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MBA 505 Chapter 4 Quiz
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1. A market
a. makes possible the exchange of goods and services
between buyers and sellers.
b. refers only to a specialized place or service where goods
and services are exchanged.
c. refers only to a formally organized place where a well-defined
commodity is always traded.
d. refers only to a localized place or service that facilitates
the exchange of goods and services.
e. refers to both large and small places where poorly defined
commodities are traded.
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2. Which of the following is not held constant when constructing
a demand curve for good X?
a. Consumer income
b. Consumer tastes
c. Price of good X
d. Prices of other goods
e. Consumer expectations
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3. Which of the following would not shift the demand curve for
golf balls?
a. An increase in the price of golf clubs
b. A decrease in the popularity of golf
c. An increase in the number of golfers
d. An expected increase in the price of golf balls
e. A decrease in the price of golf balls
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4. Tennis rackets and tennis balls are
a. independent goods.
b. complementary goods.
c. substitute goods.
d. economic bads.
e. free goods.
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5. According to the law of supply, if the price of electric ranges
increased, everything else help constant,
a. the supply of electric ranges would decrease.
b. the demand for gas ranges would decrease.
c. the demand for electric ranges would increase.
d. the supply of electric ranges would increase.
e. the quantity supplied of electric ranges would increase.
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6. Which of the following would not affect the supply of automobiles?
a. An increase in the price of steel
b. An improvement in the technology of automobile manufacturing
c. An increase in the price of motor oil
d. A decrease in the number of automobile producers
e. An increase in the productivity of workers
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7. Which of the following is not a determinant of supply?
a. The prices of resources or inputs
b. The price of consumer goods or services, or outputs
c. The number of producers in the market
d. The technology available
e. The expectations of producers
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Price
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Quantity Demanded
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Quantity Supplied
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$45
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350
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0
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50
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300
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5
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55
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250
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50
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60
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200
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100
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65
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150
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150
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70
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100
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200
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8. Refer to the table above. If a price floor of
$50 is imposed, which of the following is incorrect?
a. At a price of $50, a shortage will result equal to
250 units.
b. At a price of $50, quantity supplied equals 5 units.
c. Equilibrium price is not attainable.
d. At a price of $50, market forces will work to increase the
price.
e. The price floor is ineffective.
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9. Refer to the table above. If a price floor of $70 is
imposed,
a. a shortage will result equal to 100 units.
b. a shortage will result equal to 200 units.
c. the price will move to its equilibrium level.
d. producers will not supply the market.
e. a surplus will result equal to 100 units.
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10. This month Fritter Farm finds that it has been able to sell
200 fritters at a price of $1 per fritter. Last month, the firm was
able to sell only 150 fritters at $1 per fritter. What most likely happened
over the month?
a. Demand increased.
b. Demand decreased.
c. Supply decreased.
d. Quantity supplied decreased.
e. Quantity demanded increased.
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11. If supply and demand for a good both decreased, which of
the following is true?
a. Equilibrium price will rise, but we cannot say for
sure what will happen to equilibrium quantity.
b. Equilibrium price will fall, but we cannot say for sure what
will happen to equilibrium quantity.
c. Equilibrium quantity will rise, but we cannot say for sure
what will happen to equilibrium price.
d. Equilibrium quantity will fall, but we cannot say for sure
what will happen to equilibrium price.
e. Equilibrium price and equilibrium quantity will both fall.
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12. The price elasticity of demand for a product measures
a. how much the price changes, given a change in demand.
b. the slope of the demand curve for that product.
c. changes in demand.
d. how responsive consumers are to a price change.
e. how responsive producers are to a price change.
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13. A product faces elastic demand if
a. there are few substitutes, few competitors producing the
product, and a short time period is involved.
b. consumers are very responsive to a change in the price of the product.
c. consumers are not very responsive to changes in the price of the
product.
d. the price rising by some percentage causes the quantity demanded
to fall by a smaller percentage.
e. there is a positive relationship between price and total revenue.
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14. If the price elasticity of demand is 4, a 1 percent increase in
the price will cause the quantity demanded to __________ by __________
percent.
a. increase, 0.25
b. decrease, 0.25
c. increase, 4
d. decrease, 25
e. decrease, 4
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15. Assume 200 videotapes are rented when the price is $4.00. If the
price drops by $0.80, the number of videotapes rented increase to 220.
Which of the following statements is true about the point price elasticity
of demand?
a. the elasticity of demand is 5.
b. demand is inelastic.
c. demand is elastic.
d. demand is unit-elastic.
e. the elasticity of demand is 2.
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16. To calculate a price elasticity of demand,
a. divide the percent change in the price by the percent change
in the quantity demanded.
b. multiply the percent change in the quantity demanded by the percent
change in the price.
c. calculate the slope of the demand curve.
d. multiply the percent change in the price by the percent change in
the quantity demanded.
e. divide the percent change in the quantity demanded by the percent
change in the price.
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17. If demand is unit-elastic, a 25 percent increase in the price will
result in
a. a 25 percent change in total revenue.
b. no change in the quantity demanded.
c. a 100 percent decrease in the quantity demanded.
d. a 25 percent decrease in the quantity demanded.
e. a 25 percent increase in the quantity demanded.
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Use the information in the following table to answer questions 18-24.
Use 1999 as the starting point unless otherwise specified.
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date
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price of pens
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quantity of pens demanded
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quantity
of pens supplied |
consumers' average income
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price of pencils
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January 1999
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$1.25 each
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1100 gross
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1200 gross
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$34,000/year
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$0.35 each
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January 2000
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$2.50 each
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750 gross
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800 gross
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$42,000/year
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$0.70 each
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18. What is the point price elasticity of demand for pens?
a. -0.33
b. -1.35
c. 0.75
d. 0.57
e. 0.32
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19. What is the arc elasticity of demand for pens?
a. -0.33
b. -1.35
c. 0.75
d. 0.57
e. 0.32
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20. What is the cross-price elasticity of demand for pens with respect
to pencils?
a. -0.33
b. -1.35
c. 0.75
d. 0.57
e. 0.32
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21. What kind of goods are pens and pencils, based on the cross-price
elasticity?
a. inferior
b. complements
c. normal
d. substitutes
e. none of the above
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22. What is the income elasticity of demand for pens?
a. -0.33
b. -1.35
c. 0.75
d. 0.57
e. 0.32
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23. What kind of good are pens, based on the income elasticity?
a. inferior
b. complements
c. normal
d. substitutes
e. none of the above
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24. What is the supply elasticity for pens?
a. -0.33
b. -1.35
c. 0.75
d. 0.57
e. 0.32
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Answers
1a,2c,3e,4b,5e,6c,7b,8e,9e,10a,11d,12d,13b,14e,15b,16e,17d,18e,19d,20a,21b,22b,23a,24a.
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