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61) If a 4 percent change in the price of a good leads to a 3 percent change in quantity demanded,
the price elasticity of demand equals
A) 1.33.
B) 0.75.
C) 4.00.
D) 3.44.
E) None of the above answers are correct.
62) A 10 percent increase in price leads to a 20 percent decrease in the quantity demanded. The
price elasticity of demand is equal to
A) 0.5.
B) 1.0.
C) 2.0.
D) 20.0.
E) 10.0.
63) A firm can sell 10 units if the price is $100 and can sell 8 units if the price is $125. Using the
midpoint method, what is the price elasticity of demand?
A) 0.75
B) 1.00
C) 1.25
D) 0.50
E) 0.0
64) When the price of a cup of coffee falls from $3.00 to $2.50, the quantity demanded increases
from 1,000 per month to 1,150 per month. Using the midpoint method, the price elasticity of
demand is
A) 0.77.
B) 1.30.
C) 0.07.
D) 3.00.
E) 2.50.
65) During last year the price of regular unleaded gasoline in Oakland, California increased 11.0
percent. If the price elasticity of demand for gasoline was 0.13, the price hike means that the
quantity demanded decreased by
A) 1.43 percent.
B) 8.46 percent.
C) 0.16 percent.
D) 4.31 percent.
E) 6.46 percent.
66) If the price elasticity of demand for a product is 2.5, then a price increase of 1.5 percent
decreases the quantity demanded by
A) 1.55 percent.
B) 3.50 percent.
C) 5.00 percent.
D) 3.75 percent.
E) 1.00 percent.
67) Suppose the University of Oklahoma increases the price of student football tickets for the
2008 season by 30 percent. If the price elasticity of demand for student tickets is 1.22, the price
increase leads to
A) a 36.6 percent decrease in the quantity demanded.
B) a 30 percent decrease in the quantity demanded.
C) a 1.22 percent decrease in the quantity demanded.
D) 28.78 percent decrease in the quantity demanded.
E) no change in the quantity demanded.
68) Using the data in the table above, when the price of a skirt rises from $20 to $35, what is the
price elasticity of demand? (Use the midpoint method.)
A) 0.33
B) 0.25
C) 1.00
D) 1.33
E) 3.00
69) Using the data in the table above, the demand for skirts is
A) elastic.
B) unit elastic.
C) inelastic.
D) indeterminate.
E) perfectly inelastic.
70) The data in the table above give two points on the demand curve for pizza. Using the
midpoint method, when the price of a pizza falls from $10 to $9, what is the percentage change
in price?
A) 8.2 percent
B) 15.5 percent
C) 10.5 percent
D) 5.0 percent
E) 1.0 percent
71) The data in the table above give two points on the demand curve for pizza. Using the
midpoint method, when the price of a pizza falls from $10 to $9, what is the percentage change
in the quantity demanded?
A) 22.2 percent
B) 10.0 percent
C) 15.5 percent
D) 5.2 percent
E) 25 percent
72) The data in the table above give two points on the demand curve for pizza. Using the
midpoint method, when the price of a pizza falls from $10 to $9, what is the price elasticity of
demand?
A) 0.5
B) 0.6
C) 0.9
D) 2.1
E) 8.6
73) In the figure above, using the midpoint method, the price elasticity of demand when the price
falls from $8 to $7 is equal to
A) 2.50.
B) 1.63.
C) 0.40.
D) 0.62.
E) 1.00.
74) In the figure above, using the midpoint method, the price elasticity of demand when the price
falls from $7 to $6 is equal to
A) 2.50.
B) 1.63.
C) 0.40.
D) 0.62.
E) 1.00.
75) In the figure above, using the midpoint method, the price elasticity of demand when the price
falls from $6 to $5 is equal to
A) 2.50.
B) 1.63.
C) 1.10.
D) 0.91.
E) 1.00.
76) In the mid-1970s, Newsweek magazine reported that the city of Atlanta lowered its city bus
fares from 40 cents to 15 cents a passenger. The number of bus riders increased by 15 percent
after the fare cut. This set of results indicates that the demand for bus rides in Atlanta at that time
was
A) unit elastic.
B) perfectly inelastic.
C) elastic.
D) inelastic.
E) perfectly elastic.
77) When hamburger is $3 per pound, Ms. Rush buys 6 pounds. When hamburger is $2 per
pound, Ms. Rush buys 10 pounds. Describe Ms. Rush's demand between these two prices.
A) elastic
B) unit elastic
C) inelastic
D) perfectly inelastic
E) perfectly elastic
78) Economists use elasticity to measure the responsiveness of quantity to a change in price
rather than the slope of the demand curve because elasticity is
A) independent of the units of measurement.
B) dependent on the units of measurement.
C) easier to calculate.
D) harder to calculate.
E) always negative whereas the slope is always positive.
