Economics (McConnell), 18th Edition

Chapter 6: Elasticity, Consumer Surplus, and Producer Surplus

Quiz

1
Use the following diagram to answer the next question.
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Refer to the diagram. Between the prices of $10 and $8, the price elasticity of demand is:
A).5
B).9
C)1.11
D)2
2
Use the following diagram to answer the next question.
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Refer to the diagram. Suppose total revenue at price P3 is the same as at price P2. Then, over the price range from P2 to P3, demand is:
A)relatively elastic
B)relatively inelastic
C)unit elastic
D)perfectly elastic
3
Suppose that a 2% increase in income in the economy decreases the quantity of gadgets demanded by 1% at every possible price. This implies that:
A)the supply of gadgets is elastic
B)income elasticity is positive and gadgets are a normal good
C)income elasticity is negative and gadgets are a normal good
D)income elasticity is negative and gadgets are an inferior good
4
The maker of a particular breakfast cereal found that increasing the price from $3.00 to $3.25 per box had no impact on total revenue, but increasing the price further to $3.50 reduced total revenue by 2%. Thus, the demand for the cereal is:
A)inelastic over the range $3.00 to $3.50
B)elastic over the range $3.00 to $3.25 but not over the range $3.25 to $3.50
C)unit elastic over the range $3.00 to $3.25 and elastic over the range $3.25 to $3.50
D)unit elastic over the range $3.00 to $3.25 and inelastic over the range $3.25 to $3.50
5
Use the following diagram to answer the next question.
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Refer to the diagram. In this competitive market, combined consumer and producer surplus is maximized at:
A)price M
B)price B
C)output G
D)output H
6
The cross elasticity of demand between two goods is reported to be +0.2. This implies that:
A)a 2% increase in the price of one shifts the demand curve for the other to the left by 1%
B)the two goods are complements
C)the two goods are substitutes
D)both goods are normal goods
7
Which of the following is likely to have the most elastic demand?
A)Food
B)Fruit
C)Bananas
D)Dole brand bananas
8
Answer the next question on the basis of the following diagram:

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Refer to the diagram. At the equilibrium price and quantity, total consumer surplus in this market is:
A)$3
B)$7
C)$150
D)$350
9
Suppose legalization—and subsequent regulation—of heroin and cocaine reduces their prices by 50%. Estimates suggest the total quantity of heroin and cocaine demanded would rise by 83% and 42%, respectively. Consequently, legalization would:
A)increase total expenditures on both heroine and cocaine
B)decrease total expenditures on both heroine and cocaine
C)increase total expenditures on heroine and decrease total expenditures on cocaine
D)decrease total expenditures on heroine and increase total expenditures on cocaine
10
Assume that the price of product Y decreases by 5% and the quantity supplied decreases by 2%. The coefficient of price elasticity of supply for good Y is:
A)negative and therefore Y is an inferior good
B)less than one and therefore supply is inelastic
C)more than one and therefore supply is elastic
D)negative and therefore the supply curve is downward sloping
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