Chapter 4 MCQ - Principles of Microeconomics

lOMoARcPSD|46833899 Chapter 4 - mcq Principles of Microeconomics (Universidade de Macau) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by kigbek3 kigbek3 ([email protected]...

lOMoARcPSD|46833899 Chapter 4 - mcq Principles of Microeconomics (Universidade de Macau) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 Microeconomics, 13e (Parkin) Chapter 4 Elasticity 1 Price Elasticity of Demand 1) Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends on the A) price elasticity of demand. B) the price elasticity of supply. C) income elasticity of demand. D) cross elasticity of demand. Answer: A Topic: Price Elasticity of Demand Skill: Definition Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 2) The price elasticity of demand measures A) how often the price of a good changes. B) the slope of a budget curve. C) how sensitive the quantity demanded is to changes in demand. D) the responsiveness of the quantity demanded to changes in price. Answer: D Diff: 1 Topic: Price Elasticity of Demand Skill: Definition Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 3) Elasticity measures the A) percentage change in a variable. B) slope of a curve. C) change in a variable. D) responsiveness of a variable to a change in another variable. Answer: D Topic: Price Elasticity of Demand Skill: Definition Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 1 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 4) The price elasticity of demand for purses is measured in what units? A) dollars B) purses C) dollars per purse D) The price elasticity of demand is a unitless measure. Answer: D Topic: Price Elasticity of Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 5) The price elasticity of demand is defined as the magnitude of the A) change in quantity demanded divided by the change in price. B) change in price divided by the change in quantity demanded. C) percentage change in quantity demanded divided by the percentage change in price. D) percentage change in price divided by the percentage change in quantity demanded. Answer: C Topic: Price Elasticity of Demand Skill: Definition Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 6) The price elasticity of demand is calculated as the absolute value of the A) percentage change in quantity demanded divided by the percentage change in price. B) percentage change in price divided by the percentage change in quantity demanded. C) change in quantity demanded divided by the change in price. D) change in price divided by the change in quantity demanded. Answer: A Topic: Price Elasticity of Demand Skill: Definition Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 7) The price elasticity of demand equals magnitude of the A) change in the price divided by the change in quantity demanded. B) change in the quantity demanded divided by the change in price. C) percentage change in the price divided by the percentage change in the quantity demanded. D) percentage change in the quantity demanded divided by the percentage change in the price. Answer: D Topic: Calculating Elasticity Skill: Definition Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 2 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 8) The price elasticity of demand is equal to the ________ in the ________ divided by the ________ in the ________. A) percentage change; price; percentage change; quantity demanded B) change; price; change; quantity demanded C) percentage change; quantity demanded; percentage change; price D) change; quantity demanded; change; price Answer: C Topic: Price Elasticity of Demand Skill: Definition Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 9) The price elasticity of demand depends on A) the units used to measure price and the units used to measure quantity. B) the units used to measure price but not the units used to measure quantity. C) the units used to measure quantity but not the units used to measure price. D) neither the units used to measure price nor the units used to measure quantity. Answer: D Topic: Price Elasticity of Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 10) When the quantity of coal is measured in kilograms instead of pounds, the demand for coal becomes A) more elastic. B) less elastic. C) neither more nor less elastic. D) undefined. Answer: C Topic: Calculating Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 3 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 11) The price elasticity of demand for oranges ________ change if the units of the quantity was changed from pounds to kilograms and ________ change if the units of the price was changed from dollars to cents. A) would; would B) would; would not C) would not; would D) would not; would not Answer: D Topic: Price Elasticity of Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 12) Suppose the quantity of gasoline is measured in gallons and the price of gasoline is measured in dollars. The price elasticity of demand is 0.67. If the price of gasoline was now measured in cents rather than dollars, the price elasticity of demand would now be A) 0.0067. B) 0.67. C) 6.7. D) 67.0. Answer: B Topic: Price Elasticity of Demand Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 13) A decrease in the price of eggs from $1.50 to $1.30 per dozen resulted in an increase in egg purchases in two cities. In Philadelphia, daily egg purchases increased from 6000 to 8000 dozens; in nearby Dover, Delaware, daily egg purchases increased from 300 to 400 dozens. The price elasticity of demand is therefore A) lower in the smaller city as would be expected. B) greater in the smaller city as would be expected. C) certainly affected by population differences in different markets. D) the same in Philadelphia as in Dover. Answer: D Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 4 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 14) Dan sells newspapers. Dan says that a 4 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8 percent. According to Dan, the demand for newspapers is A) inelastic. B) unit elastic. C) perfectly elastic. D) elastic. Answer: D Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 15) The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the A) price of furniture will increase the quantity of furniture demanded by 1.3 percent. B) price of furniture will decrease the quantity of furniture demanded by 1.3 percent. C) quantity of furniture demanded will decrease the price of furniture by 1.3 percent. D) quantity of furniture demanded will increase the price of furniture by 1.3 percent. Answer: B Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 16) The price elasticity of demand for oil is estimated at 0.05. This value means a 10 percent increase in the A) quantity of oil demanded will result from a 0.5 percent increase in the price of oil. B) quantity of oil demanded will result from a 0.5 percent decrease in the price of oil. C) price of oil will increase the quantity of oil demanded by 0.5 percent. D) price of oil will decrease the quantity of oil demanded by 0.5 percent. Answer: D Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 5 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 17) If a 6 percent decrease in the price leads to a 5 percent increase in the quantity demanded, the price elasticity of demand is A) 0.30. B) 0.60. C) 0.83. D) 1.20. Answer: C Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 18) A 10 percent increase in the quantity of spinach demanded results from a 20 percent decline in its price. The price elasticity of demand for spinach is A) 0.5. B) 2.0. C) 10.0. D) 20.0. Answer: A Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 19) A 20 percent increase in the quantity of pizza demanded results from a 10 percent decline in its price. The price elasticity of demand for pizza is A) 0.5. B) 2.0. C) 10.0. D) 20.0. Answer: B Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 6 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 20) If a 20 percent increase in the price of a used car results in a 10 percent decrease in the quantity of used cars demanded, then the price elasticity of demand equals A) 0.5. B) 1.0. C) 2.0. D) 10.0. Answer: A Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 21) If the price of a movie ticket increases by 4 percent and the quantity of movies demanded falls by 2 percent, the price elasticity of demand is A) 2.0. B) 4.0. C) 0.5. D) some amount that cannot be determined without more information. Answer: C Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 22) If the price of a burger decreases by 5 percent and as a result the quantity of burgers demanded increases by 8 percent, the price elasticity of demand equals A) 0.60. B) 0.40. C) 1.60. D) 0.625. Answer: C Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 7 