131. In the case of perfectly inelastic demand,
a.
the change in quantity demanded equals the change in price.
b.
the percentage change in quantity demanded equals the percentage change in price.
c.
infinitely-large changes in quantity demanded result from very small changes in the price.
d.
quantity demanded stays the same whenever price changes.
132. When demand is perfectly inelastic, the demand curve will be
a.
negatively sloped, because buyers decrease their purchases when the price rises.
b.
vertical, because buyers purchase the same amount as before whenever the price rises or falls.
c.
positively sloped, because buyers increase their purchases when price rises.
d.
positively sloped, because buyers increase their total expenditures when price rises.
133. When demand is perfectly inelastic, the price elasticity of demand
a.
b.
c.
d.
134. A perfectly inelastic demand implies that buyers
a.
decrease their purchases when the price rises.
b.
purchase the same amount as before when the price rises or falls.
c.
increase their purchases only slightly when the price falls.
d.
respond substantially to an increase in price.
135. Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth,
Marcus’s
a.
demand for cigarettes is perfectly inelastic.
b.
price elasticity of demand for cigarettes is infinite.
c.
income elasticity of demand for cigarettes is 0.
d.
More than one of the above is correct.
136. Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of
apps. Jerome’s demand for apps is
a.
perfectly elastic.
b.
unit elastic.
c.
perfectly inelastic.
d.
somewhat inelastic, but not perfectly inelastic.
137. For a vertical demand curve,
a.
the slope is undefined, and the price elasticity of demand is equal to 0.
b.
the slope is equal to 0, and the price elasticity of demand is undefined.
c.
both the slope and price elasticity of demand are undefined.
d.
both the slope and price elasticity of demand are equal to 0.
138. In which of these instances is demand said to be perfectly inelastic?
a.
An increase in price of 2% causes a decrease in quantity demanded of 2%.
b.
A decrease in price of 2% causes an increase in quantity demanded of 0%.
c.
A decrease in price of 2% causes a decrease in total revenue of 0%.
d.
An increase in price of 2% causes a decrease in quantity demanded of 1/2%.
139. Demand is said to have unit elasticity if the price elasticity of demand is
a.
less than 1.
b.
greater than 1.
c.
equal to 1.
d.
equal to 0.
140. Demand is said to be unit elastic if quantity demanded
a.
changes by the same percent as the price.
b.
changes by a larger percent than the price.
c.
changes by a smaller percent than the price.
d.
does not respond to a change in price.
141. If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the
elasticity, then demand is
a.
perfectly inelastic, and the demand curve is vertical.
b.
elastic, and the demand curve is a straight, downward-sloping line.
c.
perfectly elastic, and the demand curve is horizontal.
d.
elastic, and the demand curve is something other than a straight, downward-sloping line.
142. When quantity moves proportionately the same amount as price, demand is
a.
elastic, and the price elasticity of demand is 1.
b.
perfectly elastic, and the price elasticity of demand is infinitely large.
c.
perfectly inelastic, and the price elasticity of demand is 0.
d.
unit elastic, and the price elasticity of demand is 1.
143. When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand
a.
first becomes smaller, then larger.
b.
always becomes larger.
c.
always becomes smaller.
d.
first becomes larger, then smaller.
144. The price elasticity of demand changes as we move along a
a.
horizontal demand curve.
b.
vertical demand curve.
c.
linear, downward-sloping demand curve.
d.
All of the above are correct.
Figure 5-2
145. Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?
a.
D1
b.
D2
c.
D3
d.
All of the above are equally elastic.
146. Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different
values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?
a.
D1
b.
D2
c.
D3
d.
All of the above are equally elastic.
Figure 5-3
147. Refer to Figure 5-3. The demand curve representing the demand for a luxury good with several close substitutes is
a.
A.
b.
B.
c.
C.
d.
D.
148. Refer to Figure 5-3. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then
Jenna’s demand for gas is represented by demand curve
a.
A.
b.
B.
c.
C.
d.
D.
149. Refer to Figure 5-3. Which demand curve is perfectly elastic?
a.
A
b.
B
c.
C
d.
D
150. Refer to Figure 5-3. Which demand curve is perfectly inelastic?
a.
A
b.
B
c.
C
d.
D
151. Refer to Figure 5-3. Which demand curve is unit elastic?
a.
A
b.
B
c.
D
d.
None of the above.
152. An increase in price causes an increase in total revenue when demand is
a.
elastic.
b.
inelastic.
c.
unit elastic.
d.
All of the above are possible.
153. Suppose that demand is inelastic within a certain price range. For that price range,
a.
an increase in price would increase total revenue because the decrease in quantity demanded is proportionately
less than the increase in price.
b.
an increase in price would decrease total revenue because the decrease in quantity demanded is proportionately
greater than the increase in price.
c.
a decrease in price would increase total revenue because the increase in quantity demanded is proportionately
smaller than the decrease in price.
d.
a decrease in price would not affect total revenue.
154. When demand is inelastic, the price elasticity of demand is
a.
less than 1, and price and total revenue will move in the same direction.
b.
less than 1, and price and total revenue will move in opposite directions.
c.
greater than 1, and price and total revenue will move in the same direction.
d.
greater than 1, and price and total revenue will move in opposite directions.
155. How does total revenue change as one moves downward and to the right along a linear demand curve?
a.
It always increases.
b.
It always decreases.
c.
It first increases, then decreases.
d.
It is unaffected by a movement along the demand curve.
156. On a downward-sloping linear demand curve, total revenue reaches its maximum value at the
a.
midpoint of the demand curve.
b.
lower end of the demand curve.
c.
upper end of the demand curve.
d.
It is impossible to tell without knowing prices and quantities demanded.
157. When demand is inelastic, a decrease in price will cause
a.
an increase in total revenue.
b.
a decrease in total revenue.
c.
no change in total revenue but an increase in quantity demanded.
d.
no change in total revenue but a decrease in quantity demanded.
158. When demand is elastic, a decrease in price will cause
a.
an increase in total revenue.
b.
a decrease in total revenue.
c.
no change in total revenue but an increase in quantity demanded.
d.
no change in total revenue but a decrease in quantity demanded.
159. When demand is inelastic, an increase in price will cause
a.
an increase in total revenue.
b.
a decrease in total revenue.
c.
no change in total revenue but an increase in quantity demanded.
d.
no change in total revenue but a decrease in quantity demanded.
160. When demand is elastic, an increase in price will cause
a.
an increase in total revenue.
b.
a decrease in total revenue.
c.
no change in total revenue but an increase in quantity demanded.
d.
no change in total revenue but a decrease in quantity demanded.
161. If demand is price inelastic, then when price rises, total revenue
a.
will fall.
b.
will rise.
c.
will remain unchanged.
d.
may rise, fall, or remain unchanged. More information is need to determine the change in total revenue with
certainty.
162. If a change in the price of a good results in no change in total revenue, then
a.
the demand for the good must be elastic.
b.
the demand for the good must be inelastic.
c.
the demand for the good must be unit elastic.
d.
buyers must not respond very much to a change in price.
163. When demand is unit elastic, price elasticity of demand equals
a.
1, and total revenue and price move in the same direction.
b.
1, and total revenue and price move in opposite directions.
c.
1, and total revenue does not change when price changes.
d.
0, and total revenue does not change when price changes.
164. If the demand curve is linear and downward sloping, which of the following statements is not correct?
a.
Demand is more elastic on the lower part of the demand curve than on the upper part.
b.
Different pairs of points on the demand curve can result in different values of the price elasticity of demand.
c.
Different pairs of points on the demand curve result in identical values of the slope of the demand curve.
d.
Starting from a point on the upper part of the demand curve, an increase in price leads to a decrease in total
revenue.
165. Total revenue
a.
always increases as price increases.
b.
increases as price increases, as long as demand is elastic.
c.
decreases as price increases, as long as demand is inelastic.
d.
remains unchanged as price increases when demand is unit elastic.
166. Moving downward and to the right along a linear demand curve, we know that total revenue
a.
first increases, then decreases.
b.
first decreases, then increases.
c.
always increases.
d.
always decreases.
167. Total revenue will be at its largest value on a linear demand curve at the
a.
top of the curve, where prices are highest.
b.
midpoint of the curve.
c.
low end of the curve, where quantity demanded is highest.
d.
None of the above is correct.
168. In which of the following situations will total revenue increase?
a.
Price elasticity of demand is 1.2, and the price of the good decreases.
b.
Price elasticity of demand is 0.5, and the price of the good increases.
c.
Price elasticity of demand is 3.0, and the price of the good decreases.
d.
All of the above are correct.
169. Which of the following is not possible?
a.
Demand is elastic, and a decrease in price causes an increase in revenue.
b.
Demand is unit elastic, and a decrease in price causes an increase in revenue.
c.
Demand is inelastic, and an increase in price causes an increase in revenue.
d.
Demand is perfectly inelastic, and an increase in price causes an increase in revenue.
170. Which of the following could be the price elasticity of demand for a good for which a decrease in price would
increase revenue?
a.
0
b.
0.4
c.
1
d.
4
171. Which of the following could be the price elasticity of demand for a good for which an increase in price would
increase revenue?
a.
0.3
b.
1
c.
1.8
d.
None of the above could be correct.
172. Which of the following could be the price elasticity of demand for a good for which a decrease in price would
decrease revenue?
a.
0.8
b.
1
c.
1.8
d.
2.4
173. Which of the following could be the price elasticity of demand for a good for which an increase in price would
decrease revenue?
a.
0.6
b.
0.9
c.
1
d.
2.6
174. When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to
$70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for
good A is
a.
1.50, and an increase in price will result in an increase in total revenue for good A.
b.
1.50, and an increase in price will result in a decrease in total revenue for good A.
c.
0.67, and an increase in price will result in an increase in total revenue for good A.
d.
0.67, and an increase in price will result in a decrease in total revenue for good A.
175. The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price.
If the owner is only interested in increasing revenue, she should
a.
lower the price of the cinnamon rolls.
b.
leave the price of the cinnamon rolls unchanged.
c.
raise the price of the cinnamon rolls.
d.
reduce costs.
176. Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000
packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint
method, the price elasticity of demand is about
a.
1.43, and an increase in the price will cause hotels’ total revenue to decrease.
b.
1.43, and an increase in the price will cause hotels’ total revenue to increase.
c.
0.70, and an increase in the price will cause hotels’ total revenue to decrease.
d.
0.70, and an increase in the price will cause hotels’ total revenue to increase.
177. Skip’s Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of
driveway repairs from $600 to $750. The price elasticity of demand for Skip’s Sealcoating Service is
a.
0.11.
b.
0.47.
c.
1.12.
d.
2.11.
178. Hilda’s Hair Hysteria earned $3,750 in total revenue last month when it sold 125 haircuts. This month it earned
$3,600 in total revenue when it sold 90 haircuts. The price elasticity of demand for Hilda’s Hair Hysteria is
a.
0.33.
b.
0.88.
c.
1.14.
d.
7.98.
179. Suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. When the price of wheat
is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The demand for wheat is
a.
income inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.
b.
income elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.
c.
price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.
d.
price elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.
180. Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price of ginger
ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statements is true?
a.
The demand for ginger ale is income inelastic, so an increase in the price of ginger ale will increase the total
revenue of ginger ale producers.
b.
The demand for ginger ale is income elastic, so an increase in the price of ginger ale will increase the total
revenue of ginger ale producers.
c.
The demand for ginger ale is price inelastic, so an increase in the price of ginger ale will increase the total
revenue of ginger ale producers.
d.
The demand for ginger ale is price elastic, so an increase in the price of ginger ale will decrease the total
revenue of ginger ale producers.
181. Suppose that 50 hot dogs are demanded at a particular price. If the price of hot dogs rises from that price by 5
percent, the number of hot dogs demanded falls to 48. Using the midpoint approach to calculate the price elasticity of
demand, it follows that the
a.
demand for hot dogs in this price range is unit elastic.
b.
price increase will decrease the total revenue of hot dog sellers.
c.
price elasticity of demand for hot dogs in this price range is about 1.22.
d.
price elasticity of demand for hot dogs in this price range is about 0.82.
