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Elasticity and Its Application 1197
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.
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.
195.
Josh mows lawns. If the demand for lawn-mowing service is elastic and Josh wants to increase
his total revenue,
he should
a.
increase the price of his lawn-mowing service.
b.
decrease the price of his lawn-mowing service.
c.
reduce the costs of operating his lawn-mowing service.
d.
More than one of the above is correct.
196.
Holding all other forces constant, if increasing the price of a good leads to an increase in total
revenue, then the
demand for the good must be
a.
unit elastic.
b.
inelastic.
c.
elastic.
d.
None of the above is correct because a price increase always leads to an increase in total
revenue.
197.
Holding all other forces constant, if increasing the price of a good leads to a decrease in total
revenue, then the
demand for the good must be
a.
unit elastic.
b.
inelastic.
c.
elastic.
d.
None of the above is correct because a price increase always leads to an decrease in total
revenue.
198.
Holding all other forces constant, if decreasing the price of a good leads to an increase in total
revenue, then the
demand for the good must be
a.
unit elastic.
b.
inelastic.
c.
elastic.
d.
None of the above is correct because a price decrease never leads to an increase in total
revenue.
199.
Holding all other forces constant, if decreasing the price of a good leads to a decrease in total
revenue, then the
demand for the good must be
a.
unit elastic.
b.
inelastic.
c.
elastic.
d.
None of the above is correct because a price decrease never leads to an decrease in total
revenue.
200.
Suppose you are in charge of setting prices at a local ice cream shop. The business needs to
increase its total
revenue, and your job is on the line. You evaluate the data and determine that
the price elasticity of demand for ice
cream at your shop is 1.8. You should
a.
increase the price of ice cream.
b.
decrease the price of ice cream.
c.
decrease the cost of operating the ice cream shop.
d.
increase the price of bottled water also sold at the ice cream shop because its price elasticity
of demand is
1.2.
201.
Suppose an airline determines that its customers traveling for business have inelastic demand
and its customers
traveling for vacations have an elastic demand. If the airline's objective is to
increase total revenue, it should
a.
increase the price charged to vacationers and decrease the price charged to business
travelers.
b.
decrease the price charged to vacationers and increase the price charged to business
travelers.
c.
decrease the price to both groups of customers.
d.
increase the price for both groups of customers.
202.
Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make
the money she needs.
Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but
she wants to adjust
her price to earn the $50 faster. If you know that the demand for lemonade is
elastic, what is your advice to her?
a.
Leave the price at 25 cents and be patient.
b.
Raise the price to increase total revenue.
c.
Lower the price to increase total revenue.
d.
There isn't enough information given to answer this question.
203.
Suppose the point (Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear
demand curve. Then
a.
a decrease in price from $18 to $16 will increase total revenue.
b.
a decrease in price from $24 to $22 will decrease total revenue.
c.
a decrease in the price from $21 to $19 will decrease total revenue.
d.
the maximum value of total revenue is $68,000.
204.
Suppose a market has the demand function Qd=20-0.5P. At which of the following prices will
total revenue be
maximized?
a. $10
b. $20
c. $30
d. $40
205.
Suppose a market has the demand function Qd=20-0.5P. Between which of the following price
ranges is demand
most inelastic?
a. $0 to $10
b. $10 to $20
c. $20 to $30
d. $30 to $40
1206 Elasticity and Its Application
Table 5-5
Price
Total
Revenue
$5
$70
$6
$78
$7
$84
$8
$88
$9
$90
$10
$90
206.
Refer to Table 5-5. As price rises from $5 to $6, the price elasticity of demand using the
midpoint method is
approximately
a. 0.07.
b. 0.18.
c. 0.41.
d. 2.45.
207.
Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the
midpoint method is
approximately
a. 0.09.
b. 0.58.
c. 0.65.
d. 1.53.
208.
Refer to Table 5-5. Demand is unit elastic when quantity demanded changes from
a.
9 to 8.
b.
10 to 9.
c.
10 to 11.
d.
There is not enough information given to determine the correct answer.
209.
Refer to Table 5-5. When price is between $5 and $9, demand is
a.
elastic.
b.
unit elastic.
c.
inelastic.
d.
There is not enough information given to determine whether demand is elastic, unit elastic, or
inelastic.
1208 Elasticity and Its Application
Table 5-6
Price
Total
Revenue
$10
$5,000
$15
$6,000
$20
$6,000
$25
$5,000
$30
$3,000
210.