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 23) If the quantity demanded of hamburgers increases by 20 percent when the price decreases by 5 percent, then the price elasticity of demand is A) 0.25. B) 4.0. C) 20.0. D) 5.0. Answer: B Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 24) Suppose that the quantity of pizza demanded decreased by 15 percent after an increase in price of 10 percent. What is the price elasticity of demand for pizza? A) 1.50 B) 0.67 C) -1.50 D) -0.67 Answer: A Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 25) Suppose a drought increased the price of corn by 25 percent while it decreased the quantity by 50 percent. The price elasticity of demand equals A) 2.00. B) 0.50. C) 20.0. D) zero. Answer: A Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 8 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 26) The worst drought in over 50 years has decimated crops of soy beans and corn in the United States. (Source: New York Times, August 10, 2012). Because the production of corn has decreased, prices are expected to increase by 25 percent. These data are insufficient for calculating the elasticity of demand because we also need to know the A) percentage increase in income. B) percentage increase in quantity. C) percentage decrease in quantity. D) increase in bushels per acre. Answer: C Topic: Calculating Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Reflective thinking 27) When the price of a movie ticket increases from $5 to $7, the quantity of tickets demanded decreases from 600 to 400 a day. What is the price elasticity of demand for movie tickets? A) 0.83 B) 1.20 C) 1.00 D) 2.32 Answer: B Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 28) Suppose a rise in the price of peaches from $5.50 to $6.50 per bushel decreases the quantity demanded from 12,500 to 11,500 bushels. The price elasticity of demand is A) 0.5. B) 1.0. C) 2.0. D) 1000.0. Answer: A Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 9 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 29) Taco Bell's economists determine that the price elasticity of demand for their tacos is 2.0. So, if Taco Bell raises the price of its tacos by 6.0 percent, the quantity demanded will decrease by ________ percent. A) 2.0 B) 3.0 C) 6.0 D) 12.0 Answer: D Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 30) Using average price and average quantity, calculate the price elasticity of demand if a price rise from $8 to $10 and decreases the quantity demanded from 20 units to 15 units. The price elasticity of demand equals A) 2.5. B) 1.29. C) 0.78. D) 0.06 Answer: B Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 31) A local pizzeria raised its price from $9 to $11 for each pizza and the sales of its pizza decreased from 150 to 100 per day. What is the price elasticity of demand in this case? A) 1/2 B) -2 C) -1/2 D) 2 Answer: D Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 10 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 32) Using the average price and average quantity, what is the elasticity of demand for oranges when the price of oranges changes from $200 to $160 per bushel and so the quantity demanded changes from 1000 to 1400 bushels? A) 1.5 B) 0.1 C) 10.0 D) 0.67 Answer: A Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 33) If the price of a soda increases from 75¢ to $1.00 and as a result the quantity demanded of sodas decreases from 10 to 9 per week, the elasticity of demand for sodas equals A) 2.72. B) 0.37. C) 0.83. D) 1.20. Answer: B Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 34) When the price of oranges increases from $4 to $6 per bag, the quantity demanded of oranges decreases from 800 bags to 700 bags. The price elasticity of demand over this price range is equal to A) 3. B) 3/7 or 0.4286. C) 1/3 or 0.3333. D) 1/4 or 0.25. Answer: C Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 11 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 35) Florida State University has just lowered the price of its season football tickets from $350.00 to $300.00. As a result, there was an increase in the number of season tickets purchased from 43,000 to 47,000. The price elasticity of demand for season tickets equals A) 1.71. B) 1.58. C) 0.71. D) 0.58. Answer: D Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 36) Suppose the quantity demanded is 5 units when the price is $1.00. If the price rises to $2.00, the quantity demanded falls to 3 units. The price elasticity of demand is A) 0.5. B) 0.75. C) 1.33. D) 2.00. Answer: B Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 37) A fall in the price of lemons from $10.50 to $9.50 per bushel increases the quantity demanded from 19,200 to 20,800 bushels. The price elasticity of demand is A) 0.80. B) 1.20. C) 1.25. D) 8.00. Answer: A Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 12 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 38) Last year the price of corn was $3 per bushel and the quantity of corn demanded was 8 million bushels. This year the price of corn is $4 per bushel and the quantity of corn demanded is 7 million bushels. Assuming that the demand curve has not shifted, what is the price elasticity of demand for corn? (Use the midpoint formula.) A) 1 B) 0.47 C) 2.14 D) 0.29 Answer: B Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 39) A fall in the price of cabbage from $10.50 to $9.50 per bushel increases the quantity demanded from 18,800 to 21,200 bushels. The price elasticity of demand is A) 0.80. B) 1.20. C) 1.25. D) 8.00. Answer: B Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 40) Suppose that the quantity of root beer demanded declines from 103,000 gallons per week to 97,000 gallons per week as a consequence of a 10 percent increase in the price of root beer. The price elasticity of demand is A) 0.60. B) 1.40. C) 1.66. D) 6.00. Answer: A Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 13 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 41) The price elasticity of demand is 5.0 if a 10 percent increase in the price results in a ________ decrease in the quantity demanded. A) 2 percent B) 5 percent C) 10 percent D) 50 percent Answer: D Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 42) A shift of the supply curve of DVDs raises the price of a DVD from $9.50 to $10.50 a DVD and reduces the quantity demanded from 41 million to 39 million DVDs a month. The price elasticity of demand for DVDs is A) 2 million DVDs a month per dollar. B) $1 per 2 million barrels a day. C) 0.5. D) 2.0. Answer: C Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 43) A decrease in the supply of sugar increases the price of sugar from $1.00 a packet to $1.25 a packet. The quantity decreases from 100 packets a day to 80 packets a day. The price elasticity of demand of sugar is A) 0.75. B) 0.5. C) 1.0. D) 1.25. Answer: C Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 14 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 44) Suppose the price elasticity of demand for oil is 0.1. In order to lower the price of oil by 20 percent, the quantity of oil supplied must be increased by A) 200 percent. B) 20 percent. C) 2 percent. D) 0.2 percent. Answer: C Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 45) The price elasticity of demand for cigarettes is 0.4. If government wants to reduce smoking by 10 percent, by how much should it raise the price of cigarettes by imposing a tax? A) by 10 percent B) by 20 percent C) by 25 percent D) by 50 percent Answer: C Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 46) The price elasticity of demand for DVDs is 2. If the price of a DVD increased by 2 percent, the quantity demanded will A) decrease by 2 percent. B) not change. C) decrease by 4 percent. D) decrease by 1 percent. Answer: C Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 15 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 47) Suppose the price elasticity of teenagers' demand for cigarettes is 2.0. If the government imposes a tax on cigarettes that raises the price by 10 percent, by how much will it reduce teenaged smoking? A) by 5 percent B) by 10 percent C) by 15 percent D) by 20 percent Answer: D Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 48) According to one study, the price elasticity of demand for cigarettes is 0.25. To decrease the consumption of cigarettes by 8 percent, a tax on cigarettes must raise the price of cigarettes by A) 32 percent. B) 25 percent. C) 2 percent. D) 3.1 percent. Answer: A Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 49) The "Economics in Action" in the text mentions that the elasticity of demand for agricultural products is 0.42. If a drought boosts the price of corn 25 percent, then we can calculate the quantity of corn demanded A) increased by 10.5 percent. B) decreased by 10.5 percent. C) increased by 8.4 percent. D) decreased