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1.	When people have more time to respond to price changes, demand becomes
	a.	less elastic.
	b.	unitarily elastic.
	c.	neither more nor less elastic because time has no effect on demand.
	d.	more elastic.

2.	Refer to Figure 5.6. At point C the price elasticity of demand is -1. Along line segment BC of the demand curve, the demand is
	a.	elastic.
	b.	inelastic.
	c.	either elastic or inelastic depending upon whether price increases or decreases.
	d.	unitarily elastic.

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3.	Refer to Figure 5.7. Using the midpoint formula, if the price of a Gardenburger is increased from $6 to $7, the price elasticity of demand equals
	a.	-13.
	b.	-.13.
	c.	-.33.
	d.	-1.44.

4.	Refer to Figure 5.7. Using the midpoint formula, if the price of a Gardenburger is increased from $8 to $10, the price elasticity of demand equals
	a.	-9.
	b.	-.5.
	c.	-4.5.
	d.	-.036.

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5.	Refer to Figure 5.4. Assume that initially there is free trade. If the United States then imposes a 10 cent tax per bell pepper, the tax revenue generated will equal
	a.	$100,000 per day.
	b.	$600,000 per day.
	c.	$400,000 per day.
	d.	$1.4 million per day.

6.	The ABC Computer Company wants to increase the quantity of computers it sells by 5%. If the price elasticity of demand is -2.5 the company must
	a.	decrease price by 10%.
	b.	increase price by 2.0%.
	c.	decrease price by 0.5%.
	d.	decrease price by 2.0%.

7.	The more substitutes there are for a product,
	a.	the smaller the income elasticity for the product.
	b.	the less price elastic the demand for the product is.
	c.	the greater the income elasticity for the product.
	d.	the more price elastic the demand for the product is.

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8.	A firm should always set price so that the firm
	a.	is selling in either the elastic or inelastic portion of the demand curve, depending upon costs of production.
	b.	is selling in the elastic portion of the demand curve.
	c.	is selling at the point of unitary elasticity because that is where total revenue is maximized.
	d.	is selling in the inelastic portion of the demand curve.

9.	Which of the following will have the most elastic demand?
	a.	chocolate ice cream
	b.	ice cream
	c.	Ben and Jerry's chocolate ice cream
	d.	frozen desserts

10.	A restaurant owner knows that the demand for hamburgers is elastic. If she wants to increase total revenue from hamburger sales, she should
	a.	increase the price of hamburgers.
	b.	decrease the supply of hamburgers.
	c.	keep the price of hamburgers constant.
	d.	decrease the price of hamburgers.

11.	A decrease in demand for cameras would likely be caused by
	a.	an increase in the price of cameras.
	b.	an increase in the price of a complementary good.
	c.	a decrease in the price of cameras.
	d.	an increase in the price of a substitute good.

12.	As you move down a straight-line downward-sloping demand curve, the price elasticity of demand
	a.	may become more or less elastic depending on the slope of the demand curve.
	b.	becomes more elastic.
	c.	becomes more inelastic.
	d.	remains constant because the slope is constant.

13.	If the government imposes a maximum price that is above the equilibrium price,
	a.	quantity demanded will be less than quantity supplied.
	b.	the available supply will have to be rationed with a nonprice rationing mechanism.
	c.	this maximum price will have no economic impact.
	d.	demand will be greater than supply.

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14.	Refer to Figure 5.2. If the government will not allow landlords to charge more than $400 for an apartment, which of the following will happen?
	a.	The market will be in equilibrium at a price of $400.
	b.	A nonprice rationing system such as queuing must be used to ration the available supply of apartments.
	c.	Supply must eventually increase so that the market will come into equilibrium at a price of $400.
	d.	Demand must eventually decrease so that the market will come into equilibrium at a price of $400.

15.	The elasticity of labor supply is
	a.	always positive.
	b.	always zero.
	c.	either positive or negative.
	d.	always negative.

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16.	As a result of a technological breakthrough at ABC Computers, the supply curve shifted out, the equilibrium price of computers decreased, and total revenue decreased. This suggests the price elasticity of demand for computers is
	a.	perfectly elastic.
	b.	elastic.
	c.	perfectly inelastic.
	d.	inelastic.

17.	At a price of $10 the same amount of income was spent on cassette tapes as when the price of cassette tapes was $13. Therefore demand for cassette tapes is
	a.	elastic.
	b.	inelastic.
	c.	perfectly inelastic.
	d.	unitarily elastic.

18.	After a price increase, the demand for items like natural gas and home heating fuel is likely to become more elastic "as time goes by."
	a.	True
	b.	False

19.	A product with few substitutes is likely to have an elastic demand.
	a.	True
	b.	False

20.	Slope is the best measure of elasticity.
	a.	True
	b.	False

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1.	d 117
2.	a 114
3.	d 114
4.	c 114
5.	a 105
6.	d 116
7.	d 117
8.	b 116
9.	c 117
10.d 116
11.b 119
12.c 114
	13.c 101
14.b 101
15.c 119
16.d 116
17.d 116
18.True117
19.False117
20.False 109