Download Practice Questions: Supply and Demand, Elasticity

Practice Questions: Supply and Demand, Elasticity
1) If each 10 percent increase in the price of gasoline reduces by 2 percent the quantity
purchased, the price elasticity of demand for gasoline is
A) 5.
B) 12.
C) .2
D) 8.
E) 20.
2) If the elasticity of demand is -2 and a hurricane destroys 25% of the cranberry crop then the
price of cranberries will increase by ______%.
3) If the university administration plans to cut tuition charges in the hope of attracting more
students and thereby increasing tuition revenues, we know
A) they cannot succeed because of the law of demand.
B) they are assuming an elastic demand.
C) they are assuming an inelastic demand.
D) they will only succeed if more students can be enrolled at no cost.
E) they must be running in the red.
4) If land suitable for growing corn is also suitable for growing soybeans, the discovery that
soybean oil prevents cancer will
A) raise the cost of growing corn.
B) reduce the cost of growing corn.
C) decrease the demand for corn.
D) increase the supply (curve) of soybeans.
E) have no effect on the cost of growing corn.
5) What will be the principal and most immediate effect on the supply curve or demand curve for
raw COTTON of new EPA regulations prohibiting the use of certain pesticides and herbicides
widely used by cotton farmers?
A) decrease in demand
B) increase in supply
C) increase in demand
D) decrease in supply
6) What will be the most likely effect on the price and quantity sold of COTTON of the
development of a low-cost process for treating cotton cloth so that it dries wrinkle-free?
A)
B)
C)
D)
increase in price, decrease in quantity
decrease in price, increase in quantity
increase in price, increase in quantity
decrease in price, decrease in quantity