1
AP MICRO Week 4 Practice Quiz: M, 20
1. A marketing survey shows that gate receipts would
increase if the price of tickets to a summer rock
concert increased, even though the number of
tickets sold would fall. What does this imply about
the price elasticity of demand for concert tickets?
4. If a 10 percent increase in price leads to no change in
quantity demanded, the demand curve is
(A) Demand is inelastic
(C) vertical
(B) Demand is elastic
(D) horizontal
(C) Demand is unit elastic
(E) asymptotic
(A) indeterminate
(B) downward sloping
(D) Demand is perfectly inelastic
(E) Demand is perfectly elastic
2. If the price of lunch at the school cafeteria increases
and cafeteria revenue remains constant, the
elasticity of demand for a school lunch must be
5. When price elasticity of demand is less than 1, what
should a firm do if it wants to increase its total
revenue?
(A) decrease the price
(A) elastic
(B) raise the price
(B) perfectly elastic
(C) produce less
(C) unit elastic
(D) reduce costs
(D) inelastic
(E) sell more
(E) perfectly inelastic
3. If the price of a good decreases by 3 percent and
total revenue increases, the elasticity of demand for
the good could possibly be
(A) 1.3
6. When Yolanda's income increases from $40,000 to
$60,000, she increases her purchases of good X from
90 to 110. Which of the following is true? Yolanda's
income elasticity of demand for good X is
(B) 1
(A) .5 and X is a normal good
(C) 0.8
(B) .5 and X is an inferior good
(D) 0.2
(C) 2 and X is a normal good
(E) 0
(D) 2 and X is an inferior good
(E) -2 and X is an inferior good
2
AP MICRO Week 4 Practice Quiz: M, 20
7. If a 10 percent increase in income leads to a 20
percent decrease in the quantity of a good
purchased, which of the following is true? The
income elasticity of demand for the good is
10. Which factor contributes to price elasticity of
supply?
(A) 0.5 and it is a normal good
(B) Inflexibility of sellers
(B) 2 and it is a normal good
(C) Consumer expectations regarding future prices
(C) -0.5 and it is a normal good
(D) Producer tastes and preferences
(D) -2 and it is an inferior good
(E) The availability of a producer surplus
(A) Time
(E) -0.5 and it is an inferior good
8. If the cross-price elasticity of demand between two
goods is +2, it means that the two goods are
11. If a firm raises its prices by 5 percent and its total
revenue increases by 5 percent, which of the
following must be true of the price elasticity of
demand for its product? It is
(A) normal goods
(A) less than zero
(B) inferior goods
(B) greater than zero
(C) complements
(C) equal to zero
(D) substitutes
(D) greater than one
(E) elastic
(E) unitary elastic
9. When the price of a good increases, total revenue
for the sale of the good will
12. Which of the following must be true if total revenue
increases when a firm decreases price?
(A) decrease if demand is price elastic
(A) The supply is price elastic
(B) increase if demand is price elastic
(B) The supply is income elastic
(C) decrease if demand is price inelastic
(C) The supply is income inelastic
(D) increase if demand is unit elastic
(D) The demand is price elastic
(E) decrease if demand is unit elastic
(E) The demand is price inelastic
3
AP MICRO Week 4 Practice Quiz: M, 20
13. How do economists know that a good is a viable
substitute?
(A) Calculate cross-elasticity and the result is a positive
number
(B) Calculate cross-elasticity and the result is a negative
number
(C) The product is price inelastic
(D) Wait to see if the market forces of supply and
demand balance to equilibrium for the potential
substitute
(E) None of the above
14. If a store raises its prices by 20 percent and its total
revenue increases by 10 percent, the demand it
faces in this price range must be
(A) inelastic
(B) elastic
(C) unit elastic
(D) perfectly elastic
(E) perfectly inelastic
15. If a one-of-a-kind Etruscan vase is offered for sale at
an auction, which, if any, of the following correctly
shows the supply curve for the vase?
4
AP MICRO Week 4 Practice Quiz: M, 20
16. Which of the following must be true if the revenues
of wheat farmers increase when the price of wheat
increases?
19. If a 5 percent wage increase in a particular labor
market results in a 10 percent decrease in
employment, the demand for labor is
(A) The supply of wheat is price elastic.
(A) perfectly elastic
(B) The supply of wheat is income elastic.
(B) relatively elastic
(C) The supply of wheat is income inelastic.
(C) unit elastic
(D) The demand for wheat is price elastic.
(D) relatively inelastic
(E) The demand for wheat is price inelastic.
(E) perfectly inelastic
17. Which of the following is true in the elastic range of
a firm’s demand curve?
(A) The firm should expand output to increase economic
profits.
(B) An increase in price will also lead to an increase in
total cost.
(C) A decrease in price will likely lead to an increase in
total revenue.
(D) Marginal revenue is negative.
(E) The firm is maximizing total revenue.
18. To alleviate a financial crisis, a university increases
student fees. This action will increase university
revenues if the price elasticity of demand for
university education is
(A) inelastic
(B) unit elastic
(C) elastic
(D) equal to the price elasticity of supply
(E) equal to one
20. If the income elasticity of demand for good X is
negative and the cross-price elasticity of demand
between good X and good Y is negative, which of the
following must be true of good X?
(A) X is a normal good and is a substitute for Y.
(B) X is a normal good and is a complement to Y.
(C) X is an inferior good and is a substitute for Y.
(D) X is an inferior good and is a complement to Y.
(E) X is a normal good and Y is an inferior good.
21. Assume that the price of good X decreases from $10
to $9 per unit and that the quantity demanded of
good X increases from 25 to 30 units. In this price
range, the demand for good X is
(A) inelastic
(B) elastic
(C) unit elastic
(D) perfectly inelastic
(E) perfectly elastic
Price Elasticity of Demand = % change in quantity demanded
% change in price
Name
Possible Values
Perfectly inelastic demand
0
*take absolute value
Significance
Price has no effect on quantity demanded (vertical
demand curve)
Between 0 and 1
Unit-elastic demand
Greater than 1,
less than ∞
∞
A rise in price reduces total revenue.
A rise in price causes quantity demanded to fall to 0.
A fall in price leads to an infinite quantity demanded
(horizontal demand curve).
Cross-price elasticity of demand =
Complements
Quantity demanded of one good rises when the price
of another rises.
= %∆ in quantity demanded
%∆ in income
Inferior good
Quantity demanded rises when income rises, and
more rapidly than income.
Normal good, income-elastic
Price elasticity of supply =
Perfectly inelastic supply
Greater than 0,
less than ∞
Perfectly elastic supply
Ordinary upward-sloping supply curve.