Monday, October 1, 2012

Chapter 05; A

 




Quiz AP Econ Ch 05A Micro HARD
This is the one and only time you can take this quiz.

Feedback for Questions 1 - 25 of 25
QUESTION 1:
The price of product X is reduced from $100 to $90. As a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price elasticity range

(This idea of elasticity is crucial to your understanding of micro.  Get it straight in your head.)

You incorrectly answered "is of unit elasticity.". Correct answer shown below.

Answer  Correct  
has declined.  
is of unit elasticity.  
is inelastic.  
results in lower total revenue for firms.  
is elastic. X

QUESTION 2:
Consider a situation where the U.S. Congress wants to place a special tax on private airplanes to increase tax revenue. This tax would only be effective in raising new tax revenues if the price elasticity of:

Your answer was correct.
Answer  Correct  
supply is elastic.  
supply is inelastic.  
demand is elastic.  
demand is inelastic. X

QUESTION 3:
Sony is considering a 10 percent price reduction on its color television sets. If the demand for sets in this price range is inelastic:

You incorrectly answered "revenues derived from color sets will increase.". Correct answer shown below.

Answer  Correct  
revenues from color sets will remain constant.  
revenues derived from color sets will decrease. X
revenues derived from color sets will increase.  
the number of television sets sold will decrease.  

QUESTION 4:
In most cases the supply curve for a perfectly competitive industry can be described as which of the following?

Your answer was correct.
Answer  Correct  
More elastic in the short run than in the long run  
More elastic in the long run than in the short run X
Downward sloping in the short run  
Perfectly inelastic in the long run  
Perfectly elastic in the short run  

QUESTION 5: The government is considering imposing a 3 percent tax on either good A or good B. In order to generate the largest revenue, the tax should be imposed on the good for which

Your answer was correct.
Answer  Correct  
demand is perfectly elastic  
demand is perfectly inelastic X
demand is unit elastic  
supply is perfectly elastic  
supply is unit elastic  

QUESTION 6:
If a union argues that a price cut will boost revenues of the firm and management argues that the opposite is true, then the price elasticity of demand is:

You incorrectly answered "unit-elastic from the union's perspective and unit-inelastic from management's perspective.". Correct answer shown below.

Answer  Correct  
unit-elastic from the union's perspective and unit-inelastic from management's perspective.  
perfectly inelastic from the union's perspective and perfectly elastic from management's perspective.  
elastic from the union's perspective~ inelastic from management's perspective. X
inelastic from the union's perspective; elastic from management's perspective.  

QUESTION 7:
The price of gold is often volatile because

You incorrectly answered "demand is relatively inelastic so changes in supply have a large effect on price.". Correct answer shown below.

Answer  Correct  
demand is relatively inelastic so changes in supply have a large effect on price.  
supply is relatively elastic so changes in demand have a large effect on price.  
demand is relatively elastic so changes in supply have a large effect on price.  
supply is relatively inelastic so changes in demand have a large effect on price. X

QUESTION 8:
The elasticity of supply for a product such as automobiles will normally be greater over a time period of:<o:p>

You incorrectly answered "1 year.". Correct answer shown below.

Answer  Correct  
1 month.  
6 months.  
1 year.  
5 years. X
6 weeks  

QUESTION 9:
A producer estimates that the price elasticity of supply for his product is +1.5. As a result of an increase in market price from $30 to $45 following an outward shift of the producer's demand curve, we could expect the producer to expand supply by

Your answer was correct.
Answer  Correct  
75% X
50%  
70%  
100%  
10%  

QUESTION 10:
If the demand for a product is elastic, then:

Your answer was correct.
Answer  Correct  
a higher tax will generate more tax revenue.  
a higher tax will generate less tax revenue. X
total revenue will decrease as price decreases.  
total revenue will remain constant as price remains constant.  

QUESTION 11: Refer to the table. Starting at an $11 price, at what price range does demand become elastic?

 
Price             Quantity demanded
 $5                            10
   4                             20
   3                             30
   2                             40
   1                             50

You incorrectly answered "$1-2". Correct answer shown below.

Answer  Correct  
$1-2  
$2-3  
$3-4 X
$4-5  
$5-10  

QUESTION 12:
Assume a 3% increase in income in the economy produces a 1% decline in the quantity demanded of good X. The outcome would be
Coefficient of Income Elasticity  /  Type of Good X is:

You incorrectly answered "positive / normal good". Correct answer shown below.