by 8.4 percent. Answer: B Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 16 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 50) Because of an increase in the price of leather, the price of a pair of women's dress shoes increased 12 percent. If the price elasticity of demand for women's dress shoes is 0.85, which of the following will happen? A) Total expenditure on women's dress shoes decreases. B) The number of pairs of women's dress shoes demanded decreases by 10.2 percent. C) Total revenue from the sale of women's dress shoes decreases. D) none of the above Answer: B Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 51) The price elasticity of demand for new cars is 1.2. Hence, a 10 percent price increase will A) decrease the quantity of new cars demanded by 1.2 percent. B) increase consumer expenditure on new cars by 1.2 percent. C) decrease the quantity of new cars demanded by 12 percent. D) increase consumer expenditure on new cars by 12 percent. Answer: C Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 52) The price of a good rises by 12 percent and the price elasticity of demand for the good is 0.85. Which of the following is a CORRECT interpretation of these facts? A) When the price rises by 12 percent, the quantity demanded decreased by 0.85 percent. B) For each 1 percent that the price rose, the quantity demanded decreased by 10.2 percent. C) For each 0.85 percent that the price rose, the quantity demanded decreased by 1 percent. D) For each 1 percent that the price rose, the quantity demanded decreased by 0.85 percent. Answer: D Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 17 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 53) If the price elasticity of demand for clothing is 0.64, this implies that A) a 6.4 percent increase in price the price of clothing leads to a 10 percent decrease in the quantity demanded. B) a 10 percent increase in the price of clothing leads to a 6.4 percent decrease in the quantity demanded. C) if there is an increase in the price of clothing the total expenditures on clothing decreases. D) Both answers A and C are correct. Answer: B Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 54) If the price elasticity of demand for a good is 0.8, then a A) 1 percent rise in the price leads to a 0.8 percent decrease in the quantity demanded. B) one dollar rise in the price leads to a 0.8 percent decrease in the quantity demanded. C) 1 percent rise in the price leads to an 80 percent decrease in the quantity demanded. D) 1 percent rise in the price leads to an 8 percent decrease in the quantity demanded. Answer: A Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking Price Quantity demanded (dollars per bushel) (bushels) 8 2,000 7 4,000 6 6,000 5 8,000 4 10,000 3 12,000 55) The table above gives the demand schedule for snow peas. The price elasticity of demand between $6.00 and $7.00 per bushel is A) 1.0. B) 2.0. C) 2.6. D) 5.0. Answer: C Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 18 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 56) The table above gives the demand schedule for snow peas. If the price of snow peas falls from $4.00 to $3.00 a bushel, total revenue will A) increase because demand is elastic in this range. B) decrease because demand is elastic in this range. C) increase because demand is inelastic in this range. D) decrease because demand is inelastic in this range. Answer: D Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 57) The table above gives the demand schedule for snow peas. The demand curve for snow peas is a straight line and so the elasticity of demand is A) 1 at all prices. B) the same at all prices but not 1. C) higher at higher prices. D) lower at higher prices. Answer: C Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking Price Quantity demanded (dollars per bushel) (bushels) A 10 0 B 8 4 C 6 8 D 4 12 E 2 16 58) The table above gives the demand schedule for peas. Between point A and point B, the price elasticity of demand equals A) 0.11. B) 0.50. C) 0.22. D) 9.09. Answer: D Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 19 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 59) The table above gives the demand schedule for peas. Between point C and point D, the price elasticity of demand is A) elastic. B) unit elastic. C) 0.75. D) 3.00. Answer: B Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 60) The table above gives the demand schedule for peas. Which of the following statements CORRECTLY describes the price elasticity of demand? A) The price elasticity of demand is larger at point A than at point B. B) The price elasticity of demand is larger at point D than at point A. C) The price elasticity of demand is constant because the slope is constant. D) The price elasticity of demand increases moving from point A to point B to point C to point D to point E. Answer: A Topic: Calculating Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 20 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 61) The figure shows the demand curve for popsicles. The price elasticity of demand when the price of a popsicle increases from $0.30 to $0.50 is A) 0. B) 1. C) 1/2. D) 2. Answer: B Topic: Calculating Elasticity Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 21 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 62) The figure illustrates the demand for hamburgers. When the price is $1.00 a hamburger, the elasticity of demand is ________ and a 1 percent increase in the price will ________ the quantity of hamburgers demanded by ________ percent. A) 1.00; decrease; 0.40 B) 0.40; decrease; 0.40 C) 2.50; increase; 2.50 D) 5.00; decrease; 5.00 Answer: B Topic: Calculating Elasticity Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 63) The price elasticity of demand can range between A) zero and one. B) negative infinity and infinity. C) zero and infinity. D) negative one and one. Answer: C Topic: Inelastic and Elastic Demand Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 22 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 64) If the quantity demanded changes by a relatively small amount for a given change in price, then demand is A) perfectly inelastic. B) perfectly elastic. C) elastic. D) inelastic. Answer: D Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 65) If the price elasticity is between 0 and 1, demand is A) elastic. B) inelastic. C) unit elastic. D) perfectly elastic. Answer: B Topic: Inelastic and Elastic Demand Skill: Definition Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 66) Demand is inelastic if A) a large change in quantity demanded results in a small change in price. B) the quantity demanded is very responsive to changes in price. C) the price elasticity of demand is less than 1. D) the price elasticity of demand is greater than 1. Answer: C Topic: Inelastic and Elastic Demand Skill: Definition Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 23 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 67) When the percentage change in quantity demanded is less than the percentage change in price, the demand for the good is A) inelastic. B) unit elastic. C) perfectly inelastic. D) elastic. Answer: A Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 68) If a 20 percent increase in the price of a used car results in a 10 percent decrease in the quantity of used cars demanded, then the demand for used cars is A) elastic. B) inelastic. C) unit elastic. D) arc elastic. Answer: B Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 69) Demand is price inelastic if a relatively ________ price increase leads to a relatively ________ in the quantity demanded. A) large; small increase B) small; large decrease C) large; small decrease D) small; large increase Answer: C Topic: Inelastic and Elastic Demand Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 24 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 70) If a consumer is relatively insensitive to changes in the price of a good, then the consumer's demand for the good is A) elastic. B) unit elastic. C) inelastic. D) perfectly elastic. Answer: C Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 71) If the price of salt increases and the quantity demanded does NOT change, then A) the price elasticity of demand is equal to zero. B) demand is perfectly inelastic. C) the demand curve for salt is horizontal. D) Both answers A and B are correct. Answer: D Topic: Inelastic and Elastic Demand Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 72) Marvin loves chocolate truffles. As the price of a chocolate truffle increases from $1 to $2 to $3, Marvin continues to buy a dozen chocolate truffles every week. Marvin's demand for chocolate truffles is A) elastic. B) unit elastic. C) illustrated by a horizontal demand curve. D) perfectly inelastic. Answer: D Topic: Inelastic and