### Microeconomics Practice Test - 3: Measurement of Elasticities

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1. If the percentage increase in the quantity of a commodity demanded is smaller than the percentage fall in its price, the coefficient of price elasticity of demand is

1. greater than 1

2. equal to 1

3. smaller than 1

4. zero

2. If the quantity of a commodity demanded remains unchanged as its price changes, the coefficient of price elasticity of demand is

1. greater than 1

2. equal to 1

3. smaller than 1

4. zero

3. Arc elasticity gives a better estimate of point elasticity of a curvilinear demand curve as

1. the size of the arc becomes smaller

2. the curvature of the demand curve over the arc becomes less

3. both of the above

4. neither of the above

4. If a straight-line demand curve is tangent to a curvilinear demand curve, the elasticity of the two demand curves at the point of tangency is

1. the same

2. different

3. can be the same or different

4. it depends on the location of the point of tangency

5. An increase in the price of a commodity when demand is inelastic causes the total expenditures of consumers of the commodity to

1. increase

2. decrease

3. remain unchanged

4. any of the above

6. A fall in the price of a commodity whose demand curve is a rectangular hyperbola causes total expenditures on the commodity to

1. increase

2. decrease

3. remain unchanged

4. any of the above

7. A negative income elasticity of demand for a commodity indicates that as income falls, the amount of the commodity purchased

1. rises

2. falls

3. remains unchanged

4. any of the above

8. If the income elasticity of demand is greater than 1, the commodity is

1. a necessity

2. a luxury

3. an inferior good

4. a nonrelated good

9. If the amounts of two commodities purchased both increase or decrease when the price of one changes, the cross elasticity of demand between them is

1. negative

2. positive

3. zero

4. 1

10. If the amount of a commodity purchased remains unchanged when the price of another commodity changes, the cross elasticity of demand between them is

1. negative

2. positive

3. zero

4. 1

11. es for a positively sloped straight-line supply curve that intersects the price axis is

1. equal to zero

2. equal to 1

3. greater than 1

4. constant

12. Which of the following elasticities measure a movement along a curve rather than a shift in the curve?

1. The price elasticity of demand

2. The cross elasticity of demand

3. The income elasticity of demand

4. The price elasticity of supply