Answer  Correct  
negative / inferior good X
negative / normal good  
positive / inferior good  
positive / normal good  
negative / unrelated  

QUESTION 13:
If a business decreased the price of its product from $10 to $9 when the price elasticity of demand was inelastic, then total revenues would: <o:p>

You incorrectly answered "increase". Correct answer shown below.

Answer  Correct  
decrease X
increase  
remain unchanged  
be perfectly inelastic  

QUESTION 14:
If a store raises its prices by 20 percent and its total revenue increases by 10 percent, the demand it faces in this price range must be

You incorrectly answered "elastic". Correct answer shown below.

Answer  Correct  
inelastic X
elastic  
unit elastic  
Perfectly elastic  
Perfectly inelastic  

QUESTION 15:
An increase in the price of tickets to a popular sporting event will increase total revenue if:

Your answer was correct.
Answer  Correct  
there are many substitutes for the product.  
the ticket is consider to be a luxury.  
the demand for tickets is inelastic. X
the demand for tickets is elastic.  

QUESTION 16:
Suppose that a 20% increase in the price of normal good Y causes a 10% decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is

Your answer was correct.
Answer  Correct  
negative, and therefore these goods are substitutes.  
negative, and thus income sensitive  
negative, and therefore these goods are complements X
positive, and therefore these goods are substitutes  
positive, and therefore these goods are complements  

QUESTION 17: If the price elasticity of demand for automobiles is 2: <o:p>

Your answer was correct.
Answer  Correct  
a 10 percent decrease in price would result in a 20 percent decrease in quantity demanded.  
a 10 percent decrease in price would result in a 20 percent increase in quantity demanded. X
a 10 percent increase in price would result in a 20 percent increase in quantity demanded.  
a 10 percent increase in price would result in a 10 percent decrease in quantity demanded.  

QUESTION 18:
If the demand curve for product B shifts to the right as the price of product A declines, it can be concluded that


Your answer was correct.
Answer  Correct  
A is a superior good and B is an inferior good  
A is an inferior good and B is a superior good  
A and B are complementary goods X
A and B are substitute goods  
A and B are both inferior goods.  

QUESTION 19:
Changes in demand have a large effect on the price of gold because the:

You incorrectly answered "demand for gold is relatively elastic.". Correct answer shown below.

Answer  Correct  
supply of gold is relatively elastic.  
supply of gold is relatively inelastic. X
demand for gold is relatively elastic.  
demand for gold is relatively inelastic.  

QUESTION 20: Refer to the table. What is the price with the maximum total revenue? <o:p>

 
Price             Quantity demanded
 $5                            10
   4                             20
   3                             30
   2                             40
   1                             50

Your answer was correct.
Answer  Correct  
$2  
$3 X
$4  
$5  
$1  

QUESTION 21:
Price             Quantity demanded
  $5                            10
   4                             20
   3                             30
   2                             40
   1                             50

Refer to the above table. Starting at a $5 price, at what price range does demand become inelastic? <o:p>

Your answer was correct.
Answer  Correct  
$1-2  
$2-3 X
$3-4  
$4-5  
$3-30  

QUESTION 22:
If, when income changes, the quantity demanded of a commodity remains the same, its income elasticity of demand is equal to

(Hints: this is a basic question of micro.  If you don't understand this now, with no guessing, then you need to before you go to sleep tonight..)

You incorrectly answered "infinity". Correct answer shown below.

Answer  Correct  
+1  
-1  
zero X
infinity  

QUESTION 23: An auto rental company lowers the price of its rentals to increase its market share. The price cut increases quantity demanded, but total revenue decreases. This result suggests that over this price range, the demand for the auto rentals is:

You incorrectly answered "elastic". Correct answer shown below.

Answer  Correct  
elastic  
inelastic X
unit elastic  
perfectly elastic  

QUESTION 24:
The price elasticity of demand for a textbook is estimated to be 1 no matter what the price or quantity demanded. In this case:

Your answer was correct.
Answer  Correct  
a 10 percent increase in price will result in a 10 percent increase in the quantity demanded.  
a 10 percent increase in price will result in a 10 percent decrease in the quantity demanded. X
an increase in price will decrease the total revenue of sellers.  
a decrease in price will increase the total revenue of sellers.  

QUESTION 25:
The price of season tickets to a performing arts theater decreases by 3 percent. As a result, the quantity demanded increases by 6 percent. The price elasticity of demand for season tickets is:

Your answer was correct.
Answer  Correct  
0  
1  
2 X
3  
4  





 

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