Question 1

Suppose that a jewelry store found that when it increased prices by 10 percent,sales revenue increased by 3 percent.Which of the following is true about the price elasticity of demand for the store's goods?

Accepted Answer

A)   Demand is perfectly inelastic.
B)   Demand is inelastic, but not perfectly.
C)   Demand is unitary classic.
D)   Demand is elastic, but not perfectly.
E)   Demand is perfectly elastic.F) All of the above
G) B) and C)

Question 2

Exhibit 5-9 Supply and demand curves for good X
 
-As shown in Exhibit 5-9,the price elasticity of demand for good X between points E and B is:

Accepted Answer

A)   3/7 = 0.43.
B)   7/3 = 2.33.
C)   1/2 = 0.50.
D)   1.E) All of the above
F) A) and B)

Question 3

If the price elasticity of demand coefficient equals 2,this means a 10 percent increase in price will result in a 20 percent decrease in the quantity demanded.

Accepted Answer

A) True 
 B)False

Question 4

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) A) and D)
F) B) and C)

Question 5

If the demand for cigarettes is highly inelastic,this indicates that:

Accepted Answer

A)   higher cigarette prices will increase the demand for cigarettes.
B)   the price elasticity coefficient of cigarettes exceeds 1.
C)   the price elasticity coefficient of cigarettes equals 1.
D)   the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes.E) A) and B)
F) B) and D)

Question 6

If a revenue-maximizing firm is told that the price elasticity of demand is equal to one,it should:

Accepted Answer

A)   raise prices 1 percent.
B)   lower prices 1 percent.
C)   raise prices until the elasticity becomes very high.
D)   keep the price where it is.
E)   lower prices until the elasticity becomes very high.F) C) and D)
G) D) and E)

Question 7

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

Accepted Answer

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

Question 8

When a 2 percent increase in price generates a greater than 2 percent decrease in quantity demanded,then:

Accepted Answer

A)   demand is price inelastic.
B)   total revenue increases.
C)   demand is positively sloped.
D)   demand is unit elastic.
E)   total revenueF) A) and E)
G) B) and E)

Question 9

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) A) and C)
G) All of the above

Question 10

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units,then according to the averaging equation,the value of price elasticity of demand in absolute terms is:

Accepted Answer

A)   0.33.
B)   2.33.
C)   0.25.
D)   3.
E)   0.66.F) All of the above
G) A) and B)

Question 11

The price elastic portion of the linear demand curve lies:

Accepted Answer

A)  b and c.
B)  above the point of unit elasticity.
C)  anywhere to the left of current market prices.
D)  below the point where total revenue is maximized.
E)  at the intersection with the supply curve.F) B) and E)
G) B) and C)

Question 12

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 D)
G) D) and E)

Question 13

The longer the time period under study,

Accepted Answer

A)   the more elastic is the price elasticity of demand.
B)   the less sensitive consumers will be to price changes.
C)   the less adjustment consumers will make to price changes.
D)   the more inelastic is the price elasticity of demand.
E)   the more likely any given price cut will result in a smaller reaction by the consumer.F) None of the above
G) A) and E)

Question 14

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 E)
G) C) and D)

Question 15

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) B) and C)
F) A) and D)

Question 16

Exhibit 5-2 Price and quantity demanded data
 
-Using Exhibit 5-2,what is the price elasticity of demand when the price falls from five dollars to four?

Accepted Answer

A)   1.
B)   1.25.
C)   0.8.
D)   2.0.
E)   0.4.F) A) and D)
G) All of the above

Question 17

Which of the following statements is true?

Accepted Answer

A)  b and d.
B)  Total revenue is maximized when elasticity is one.
C)  Goods are said to be price inelastic when the elasticity is greater than two.
D)  Demand for milk is more elastic than demand for football tickets.
E)  Demand for 5-cent candy is more elastic than demand for sweaters.F) A) and D)
G) B) and C)

Question 18

Demand sensitivity depends on all of the following except:

Accepted Answer

A)   how low is the price of the good.
B)   the sensitivity of firms' output to changes in its price.
C)   the consumer's income.
D)   the availability and closeness of substitutes.
E)   the amount of time a consumer has to adjust to price changes.F) A) and B)
G) A) and C)

Question 19

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) B) and C)

Question 20

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) B) and C)
F) A) and C)

Exam 5: Price Elasticity of Demand

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

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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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Demand sensitivity depends on all of the following except:

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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:

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Which of the following statements is true?

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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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Suppose that a jewelry store found that when it increased prices by 10 percent,sales revenue increased by 3 percent.Which of the following is true about the price elasticity of demand for the store's goods?

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Exhibit 5-9 Supply and demand curves for good X -As shown in Exhibit 5-9,the price elasticity of demand for good X between points E and B is:

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If a revenue-maximizing firm is told that the price elasticity of demand is equal to one,it should:

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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:

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If the price elasticity of demand coefficient equals 2,this means a 10 percent increase in price will result in a 20 percent decrease in the quantity demanded.

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If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units,then according to the averaging equation,the value of price elasticity of demand in absolute terms is:

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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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The price elastic portion of the linear demand curve lies:

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Exhibit 5-2 Price and quantity demanded data -Using Exhibit 5-2,what is the price elasticity of demand when the price falls from five dollars to four?

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

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If the demand for cigarettes is highly inelastic,this indicates that:

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When a 2 percent increase in price generates a greater than 2 percent decrease in quantity demanded,then:

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The longer the time period under study,

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

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