Econ103 Quiz 2

Name___________________________________ Student Number ___________________________________

Multiple Choice. (Please CIRCLE the one answer that best complete the statement or answers the question.)
1) Supply is elastic if
A) a small percentage change in price results in a large percentage change in quantity supplied.
B) the good is a normal good.
C) a large percentage change in price results in a small percentage change in quantity supplied.
D) the good is an inferior good.
E) a small percentage change in demand results in a large percentage change in supply.

2) A technological breakthrough lowers the cost of photocopiers. If the demand for photocopiers is price
inelastic, the number of photocopiers sold
A) increases and total revenue increases.
B) increases and total revenue decreases.
C) increases, but changes in total revenue will depend on elasticity of supply.
D) decreases and total revenue decreases.
E) decreases and total revenue increases.

3) A good has a price elasticity of demand equal to 2. If an increase in supply lowers its price from $1.20
to $0.80, the percentage change in quantity demanded is
A) a decrease of 80 percent.
B) an increase of 40 percent.
C) an increase of 2 percent.
D) an increase of 80 percent.
E) a decrease of 40 percent.

4) The demand for a good is price inelastic if

A) an increase in income increases total revenue.
B) an increase in income decreases total revenue.
C) a rise in price decreases total revenue.
D) a rise in price increases total revenue.
E) the good is a luxury.

5)

Figure 4.2.1
Figure 4.2.1 shows the market for pizza. When the price of a panzerotti rises, the demand curve for pizza
shifts from D0 to D1. Panzerotti and pizza are ________, and the cross elasticity of demand for pizza with
respect to the price of panzerotti is ________.
A) complements; negative B) substitutes; positive C) complements; positive
D) substitutes; negative E) normal goods; negative

6) Which one of the following is true if demand is income elastic?

A) An increase in income decreases demand.
B) The percentage change in income is greater than the percentage change in quantity demanded.
C) The percentage change in income is smaller than the percentage change in quantity demanded.
D) A rise in price increases the quantity demanded.
E) The good is an inferior good.

7) A good has a price elasticity of demand equal to zero. As the price of the good falls, the
A) quantity demanded does not change.
B) total revenue does not change.
C) total revenue increases.
D) quantity demanded falls to zero.
E) quantity demanded increases.

8) Suppose that the price elasticity of demand for bottled water in St. Thomas, Ontario is 1.5, and the
price elasticity of demand for bottled water in West Kelowna, British Columbia is 0.8. The demand for
bottled water in St. Thomas is ________ and demand for bottled water in West Kelowna is ________.
A) perfectly elastic; inelastic
B) elastic; inelastic
C) unit elastic; unit elastic
D) elastic; unit elastic
E) inelastic; elastic

9) A given percentage rise in the price of a good is likely to result in a larger percentage decrease in the
quantity of the good demanded
A) the more difficult it is to obtain good substitutes.
B) the lower the price.
C) the larger the proportion of income spent on it.
D) the shorter the passage of time since the price change.
E) the steeper the slope of the demand curve.

10) You are told that a 5 percent increase in the price of a good increases the quantity supplied by 10
percent after one month. Supply of this good is ________. This good is most likely produced using
productive resources that are ________.
A) unit elastic; unique or rare
B) inelastic; plentiful or easily obtained
C) elastic; unique or rare
D) decreasing; unique or rare
E) elastic; plentiful or easily obtained

11) The demand curve is P = 700 - 20QD. The supply curve is P = 300 + 20QS. At market equilibrium,
the equilibrium quantity is ________ and the equilibrium price is ________.
A) 10; 500 B) 500; 10 C) 0.10; 20 D) 400; 40 E) 20; 0.10

12) Which one of the following will shift the supply curve of good X leftward?
A) a technological change that increases production of X
B) a decrease in the wages of workers employed to produce X
C) a decrease in the cost of capital used to produce X
D) an increase in the cost of machinery used to produce X
E) a situation where the quantity of X demanded exceeds the quantity of X supplie

Figure 3.4.2

13) At a price of $4 a unit in Figure 3.4.2

A) the equilibrium quantity is 400 units.
B) the quantity demanded is 200 units.
C) the quantity supplied is 400 units.
D) there is a surplus of 200 units.
E) there is a shortage of 200 units.

14) What happens in the market for laptops if the expected future price of a laptop rises?
A) The quantity of laptops supplied today increases.
B) The supply of laptops today decreases.
C) The supply of laptops doesn't change today.
D) The supply of laptops today increases.
E) The quantity of laptops supplied today decreases.

15) If A and B are substitutes and the cost of a factor of production used in the production of A increases,
then the price of
A) B rises, but the price of A falls.
B) B falls, but the price of A rises.
C) A falls, and the price of B will stay unchanged.
D) A and B fall.
E) A and B rise.

16) Farm land can be used to produce either cattle or corn. If the demand for cattle increases, then the
A) demand for corn increases.
B) price of corn falls.
C) supply of corn decreases.
D) supply of corn increases.
E) demand for corn decreases.

Figure 3.5.2

Original equilibrium at 1.

17) Refer to Figure 3.5.2, which represents the market for tacos. A new scientific study reveals that tacos
cause bad breath. Simultaneously, the cost of producing tacos decreases. What is the new equilibrium,
ceteris paribus?
A) 2 B) 3 C) 9 D) 4 E) 7

18) If a 10 percent rise in the price of goods leads to a 10 percent decrease in quantity demanded, the
demand curve for this good
A) is horizontal. B) is vertical. C) has slope equal to 1.
D) is a straight line with slope equal to 10. E) none of the above.

19) Suppose income increases. Choose the correct statement.

A) The equilibrium price of turnips falls if a turnip is an inferior good.
B) The equilibrium price of turnips rises if a turnip is an inferior good.
C) The equilibrium quantity of turnips decreases if a turnip is an inferior good.
D) The supply of turnips decreases whether or not a turnip is an inferior good.
E) Both A and C.

20) Some producers are chatting over a beer. Which one of the following quotations refers to a rightward
shift of the supply curve?
A) "Wage increases have forced us to raise our prices."
B) "Raw material prices have sky-rocketed; we will have to pass the cost on to our customers."
C) "We anticipate a big increase in demand. Our product price should rise, so we are planning for an
increase in output."
D) "Our new, sophisticated equipment will enable us to undercut our competitors."
E) Both A and C.