Question

QUESTION 25

1. Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus’s

   	a.	demand for cigarettes is perfectly inelastic.
   	b.	price elasticity of demand for cigarettes is infinite.
   	c.	income elasticity of demand for cigarettes is 0.
   	d.	More than one of the above is correct.

QUESTION 26

1. The demand for a good becomes more inelastic

   	a.	as more close substitutes for it become available.
   	b.	the longer the time horizon.
   	c.	as the market is defined more broadly.
   	d.	as it is increasingly viewed as a luxury good.

QUESTION 27

1. If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

   	a.	2 percent increase in the quantity demanded.
   	b.	1.5 percent increase in the quantity demanded.
   	c.	6 percent increase in the quantity demanded.
   	d.	0.6 percent increase in the quantity demanded.

QUESTION 28

1. In which of the following situations will total revenue increase?

   	a.	Price elasticity of demand is 1.2, and the price of the good decreases.
   	b.	Price elasticity of demand is 0.5, and the price of the good increases.
   	c.	Price elasticity of demand is 3.0, and the price of the good decreases.
   	d.	All of the above are correct.

QUESTION 29

1. For which pairs of goods is the cross-price elasticity most likely to be positive?

   	a.	Halloween candy and rain coats
   	b.	pizza and college textbooks
   	c.	canoes and kayaks
   	d.	cats and cat food

QUESTION 30

1. There are fewer farmers in the United States today than 200 years ago because of

   	a.	improvements in farm technology.
   	b.	environmental programs designed to reduce soil erosion.
   	c.	increased government regulations in farming.
   	d.	an elastic demand for food.

Answer 1

25) option A)

Demand is not responsive towards any price change

26) option c)

For broadly defined goods, less Substitutes are available, so demand gets inelastic

27) option d)

%∆ in Q = -.2*-3% = +.6%

28) option a)

If demand is elastic, & price fall, TR will rise

29) option C)

For Complement good, cross price elasticity is negative

For substitutes , it is positive. ,

30)option A)