choose the best answer 12. If, from a position of stable equilibrium, the market supply of a commodity decreases whilethe market demand remains unchanged, (a) the equilibrium price falls, (b) the equilibriumquantity rises, (c) both the equilibrium price and the equilibrium quantity decrease, or (d) theequilibrium price rises but the equilibrium quantity falls.13. If the percentage increase in the quantity of a commodity demanded is smaller than thepercentage fall in its price, the coefficient of price elasticity of demand is (a) greater than 1, (b)equal to 1, (c) smaller than 1, or (d) zero.14. If the quantity of a commodity demanded remains unchanged as its price changes, thecoefficient of price elasticity of demand is (a) greater than 1, (b) equal to 1, (c) smaller than 1, or(d) zero.15. Arc elasticity gives a better estimate of point elasticity of a curvilinear demand curve as (a)the size of the arc becomes smaller, (b) the curvature of the demand curve over the arc becomesless, (c) both of the above, or (d) neither of the above.16. If a straight-line demand curve is tangent to a curvilinear demand curve, the elasticity of thetwo demand curves at the point of tangency is (a) the same, (b) different, (c) can be the same ordifferent, or (d) it depends on the location of the point of tangency.17. An increase in the price of a commodity when demand is inelastic causes the totalexpenditures of consumers of the commodity to (a) increase, (b) decrease, (c) remain unchanged,or (d) any of the above.18. A fall in the price of a commodity whose demand curve is a rectangular hyperbola causestotal expenditures on the commodity to (a) increase, (b) decrease, (c) remain unchanged, or (d)any of the above.19. A negative income elasticity of demand for a commodity indicates that as income falls, theamount of the commodity purchased (a) rises, (b) falls, (c) remains unchanged, or (d) any of theabove.20. If the income elasticity of demand is greater than 1, the commodity is (a) a necessity, (b) aluxury, (c) an inferior good, or (d) a nonrelated good.21. If the amounts of two commodities purchased both increase or decrease when the price ofone changes, the cross elasticity of demand between them is (a) negative, (b) positive, (c) zero,or (d) 1.22. If the amount of a commodity purchased remains unchanged when the price of anothercommodity changes, the cross elasticity of demand between them is (a) negative, (b) positive (c)zero, or (d) 1. 1. In drawing an individual's demand curve for a commodity, all but which one of the followingare kept constant?(a) The individual's money income, (b) the price of other commodities, (c) the price of thecommodity under consideration, or (d) the tastes of the individual.2. The individual's demand curve for a commodity represents (a) a maximum boundary of theindividual's intentions,(b) a minimum boundary of the individual's intentions, (c) both a maximum and a minimumboundary of the individual's intentions, or (d) neither a maximum nor a minimum boundary ofthe individual's intentions.3. A fall in the price of a commodity, holding everything else constant, results in and is referredto as (a) an increase in demand, (b) a decrease in demand, (c) an increase in the quantitydemanded, or (d) a decrease in the quantity demanded.4. When an individual's income rises (while everything else remains the same), that person'sdemand for a normal good (a) rises, (b) falls, (c) remains the same, or (d) any of the above.5. When an individual's income falls (while everything else remains the same), that person'sdemand for an inferior good (a) increases, (b) decreases, (c) remains unchanged, or (d) we cannotsay without additional information.6. When the price of a substitute of commodity X falls, the demand for X (a) rises, (b) falls, (c)remains unchanged, or (d) any of the above.7. When both the price of a substitute and the price of a complement of commodity X rise, thedemand for X (a) rises, (b) falls, (c) remains unchanged, or (d) all of the above are possible.8. In drawing a farmer's supply curve for a commodity, all but which one of the following arekept constant? (a) Technology, (b) the prices of inputs, (c) features of nature such as climate andweather conditions, or (d) the price of the commodity under consideration.9. A producer's positively sloped supply curve for a commodity represents (a) a maximumboundary of the producer's intentions, (b) a minimum boundary of the producer's intentions, (c)in one sense a maximum and in another sense a minimum boundary of the producer's intentions,or (d) none of the above.10. If the supply curve of a commodity is positively sloped, a rise in the price of the commodity,ceteris paribus, results in and is referred to as (a) an increase in supply, (b) an increase in thequantity supplied, (c) a decrease in supply, or (d) a decrease in the quantity supplied.11. When the market supply curve for a commodity is negatively sloped, we have a case of (a)stable equilibrium, (b) unstable equilibrium, or (c) any of the above is possible and we cannotsay without additional information.

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