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```					Grosse Pointe South

AP Micro

Chapter 20 Practice Test

1. The price elasticity of demand deals with:

a. the effect of price changes on quantity supplied.

b. the effect of price changes on supply.

c. the effect of quantity changes on price.

d.the effect of price changes on quantity demanded.

e. the effect of quantity changes on supply.

2. Suppose that when the manager of a local movie theater raises her price from \$7.50 to \$8.50
total revenue falls. This means that

a. the supply of movie tickets is inelastic.

b. the demand for movie tickets is elastic.

c.the demand for movie tickets is inelastic.

d. the supply of movie tickets is elastic.

e. Cannot be determined from the information provided.

3. The less responsive consumers are to a price change, then

a. the more price elastic is the demand curve.

b. the more price elastic is the supply curve.

c. the more income elastic is the demand curve.

d. the more price inelastic is the demand curve.

e. None of these.
Grosse Pointe South

AP Micro

Chapter 20 Practice Test

4. If the price elasticity of demand is equal to 4, a 1 percent increase in price will cause the
quantity demanded to __________ by __________ percent.

a. decrease; 25

b. decrease; 4

c. increase; 1/4

d.decrease; 1/4

e. increase; 4

5. If the demand for corn is elastic, then,

a. the price elasticity of demand for corn is greater than one.

b. a decrease in price will increase total revenue for corn producers.

c. an increase in price will reduce total revenue for corn producers.

d. there are many substitutes in the consumption of corn.

e. All of these.

6. Suppose 200 videotapes are rented when the price is \$4. If the price drops by \$0.80, the
number of videotapes rented increases to 220. Which of the following statements about the non-
arc price elasticity of demand is true?

a. Demand is inelastic.

b. Demand is elastic.

c. The elasticity of demand is equal to 5.

d. The elasticity of demand is equal to 2.

e.Demand is unit-elastic.
Grosse Pointe South

AP Micro

Chapter 20 Practice Test

7. If a 50 percent increase in the price of pizza results in a 25 percent decrease in the quantity
demanded of pizza, then the elasticity of demand for pizza is

a. equal to 2 and is inelastic.

b. equal to 2 and is elastic.

c. equal to 1/2 and demand is inelastic.

d. equal to 1/2 and demand is elastic.

e.Cannot be determined from the information provided.

8. Suppose that technological advances increase the number of substitutes available for a
product. Then,

a.the demand for that product is likely to become less price elastic.

b. the supply for that product is likely to become less price elastic.

c.the demand for that product is likely to become more price inelastic.

d. the demand for that product is likely to become more price elastic.

9. If 100 units of product L are sold at a unit price of \$10 and only 25 units are sold at a unit
price of \$20, one can conclude that demand for L is (using midpoint)

a. elastic.

b. inelastic.

c. of unitary elasticity.

d. infinitely elastic.

e.perfectly inelastic.
Grosse Pointe South

AP Micro

Chapter 20 Practice Test

10. If demand is perfectly inelastic, then

a.the elasticity of demand is 1.

b. the demand curve will be a horizontal line.

c. the elasticity of demand is –1.

d. quantity demanded does not change when price changes.

e. the demand curve will be nonexistent.

11.

Referring to the figure above, the demand curve B compared to the demand curve C is

a. less elastic.

b.varies from being more elastic to being less elastic.

c. less than 1.

d. equal to zero.

e.more elastic.
Grosse Pointe South

AP Micro

Chapter 20 Practice Test

12. If because of decreased prices of fuel oil and natural gas, electric rates were reduced by 15
percent and the quantity demanded did not change, one could conclude that in the short run the
demand for electricity is

a. unitary elastic.

b. relatively inelastic.

c. relatively elastic.

d. perfectly elastic.

e. perfectly inelastic.

13. Along a straight-line demand curve, in what range is demand most elastic?

a. At the midpoint of the demand curve.

b. At the lower portion of the demand curve, below the midpoint.

c. At the horizontal intercept of the demand curve.

d. At the upper portion of the demand curve, above the midpoint.

e. None of these.

14. The movie theater recognizes that demand for tickets to its matinee movies is quite elastic.
To increase its sales it should

a. lower the ticket price.

b. realize it can’t increase sales and simply stop showing the matinees.

c. reduce the price of popcorn and raise the price of soda-pop.

d.increase the price of popcorn.

e. raise the ticket price.
Grosse Pointe South

AP Micro

Chapter 20 Practice Test

15. When economists refer to price discrimination in a certain market, they mean

a. the common business strategy of taking advantage of the consumer’s general lack of

b. illegal use of unfair business practices.

c. because of the existence of different price elasticities of demand, charging different customers
different prices for the same product guarantees that a firm’s profit will increase.

d.because of the existence of different price elasticities of demand, charging different customers
different prices for the same product can increase a firm’s total revenue.

e. illegal use of market power.

16. Which of the following goods would be expected to have the highest price elasticity of
demand?

a. Soda-pop

b. Hamburger

c. Coffee

d.Automobile

e. Toothpaste

17. American children often eat peanut butter and jelly sandwiches for lunch. Since they are
often used together, peanut butter and jelly are

a. complements and have a positive cross-price elasticity.

b. hated by most American children.

c. substitutes and have a negative cross-price elasticity.

d. complements and have a negative cross-price elasticity.

e. substitutes and have a positive cross-price elasticity.
Grosse Pointe South

AP Micro

Chapter 20 Practice Test

18. If a 10 percent increase in the price of good Y brings forth a 25 percent increase in the
quantity demanded of good X, then the cross-price elasticity of demand is equal to ________ ,
and good Y and good X are ________.

a.unit-elastic; not related

b. 2.5; substitutes

c. 0.4; substitutes

d. 0.4; complements

e. 2.5; complements

19. Which of the following goods is likely to have an income elasticity which is less than zero?

a.A dinner at a French restaurant

b. A state-of-the-art cellular telephone

c. A box of generic macaroni and cheese dinner

d. A beach house

e. A luxury yacht

20.

In the table above, what is the income elasticity of demand for automobiles (using the arc
elasticity formula)?

a.–3/5

b. 5/3

c. 3/5

d. –5/3

e. Approaching zero
Grosse Pointe South

AP Micro

Chapter 20 Practice Test
Grosse Pointe South

AP Micro

Chapter 20 Practice Test

Reference: [39.1.8]
[1] [D]

Reference: [39.1.10]
[2] [B]

Reference: [39.1.12]
[3] [D]

Reference: [39.1.28]
[4] [B]

Reference: [39.1.16]
[5] [E]

Reference: [39.1.29]
[6] [A]

Reference: [39.1.32]
[7] [C]

Reference: [39.1.40]
[8] [D]

Reference: [39.1.42]
[9] [A]

Reference: [39.1.55]
[10] [D]

Reference: [39.1.59]
[11] [A]

Reference: [39.1.70]
[12] [E]

Reference: [39.1.76]
[13] [D]
Grosse Pointe South

AP Micro

Chapter 20 Practice Test

Reference: [39.2.115]
[14] [A]

Reference: [39.2.150]
[15] [B]

Reference: [39.3.191]
[16] [A]

Reference: [39.4.205]
[17] [D]

Reference: [39.4.212]
[18] [B]

Reference: [39.4.231]
[19] [C]

Reference: [39.4.241]
[20] [C]

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