Principles of Microeconomics Signature:
(Econ 002) Printed name:
Drake University, Summer 2001
William M. Boal ID number:
QUIZ #3: VERSION B
“Elasticities”
INSTRUCTIONS: This quiz is closed-book, closed-notes, but calculators are permitted. Numerical answers, if
rounded, must be correct to at least 3 significant digits. Point values for each question are noted in brackets.
Maximum total points are 100.
I. Multiple choice:
Circle the one best answer to each question. [4 pts each: 16 pts total]
(1) The supply curve in the graph below is
a. perfectly elastic.
b. perfectly inelastic.
c. unitary elastic.
d. Cannot be determined from information given.
(2) Suppose the price elasticity of demand for internet
service is -3. If the price of internet service is falls,
the revenue received by internet service providers
will
a. decrease.
b. remain constant.
c. increase.
d. fluctuate randomly.
(3) If buyers or consumers have more time to
anticipate and adjust to a price change, their demand
is
a. more elastic.
b. less elastic.
c. downward-sloping.
d. Time for adjustment does not affect elasticity.
(4) Which good is likely to have the most elastic
demand?
a. Libby’s brand tomato juice.
b. All tomato juice.
c. All juice.
d. Demand for all three must have the same
elasticity.
II. Problems:
Insert your answer to each question below in the box provided. Feel free to use the margins for
scratch workonly the answers in the boxes will be graded. Work carefullypartial credit is not normally given for
questions in this section.
(1) [12 pts] Suppose that when the price of corn is $0.50 per pound, 300 pounds are sold per week; but when the
price is $1.10 per pound, 180 pounds are sold per month.
a. Compute the price elasticity of demand using the so-called arc formula.
b. Suppose potatoes were measured in kilograms rather than pounds. Would
the elasticity increase, decrease, or remain the same?
c. Suppose the price of potatoes were measured in cents rather than dollars.
Would the elasticity increase, decrease, or remain the same?
P
Q
Supply