Elastic Demand Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 25 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 73) If the price of a good increases from $3 to $4, and the quantity demand remains unchanged, then the demand is A) perfectly inelastic. B) perfectly elastic. C) somewhat elastic. D) infinite. Answer: A Topic: Inelastic and Elastic Demand Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 74) When the price elasticity of demand for a good equals A) 0, the demand curve is vertical. B) 0, the demand curve is horizontal. C) 1, the demand curve is vertical. D) 1, the demand curve is horizontal. Answer: A Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 75) A straight-line demand curve along which the price elasticity of demand equals 0 is one that A) forms a 45 degree angle with the vertical axis. B) forms a 60 degree angle with the horizontal axis. C) is vertical. D) is horizontal. Answer: C Topic: Inelastic and Elastic Demand Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 76) Demand is perfectly inelastic when A) shifts in the supply curve results in no change in price. B) the good in question has perfect substitutes. C) shifts of the supply curve result in no change in quantity demanded. D) shifts of the supply curve result in no change in the total revenue from the quantity sold. Answer: C Topic: Inelastic and Elastic Demand Skill: Definition Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 26 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 77) A good with a vertical demand curve has a price elasticity of demand that A) is equal to 1. B) is equal to infinite. C) is equal to zero. D) varies between 0 and 1. Answer: C Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 78) If the demand for a good is elastic, when the price increases, the A) demand will decrease. B) quantity demanded will increase. C) quantity demanded will decrease by a smaller percentage than the price increased. D) quantity demanded will decrease by a greater percentage than the price increased. Answer: D Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 79) If demand is price elastic A) a 1 percent decrease in the price leads to an increase in the quantity demanded that exceeds 1 percent. B) a 1 percent increase in the price leads to an increase in the quantity demanded that exceeds 1 percent. C) a 1 percent decrease in the price leads to a decrease in the quantity demanded that is less than 1 percent. D) the price is very sensitive to any shift of the supply curve. Answer: A Topic: Inelastic and Elastic Demand Skill: Definition Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 80) A hot dog vendor on a street corner could increase the quantity of hot dogs her customers demand by 12 percent if she lowers the price of a hot dog 10 percent. The demand for the hot dogs is A) cross elastic. B) arc elastic. C) unit elastic. D) elastic. Answer: D Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 27 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 81) Demand is price elastic if a A) relatively large price increase leads to a relatively small decrease in the quantity demanded. B) relatively small price increase leads to a relatively large decrease in the quantity demanded. C) price increase leads to a decrease in the quantity demanded. D) price increase leads to an increase in the quantity demanded. Answer: B Topic: Inelastic and Elastic Demand Skill: Definition Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 82) If the demand for a good is elastic, the price elasticity of demand is A) greater than 1. B) equal to 1. C) between 0 and 1. D) less than zero. Answer: A Topic: Inelastic and Elastic Demand Skill: Definition Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 83) "Last October, due to an early frost, the price of a pumpkin increased by 10 percent compared to the price in the previous Halloween seasons. As a result, the quantity demanded county-wide decreased from 2 million to 1.5 million." Based on this statement, the A) demand for pumpkins is elastic. B) demand for pumpkins is inelastic. C) demand for pumpkins is unit elastic. D) demand curve for pumpkins shifted rightward. Answer: A Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 28 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 84) If the price elasticity of demand for peanut butter is 2.4, then peanut butter A) has an elastic demand. B) has an inelastic demand. C) has a unit elastic demand. D) is a normal good. Answer: A Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 85) If the quantity demanded changes by an infinitely large amount for a given change in price, then demand is A) perfectly inelastic. B) perfectly elastic. C) elastic. D) inelastic. Answer: B Topic: Inelastic and Elastic Demand Skill: Definition Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 86) When the demand for a good is perfectly elastic A) total revenue is as large as possible. B) the demand curve for the good is vertical. C) the price elasticity of demand is infinite. D) the price elasticity of demand is zero. Answer: C Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 29 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 87) If the demand for a good is perfectly elastic, the price elasticity of demand is ________ and the demand curve is ________. A) infinite; vertical B) zero; vertical C) zero; horizontal D) infinite; horizontal Answer: D Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 88) A good with a horizontal demand curve has a demand A) with an income elasticity of demand equal to 0. B) with a price elasticity of demand equal to 0. C) with a price elasticity of demand equal to infinity. D) for which there are no substitutes. Answer: C Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 89) If the price elasticity of demand for gasoline is 0.8 and the price elasticity of demand for plane tickets is 2.2 then the demand for gasoline is ________ and the demand for plane tickets is ________. A) elastic; inelastic B) inelastic; elastic C) elastic; elastic D) inelastic; inelastic Answer: B Topic: Inelastic and Elastic Demand Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 30 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 90) If the price elasticity of demand for airline travel is 0.52 in the short run and 1.46 in the long run, then the demand for airline travel is ________ in the short run and ________ in the long run. A) elastic; elastic B) elastic; inelastic C) inelastic; elastic D) inelastic; inelastic Answer: C Topic: Inelastic and Elastic Demand Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 91) The demand for movies is unit elastic if A) a 5 percent decrease in the price leads to an infinite increase in the quantity demanded. B) a 5 percent increase in the price leads to a 5 percent decrease in the quantity demanded. C) any increase in the price leads to a 1 percent decrease in the quantity demanded. D) a 5 percent increase in the price leads to a 5 percent increase in total revenue. Answer: B Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 92) Unit elastic demand means that the A) ratio of a change in the quantity demanded to a change in the price equals 1. B) ratio of a percentage change in the quantity demanded to a percentage change in the price equals 1. C) demand curve is vertical. D) demand curve is horizontal. Answer: B Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 31 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 93) Freezing temperatures in California have sharply reduced the supply of oranges in the U.S. You predict that the price of oranges will ________, and the more elastic the demand for oranges, the ________ will be the effect on the price. A) fall; smaller B) fall; greater C) rise; smaller D) rise; greater Answer: C Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 94) If the elasticity of demand for peaches is 1.76 and the elasticity of demand for apples is 1.59, then consumers are A) more sensitive to a change in the price of peaches than they are to a change in the price of apples. B) less sensitive to a change in the price of peaches than they are to a change in the price of apples. C) more sensitive to a change in the quantity of peaches than they are to a change in the quantity of apples. D) less sensitive to a change in the quantity of peaches than they are to a change in the quantity of apples. Answer: A Topic: Inelastic and Elastic Demand Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 32 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 95) The demand curve in the figure above illustrates the demand for a product with A) zero price elasticity of demand at all prices. B) infinite price elasticity of demand. C) unit price elasticity of demand at all prices. D) a price elasticity of demand that is different at all prices. Answer: A Topic: Inelastic and Elastic Demand Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 33 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 96) In the above figure, which demand curve illustrates perfectly elastic demand? A) G B) H C) I D) J Answer: D Topic: Inelastic and Elastic Demand Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 34 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 97) The demand curve in the figure above illustrates a product whose demand has a price elasticity of demand equal to A) zero at all prices. B) infinity. C) one at all prices. D) a different amount at different prices. Answer: B Topic: Inelastic and Elastic Demand Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 35 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 98) The demand curve in the figure above illustrates the demand for a product with A) zero price elasticity of demand at all prices. B) infinite price elasticity of demand. C) unit price elasticity of demand at all prices. D) a price elasticity of demand that is different at all prices. Answer: C Topic: Inelastic and Elastic Demand Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 99) If the demand curve for oranges is a downward sloping straight line, the price elasticity of demand will increase the A) higher the price of oranges. B) higher the price of other fruits. C) higher the income level of consumers. D) lower the price of oranges. Answer: A Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 36 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 100) If the demand curve is a downward sloping straight line, the price elasticity of demand always A) increases as the demand curve shifts rightward. B) increases as the demand curve shifts leftward. C) increases with movements upward along the demand curve. D) decreases with movements upward along the demand curve. Answer: C Topic: Elasticity Along a Straight-Line Demand Curve Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 101) Along a straight-line demand curve, as the price falls the A) demand becomes more elastic. B) demand becomes less elastic. C) elasticity of demand is constant. D) demand is always unitary elastic. Answer: B Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 102) The price elasticity of demand ________ in value when moving downward along a ________ line demand curve. A) falls; straight B) rises; curved C) falls, curved D) rises; straight Answer: A Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 37 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 103) The demand for bus rides is a downward-sloping straight line demand curve. The price elasticity of demand for bus rides A) increases as the price of a bus ride falls. B) decreases as the price of a bus ride falls. C) is the same no matter what the price of a bus ride. D) decreases as the price of a bus ride rises. Answer: B Topic: Elasticity Along a Straight-Line Demand Curve Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 104) The demand for computer chips is a downward sloping straight line. If there is an increase in the supply of computer chips, this change will A) increase the price elasticity of demand for computer chips. B) decrease the price elasticity of demand for computer chips. C) have no effect on the price elasticity of demand for computer chips. D) have an unpredictable effect on the price elasticity of demand for computer chips. Answer: B Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 105) At the midpoint of a downward sloping straight-line demand curve, the demand A) is elastic. B) is unit elastic. C) is inelastic. D) has an elasticity exactly equal to zero. Answer: B Topic: Elasticity Along a Straight-Line Demand Curve Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 38 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 106) A straight-line demand curve with negative slope intersects the horizontal axis at 200 tons per week. The point on the demand curve at which the price elasticity of demand is 1 corresponds to a quantity demanded A) of 0 tons. B) of 100 tons. C) of 200 tons. D) that would be negative if a negative quantity demanded were possible. Answer: B Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 107) If the demand curve for a good is a downward sloping straight line, the demand for the good will be more price elastic the higher is the A) price of the good. B) price of complements. C) income of consumers. D) income elasticity of demand for that good. Answer: A Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 108) The demand curve for microwave popcorn is linear. Which of the following definitely makes the demand for microwave popcorn more inelastic? A) a decrease in the price of microwave popcorn B) an increase in the price of microwave popcorn C) an increase in income D) a decrease in income Answer: A Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 39 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 109) If the demand curve for tacos is a downward sloping straight line, at which of the following prices is the demand the most elastic? A) a price of $0.50 per taco B) a price of $1.00 per taco C) a price of $1.50 per taco D) There is not enough information given to determine at which price the demand is most elastic. Answer: C Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 110) On a linear demand curve that intersects both axes A) the elasticity exceeds 1.00 at all prices. B) the elasticity is less than 1.00 at all prices. C) the elasticity equals 1.00 at all prices. D) the elasticity decreases as the price falls and quantity increases. Answer: D Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 111) On a straight-line downward-sloping demand curve, the maximum elasticity of demand occurs A) at its vertical intercept. B) at its midpoint. C) at its horizontal intercept. D) where it intersects the supply curve. Answer: A Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 40 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 112) A straight-line demand curve with negative slope intersects the horizontal axis at 100 tons per week. At the midpoint on the demand curve (corresponding to 50 tons per week) the price elasticity of demand is A) 0. B) 0.5. C) 1.0. D) unknown without more information. Answer: C Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 113) Which of the following statements is FALSE? A) A good with a vertical demand curve has a perfectly inelastic demand. B) A good with a straight line, downward sloping demand curve has a demand whose elasticity is constant. C) A good with a horizontal demand curve has a perfectly elastic demand. D) All of the above statements are false. Answer: B Topic: Elasticity Along a Straight-Line Demand Curve Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 41 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 114) The figure above illustrates a linear demand curve. By comparing the price elasticity in the $2 to $4 price range with the elasticity in the $8 to $10 range, you can conclude that the elasticity is A) greater in the $8 to $10 range. B) greater in the $2 to $4 range. C) the same in both price ranges. D) greater in the $8 to $10 range when the price rises but greater in the $2 to $4 range when the price falls. Answer: A Topic: Elasticity Along a Straight-Line Demand Curve Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 115) The figure above illustrates a linear demand curve. If the price falls from $8 to $6 A) total revenue increases. B) total revenue decreases. C) total revenue remains unchanged. D) the quantity demanded increases by less than 20 percent. Answer: A Topic: Elasticity Along a Straight-Line Demand Curve Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 42 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 116) The figure above illustrates a linear demand curve. In the range from $8 to $6 A) the demand is price elastic. B) the demand is unit elastic. C) the demand is price inelastic. D) more information is needed to determine if the demand is price elastic, unit elastic, or inelastic. Answer: A Topic: Elasticity Along a Straight-Line Demand Curve Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 117) The figure above illustrates a linear demand curve. If the price falls from $6 to $4 A) total revenue increases. B) total revenue decreases. C) total revenue remains unchanged. D) quantity demanded increases by more than 100 percent. Answer: C Topic: Elasticity Along a Straight-Line Demand Curve Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 118) The figure above illustrates a linear demand curve. In the price range from $8 to $6, demand is ________ and in the price range $4 to $2, demand is ________. A) elastic; elastic B) elastic; inelastic C) inelastic; elastic D) inelastic; inelastic Answer: B Topic: Elasticity Along a