79) Which of the following is correct?
i. All linear demand curves have a constant slope and a constant price elasticity of demand.
ii. The price elasticity of demand changes while moving along a downward-sloping linear
demand curve.
iii. The magnitude of the slope of all linear demand curves is equal to the price elasticity of
demand.
A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii, and iii
80) Moving downward along a linear (straight-line) downward sloping demand curve, the
A) slope is constant.
B) price is constant.
C) quantity is constant.
D) elasticity is constant.
E) None of the above answers is correct.
81) Moving downward along a linear (straight-line) downward-sloping demand curve, the
A) price elasticity of demand does not change.
B) quantity demanded decreases.
C) demand becomes more elastic.
D) demand becomes less elastic.
E) total revenue never changes.
82) As you move up along a straight-line demand curve,
A) the price elasticity of demand decreases in size.
B) the price elasticity of demand increases in size.
C) total revenue always decreases.
D) total revenue always increases.
E) total revenue never changes.
83) Which of the following statements is correct for the price elasticity of demand along a linear,
downward-sloping demand curve?
A) The price elasticity of demand is constant because the slope is constant.
B) At low prices, demand is elastic but at high prices demand is inelastic.
C) At high prices, demand is elastic but at low prices demand is inelastic.
D) The price elasticity of demand is not defined for a linear demand curve because the slope is
constant.
E) None of the above answers is correct.
84) At the midpoint of a linear, downward-sloping demand curve, the price elasticity of demand
is
A) greater than one.
B) equal to one.
C) less than one but greater than zero.
D) zero.
E) infinite.
85) Along a linear (straight-line) downward-sloping demand curve, demand is unit elastic at
A) the highest price.
B) the lowest price.
C) the midpoint.
D) all points on the linear demand curve.
E) None of the above because linear demand curves are never unit elastic.
86) Total revenue equals
A) price multiplied by the price elasticity of demand.
B) quantity multiplied by the price elasticity of demand.
C) price multiplied by quantity.
D) price times quantity multiplied by the price elasticity of demand.
E) the percentage change in the price multiplied by the percentage change in the quantity.
87) The price of the good multiplied by the quantity sold is its
A) total revenue.
B) total cost.
C) total spending.
D) total income.
E) total quantity.
88) Total revenue equals
A) price × quantity sold.
B) profit - cost.
C) price.
D) quantity sold - cost.
E) cost × price.
89) The total revenue test says
i) Demand is elastic if a decrease in price results in an increase in total revenue.
ii) Total revenue is maximized when demand is elastic.
iii) Total revenue is minimized when demand is unit elastic.
A) i only
B) i and ii
C) ii and iii
D) i, ii and iii
E) ii only
90) If demand is price inelastic and the price is lowered, which of the following occurs?
A) the quantity sold decreases
B) the total expenditure increases and the total revenue decreases
C) the total revenue of the firms selling the product is unchanged
D) the total revenue of the firms selling the product decreases
E) the total expenditure decreases and the total revenue increases
91) If demand is inelastic and the price falls, the total revenue
A) rises.
B) falls.
C) remains constant.
D) might rise, fall, or remain constant.
E) becomes negative.
92) Total revenue increases if the price of the good
A) rises and demand is elastic.
B) rises and demand is inelastic.
C) rises and demand is unit elastic.
D) falls and supply is inelastic.
E) falls and demand is unit elastic.
93) You own a small store. Your cashier thinks you should raise prices to increase your total
revenue and your customer thinks you should lower prices to increase your total revenue. The
cashier thinks the price elasticity of demand is ________ and the customer believes the price
elasticity of demand is ________.
A) inelastic; elastic
B) elastic; inelastic
C) elastic; elastic
D) inelastic; inelastic
E) unit elastic; elastic
94) Products X, Y, and Z have price elasticities of 3.0, 0.80, and 1.0 respectively. Total revenue
decreases if the price of
A) product X falls.
B) product Y falls.
C) product Z falls.
D) product X or product Z fall.
E) product Y or product Z fall.
95) If a 2 percent rise in price leads to a 4 percent decrease in quantity demanded, then demand is
A) elastic and total revenue decreases.
B) elastic and total revenue increases.
C) inelastic and total revenue decreases.
D) elastic, but we cannot tell what happens to total revenue without more information.
E) total revenue decreases but we cannot tell if the demand is elastic or inelastic without more
information.
96) If the demand for insulin is inelastic, an increase in insulin prices leads to
A) less total revenue for insulin makers.
B) more total revenue for insulin makers.
C) no change in total revenue for insulin makers.
D) first a decrease, then an increase in total revenue for insulin makers.
E) total revenue probably changes but we need more information about the change in total
expenditures on insulin to determine if the total revenue rises, falls, or stays the same.
97) If the price elasticity of demand for gasoline equals 0.3, then an increase in the price of a
gallon of gasoline from $3.10 to $3.30
A) decreases total revenue.
B) increases total revenue.
C) leads to no change in total revenue.
D) makes the demand for gasoline elastic.
E) Both answers B and D are correct.
