MCQ (Chapter#3)

1) When the quantity of coal is measured in kilograms instead of pounds, the demand for coal becomes
A) less elastic. B) more elastic.
C) undefined. D) neither more nor less elastic.
2) A decrease in the price of eggs from $1.50 to $1.30 per dozen resulted in an increase in egg purchases in two cities. In
Philadelphia, daily egg purchases increased from 6000 to 8000 dozens; in nearby Dover, Delaware, daily egg purchases
increased from 300 to 400 dozens. The price elasticity of demand is therefore
A) the same in Philadelphia as in Dover.
B) greater in the smaller city as would be expected.
C) lower in the smaller city as would be expected.
D) certainly affected by population differences in different markets.

3) The price elasticity of demand for oil is estimated at 0.05. This value means a 10 percent increase in the
A) price of oil will increase the quantity of oil demanded by 0.5 percent.
B) quantity of oil demanded will result from a 0.5 percent decrease in the price of oil.
C) quantity of oil demanded will result from a 0.5 percent increase in the price of oil.
D) price of oil will decrease the quantity of oil demanded by 0.5 percent.
4) If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price
elastic, she should
A) raise her price because she knows that the quantity demanded will also increase.
B) lower her price because she knows that the percentage increase in the quantity demanded will be greater than the
percentage decrease in price.
C) raise her price because she knows that the percentage decrease in the quantity demanded will be smaller than the
percentage increase in price.
D) lower her price to increase the demand and shift the demand curve rightward.

5) The marketing people for AT&T believe that if they lower the price of long-distance phone calls by 5 percent, their
quantity demanded will increase by 15 percent. If they are correct in their belief, then
A) the demand for long-distance phone calls is price inelastic.
B) the total revenue from long-distance phone calls will decrease if they lower the price.
C) the total revenue from long-distance phone calls will increase if they lower the price.
D) the demand for long-distance phone calls is income elastic.
6) Suppose Clem's Chemical Company wants to increase its total revenue. If there are few substitutes for Clem's
Chemicals,
A) Clem should increase the price of his chemicals.
B) Clem will not be able to change the price of his chemicals.
C) Clem should decrease the price of his chemicals.
D) the demand for chemicals is elastic.

7) Toothpaste and toothbrushes are complements, so the ________ elasticity of demand is ________.
A) cross; negative
B) cross; positive
C) income; negative
D) income; positive
8) The cross-elasticity of demand between Homer's Holesome Doughnuts and Krusty's Krispy Crullers is 5.0, which
indicates that Homer's doughnuts and Krusty's crullers are
A) complements and the relationship between the two goods is weak (that is, the quantity demanded of doughnuts is not
very responsive to changes in the price of crullers).
B) substitutes and the relationship between the two goods is strong (that is, the quantity demanded of doughnuts is very
responsive to changes in the price of crullers).
C) complements and the relationship between the two goods is strong (that is, the quantity demanded of doughnuts is
very responsive to changes in the price of crullers).
D) substitutes and the relationship between the two goods is weak (that is, the quantity demanded of doughnuts is not
very responsive to changes in the price of crullers).