Straight-Line Demand Curve Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 43 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 119) The figure above illustrates a linear demand curve. If the price rises from $6 to $8 demand is ________ and if the price falls from $8 to $6 demand is ________. A) elastic; elastic B) elastic; inelastic C) inelastic; elastic D) inelastic; inelastic Answer: A Topic: Elasticity Along a Straight-Line Demand Curve Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 120) The demand curve in the figure above illustrates the demand for a product with a price elasticity of demand A) equal to zero at all prices. B) equal to infinite at all prices. C) equal to one at all prices. D) that is different at all prices. Answer: D Topic: Elasticity Along a Straight-Line Demand Curve Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 44 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 121) The figure illustrates Anne's demand for books. At ________ a book, Anne's demand for books is inelastic. A) all prices between $15 and $30 B) all prices between $10 and $15 C) all prices between $10 and $20 D) all prices below $30 Answer: B Topic: Elasticity Along a Straight-Line Demand Curve Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 122) According to the total revenue test, a price cut increases total revenue if demand is A) inelastic. B) perfectly inelastic. C) elastic. D) unit elastic. Answer: C Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 45 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 123) Demand is inelastic when a price ________ results in total revenue ________. A) rise; decreasing B) fall; increasing C) rise, increasing D) fall, remaining the same Answer: C Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 124) Demand is elastic when a price ________ results in total revenue ________. A) rise, decreasing B) fall, decreasing C) rise, increasing D) fall; remaining constant Answer: A Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 125) When the demand for a good is inelastic and its price increases, the total revenue from the sale of the good will A) increase. B) decrease initially and then increase. C) decrease. D) not change. Answer: A Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 126) When demand is ________, a decrease in price ________ total revenue. A) elastic; decreases B) inelastic; decreases C) unit elastic; increases D) elastic; does not change Answer: B Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 46 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 127) If demand is inelastic, an increase in the price will A) decrease total revenue. B) increase total revenue. C) not change total revenue. D) increase the quantity demanded. Answer: B Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 128) To maximize its revenue A) a firm facing inelastic demand should always raise its price. B) a firm facing elastic demand should always raise its price. C) a firm should always charge the highest price possible regardless of the elasticity of demand. D) None of the above answers is correct. Answer: A Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 129) The demand for a good is elastic if A) an increase in its price results in an increase in total revenue. B) a decrease in its price results in a decrease in total revenue. C) an increase in its price results in a decrease in total revenue. D) the good is a necessity. Answer: C Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 130) Demand is unit elastic when A) the slope of the demand curve is -1. B) a shift of the supply curve leads to no change in price. C) a shift of the supply curve leads to an equal shift of the demand curve. D) a change in the price of the product leads to no change in the total revenue. Answer: D Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 47 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 131) Producers' total revenue will decrease if A) income increases and the good is a normal good. B) the price rises and demand is elastic. C) the price rises and demand is inelastic. D) income falls and the good is an inferior good. Answer: B Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 132) Producers' total revenue will increase if A) income increases and the good is an inferior good. B) the price rises and demand is elastic. C) the price rises and demand is inelastic. D) income falls and the good is a normal good. Answer: C Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 133) If University of Nebraska increased its season football ticket sales from 43,000 to 47,000 when it lowered price from $350.00 to $300.00, then its demand for season tickets must be ________ because total revenue ________ when the price was lowered. A) elastic; decreased B) elastic; increased C) inelastic; decreased D) inelastic; increased Answer: C Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 48 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 134) "Last October, due to an early frost, the price of a pumpkin increased by 10 percent compared to the price in the previous Halloween season. As a result, the quantity demanded county-wide decreased from 2 million to 1.5 million." Based on this statement, it is certain that the A) demand curve for Halloween costumes shifted leftward. B) price elasticity of demand for pumpkins decreased from its value in previous years. C) demand curve for pumpkins shifted leftward. D) total revenue from the sale of pumpkins decreased. Answer: D Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Reflective thinking 135) At a local ice cream parlor, when the price of half-gallons of chocolate ice cream was lowered by fifty cents per half-gallon, total revenue from the sale of chocolate ice cream decreased. This result indicates that A) there are more people who like vanilla ice cream than there are people who like chocolate ice cream. B) the demand for chocolate ice cream is inelastic. C) the demand for chocolate ice cream is elastic. D) None of the above answers is correct. Answer: B Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 136) If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price elastic, she should A) lower her price to increase the demand and shift the demand curve rightward. B) raise her price because she knows that the quantity demanded will also increase. C) raise her price because she knows that the percentage decrease in the quantity demanded will be smaller than the percentage increase in price. D) lower her price because she knows that the percentage increase in the quantity demanded will be greater than the percentage decrease in price. Answer: D Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 49 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 137) A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.1. To increase its revenue, the transit authority should A) raise the fare. B) lower the fare. C) leave the fare as it is. Answer: B Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 138) The taxicab fare in Newville is regulated. The fare currently charged is $6 a ride. Newville taxicab drivers want to obtain government's permission to lower the fare, which they think will increase their total revenue. From this we can conclude that the drivers believe that the demand for taxicab rides is A) elastic. B) inelastic. C) unit elastic. D) perfectly inelastic. Answer: A Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 139) If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price inelastic, she should A) lower her price to increase the demand and shift the demand curve rightward. B) raise her price because she knows that the quantity demanded will also increase. C) raise her price because she knows that the percentage decrease in the quantity demanded will be smaller than the percentage increase in price. D) lower her price because she knows that the percentage increase in the quantity demanded will be greater than the percentage decrease in price. Answer: C Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 50 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 140) In 1973 and again in 1979, the Organization of Petroleum Exporting Countries (OPEC) raised the world price of crude oil and increased their revenue as well. Which of the following is a TRUE statement regarding these OPEC price hikes? A) Their revenue increased because the demand for oil was income inelastic. B) Their revenue increased because the demand for oil was price inelastic. C) Their revenue would have increased regardless of income elasticity or price elasticity because oil is an imported product for most nations. D) Their revenue only increased because oil was already very expensive. Answer: B Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 141) The marketing people at Ben and Jerry's Ice Cream Company