182. Suppose that 300 bottles of soda are demanded at a particular price. If the price of a bottle of soda rises from that
price by 6 percent, the number of bottles of soda demanded falls to 275. Using the midpoint approach to calculate the
price elasticity of demand, it follows that the
a.
demand for bottles of soda in this price range is perfectly elastic.
b.
price increase will increase the total revenue of soda sellers.
c.
price elasticity of demand for bottles of soda in this price range is about 0.69.
d.
price elasticity of demand for bottles of soda in this price range is about 1.45.
183. When a university bookstore prices chemistry textbooks at $200 each, it generally sells 120 books per month. If it
lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity
of demand for chemistry books is about
a.
1.29, and a decrease in price from $200 to $160 results in an increase in total revenue.
b.
1.29, and a decrease in price from $200 to $160 results in a decrease in total revenue.
c.
0.78, and a decrease in price from $200 to $160 results in an increase in total revenue.
d.
0.78, and a decrease in price from $200 to $160 results in a decrease in total revenue.
184. A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city
raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the
city lower the price of admission to raise revenues. Who is correct?
a.
the mayor
b.
the city manager
c.
The answer depends on the price elasticity of demand.
d.
The answer depends on the costs of construction of the new municipal swimming pool.
185. A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city
raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the
city lower the price of admission to raise revenues. Who is correct?
a.
Both the mayor and city manager would be correct if demand were price elastic.
b.
Both the mayor and city manager would be correct if demand were price inelastic.
c.
The mayor would be correct if demand were price elastic; the city manager would be correct if demand were
price inelastic.
d.
The mayor would be correct if demand were price inelastic; the city manager would be correct if demand were
price elastic.
186. You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase
the total revenue of a bakery. The first step you would take would be to
a.
increase the price of every loaf of bread in the store.
b.
look for ways to cut costs and increase profit for the bakery.
c.
determine the price elasticity of demand for the bakery’s products.
d.
determine the price elasticity of supply for the bakery’s products.
187. You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic
center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends
reducing the price of a day pass. You realize that
a.
the mayor thinks demand is elastic, and the city manager thinks demand is inelastic.
b.
both the mayor and the city manager think that demand is elastic.
c.
both the mayor and the city manager think that demand is inelastic.
d.
the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.
188. Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition
would enhance revenue, it is
a.
ignoring the law of demand.
b.
assuming that the demand for university education is elastic.
c.
assuming that the demand for university education is inelastic.
d.
assuming that the supply of university education is elastic.
189. If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the
quantity demanded of apples by
a.
1.92%, and apples sellers’ total revenue will increase as a result.
b.
1.92%, and apples sellers’ total revenue will decrease as a result.
c.
3%, and apples sellers’ total revenue will increase as a result.
d.
3%, and apples sellers’ total revenue will decrease as a result.
190. If the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil will
increase the quantity demanded of aluminum foil by
a.
1.66%, and aluminum foil sellers’ total revenue will increase as a result.
b.
1.66%, and aluminum foil sellers’ total revenue will decrease as a result.
c.
3.48%, and aluminum foil sellers’ total revenue will increase as a result.
d.
3.48%, and aluminum foil sellers’ total revenue will decrease as a result.
191. If the demand for donuts is elastic, then a decrease in the price of donuts will
a.
increase total revenue of donut sellers.
b.
decrease total revenue of donut sellers.
c.
not change total revenue of donut sellers.
d.
There is not enough information to answer this question.
192. If the demand for bananas is elastic, then an increase in the price of bananas will
a.
increase total revenue of banana sellers.
b.
decrease total revenue of banana sellers.
c.
not change total revenue of banana sellers.
d.
There is not enough information to answer this question.
193. If the demand for textbooks is inelastic, then a decrease in the price of textbooks will
a.
increase total revenue of textbook sellers.
b.
decrease total revenue of textbook sellers.
c.
not change total revenue of textbook sellers.
d.
There is not enough information to answer this question.
194. If the demand for textbooks is inelastic, then an increase in the price of textbooks will
a.
increase total revenue of textbook sellers.