1) The elasticity of demand of a good X is 0.3. The initial price of the good is $10. Suppose nowprice increases and quantity decreases by 2%. What is the new price (approx)?2) One of these factors does not affect the elasticity of demandA) Luxury or necessityB) Number of substitutesC) TechnologyD) How broadly the market is definedE) None of the above3) I bought 30 units of good X at $12. The price of X decreased by 5% and my quantity demanded increased by 10% . What is my elasticity of demand using mid point formula?A) -2.3B) -0.8C) -1.8D) -0.24) The elasticity of demand for a good is 1.2. The price of the good increases by 10%. The initialquantity of the good is 20. What is the new quantity demanded?A) 23.6B) 22.4C) 17.6D) 26.85) The elasticity of demand along a straight line A) OneB) ConstantC) VariesD) None of the above6) The slope of the demand curve is -0.8. What is the elasticity of demand?A) -0.8B) One half of the slopeC) Cant be determinedD) None of the above.7) Consider the following Statements(i) CROSS PRICE ELASTICITY IS NEGATIVE WHEN TWO GOODS ARE SUBSTITUTES(ii) CROSS PRICE ELASTICITY IS NEGATIVE WHEN TWO GOODS ARE COMPLEMENTSA) (i) is true but (ii) is falseB) (i) is False but (ii) is trueC) Both are trueD) Both are false8) Suppose elasticity of demand is 0.8 and elasticity of supply is 1.2. The Government now imposes a $10 tax. A) The seller bears the larger burden of the tax.B) The buyer bears the larger burden of the taxC) Both bear the same burdenD) None of the above9) The price elasticity of supply is 0.2. The initial quantity supplied is 20 units. Now price increases by 10%. What is the new quantity supplied?A) 20.6B) 20.2C) 20.4D) 20.110) Suppose firm X faces a demand curve with elasticity of demand 1.7. The current quantity demanded is 40 units @ a price of $10. The owner of the firm wants to increase prices by 10% . Evaluate the decision. Explain your reason.A) The price must be increased because demand is inelastic.B) The price must not be increased because the demand is inelastic.C) The price must be increased because demand is elastic.D) The price must not be increased because demand is elastic. 11) Which of the following statements is correct?A) If demand is elastic, increase the price, revenues would increase.B) If demand is elastic, decrease the price, revenues would increase.C) If demand is inelastic, decrease the price, revenues would increase.D) If demand is inelastic, increase the price, revenues would decrease.12) Consider the following two statements(i) Good X and Good Y are normal goods(ii) The cross price elasticity of demand of X to changes in price of Y is 1.2A) X and Y are complementsB) X and Y are substitutesC) There is no relation between X and Y D) None of the above13) If primary education is good and noble but current market price and quantity does not reflect the optimal amount to be produced, thenA) Impose a tax that shifts the demand curve to the right producing higher quantity and price.B) Impose a subsidy that shifts supply curve to the left producing higher quantity but lower price.C) Impose a subsidy that shifts demand curve to the right producing higher quantity and higher price.D) Impose a tax that shifts the supply curve to the right producing lower quantity and higher price.14) The economist who coined the concept of social cost and benefitA) Douglass NorthB) John Maynard KeynesC) A.C.PigouD) Minsky15) Which of the following is an example of negative externalityA) Use of wind energyB) Living in an educated societyC) Classrooms beside fire station16) I love ice creams and it constitutes 0.5 % of my budget. Now if price of ice creams go upA) Demand for Ice creams decreases by a large percentage because demand is elasticB) Demand for Ice creams increases by a large percentage because demand is inelasticC) Demand for Ice creams hardly changes because demand is inelasticD) Demand for Ice creams hardly changes because demand is elastic17) Income elasticity of demand isA) Percentage change in quantity demanded due to percentage change in priceB) Percentage change in quantity demanded due to percentage change in price of a substituteC) Percentage change in quantity demanded due to percentage change in incomeD) Percentage change in quantity supplied due to percentage change in
View Full Document
Unlocking...