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43.
Suppose the total-revenue curve is derived from a particular linear demand curve. That
demand curve must be
44.
Suppose the total-revenue curve is derived from a particular linear demand curve. That
demand curve must be
45.
Which of the following statements is not correct?
6-23
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
Di f f i cu l t y :
02 Medium
Learning Objective: 06-02 Explain the usefulness of the total-revenue test for price
elasticity of demand.
Test Bank: I
Topic:
The Total-Revenue Test
46.
In which of the following instances will total revenue decline?
47.
If a firm's demand for labor is elastic, a union-negotiated wage increase will
48.
The Illinois Central Railroad once asked the Illinois Commerce Commission for
permission to increase its commuter rates by 20 percent. The railroad argued that declining
revenues
made this rate increase essential. Opponents of the rate increase contended that
the railroad's revenues would fall because of the rate hike. It can be concluded that
6-24
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
A.
both groups felt that the demand was elastic but for different reasons.
B.
both groups felt that the demand was inelastic but for different reasons.
C.
the railroad felt that the demand for passenger service was inelastic and opponents of the
rate increase felt it was elastic.
D. the railroad felt that the demand for passenger service was elastic and opponents of the
rate increase felt it was inelastic.
49.
If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and
$11,000 worth of it when its price is $6, then
50.
Suppose the price elasticity of demand for bread is 0.20. If the price of bread falls by 10
percent, the quantity demanded will increase by
6-25
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Di f f i cu l t y :
02 Medium
Learning Objective: 06-02 Explain the usefulness of the total-revenue test for price
elasticity of demand.
Test Bank: I
Topic:
The Total-Revenue Test
51.
Refer to the diagram, which is a rectangular hyperbola, that is, a curve such that each
52.
Refer to the diagram, which is a rectangular hyperbola, that is, a curve such that each
53.
Gigantic State University raises tuition for the purpose of increasing its revenue so that
more faculty can be hired. GSU is assuming that the demand for education at GSU is
6-27
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
Di f f i cu l t y :
02 Medium
Learning Objective: 06-02 Explain the usefulness of the total-revenue test for price
elasticity of demand.
Test Bank: I
Topic:
The Total-Revenue Test
54.
If the demand for farm products is price inelastic, a good harvest will cause farm
revenues to
55.
Other things the same, if a price change causes total revenue to change in the opposite
direction, demand is
56.
If the price elasticity of demand for a product is unity, a decrease in price will
6-28
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
increase the quantity demanded and increase total revenue.
C.
increase the quantity demanded but decrease total revenue.
D.
increase the quantity demanded, but total revenue will be unchanged.
57.
In which of the following cases will total revenue increase?
58.
A manufacturer of frozen pizzas found that total revenue decreased when price was
lowered from $5 to $4. It was also found that total revenue decreased when price was raised
from $5 to $6. Thus,
6-29
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: I
Topic:
The Total-Revenue Test
59.
Refer to the diagram. In the P1P2 price range, demand is
60.
Refer to the diagram. In the P3P4 price range, demand is
61.
The total-revenue test for elasticity
6-31
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
elasticity of demand.
Test Bank: I
Topic:
The Total-Revenue Test
62.
If the University Chamber Music Society decides to raise ticket prices to provide more
funds to finance concerts, the Society is assuming that the demand for tickets is
63.
The state legislature has cut Gigantic State University's appropriations. GSU's Board of
Regents decides to increase tuition and fees to compensate for the loss of revenue. The board
is assuming that the
64.
Which of the following is correct?
6-32
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. If demand is inelastic, an increase in price will decrease total revenue.
65.
Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the
total revenue received by peanut farmers changes from $16 to $14 billion. Thus,
66.
Which of the following is correct?
6-33
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: I
Topic:
The Total-Revenue Test
67.
Refer to the diagram. Total revenue at price P1 is indicated by area(s)
68.
Refer to the diagram. If price falls from P1 to P2, total revenue will become area(s)
69.
Refer to the diagram. The decline in price from P1 to P2 will
70.
Refer to the diagram. In the P1 to P2 price range, we can say
71.
Refer to the diagram. If price falls from $10 to $2, total revenue
72.
Refer to the diagram and assume that price increases from $2 to $10. The coefficient of price
73.
The demand schedules for such products as eggs, bread, and electricity tend to be
6-39
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 06-03 List the factors that affect price elasticity of demand and
describe some applications of price elasticity of demand.
Test Bank: I
Topic:
Determinants of Price Elasticity of Demand
74.
The elasticity of demand for a product is likely to be greater,
75.
We would expect
76.
The narrower the definition of a product,
6-40
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C.
the larger the number of substitutes and the smaller the price elasticity of demand.
D.
the smaller the number of substitutes and the smaller the price elasticity of demand.
77.
The more time consumers have to adjust to a change in price,
78.
The demand for autos is likely to be
