Question 1

Over the elastic portion of a demand curve, 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 demanded, but anything can happen to revenue.E) B) and D)
F) None of the above

Question 2

If the demand curve over a certain range is "price elastic," this implies that the:

Accepted Answer

A)   percentage change in the quantity demanded exceeds one.
B)   percentage change in the quantity demanded exceeds the percentage change in product price.
C)   percentage change in price exceeds the percentage change in quantity demanded.
D)   product is non-reactive.
E)   product has no good substitute.F) B) and C)
G) C) and D)

Question 3

When demand is price inelastic:

Accepted Answer

A)   price and total revenue move in the same direction.
B)   price and total revenue move in the opposite direction.
C)   total revenue increases whether price goes up or down.
D)   total revenue decreases whether price goes up or down.E) A) and B)
F) A) and C)

Question 4

Price elasticity of demand is defined as the ratio of the:

Accepted Answer

A)   percentage increase in price to an increase in quantity demanded.
B)   unit change in quantity demanded to the dollar change in price.
C)   maximum amount that consumers will pay to increase quantity.
D)   percentage change in quantity demanded to the percentage change in price, other things being equal.E) B) and D)
F) A) and D)

Question 5

If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:

Accepted Answer

A)   elastic.
B)   inelastic.
C)   perfectly inelastic.
D)   perfectly elastic.E) B) and C)
F) A) and B)

Question 6

Along the elastic range of a demand curve, a price change causes:

Accepted Answer

A)   a change in total revenue in the opposite direction.
B)   a change in total revenue in the same direction.
C)   no change in total revenue.
D)   an unpredictable change in the total revenue.E) All of the above
F) A) and B)

Question 7

If a good has a price elasticity of demand coefficient less than one, then:

Accepted Answer

A)   this good has an elastic demand.
B)   this good has an inelastic demand.
C)   a 10 percent increase in the price will result in a greater than 10 percent decrease in the quantity demanded.
D)   the demand curve will be vertical.E) All of the above
F) A) and B)

Question 8

Exhibit 5-5  Demand curve for computers  In Exhibit 5-5, if the area OABC equals the area ODEF, the demand curve is:

Accepted Answer

A)   elastic.
B)   inelastic.
C)   unitary elastic.
D)   nonelastic.E) A) and B)
F) A) and C)

Question 9

Price elasticity remains constant along a straight-line demand curve.

Accepted Answer

A) True 
 B)False

Question 10

Suppose the Good Food supermarket increases the price of a pound of bananas from $.75 to $1.25 and finds that the quantity of bananas it sells per month drops from 1,500 to 1,000. The price elasticity of demand coefficient for bananas in this price range is:

Accepted Answer

A)   0.80.
B)   3.00.
C)   2.00.
D)   0.50.E) A) and B)
F) A) and C)

Question 11

If demand for a good is price elastic, then the price elasticity will be:

Accepted Answer

A)   equal to one.
B)   equal to zero.
C)   greater than one.
D)   less than one.
E)   less than zero.F) A) and E)
G) None of the above

Question 12

A public transit company finds that when it reduces the price of a bus ticket, total revenues remain the same. One can conclude from this that:

Accepted Answer

A)   the demand curve is horizontal, reflecting infinite price elasticity.
B)   the company sells the same number of bus tickets both before and after the price change.
C)   the demand curve for bus tickets must have shifted to the right.
D)   the firm is operating in a range of the demand curve that is unit elastic.
E)   the price should be lowered further so that a larger quantity can be sold.F) B) and C)
G) B) and D)

Question 13

If the price elasticity of demand is computed for two products, and product A measures .79, and product B measures 1.6, then:

Accepted Answer

A)   product A is more price elastic than product B.
B)   product B is more price elastic than product A.
C)   consumers are more sensitive to price changes in product A than in product B.
D)   product B is more price inelastic than product A.
E)   products A and B must be substitutes.F) A) and C)
G) B) and E)

Question 14

If Pete raises his price of muffins from $2 to $3 and his sales revenue increases from $35,000 to $38,000, then:

Accepted Answer

A)   the demand for Pete's muffins in this range is price elastic.
B)   the demand for Pete's muffins in this range is price inelastic.
C)   the demand for Pete's muffins in this range is unit elastic.
D)   the percentage change in quantity demanded must exceed the percentage change in product price.
E)   this is impossible since this would violate the law of demand.F) A) and E)
G) All of the above

Question 15

Exhibit 5-1  Demand curves  In Exhibit 5-1, the demand curve between points a and b is:

Accepted Answer

A)   price elastic.
B)   price inelastic.
C)   unit elastic.
D)   perfectly elastic.
E)   perfectly inelastic.F) A) and B)
G) B) and D)

Question 16

Suppose the president of a college argues that a 25 percent tuition increase will raise revenues for the college. It can be concluded that the president thinks that demand to attend this college is:

Accepted Answer

A)   elastic.
B)   inelastic, but not perfectly inelastic.
C)   unitary elastic.
D)   perfectly elastic.E) B) and D)
F) A) and D)

Question 17

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

Accepted Answer

A)   ​ vertical
B)   ​ rectangular hyperbola
C)   ​ horizontal
D)   ​circularE) A) and B)
F) A) and C)

Question 18

The short-run price elasticity of demand for airline travel is .05, while the long-run elasticity is 2.36. This means that a significant increase in airline ticket prices will cause airline companies to:

Accepted Answer

A)   collect less revenue from short-notice travelers.
B)   collect more revenue from travelers who book well in advance.
C)   lose money on short-notice travelers.
D)   collect less revenue from travelers who book well in advance.
E)   lose many of its short-notice travelers.F) C) and D)
G) B) and D)

Question 19

If Stimpson University increases tuition in order to increase its revenue, it will:

Accepted Answer

A)   not be successful if the demand curve slopes downward.
B)   be successful if demand is elastic.
C)   be successful if demand is inelastic.
D)   be successful if supply is elastic.
E)   be successful if supply is inelastic.F) A) and B)
G) D) and E)

Question 20

Exhibit 5-6  Demand curve for concert tickets  In Exhibit 5-6, suppose promoters charge a price of $30 per ticket. How much total revenue will their sales generate?

Accepted Answer

A)   $300,000.
B)   $400,000.
C)   $500,000.
D)   $600,000.E) A) and B)
F) C) and D)

Exam 5: Price Elasticity of Demand

If Stimpson University increases tuition in order to increase its revenue, it will:

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Over the elastic portion of a demand curve, a decrease in price causes:

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A public transit company finds that when it reduces the price of a bus ticket, total revenues remain the same. One can conclude from this that:

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Suppose the president of a college argues that a 25 percent tuition increase will raise revenues for the college. It can be concluded that the president thinks that demand to attend this college is:

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When demand is price inelastic:

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If Pete raises his price of muffins from $2 to $3 and his sales revenue increases from $35,000 to $38,000, then:

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If a good has a price elasticity of demand coefficient less than one, then:

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Exhibit 5-6 Demand curve for concert tickets In Exhibit 5-6, suppose promoters charge a price of $30 per ticket. How much total revenue will their sales generate?

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Price elasticity of demand is defined as the ratio of the:

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Suppose the Good Food supermarket increases the price of a pound of bananas from $.75 to $1.25 and finds that the quantity of bananas it sells per month drops from 1,500 to 1,000. The price elasticity of demand coefficient for bananas in this price range is:

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The short-run price elasticity of demand for airline travel is .05, while the long-run elasticity is 2.36. This means that a significant increase in airline ticket prices will cause airline companies to:

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

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Price elasticity remains constant along a straight-line demand curve.

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If the price elasticity of demand is computed for two products, and product A measures .79, and product B measures 1.6, then:

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Exhibit 5-1 Demand curves In Exhibit 5-1, the demand curve between points a and b is:

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If demand for a good is price elastic, then the price elasticity will be:

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Along the elastic range of a demand curve, a price change causes:

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Exhibit 5-5 Demand curve for computers In Exhibit 5-5, if the area OABC equals the area ODEF, the demand curve is:

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If the demand curve over a certain range is "price elastic," this implies that the:

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If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:

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

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