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Chapter 04 - Elasticity
47. Refer to the above graph. If the price decreases from P3 to P2, then the loss in total
revenue is areas:
48. Refer to the above graph. If the price increases from P1 to P2, then the gain in total
revenue is areas:
49. Refer to the above graph. Consider a situation where price increases from P3 to P4. In this
price range, demand is relatively:
Chapter 04 - Elasticity
50. Refer to the above graph. Consider a situation where price decreases from P2 to P1. In this
price range, demand is relatively:
51. You are the sales manager for a software company and have been informed that the price
elasticity of demand for your most popular software is less than 1. To increase total revenues,
you should:
Chapter 04 - Elasticity
52. In the graph above, if the price of the product decreases from $6 to $5, then total revenue
would:
53. A firm produces and sells two goods, A and B. Good A is known to have many close
substitutes; good B makes up a significant portion of most families' budgets. A price increase
for each good would most likely cause total revenues from good A to:
Chapter 04 - Elasticity
54. In some markets consumers may buy many different brands of a product. Which of the
statements below best represents a situation where demand for a particular brand would be
very elastic?
55. Which is not characteristic of a product with relatively inelastic demand?
56. What is the most likely effect of the development of television, videocassette players, and
rental movies on the movie theater industry?
Chapter 04 - Elasticity
57. The demand for Cheerios cereal is more price-elastic than the demand for cereals as a
whole. This is best explained by the fact that:
58. Which of the following factors will make the demand for a product relatively elastic?
59. The price elasticity of demand increases with the length of the period considered because:
Chapter 04 - Elasticity
60. If in the short run the demand for mass transit is inelastic and in the long run the demand
is elastic, then a price:
61. A study of mass-transit systems in American cities revealed that in the long run revenues
generally decline after substantial fare increases. This would suggest that:
Chapter 04 - Elasticity
62. You are the only seller of eggs in town, and the price-elasticity coefficient for eggs is
known to be 0.8. If you want to increase your sales quantity by 10% through a price-change,
what should you do to price?
63. Which product is most likely to be the most price elastic?
64. A state government wants to increase the taxes on cigarettes to increase tax revenue. This
tax would only be effective in raising new tax revenues if the price elasticity of demand is:
Chapter 04 - Elasticity
65. The Mear Corporation finds that its total spending on machine parts increases after the
price of machine parts falls, other things being equal. Which of the following is true about the
Mear Corporation's demand for machine parts with the price change?
66. You are the newly appointed sales manager of the Rock Record Company and have been
charged with the task of increasing revenues. Your economics consultants have informed you
that at present price and output levels, price elasticity of demand for your product is less than
one. You should:
Chapter 04 - Elasticity
67. If demand for farm crops is inelastic, a good harvest will cause farm revenues to:
68. A union argues that a price cut will boost the revenues of the firm, while management
argues that the opposite is true. This suggests that the price elasticity of demand is:
69. If the demand for a product is elastic, then:
Chapter 04 - Elasticity
70. Sony is considering a 10 percent price reduction on its color television sets. If the price-
elasticity coefficient for the sets in this price range is 0.75, then the price cut will cause:
71. The price elasticity of demand for a textbook is estimated to be 1 no matter what the price
or quantity demanded. In this case:
72. An increase in the price of tickets to a popular sporting event will increase total revenue
if:
Chapter 04 - Elasticity
73. An auto rental company lowers the price of its rentals to increase its market share. The
price cut increases quantity demanded, but total revenue decreases. This result suggests that
over this price range, the demand for the auto rentals is:
74. The elasticity of supply for a product will be 2 if:
75. Suppose the price elasticity of supply for crude oil is 2.5. How much would price have to
rise to increase production by 20 percent?
Chapter 04 - Elasticity
76. In the graph above, what is the price elasticity of supply between points A and B above?
77. If a product has a short-run elasticity of supply equal to zero, then an increase in the
demand for the product will:
Chapter 04 - Elasticity
78. The following data relate to the supply schedule of a product.
Over which price range is the elasticity of supply greater than 1?
79. At a price of $4 per unit, Gadgets Inc. is willing to supply 20,000 gadgets, while United
Gadgets is willing to supply 10,000 gadgets. If the price were to rise to $8 per unit, their
respective quantities supplied would rise to 45,000 and 25,000. If these are the only two firms
supplying gadgets, what is the elasticity of supply in the market for gadgets?
Chapter 04 - Elasticity
80. At a price of $20 per unit, 140 units of good W are demanded and 100 units are supplied.
When the price is raised to $30 per unit, 100 units are demanded and 140 units are supplied.
The price elasticity of supply in this range is:
81. A price increase from $43 to $49 results in an increase in quantity supplied from 220 units
to 240 units. The price elasticity of supply in this price range is:
Chapter 04 - Elasticity
82. Refer to the above graph. Which of the following statements is correct?
83. Refer to the above graph. If the demand increased, then:
84. Refer to the above graph. If the demand decreased:
Chapter 04 - Elasticity
85. Refer to the graph above. Over the $5-$6 price range, the elasticity of supply using the
mid-point formula is:
86. Refer to the graph above. The time horizon depicted in the graph:
Chapter 04 - Elasticity
87. Economists distinguish among the market period, the short run, and the long run by noting
that:
88. To economists the main differences between "the short run" and "the long run" are that:
89. The supply of cars will be more elastic the:
