. left; increases; higher
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11. The burden of a gasoline tax will be borne mostly by _______ because the demand curve is relatively _______.
a. producers; inelastic
b. producers; elastic
c. consumers; inelastic
d. consumers; elastic
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12. In order to show the imposition of a tax on a supply and demand graph, shift the supply curve ______. In order to show the imposition of a subsidy on a supply and demand graph, shift the supply curve ______.
a. upward; upward
b. downward; upward
c. upward; downward
d. downward; upward
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13. If demand is inelastic relative to supply, most of the burden of a tax will be borne by ______.
a. consumers
b. producers
c. firms
d. none of the above
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14. When the minimum wage is raised, we would expect that unemployment ______, but if demand for labor is relatively inelastic, revenues of low-wage workers will ______ after the minimum wage increase.
a. increases; increase
b. increases; decrease
c. decreases; increase
d. decreases; decrease
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15. Price ceilings generally lead to:
a. unemployment.
b. shortages.
c. surpluses.
d. none of the above.
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