1 Econ 2110 Section 002 Summer, 2020 Guncha Babajanova Practice Questions for Exam 22 1. Buyers and sellers communicate primarily a. through surveys. b. through government agencies. c. through advertising. d. through their willingness to buy and sell at various prices. e. All of the above. 2. If demand is elastic, we would expect a. a big change in quantity when price changes. b. a small change in quantity when price changes. c. the demand curve to shift when price changes. d. supply to be elastic as well. 3. Which of the following would you expect to have the least elastic demand? a. breakfast cereal. b. Kellogg’s breakfast cereal c. Kellogg’s breakfast cereal sold at Ingles. d. food. e. There is not enough information to determine. 4. Which of the following would make the demand for education at Clemson more elastic? a. An improvement in the quality of Clemson education. b. The founding of four more universities in South Carolina. c. A fall in the price of textbooks. d. A rise in local land prices. 5. If price rises from 10 to 12 and quantity demanded falls by 12%, we know that demand is a. elastic. b. inelastic. c. unit elastic. d. downward sloping. e. There is not enough information to say.3 6. Which of the following would you expect to have the least elastic demand? a. wheat bread made by Pepperidge Farm. b. headache medicine. c. wheat bread made by Pepperidge Farm and sold at Bi-Lo d. There is not enough information to determine. Use the following table to answer the next four questions. Price Quantity Demanded 10 80 9 100 8 120 7 140 6 160 7. The demand for this product a. is elastic. b. is inelastic. c. is unit elastic. d. may be elastic or inelastic, depending on the price. 8. The elasticity of demand for a price cut from 10 to 9 is a. 4 b. 2.5 c. 2 d. 1.5 e. 0.5 9. The firm is currently charging a price of 8. If it wants to increase its sales revenue, it should a. raise price to 9. b. lower price to 7. c. leave the price at 8, because it will have excess demand at a lower price and excess supply at a higher price. d. either raising or lowering price will increase total revenue. e. neither raising or lowering price will increase total revenue. 10. We therefore know that at the price of 8, demand for the product a. will increase if price falls. b. decrease if price rises. c. is elastic. d. is inelastic. e. All of the above.4 11. If the supply of a good is absolutely fixed (like wine bottled in 1983) a. the supply curve will be horizontal. b. the supply will be vertical. c. the supply curve will slope downward. d. the good will have no supply curve. 12. The “law of demand” a. determines the equilibrium price. b. doesn’t hold for scarce goods. c. says that people buy less of a good when price rises. d. applies only to consumer goods. 13. Which of the following will NOT increase the demand for porcelain tea sets? a. A rise in the price of china tea sets (a substitute). b. A fall in the price of tea (a complement). c. A rise in income, and porcelain tea sets are a normal good. d. A fall in the price of porcelain. e. All of the above will increase demand for porcelain tea sets. Use the following demand and supply functions to answer the next two questions: QD = 200-P QS = P - 30 14. If supply increases, we would expect that the quantity supplied at $50 a. will equal 20. b. will be greater than 20. c. will be less than 20. d. There is not enough information to say. 15. If supply increases, we would expect that the quantity demanded at $50 a. will equal 150. b. will be greater than 150. c. will be less than 150. d. There is not enough information to say. 16. If quantity demanded falls by 100,000 when price rises by 2 cents, we know that a. demand is elastic. b. demand is inelastic. c. demand is unit elastic. d. there is not enough information to calculate elasticity.5 17. If Clemson decides to increase tuition so as to raise its revenues, it must believe that a. the demand for education at Clemson is elastic. b. the demand for education at Clemson is inelastic. c. the demand for education at Clemson has increased. d. the supply of education at Clemson has increased. 18. If a price rise of 9% leads to a rise in quantity supplied of 12%, we know that supply is a. elastic. b. inelastic. c. unit elastic. d. downward sloping. 19. Which of the following is likely to have the least elastic supply? a. Coca Cola. b. soft drinks. c. paintings by Rembrandt. d. automobiles. e. Oil 20. Which of the following would you expect to have the least elastic demand? a. penicillin. b. bananas. c. bananas from Columbia. d. bananas from Columbia sold at Albertsons. e. All would have equal elasticity of demand, because each would have a downward sloping demand curve. 21. Which of the following would make the demand for Pepsi more elastic? a. An improvement in the Pepsi formula. b. The launching of five new brands of cola by five different companies. c. Coca Cola going bankrupt. d. Cola is discovered to reduce the risk of colon cancer. e. Pepsi is discovered to reduce the risk of colon cancer. 22. Demand for a “necessity” is likely to be ______, while demand for a “luxury” is likely to be _____. a. elastic, elastic. b. elastic, inelastic. c. inelastic, either elastic or inelastic. d. elastic, either inelastic or elastic.6 23. If the government, recognizing that the price of roses goes up at absolutely the worse time for consumers, passes a law that says no more than $1.50 can be charged per rose (instead of the $5 now charged) the most likely outcome would be that a. consumers will buy more roses. b. suppliers will sell more roses. c. it will be harder to find roses in florists’ shops. d. the demand for roses will become more elastic. 24. If the price of toasters is fixed by law above the market-clearing price, a. a shortage of toasters will result. b. toaster inventories at appliance stores will be larger. c. toaster sellers will spend less on advertising. d. the quantity of toasters purchased will be more than the quantity supplied. 25. Price ceilings on gasoline might be expected to cause a. increased advertising of gasoline. b. gasoline to be rationed or allocated to people in different quantities than would have occurred otherwise. c. longer hours of operation at most service stations. d. poor people to be assured of an adequate supply of gasoline.