98) If a Pizza Hut raises the price of a slice of pizza from $3.00 to $3.25, the quantity demanded
decreases from 1,500 slices per week to 1,300 slices per week. The demand for slices of pizza is
________ and the total revenue received by this Pizza Hut ________.
A) elastic; decreases
B) inelastic; decreases
C) elastic; increases
D) inelastic; increases
E) unit elastic; does not change
99) If an Atlanta bakery raises the price of their rye bread by 11 percent and the quantity
demanded decreases by 11 percent, then the demand for the rye bread is ________ and the
bakery's total revenue ________.
A) unit elastic; does not change
B) unit elastic; increases
C) unit elastic; decreases
D) elastic; does not change
E) inelastic; does not change
100) Suppose the Oakland Raiders football team increases their season ticket prices and total
revenue from ticket sales falls, but not to zero. This fact means that the demand for Raiders
tickets is
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly elastic.
E) perfectly inelastic.
101) After long hair for men became popular, barbers found that their incomes fell. In an attempt
to boost their incomes, many barbers raised the price of a haircut and yet their total revenue fell
even more. What can explain this result?
A) The demand for haircuts by barbers is elastic because of many substitutes.
B) The demand for haircuts by barbers became inelastic after the increase in price.
C) Haircuts are inferior products.
D) The demand for haircuts by barbers is inelastic because most people need haircuts.
E) None of the above can explain the phenomenon.
102) Taco Bell firm raises the price of its tacos. The price elasticity of demand for Taco Bell
tacos equals 5.0. What happens to the Taco Bell's total revenue?
A) nothing
B) it increases
C) it decreases
D) it becomes negative
E) It might change, but more information is needed to determine if it increases, decreases, or
does not change.
103) Pizza Hut lowers the price of its pizza. The price elasticity of demand for Pizza Hut pizza
equals 0.3. What happens to the Pizza Hut's total revenue?
A) nothing
B) it increases
C) it decreases
D) it becomes negative
E) It might change, but more information is needed to determine if it increases, decreases, or
does not change.
104) KFC raises the price of its grilled chicken. The price elasticity of demand for KFC grilled
chicken is 0.8. What happens to the KFC's total revenue?
A) nothing
B) it increases
C) it decreases
D) it becomes negative
E) It might change, but more information is needed to determine if it increases, decreases, or
does not change.
105) A Minnesota snowmobile dealer lowers its prices in February by 16 percent and the
quantity demanded increases by 2 percent. Thus the demand for snowmobiles from this dealer is
________ and the dealer's total revenue will ________.
A) elastic; increase
B) elastic; decrease
C) inelastic; increase
D) inelastic; decrease
E) unit elastic; decrease
106) In the figure above, what is the total revenue at point A?
A) $20
B) $150
C) $170
D) $3,000
E) 150 quantity units
107) In the figure above, using the midpoint method, what is the price elasticity of demand
between points A and B?
A) 0.05
B) 0.13
C) 0.43
D) 1.00
E) 2.33
108) In the figure above, what happens to total revenue as we move from point A to point B?
A) It increases.
B) It decreases.
C) It remains constant.
D) It becomes negative.
E) More information about the elasticity of demand is needed to determine if it increases,
decreases, or does not change.
109) In the figure above, using the midpoint method, what is the price elasticity of demand when
the price falls from $8 to $7?
A) 4.0
B) 5.0
C) 0.5
D) 0.4
E) 0.25
110) In the figure above, if the price falls from $8 to $7 demand is
A) elastic.
B) inelastic.
C) unit elastic.
D) income elastic.
E) perfectly elastic.
111) In the figure above, when the price falls from $8 to $7, total revenue
A) increases from $120 to $210 so demand is elastic.
B) decreases from $210 to $120 so demand is inelastic.
C) increases from $120 to $210 so demand is inelastic.
D) decreases from $210 to $120 so demand is elastic.
E) increases from $120 to $210 but more information is needed to determine whether demand is
elastic, inelastic, or unit elastic.
112) A firm raises the price it charges. The firm's total revenue decreases. What can we conclude
about the price elasticity of demand?
A) demand is elastic
B) demand is unit elastic
C) demand is inelastic
D) demand is perfectly inelastic
E) not enough information given to conclude anything about price elasticity of demand
113) A firm raises the price it charges. The firm's total revenue does not change. What can we
conclude about the price elasticity of demand?
A) demand is elastic
B) demand is unit elastic
C) demand is inelastic
D) demand is perfectly elastic
E) not enough information given to conclude anything about price elasticity of demand
114) A firm lowers the price it charges. The firm's total revenue decreases. What can we
conclude about the price elasticity of demand?
A) demand is elastic
B) demand is unit elastic
C) demand is inelastic
D) demand is perfectly elastic
E) not enough information given to conclude anything about price elasticity of demand
115) If, when the price falls, total revenue increases, demand is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.
E) None of the above answers is correct because total revenue always decreases when the price
of the good falls.
