Elasticity and Its Application 1217
226. Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of
a. $20 and $40.
b. $40 and$50.
c. $40 and$60.
d. $50 and$70.
227. Refer to Figure 5-5. Using the midpoint method, between prices of $20 and $30, price elasticity
of demand is about
a. 0.33.
b. 0.4.
c. 1.33.
d. 3.
1218 Elasticity and Its Application
228. Refer to Figure 5-5. Using the midpoint method, between prices of $70 and $80, price elasticity
of demand is
a. 0.33.
b. 0.4.
c. 1.33.
d. 3.
229. Refer to Figure 5-5. Using the midpoint method, between prices of $50 and $60, price elasticity
of demand is about
a. 0.22.
b. 0.82.
c. 1.22.
d. 2.
Elasticity and Its Application 1219
230. Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of
a. $20.
b. $50.
c. $70
d. $100.
231. Refer to Figure 5-5. At a price of $70 per unit, sellers’ total revenue equals
a. $700.
b. $1050.
c. $1250.
d. $1400.
1220 Elasticity and Its Application
232. Refer to Figure 5-5. At a price of $10 per unit, sellers’ total revenue equals
a. $100.
b. $450
c. $500.
d. $1250.
233. Refer to Figure 5-5. At a price of $50 per unit, sellers’ total revenue equals
a. $500.
b. $750.
c. $1000.
d. $1250.
Elasticity and Its Application 1221
Figure 5-6
234. Refer to Figure 5-6. For prices above $8, demand is price
a. elastic, and total revenue will rise as price rises.
b. inelastic, and total revenue will rise as price rises.
c. elastic, and total revenue will fall as price rises.
d. inelastic, and total revenue will fall as price rises.
235. Refer to Figure 5-6. For prices below $8, demand is price
a. elastic, and total revenue will rise as price rises.
b. inelastic, and total revenue will rise as price rises.
c. elastic, and total revenue will fall as price rises.
d. inelastic, and total revenue will fall as price rises.
1222 Elasticity and Its Application
Figure 5-7
236. Refer to Figure 5-7. For prices above $5, demand is price
a. elastic, and raising price will increase total revenue.
b. inelastic, and raising price will increase total revenue.
c. elastic, and lowering price will increase total revenue.
d. inelastic, and lowering price will increase total revenue.
Elasticity and Its Application 1223
237. Refer to Figure 5-7. For prices below $5, demand is price
a. elastic, and raising price will increase total revenue.
b. inelastic, and raising price will increase total revenue.
c. elastic, and lowering price will increase total revenue.
d. inelastic, and lowering price will increase total revenue.
Figure 5-8
1224 Elasticity and Its Application
238. Refer to Figure 5-8. When the price is $15, total revenue is a. $1,500.
b. $2,500.
c. $3,500.
d. $4,500.
Elasticity and Its Application 1225
239. Refer to Figure 5-8. When price falls from $25 to $20, demand is
a. inelastic, since total revenue decreases from $4,000 to $2,500.
b. inelastic, since total revenue increases from $2,500 to $4,000.
c. elastic, since total revenue increases from $2,500 to $4,000.
d. unit elastic, since total revenue does not change.
240. Refer to Figure 5-8. An increase in price from $10 to $15 would
a. increase total revenue by $1,000.
b. decrease total revenue by $1,000.
c. increase total revenue by $500.
d. decrease total revenue by $500.
1226 Elasticity and Its Application
241. Refer to Figure 5-8. An increase in price from $15 to $20 would
a. increase total revenue by $500
b. decrease total revenue by $500.
c. increase total revenue by $1,000.
d. decrease total revenue by $1,000.
Figure 5-9
Elasticity and Its Application 1227
242. Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point
A and point B is
a. 0.33.
b. 0.5.
c. 2.0.
d. 3.0.
243. Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point
C and point D is about
a. 0.29.
b. 0.54.
c. 1.86.
d. 2.0.
