Question 1

A _______ demand curve has a price elasticity of demand that is perfectly inelastic. ​

Accepted Answer

A)   ​ circular
B)   ​ horizontal
C)   ​rectangular hyperbola
D)   ​verticalE) B) and D)
F) B) and C)

Question 2

Suppose the president of a textbook publisher argues that a 10 percent increase in the price of textbooks will raise total revenue for the publisher. It can be concluded that the company president thinks that demand for textbooks is:

Accepted Answer

A)   unitary elastic.
B)   inelastic.
C)   elastic.
D)   perfectly inelastic.E) A) and C)
F) None of the above

Question 3

You are on a campus committee which sets the ticket prices for basketball games. The committee wants to increase the total money generated from ticket sales. When should the committee choose to lower its ticket prices?

Accepted Answer

A)   Always.
B)   Never.
C)   When demand for basketball tickets is elastic.
D)   When demand for basketball tickets is inelastic.E) A) and B)
F) B) and C)

Question 4

If the value of the price elasticity of demand is 0.2, this means that:

Accepted Answer

A)   a 20 percent decrease in price causes a 1 percent increase in quantity demanded.
B)   a 0.2 percent decrease in price causes a 1 percent increase in quantity demanded.
C)   a 5 percent decrease in price causes a 1 percent increase in quantity demanded.
D)   a 0.2 percent decrease in price causes a 0.2 percent increase in quantity demanded.
E)   a 100 percent decrease in price causes a 200 percent increase in quantity demanded.F) A) and D)
G) A) and C)

Question 5

A product would be more demand price inelastic:

Accepted Answer

A)   the shorter the time the consumer has to adjust to price changes.
B)   the higher the price of the good.
C)   the more the number of good substitutes.
D)   the less the essential nature of the good.
E)   if the supply is more price elastic.F) B) and C)
G) A) and E)

Question 6

What happens to total revenue given a price increase and demand is inelastic? Why?

Accepted Answer

Total revenue will rise if the price ris...

Question 7

Exhibit 5-5  Demand curve for computers  In Exhibit 5-5, the total revenue at point B on the demand curve equals:

Accepted Answer

A)   OA.
B)   CB.
C)   AB.
D)   OABC.
E)   None of the above.F) B) and C)
G) A) and B)

Question 8

Exhibit 5-1  Demand curves  In Exhibit 5-1, between points b and c, the price elasticity of demand measures

Accepted Answer

A)   4.27.
B)   1.5.
C)   1.56.
D)   0.636.
E)   0.425.F) D) and E)
G) B) and E)

Question 9

A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was:

Accepted Answer

A)   elastic.
B)   inelastic.
C)   of unitary elasticity.
D)   indeterminate; more information is needed to determine the price elasticity of demand.E) A) and B)
F) None of the above

Question 10

If the managers of the bus system found that revenues increase when fares are raised, they would conclude that price elasticity demand for subway service is inelastic.

Accepted Answer

A) True 
 B)False

Question 11

If demand is price elastic, a decrease in price causes:

Accepted Answer

A)   an increase in total revenue.
B)   a decrease in total revenue.
C)   no change in total revenue.
D)   an increase in quantity, but anything can happen to revenue.E) None of the above
F) B) and C)

Question 12

Exhibit 5-7  Demand curve for concert tickets  In Exhibit 5-7, if promoters raise their prices from $10 to $40 per ticket, then their total revenue will:

Accepted Answer

A)   increase.
B)   decrease.
C)   remain unchanged.
D)   react unpredictably.E) A) and B)
F) A) and C)

Question 13

An economist estimates that .67 is the price elasticity of demand for disposable diapers. This suggests that disposable diaper producers could:

Accepted Answer

A)   advertise more to raise the price elasticity of demand.
B)   encourage more parents to use cloth diapers.
C)   lower the price of disposable diapers to raise more revenue.
D)   raise the price of disposable diapers to raise more revenue.
E)   maximize revenues by staying at the current price.F) A) and D)
G) All of the above

Question 14

Exhibit 5-3  Demand curves for gallons of orange juice  Using Exhibit 5-3, in general, whose demand for orange juice is the most elastic?

Accepted Answer

A)   Albert
B)   Betty
C)   Carl
D)   Dana
E)   EdwardF) A) and B)
G) C) and E)

Question 15

Which of the following events would increase the price elasticity of demand for Chicago Bears tickets that sell at a price of $20?