Refer to Table 5-6. As price rises from $10 to $15, the price elasticity of demand using the
midpoint method is
approximately
a. 0.40.
b. 0.56.
c. 1.80.
d. 2.50.
211.
Refer to Table 5-6. Using the midpoint method, demand is unit elastic when quantity
demanded changes from
a. 500 to 400.
b. 400 to 300.
c. 300 to 200.
d. 200 to 100.
Elasticity and Its Application 1209
Figure 5-4
212.
Refer to Figure 5-4. Suppose the point labeled B is the “halfway point” on the demand curve
and it corresponds
to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is
a.
less than 1 but greater than zero.
b.
equal to 1.
c.
greater than 1.
d.
equal to zero.
213.
Refer to Figure 5-4. The section of the demand curve from A to B represents the
a.
elastic section of the demand curve.
b.
inelastic section of the demand curve.
c.
unit elastic section of the demand curve.
d.
perfectly elastic section of the demand curve.
214.
Refer to Figure 5-4. The section of the demand curve from B to C represents the
a.
elastic section of the demand curve.
b.
inelastic section of the demand curve.
c.
unit elastic section of the demand curve.
d.
perfectly elastic section of the demand curve.
Elasticity and Its Application 1211
215.
Refer to Figure 5-4. The section of the demand curve at point B represents the
a.
elastic section of the demand curve.
b.
inelastic section of the demand curve.
c.
unit elastic section of the demand curve.
d.
perfectly elastic section of the demand curve.
216.
Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to
prices between $8 and $16. Then, when the price changes between $9 and $10,
a.
quantity demanded changes proportionately less than the price.
b.
quantity demanded changes proportionately more than the price.
c.
quantity demanded changes the same amount proportionately as price.
d.
the price elasticity of demand equals 1.
217.
Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to
prices between $6 and $12. Then, when the price increases from $8 to $10,
a.
the percent decrease in the quantity demanded exceeds the percent increase in the price.
b.
the percent increase in the price exceeds the percent decrease in the quantity demanded.
c.
sellers’ total revenue increases as a result.
d.
it is possible that the quantity demanded fell from 550 to 500 as a result.
218.
Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand
curve are (Q = 1,000, P= $40) and (Q = 1,500, P = $30). Then which of the following scenarios
is possible?
a.
Both of these points lie on the section of the demand curve from B to C.
b.
The vertical intercept of the demand curve is the point (Q = 0, P = $60).
c.
The horizontal intercept of the demand curve is the point (Q = 1,800, P = $0).
d.
Any of these scenarios is possible.
219.
Refer to Figure 5-4. The section of the demand curve from B to C represents the
a.
elastic section of the demand curve.
b.
perfectly elastic section of the demand curve.
c.
unit elastic section of the demand curve.
d.
inelastic section of the demand curve.
220.
Refer to Figure 5-4. Assume the section of the demand curve from B to C corresponds to
prices between $0 and $15. Then, when the price changes between $7 and $9,
a.
quantity demanded changes proportionately less than the price.
b.
quantity demanded changes proportionately more than the price.
c.
quantity demanded changes the same amount proportionately as price.
d.
the price elasticity of demand equals zero.
221.
Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand
curve are (Q = 2,000, P= $15) and (Q = 2,400, P = $12). Then which of the following scenarios
is possible?
a.
Both of these points lie on section BC of the demand curve.
b.
The vertical intercept of the demand curve is the point (Q = 0, P = $22).
c.
The horizontal intercept of the demand curve is the point (Q = 5,000, P = $0).
d.
Any of these scenarios is possible.
222.
Refer to Figure 5-4. If the price decreases in the region of the demand curve between points
A and B, we can
expect total revenue to
a.
increase.
b.
stay the same.
c.
decrease.
d.
first decrease, then increase until total revenue is maximized.
223.
Refer to Figure 5-4. If the price increases in the region of the demand curve between points A
and B, we can
expect total revenue to
a.
increase.
b.
stay the same.
c.
decrease.
d.
first increase, then decrease until total revenue is maximized.
224.
Refer to Figure 5-4. If the price decreases in the region of the demand curve between points
B and C, we can
expect total revenue to
a.
increase.
b.
stay the same.
c.
decrease.
d.
first increase, then decrease until total revenue is maximized.
225.
Refer to Figure 5-4. If the price increases in the region of the demand curve between points B
and C, we can
expect total revenue to
a.
increase.
b.
stay the same.
c.
decrease.
d.
first decrease, then increase until total revenue is maximized.
Figure 5-5
