Multiple Choice Answers

If the elasticity of demand for electricity is 0.13, the demand for electricity is:
A. inelastic.
B. elastic.
C. perfectly inelastic.
D. unit elastic.

The Honolulu tourism commission recently proposed a 7% tax on hotel rooms to pay for an outdoor amphitheater. A Purdue University economist estimates that the tax would result in a 6% increase in the price of hotel rooms. If the elasticity of demand is 1.33, what is the expected change in quantity demanded?
A. 12.5%
B. -12.5%
C. 8%
D. -8%
If the price elasticity of demand for a good is inelastic, a price change causes:
A. a zero change in quantity demanded.
B. an infinite change in quantity demanded.
C. a more than proportionate change in quantity demanded.
D. a less than proportionate change in quantity demanded.

A supply curve that intersects the horizontal (quantity) axis is:
A. inelastic.
B. elastic.
C. perfectly elastic.
D. unit elastic.
If supply is highly inelastic and demand shifts to the right:
A. price will likely rise significantly; quantity hardly changes at all.
B. price will hardly change at all; quantity will rise significantly.
C. price will rise significantly as will quantity.
D. price and quantity will hardly change at all.
Along a straight-line demand curve, total revenue is the highest when elasticity of demand is:
A. zero.
B. one.
C. infinity.
D. between zero and one.

If the demand for agricultural output is highly inelastic, an improvement in the technology used in the agricultural industry will most likely cause a:
A. small drop in the price of agricultural output combined with a small increase in quantity.
B. small drop in the price of agricultural output combined with a large increase in quantity.
C. large drop in the price of agricultural output combined with a small increase in quantity.
D. large drop in the price of agricultural output combined with a large decrease in quantity.

the Honolulu tourism commission recently proposed a 7% tax on hotel rooms to pay for an outdoor amphitheater. A Purdue University economist estimates that the tax would result in a 4% increase in price and an 8% drop in the quantity of hotel rooms demanded. As a result of the tax, the total spent on hotels will:
A. rise because demand is elastic.
B. decline because demand is elastic.
C. rise because demand is inelastic.
D. decline because demand is inelastic.

College students tend to eat more ramen noodles than recent college graduates. A primary reason for this is that:
A. ramen noodles are a normal good.
B. ramen noodles are an inferior good.
C. ramen noodles are a luxury good.
D. ramen noodles are scarce.

Refer to the graph above. The approximate elasticity of supply at point C is:
A. 5/3
B. 1/2
C. 3/5
D. 2

Refer to the graph above. The approximate elasticity of segment AB is:
A. 1/3
B. 2/3
C. 1/2
D. 3/2