1228 Elasticity and Its Application
244. Refer to Figure 5-9. If the price falls from point A to point B, total revenue
a. increases, and demand is price elastic.
b. decreases, and demand is price elastic.
c. increases, and demand is price inelastic.
d. decreases, and demand is price inelastic.
245. Refer to Figure 5-9. If the price rises from point D to point C, total revenue
a. increases, and demand is price elastic.
b. decreases, and demand is price elastic.
c. increases, and demand is price inelastic.
d. decreases, and demand is price inelastic.
Elasticity and Its Application 1229
Figure 5-10
246. Refer to Figure 5-10. If rectangle D is larger than rectangle A, then
a. demand is elastic between prices P1 and P2.
b. a decrease in price from P2 to P1 will cause an increase in total revenue.
c. the magnitude of the percent change in price between P1 and P2 is smaller than the
magnitude of the corresponding percent change in quantity demanded.
d. All of the above are correct.
1230 Elasticity and Its Application
247. Refer to Figure 5-10. Total revenue when the price is P1 is represented by the area(s)
a. B + D.
b. A + B.
c. C + D.
d. D.
248. Refer to Figure 5-10. Total revenue when the price is P2 is represented by the area(s)
a. B + D.
b. A + B.
c. C + D.
d. D.
Elasticity and Its Application 1231
Multiple Choice – Section 01A: The Elasticity of Demand
Figure 5-11
1. Refer to Figure 5-11. Suppose this demand curve is a straight, downward-sloping line all the way
from the horizontal intercept to the vertical intercept. We choose two prices, P1 and P2, and the
corresponding quantities demanded, Q1 and Q2, for the purpose of calculating the price elasticity of
demand. Also suppose P2 > P1. In which of the following cases could we possibly find that (i)
demand is elastic and (ii) a decrease in price from P1 to P2 causes an decrease in total revenue?
a. 0 < P1 < P2 < $10.
b. $10 < P1 < P2 $20.
c. P1 > $20.
d. None of the above is correct.
1232 Elasticity and Its Application
2. Refer to Figure 5-11. If price increases from $10 to $20, total revenue will
a. increase by $120, so demand must be inelastic in this price range.
b. increase by $320, so demand must be inelastic in this price range.
c. decrease by $120, so demand must be elastic in this price range.
d. decrease by $320, so demand must be elastic in this price range.
3. Refer to Figure 5-11. A decrease in price from $20 to $10 leads to a
a. decrease in total revenue of $200, so the price elasticity of demand is greater than 1 in this price
range.
b. decrease in total revenue of $200, so the price elasticity of demand is less than 1 in this price
range.
c. decrease in total revenue of $120, so the price elasticity of demand is less than 1 in this price
range.
d. decrease in total revenue of $120, so demand is elastic in this price range.
Elasticity and Its Application 1233
Figure 5-12
4. Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X
and point Y is
a. 0.4.
b. 1.
c. 2.
d. 2.5.
1234 Elasticity and Its Application
5. Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point Y
and point Z is
a. 0.5.
b. 0.75.
c. 1.0.
d. 1.3.
6. Refer to Figure 5-12. If the price decreased from $36 to $12, total revenue would
a. increase by $4,800, and demand is elastic between points X and Z.
b. increase by $7,200, and demand is elastic between points X and Z.
c. decrease by $4,800, and demand is inelastic between points X and Z.
d. decrease by $7,200, and demand is inelastic between points X and Z.
7. Refer to Figure 5-12. Sellers’ total revenue would increase if the price
a. increased from $6 to $9.
b. increased from $33 to $36.
c. decreased from $15 to $12.
d. All of the above are correct.
8. Refer to Figure 5-12. Which of the following price changes would result in no change in sellers’
total revenue?
a. The price increases from $15 to $21.
b. The price increases from $18 to $21.
c. The price decreases from $24 to $18.
d. The price decreases from $27 to $24.
1236 Elasticity and Its Application
9. Refer to Figure 5-12. Sellers’ total revenue would increase if the price
a. increased from $12 to $15.
b. decreased from $39 to $36.
c. decreased from $27 to $24.
d. All of the above are correct.