TRUE or FALSE. Directions: Read the sentences carefully.

Write TRUE if the statement is

correct and FALSE if the statement is incorrect.
1. Elasticity of demand refers to the change in demand when there is a change in another factor
such as price or income [TRUE]
2. If demand for a good or service is static even when the price changes, demand is said to be
inelastic [TRUE]
3. Examples of elastic goods include gasoline, while inelastic goods are items like canned
goods and vitamin C tablets. [FALSE]
4. The law of demand states that “elasticity shows how much a good or service is demanded
relative to its movement in price”. [TRUE]
5. Inelastic demand is when a demanded quantity for masks changes by a greater percentage
compared to its percentage change in price [FALSE]
6. The opposite of a market economy is a planned economy, where investment and production
decisions are decided by the government. [TRUE]
7. Unit elastic is when a percentage change in demand equals the price. [TRUE]
8. A mango fruit with an elastic demand gets more sales when its price drops slightly. When its
price goes up, it stays longer in the box. [TRUE]
9. The demand curve shows how quantity demanded for apple responds to price changes. The
flatter the curve, the more elastic is the demand for an apple. [TRUE]
10. The midpoint elasticity is greater than 1. [FALSE]

Price elasticity of demand measures responsiveness of

A. Quantity demanded to changes in price. /
B. Quantity demanded to changes in income.
C. Price to changes in quantity demanded.
D. Price to changes in demand.

If the price elasticity of demand is 0.33, then,

A. Demand is inelastic.
B. Demand is inelastic over that price range. /
C. Demand is elastic.
D. Demand is elastic over that price range.
Which of the following is not a type of market structure?
A. Competitive monopoly /
B. Oligopoly
C. Perfect competition
D. All of the above are types of market structures.

If a firm sells its output on a market that is characterized by many sellers and buyers, a
homogeneous product, unlimited long-run resource mobility, and perfect knowledge, then the
firm is a
A. A monopolist.
B. An oligopolist.
C. A perfect competitor. /
D. A monopolistic competitor.

If a firm sells its output on a market that is characterized by a single seller and many buyers of a
homogeneous product for which there are no close substitutes and barriers to long-run resource
mobility, then the firm is
A. A monopolist.
B. An oligopolist.
C. A perfect competitor.
D. A monopolistic competitor /

What is the difference between perfect competition and monopolistic competition?

A. Perfect competition has a large number of small firms while monopolistic competition does
not.
B. In perfect competition, firms produce identical goods, while in monopolistic competition, firms
produce slightly different goods. /
C. Perfect competition has no barriers to entry, while monopolistic competition does.
D. Perfect competition has barriers to entry while monopolistic competition does not.

The market type known as perfect competition is

A. Almost free from competition and firms earn large profits.
B. Highly competitive and firms find it impossible to earn an economic profit in the long run. /
C. Dominated by fierce advertising campaigns.
D. Marked by firms continuously trying to change their products so that consumers prefer their
product to their competitors' products.

Which of the following is different about perfect competition and monopolistic competition?
A. Firms in monopolistic competition compete on their product's price as well as its quality and
marketing. /
B. In monopolistic competition, entry into the industry is unblocked.
C. Perfect competition has a large number of independently acting sellers.
D. Only firms in monopolistic competition can earn an economic profit in the short run.

Which describes a barrier to entry?

A. Anything that protects a firm from the arrival of new competitors /
B. A government regulation that bars a monopoly from earning an economic profit
C. Something that establishes a barrier to expanding output
D. Firms already in the market incurring economic losses so that no new firm wants to enter the
market

What type of market structure is being described in this situation?

For most agricultural products, ranging from corn to soybeans to tomatoes, there are a large
number of individual farms, each of which produces a very small portion of the global market.
A. Perfect Competition /
B. Oligopoly
C. Monopoly
D. Monopsony