believe that if they lower the price of their Cherry Garcia flavor ice cream by 25 percent, the quantity demanded will increase by 5 percent. If they are correct in their belief, then A) the demand for Cherry Garcia is price elastic. B) their total revenue from Cherry Garcia will increase if they lower the price. C) the demand for Cherry Garcia is income elastic. D) their total revenue from Cherry Garcia will decrease if they lower the price. Answer: D Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 142) The marketing people for AT&T believe that if they lower the price of long-distance phone calls by 5 percent, their quantity demanded will increase by 15 percent. If they are correct in their belief, then A) the demand for long-distance phone calls is price inelastic. B) the total revenue from long-distance phone calls will increase if they lower the price. C) the demand for long-distance phone calls is income elastic. D) the total revenue from long-distance phone calls will decrease if they lower the price. Answer: B Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 51 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 143) One year, the government boosted regulated taxi fares in New York City by 15 percent with the expectation that the total revenue from taxi rides would also increase by 15 percent. The taxi commission that authorized this fare increase must have believed that the demand for taxi service was A) elastic, but not perfectly elastic. B) inelastic, but not perfectly inelastic. C) unit elastic. D) perfectly inelastic. Answer: D Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 144) Suppose Sandy's Candies wants to increase its total revenues. If Sandy increases the price of her candy, she must be assuming that the demand for candy is A) unit elastic. B) inelastic. C) elastic. D) income elastic. Answer: B Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 145) Suppose Carol's Candid Cameras wants to increase its total revenue. If the firm lowers the price of cameras by 2 percent, Carol must be predicting that the quantity A) supplied will increase by more than 2 percent. B) demanded will increase by more than 2 percent. C) demanded will decrease by less than 2 percent. D) supply will decrease by less than 2 percent. Answer: B Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 52 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 146) Suppose Clem's Chemical Company wants to increase its total revenue. If there are few substitutes for Clem's Chemicals A) Clem should increase the price of his chemicals. B) Clem should decrease the price of his chemicals. C) the demand for chemicals is elastic. D) Clem will not be able to change the price of his chemicals. Answer: A Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 147) If an increase in price results in no change in total revenue, then demand must be A) inelastic. B) elastic. C) unit elastic. D) infinitely elastic. Answer: C Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 148) If demand for Farmer John's maple syrup is inelastic, then when Farmer John raises the price of maple syrup, his total revenue will A) increase. B) decrease. C) stay the same. D) probably change, but more information is needed to determine if the total revenue increases, decreases, or stays the same. Answer: A Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 53 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 149) If the total revenue received by sellers of DVDs increases by 20 percent when price increases by 10 percent, then demand for DVDs is A) perfectly elastic. B) unitary elastic. C) inelastic. D) elastic. Answer: C Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 150) Total revenue received by surfboard manufacturers increases by $2 million when the price of a surfboard decreases by $10. The price the elasticity of demand for surfboards is A) between 0 and 1. B) greater than 1. C) equal to 0. D) some amount that is impossible to determine without more information. Answer: B Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 151) If a 20 percent decrease in the price of a good leads to a 15 percent increase in the quantity demanded, then demand is ________ and total revenue will ________ as a result of the fall in price. A) elastic; increase B) elastic; decrease C) inelastic; increase D) inelastic; decrease Answer: D Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 54 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 152) The price elasticity of demand for wheat is 0.42. A drought cuts the supply of wheat. What will happen to the farmers' total revenue? A) The total revenue will increase. B) The total revenue will decrease. C) The total revenue will not change. D) There is not enough information to determine what happens to the total revenue. Answer: A Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 153) The price elasticity of demand for corn is 0.4. A new hybrid of corn is discovered and all farmers start to use it, which increases the quantity of corn they can produce from each acre. What happens to the farmers' total revenue? A) The total revenue will increase. B) The total revenue will decrease. C) The total revenue will not change. D) There is not enough information to determine what happens to the total revenue. Answer: B Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 154) A university conducts a survey of students, which shows that a 10 percent tuition hike would lead to a 12 percent decrease in the enrollment. If the university wants to increase its total revenue, it should ________ tuition because the demand for education at this university is ________. A) raise; elastic B) not raise; elastic C) raise; inelastic D) not raise; inelastic Answer: B Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 55 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 155) A university conducts a survey of students, which shows that a 10 percent tuition hike would lead to a 7 percent decrease in the enrollment. If the university wants to increase its total revenue, it should ________ tuition because the demand for education at this university is ________. A) raise; elastic B) not raise; elastic C) raise; inelastic D) not raise; inelastic Answer: C Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 156) The price of a bus ride decreases, and the total revenue of the bus company decreases. The demand for bus rides is A) perfectly elastic. B) inelastic. C) unit elastic. D) elastic but not necessarily perfectly elastic. Answer: B Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 157) The price elasticity of demand for gasoline is 0.40. If the price of gasoline rises by 20 percent, there will be A) a decrease of more than 20 percent in the quantity of gasoline demanded. B) an increase in the total revenue received from the sale of gasoline. C) a loss of total revenue for gasoline producers, because at a higher price the quantity of gasoline demanded decreases. D) no change in the quantity of gasoline sold because people need gasoline. Answer: B Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 56 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 158) When Monica's Catering lowered the price of catered meals from $60 per person to $20 per person, the quantity demanded doubled from 500 meals to 1,000 meals. You can conclude that the demand for Monica's catered meals over the price range of $20 to $60 is A) upward sloping. B) unit elastic. C) elastic. D) inelastic. Answer: D Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 159) If the demand for a good is unit elastic A) a 5 percent increase in price results in a 5 percent increase in total revenue. B) a 5 percent increase in price results in a 5 percent decrease in total revenue. C) a 5 percent increase in price does not change total revenue. D) the demand curve is a straight line with slope of -1. Answer: C Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 160) If OPEC, a group of oil producing nations, cuts oil production to increase the total revenue, OPEC presumes that the demand for oil is A) perfectly elastic. B) unit elastic. C) elastic. D) inelastic. Answer: D Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 57 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 161) A shift of the supply curve of oil raises the price from $70 a barrel to $80 a barrel and reduces the quantity demanded from 40 million to 38 million barrels a day. You can conclude that the A) demand for oil is elastic. B) demand for oil is inelastic. C) supply of oil is elastic. D) supply of oil is inelastic. Answer: B Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 162) A shift of the supply curve of oil raises the price from $60 a barrel to $75 a barrel and reduces the quantity demanded from 40 million to 20 million barrels a day. You can conclude that the