Accepted Answer

A)   b and c.
B)   The Bears are having a successful season.
C)   The visiting team is having a successful season.
D)   The Bears have been defeated in their previous seven games.
E)   The weather on game day will be warm.F) A) and B)
G) A) and C)

Question 16

The price elasticity of demand coefficient for a good will be greater:

Accepted Answer

A)   if close substitutes exist.
B)   if minor complements exist.
C)   in the short-run.
D)   if a small portion of the budget will be spent on it.E) B) and C)
F) All of the above

Question 17

As one moves down a straight-line, down-sloping demand curve, price elasticity will:

Accepted Answer

A)   change from elastic, to unit elastic, then to inelastic.
B)   remain the same between any two points.
C)   change from inelastic, to elastic, then to unit elastic.
D)   change from unit elastic, to elastic, then to inelastic.
E)   change from elastic, to inelastic, then to unit elastic.F) D) and E)
G) B) and D)

Question 18

If New York City expects that an increase in bus fares will raise mass transit revenues, it must think that the demand for bus travel is:

Accepted Answer

A)   elastic.
B)   unit elastic.
C)   inelastic.
D)   perfectly inelastic.
E)   10.F) None of the above
G) C) and E)

Question 19

If a straight-line demand curve slopes down, price elasticity will:

Accepted Answer

A)   remain the same at all points on the demand curve.
B)   change between any two points along the demand curve.
C)   always be greater than 1.
D)   always equal 1.
E)   always be less than 1.F) C) and D)
G) All of the above

Question 20

Exhibit 5-8  Supply and demand curves for good X  As shown in Exhibit 5-8, the price elasticity of demand for good X between points E and Z is:

Accepted Answer

A)   3/13 = 0.23.
B)   13/3 = 4.33.
C)   1/3 = 0.33.
D)   1.E) None of the above
F) C) and D)

Exam 5: Price Elasticity of Demand

What happens to total revenue given a price increase and demand is inelastic? Why?

Correct AnswerverifiedTotal revenue will rise if the price ris...View AnswerShow Answer

If New York City expects that an increase in bus fares will raise mass transit revenues, it must think that the demand for bus travel is:

Correct AnswerverifiedShow Answer

A product would be more demand price inelastic:

Correct AnswerverifiedShow Answer

The price elasticity of demand coefficient for a good will be greater:

Correct AnswerverifiedShow Answer

An economist estimates that .67 is the price elasticity of demand for disposable diapers. This suggests that disposable diaper producers could:

Correct AnswerverifiedShow Answer

If the managers of the bus system found that revenues increase when fares are raised, they would conclude that price elasticity demand for subway service is inelastic.

Correct AnswerverifiedShow Answer

If a straight-line demand curve slopes down, price elasticity will:

Correct AnswerverifiedShow Answer

If demand is price elastic, a decrease in price causes:

Correct AnswerverifiedShow Answer

As one moves down a straight-line, down-sloping demand curve, price elasticity will:

Correct AnswerverifiedShow Answer

Suppose the president of a textbook publisher argues that a 10 percent increase in the price of textbooks will raise total revenue for the publisher. It can be concluded that the company president thinks that demand for textbooks is:

Correct AnswerverifiedShow Answer

Which of the following events would increase the price elasticity of demand for Chicago Bears tickets that sell at a price of $20?

Correct AnswerverifiedShow Answer

Exhibit 5-5 Demand curve for computers In Exhibit 5-5, the total revenue at point B on the demand curve equals:

Correct AnswerverifiedShow Answer

Exhibit 5-3 Demand curves for gallons of orange juice Using Exhibit 5-3, in general, whose demand for orange juice is the most elastic?

Correct AnswerverifiedShow Answer

Exhibit 5-8 Supply and demand curves for good X As shown in Exhibit 5-8, the price elasticity of demand for good X between points E and Z is:

Correct AnswerverifiedShow Answer

You are on a campus committee which sets the ticket prices for basketball games. The committee wants to increase the total money generated from ticket sales. When should the committee choose to lower its ticket prices?

Correct AnswerverifiedShow Answer

A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was:

Correct AnswerverifiedShow Answer

If the value of the price elasticity of demand is 0.2, this means that:

Correct AnswerverifiedShow Answer

Exhibit 5-7 Demand curve for concert tickets In Exhibit 5-7, if promoters raise their prices from $10 to $40 per ticket, then their total revenue will:

Correct AnswerverifiedShow Answer

A _______ demand curve has a price elasticity of demand that is perfectly inelastic. ​

Correct AnswerverifiedShow Answer

Exhibit 5-1 Demand curves In Exhibit 5-1, between points b and c, the price elasticity of demand measures

Correct AnswerverifiedShow Answer

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A _______ demand curve has a price elasticity of demand that is perfectly inelastic.

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