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Chapter ThreeSelf-Test: Multiple-Choice Questions1.The price elasticity of demand will be greater whena.the time period is shorter.b.there are fewer substitutes for the good.c.the good is considered a necessity rather than a luxury.d.the item represents a larger share of consumers’ budgets.2.For which of the following goods is demand likely to be most inelastic?a.Medical careb.Sony CD playerc.Air travel on United Airlinesd. Honda Accord automobile3.Suppose that government officials are contemplating a gasoline tax and a tax on energy that includes gasoline, natural gas, coal, and electricity. Assuming that the objective is to maximize total tax revenue, the gasoline tax will raisea.more revenue because the demand for gasoline is more elastic than the demand for energy.b.more revenue because the demand for gasoline is less elastic than the demand for energy.c.less revenue because the demand for gasoline is more elastic than the demand for energy.d.less revenue because the demand for gasoline is less elastic than the demand for energy.4.If the government imposes a 5-percent tax on airline tickets and air carriers are able to increase ticket prices by the full amount of the tax, we would expect the price elasticity of demand for airline tickets to bea.perfectly elastic.b.relatively elastic.c.relatively inelastic.d.perfectly inelastic.5.If the government imposes a ceiling on rent charged for private apartments and the ceiling is set below the market equilibrium rent, we would expecta.a surplus of rental apartments in the immediate future.b.an increase in the profits of landlords.c.a decrease in housing discrimination against the poor.d.some rental apartments to be abandoned or poorly maintained by landlords.6.If the price elasticity of demand for automobiles is 0.8, a 10-percent increase in the price of automobiles would cause the quantity demanded to decline bya.2 percent.b.4 percent.c.8 percent.d.12 percent.7.Total revenue will increase if pricea.decreases and the elasticity of demand equals 0.6.b.decreases and the elasticity of demand equals 1.0.c.increases and the elasticity of demand equals 0.3.d.increases and the elasticity of demand equals 2.0.8.If the state of California levies a tax of 50 cents per pack on the sale of cigarettes in order to increase tax revenues, it will realize the most revenue if the demand for cigarettes isa.highly elastic.b.somewhat elastic.c.highly inelastic.d.somewhat inelastic.9.If the federal government levies a price floor on wheat, it may also have toa.produce some of the wheat itself.b.purchase the surplus wheat.c.initiate programs to reduce demand in the private sector.d.initiate programs to increase supply in the private sector.10.When the supply curve of corn shifts to the right, total revenue willa.increase only if demand is relatively elastic.b.increase only if demand is relatively inelastic.c.decrease only if demand is relatively elastic.d.decrease only if demand is perfectly elastic.Answers to Multiple-Choice Questions1. d2. a3. c4. d5. d6. c7. c8. c9. b10. a ................
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