A) demand for oil is elastic. B) demand for oil is inelastic. C) supply of oil is elastic. D) supply of oil is inelastic. Answer: A Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 163) The price of milk rises, so the supply of ice cream decreases. there is, as a result a 5 percent increase in the price of ice cream and a 3 percent decrease in the quantity of ice cream sold. The revenue received by ice cream suppliers will ________ because the demand for ice cream is ________. A) decrease; price inelastic B) increase; price inelastic C) increase; price elastic D) decrease; price elastic Answer: B Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 58 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 164) In the summer 2012 the lobster catch in Maine was especially large, but instead of celebrating the fisherman were suffering from a lower total revenue. (Source: New York Times, July 28, 2012) As the lobster catch increases, there is A) a movement along the demand curve, resulting in a higher price and a decreased quantity. B) a movement along the demand curve, resulting in a lower price and an increased quantity. C) no change in either the price or the quantity. D) a movement along the demand curve, resulting in a higher price and an increased quantity. Answer: B Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 165) In the summer 2012 the lobster catch in Maine was especially large, but instead of celebrating the fisherman were suffering from a lower total revenue. (Source: New York Times, July 28, 2012) Despite the larger quantity of lobster caught, the total revenue of the fisherman decreased. This fact means that the demand for lobster is A) unit elastic. B) elastic. C) inelastic. D) perfectly elastic. Answer: C Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 166) When the price of a Caesar salad is $5.00, the demand for Caesar salads is elastic, and when the price is $4.00, the demand is inelastic. If Mike's Roadside Restaurant cuts the price from $5.00 to $4.00, its total revenue from Caesar salads A) will increase. B) will decrease. C) will remain the same. D) might increase, decrease, or remain the same. Answer: D Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 59 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 167) Suppose that the demand for corn is price inelastic. If a technological advance makes corn farms more productive, the equilibrium price of corn will ________ and the farmers' total revenue will ________. A) rise; increase B) rise; decrease C) fall; increase D) fall; decrease Answer: D Topic: Total Revenue Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 168) Total revenue for skis is at a maximum when the price elasticity of demand is A) between 0 and 1. B) 1. C) greater than 1. D) 0. Answer: B Topic: Total Revenue and Elasticity Skill: Conceptual Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 169) If hot dog vendors at baseball games want to maximize their total sales revenue, they will have to A) be willing to experience reduced hot dog expenditure by baseball fans. B) set the price of their hot dogs so that the demand is unit elastic. C) sell as many hot dogs as they can, even if it means lowering price. D) raise their price, even if it means selling fewer hot dogs. Answer: B Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 170) Sara's Strawberry Market maximizes its total revenue by selling strawberries for $1.25 a basket. At a price of $1.25, you predict that A) the demand for strawberries is inelastic. B) Sara's sells most of the strawberries that she grows. C) the demand for strawberries is elastic. D) the demand for strawberries is unit elastic. Answer: D Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 60 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 Price Quantity (dollars per demanded pound) (pounds) 10 0 9 2 7 6 5 10 3 14 1 18 0 20 171) The above table gives the demand schedule for Billy Bob's BBQ ribs. The price elasticity of demand for Billy Bob's ribs over the price range of $3 to $1 is equal to A) 4.00. B) 2.00. C) 0.50. D) 0.25. Answer: D Topic: Calculating Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 172) The above table gives the demand schedule for Billy Bob's BBQ ribs. If the price of a pound of ribs falls from $3 per pound to $1 per pound, what is the change in Billy Bob's total revenue? A) $42 B) $24 C) -$2 D) -$24 Answer: D Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 61 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 173) The above table gives the demand schedule for Billy Bob's BBQ ribs. The demand for Billy Bob's ribs over the price range of $1 per pound to $3 per pound is A) perfectly elastic. B) elastic. C) unit elastic. D) inelastic. Answer: D Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 174) The above table gives the demand schedule for Billy Bob's BBQ ribs. An increase in the price of a pound of ribs will lead to a decrease in total revenue when A) demand is inelastic. B) the demand curve is vertical. C) the price increase occurs over the price range of 0 to $5. D) the price increase occurs over the price range of $5 to $10. Answer: D Topic: Total Revenue and Elasticity Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 175) The above table gives the demand schedule for Billy Bob's BBQ ribs. The demand for Billy Bob's ribs is unit elastic at which of the following prices? A) $10 B) $7 C) $5 D) $1 Answer: C Topic: Elasticity Along a Straight-Line Demand Curve Skill: Analytical Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 62 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 176) The above figure shows the demand curve for movie rentals from Redbox. If Redbox raised its price from $2.50 to $3.00, between these two prices the price elasticity of demand equals A) 1.2. B) 0.8. C) 2.0. D) 0.5. Answer: A Diff: 1 Topic: The Price Elasticity of Demand Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 177) The above figure shows the demand curve for movie rentals from Redbox. Which of the following is TRUE? A) Consumer expenditure on movie rentals will always increase whenever Redbox lowers its price. B) Redbox will receive more total revenue if it charges $4.00 per movie rental rather than $3.00. C) The price elasticity of demand for movie rentals falls as Redbox raises its price. D) The demand for movie rentals is more price inelastic at $1.00 than it is at $1.50. Answer: D Diff: 1 Topic: The Price Elasticity of Demand Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 63 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 178) The above figure shows the demand curve for movie rentals from Redbox. At which of the following prices is the demand unit elastic? A) $5.00 B) $3.50 C) $2.50 D) $0.00 Answer: C Diff: 1 Topic: The Price Elasticity of Demand Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 179) The above figure shows the demand curve for movie rentals from Redbox. At which of the following prices does Redbox have the maximum total revenue? A) $5.00 B) $3.50 C) $2.50 D) $0.00 Answer: C Diff: 1 Topic: Total Revenue and Elasticity Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 180) The above figure shows the demand curve for movie rentals from Redbox. If Redbox lowered its price from $4.00 to $3.50, then total revenue would ________ because demand is ________. A) decrease; elastic B) increase; elastic C) decrease; inelastic D) increase; inelastic Answer: B Diff: 1 Topic: Total Revenue and Elasticity Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 64 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 181) The above figure shows the demand curve for movie rentals from Redbox. If Redbox lowered its price from $2.00 to $1.50, then total revenue would ________ because demand is ________. A) decrease; elastic B) increase; elastic C) decrease; inelastic D) increase; inelastic Answer: C Diff: 1 Topic: Total Revenue and Elasticity Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 182) The above figure shows the demand curve for movie rentals from Redbox. If Redbox lowered its price from $1.50 to $1.00, then total revenue would ________ because demand is ________. A) decrease; elastic B) increase; elastic C) decrease; inelastic D) increase; inelastic Answer: C Diff: 1 Topic: Total Revenue and Elasticity Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: Analytical thinking 65 Copyright © 2019 Pearson Education, Inc. Downloaded by kigbek3 kigbek3 ([email protected])  lOMoARcPSD|46833899 183) The figure illustrates the demand for magazines. Newsagents will maximize their total revenue when they A) sell 375 magazines a day. B) sell as many magazines as they can. C) charge $2.50 a magazine. D) sell 750 magazines a day. Answer: A Topic: Total Revenue and Elasticity Skill: Graphing Status: Old A-level heading: Price Elasticity of Demand AACSB: