Page 1
1.
Each month Jacquelyn spends exactly $50 on ice cream, regardless of the price of each
container. Jacquelyn’s price elasticity of demand for ice cream is:
A)
0.
B)
1.
C)
greater than 1.
D)
less than 1 but greater than 0.
2.
Each month Jessica buys exactly 15 Big Macs, regardless of the price. Jessica’s price
elasticity of demand for Big Macs is:
A)
0.
B)
1.
C)
greater than 1.
D)
less than 1 but greater than 0.
3.
Suppose the price elasticity of demand for cheeseburgers equals 0.37. This means the
overall demand for cheeseburgers is:
A)
price elastic.
B)
price inelastic.
C)
price unit-elastic.
D)
perfectly price inelastic.
4.
The price elasticity of demand for skiing lessons in New Hampshire is over 1. This
means that the demand is _____ in New Hampshire.
A)
price elastic
B)
price inelastic
C)
price unit-elastic.
D)
perfectly price elastic
5.
A restaurant manager has estimated that the price elasticity of demand for meals is 2. If
the restaurant increases menu prices by 5%, she can expect the number of meals sold to
decrease by _____ and total revenue to _____.
A)
10%; increase
B)
5%; stay constant
C)
10%; fall
D)
2.5%; fall
Page 2
6.
You manage a nightclub, and lately revenues have been disappointing. Your bouncer
suggests that raising drink prices will increase revenues, but your bartender suggests
that decreasing drink prices will increase revenues. You aren’t sure who is right, but you
do know that your bouncer thinks the demand for drinks is _____ and your bartender
thinks the demand for drinks is _____.
A)
elastic; inelastic
B)
inelastic; elastic
C)
elastic; elastic
D)
inelastic; inelastic
7.
A perfectly price-inelastic demand curve is:
A)
horizontal.
B)
downward sloping.
C)
upward sloping.
D)
vertical.
8.
A major state university in the South recently raised tuition by 12%. An economics
professor at this university asked his students, “How many of you will transfer to
another university because of the increase in tuition?” One student in about 300 said that
he or she would transfer. Based on this information, the price elasticity of demand for
education at this university is:
A)
1.
B)
highly elastic.
C)
highly inelastic.
D)
0.
9.
A rancher in Oklahoma decides to raise the price of her beef by 19% over the prevailing
market price. If the demand for beef is perfectly elastic, this rancher’s quantity
demanded will:
A)
fall to 0.
B)
not change.
C)
fall slightly.
D)
increase slightly.
10.
Sonik, a wireless phone company, tested the effect of a price reduction for text
messaging. It lowered prices from $0.08 to $0.04 per message and found that the
number of messages sent tripled. This means that the:
A)
demand for text messaging is inelastic in this price range.
B)
demand curve for text messaging shifted to the right.
C)
supply curve for text messaging shifted to the left.
D)
demand for text messaging is elastic in this price range.
Page 3
11.
Sometimes airlines raise ticket prices as the flight departure date approaches in the hope
of increasing revenue on the assumption that consumer demand is:
A)
steady in its price elasticity as departure time approaches.
B)
less price-elastic as departure time approaches.
C)
always unit elastic.
D)
very sensitive to price changes as the time of departure approaches.
12.
The university president believes that increasing student tuition by 5% will increase
revenues. If the president is correct that revenues will increase, then the tuition increase
will _____ the number of students enrolling by _____%.
A)
reduce; less than 5
B)
reduce; more than 5
C)
increase; exactly 5
D)
increase; less than 5
13.
The university hopes to raise more revenue by increasing parking fees. This plan will
work only if:
A)
the price effect is larger than the quantity effect.
B)
the price effect is smaller than the quantity effect.
C)
the price effect and quantity effect are the same.
D)
there is no price or quantity effect.
14.
Suppose the price elasticity of demand for fishing lures equals 1.5 in South Carolina and
0.63 in Alabama. To increase revenue, fishing lure manufacturers should:
A)
lower prices in each state.
B)
raise prices in each state.
C)
lower prices in South Carolina and raise prices in Alabama.
D)
leave prices unchanged in South Carolina and raise prices in Alabama.
15.
Total revenue is:
A)
total sales less total cost.
B)
the price of a good times the quantity of the good that is sold.
C)
the price effect times the quantity effect.
D)
the price of a good divided by the amount of the good sold.
Page 4
16.
When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the
quantity demanded increases from 190 bags to 215 bags. If the price is $1.10, total
revenue is _____, and if the price is $0.95, total revenue is _____.
A)
$209; $204.25
B)
$209; $236.50
C)
$236.50; $209
D)
$180.50; $209
17.
When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the
quantity demanded increases from 190 bags to 215 bags. In this price range, the demand
for chocolate covered peanuts is _____, and total revenue will _____ when price
decreases.
A)
elastic; increase
B)
elastic; decrease
C)
inelastic; increase
D)
inelastic; decrease
18.
When the price of chocolate-covered peanuts increases from $1.55 to $2.00, the quantity
demanded decreases from 220 to 180. If the price is $1.55, total revenue is _____, and if
the price is $2.00, total revenue is _____.
A)
$360; $440
B)
$341; $279
C)
$440; $279
D)
$341; $360
19.
When the price of chocolate-covered peanuts increases from $1.55 to $2.00, the quantity
demanded decreases from 220 to 160. In this price range, the demand for
chocolate-covered peanuts is _____, and total revenue will _____ when the price
increases.
A)
elastic; increase
B)
elastic; decrease
C)
inelastic; increase
D)
inelastic; decrease
20.
Suppose the price of barley increases by 16.53%. If breweries buy 3.28% less barley
after the price increase, the total revenue for barley producers will _____ because the
_____ effect is greater than the _____ effect.
A)
decrease; quantity; price
B)
increase; price; quantity
C)
not change; quantity; price
D)
increase; quantity; price
Page 5
21.
If demand is elastic, the _____ effect dominates the _____ effect, and a(n) _____ in
price will cause total revenue to rise.
A)
price; quantity; decrease
B)
price; quantity; increase
C)
quantity; price; increase.
D)
quantity; price; decrease
22.
Suppose the price elasticity of demand for oranges is 1.8. If a fall frost destroys
one-third of the nation’s orange crop, how will that affect total revenue from oranges, all
other things unchanged?
A)
Total revenue will rise.
B)
Total revenue will fall.
C)
Total revenue will remain unchanged.
D)
The information is insufficient to answer the question.
23.
The price elasticity of demand for gasoline in the short run has been estimated to be 0.4.
If a war in the Middle East causes the price of oil (from which gasoline is made) to
increase, how will that affect total revenue from gasoline in the short run, all other
things unchanged?
A)
Quantity demanded will stay the same; total revenue will fall.
B)
Quantity demanded will decrease; total revenue will rise.
C)
Total revenue will remain unchanged.
D)
Quantity demanded will not change; total revenue will rise.
24.
The price elasticity of demand for lettuce has been estimated to be 2.58. If an insect
infestation destroys 10% of the nation’s lettuce crop, how will that affect total revenue
from lettuce, all other things unchanged?
A)
Total revenue will remain unchanged.
B)
Total revenue will fall.
C)
Total revenue will rise.
D)
The information is insufficient to answer the question.
25.
The price elasticity of demand for fresh tomatoes has been estimated to be 2.22. If a new
insecticide and fertilizer treatment yields a 20% increase in the nation’s fresh tomato
crop, how will that affect total revenue from fresh tomatoes, all other things unchanged?
A)
Total revenue will remain unchanged.
B)
Total revenue will fall.
C)
Total revenue will rise.
D)
The information is insufficient to answer the question.
Page 6
26.
Which statement is not true regarding a price-elastic demand curve?
A)
Total revenue increases when the price falls.
B)
The absolute value of the price elasticity is a fraction greater than 0 but less than 1.
C)
The absolute value of the price elasticity is greater than 1.
D)
The percent changes in the quantity demanded exceed the percent changes in the
price for any small change in price.
27.
The demand for agricultural output is price inelastic. This means that if farmers, taken
collectively, have a bumper crop, they will have _____ prices, _____ quantities sold,
and _____ incomes.
A)
lower; greater; lower
B)
lower; greater; higher
C)
lower; lower; lower
D)
higher; higher; higher
28.
When a public transit system (such as a subway or bus line) raises its fares, its total
revenue may increase. This suggests that demand is:
A)
unstable.
B)
price-inelastic.
C)
price-elastic.
D)
price unit-elastic.
29.
If a university decreases the price of tickets to football games to collect more revenue, it
is assuming that the demand for tickets is:
A)
unstable.
B)
price-inelastic.
C)
price-elastic.
D)
price unit-elastic.
30.
If the demand for golf is price-inelastic and your local public golf course increases the
greens fees for using the course, you expect:
A)
a decrease in total revenue received by the course.
B)
an increase in total revenue received by the course.
C)
an increase in the amount of golf played on the course.
D)
no change in the amount of golf played on the course.
Page 7
31.
If the demand for golf is unit-price elastic and your local public golf course increases
the greens fees for using the course, you expect:
A)
a decrease in total revenue received by the course.
B)
an increase in total revenue received by the course.
C)
a decrease in the amount of golf played on the course.
D)
no change in the amount of golf played on the course.
Use the following to answer questions 32-34:
32.
(Ref 12-1 Figure: Demand for Notebook Computers) Use Figure 12-1: The Demand for
Notebook Computers. The change in total revenue resulting from a change in price from
P to T suggests that demand is:
A)
inelastic.
B)
price-elastic.
C)
price-inelastic.
D)
price unit-elastic.
33.
(Ref 12-1 Figure: Demand for Notebook Computers) Use Figure 12-1: The Demand for
Notebook Computers. Total revenue at point S equals the:
A)
distance 0P.
B)
distance MS.
C)
area 0TUM.
D)
area 0PSM.
Page 8
34.
(Ref 12-1 Figure: Demand for Notebook Computers) Use Figure 12-1: The Demand for
Notebook Computers. Total revenue at point V equals the:
A)
area 0TVN.
B)
area 0PSVN.
C)
distance 0T.
D)
distance NV.
35.
If a change in price causes total revenue to change in the same direction, we can
conclude that the demand is:
A)
price inelastic.
B)
price elastic.
C)
price unit-elastic.
D)
zero elastic.
36.
There is one gas station in a small rural town. The owner of the station claims that he
will sell the same quantity of gas no matter how high or low the price. If he is correct in
this assertion, the demand curve for gas at his station must be _____, with a price
elasticity of _____.
A)
vertical; zero
B)
vertical; infinity
C)
horizontal; zero
D)
horizontal; infinity
37.
Demand for vegetables at a small farmers’ market is steady, but the supply of vegetables
has decreased because of a drought. This is good news for farmers if demand is _____
and the _____ effect outweighs the _____ effect.
A)
inelastic; price; quantity
B)
elastic; price; quantity
C)
inelastic; output; price
D)
elastic; output; price
38.
In the market for computers, if the demand curve is elastic and the price of a computer
decreases, we expect total revenue to _____. If the demand curve is inelastic and the
price of a computer decreases, we expect total revenue to _____.
A)
increase; decrease
B)
increase; increase
C)
decrease; increase
D)
decrease; decrease
Page 9
39.
If a 20% price increase generates a 20% decrease in quantity demanded, then this is a(n)
_____ response.
A)
inelastic
B)
elastic
C)
unit-elastic
D)
perfectly elastic
40.
If an increase in the price of cotton increases total revenue, then the price effect is _____
the quantity effect.
A)
equal to
B)
stronger than
C)
weaker than
D)
not comparable to
41.
After a price decrease, the quantity effect tends to:
A)
decrease total revenue.
B)
increase total revenue.
C)
make the price effect stronger.
D)
make the price effect weaker.
42.
Yovanka has diabetes, and she will pay any amount of money for insulin. What is the
BEST characterization of Yovanka’s demand for insulin?
A)
price-inelastic
B)
price-elastic
C)
perfectly price-inelastic
D)
perfectly price-elastic
43.
When demand is _____, a rise in price leads to a(n) _____ in total revenue.
A)
perfectly inelastic; decrease
B)
perfectly elastic; increase
C)
inelastic; increase
D)
elastic; increase
Page 10
Use the following to answer questions 44-45:
44.
(Ref 12-2 Figure: Demand Curves) Use Figure 12-2: Demand Curves. Which graph
shows a perfectly elastic demand curve?
A)
A
B)
B
C)
C
D)
D
45.
(Ref 12-2 Figure: Demand Curves) Use Figure 12-2: Demand Curves. Which graph
shows a perfectly inelastic demand curve?
A)
A
B)
B
C)
C
D)
D
46.
Suppose that an increase in the price of a good leads to an increase in total revenue.
Ignoring other factors (like supply), at its current price the good must be:
A)
price-inelastic.
B)
price-elastic.
C)
perfectly price-elastic.
D)
inferior.
Page 11
47.
When the percentage change in quantity demanded is larger than the percentage change
in price, demand is said to be:
A)
price-inelastic.
B)
price unit-elastic.
C)
price-elastic.
D)
perfectly price-inelastic.
48.
If the price elasticity of demand is calculated to be 0.75, then demand is:
A)
price-inelastic.
B)
price-elastic.
C)
price unit-elastic.
D)
positively sloped.
49.
If the price elasticity of demand is found to be 6, then demand is:
A)
price-inelastic.
B)
price-elastic.
C)
price unit-elastic.
D)
horizontal.
50.
If the price of a good increases by 15% and the quantity demanded falls by 20%,
demand is:
A)
price-elastic.
B)
price-inelastic.
C)
price unit-elastic.
D)
normal.
51.
If total revenue goes up when the price falls, demand is said to:
A)
be price-inelastic.
B)
be price unit-elastic.
C)
be price-elastic.
D)
have positive price elasticity.
52.
If total revenue goes down when the price falls, demand is said to:
A)
be price-inelastic.
B)
be price unit-elastic.
C)
be price-elastic.
D)
have positive price elasticity.
Page 12
53.
If the quantity demanded of agricultural output is very unresponsive to a fall in price,
the demand for agricultural output is:
A)
price-elastic.
B)
price-inelastic.
C)
positively sloped.
D)
horizontal.
54.
Total revenue will decrease if the price goes _____ and demand is _____.
A)
up; perfectly price-inelastic
B)
up; price-inelastic
C)
down; price-elastic
D)
up; price-elastic
55.
If demand _____ and the University of Michigan increases the price of football tickets,
revenues will increase.
A)
is price-inelastic
B)
is price-elastic
C)
has price elasticity equal to 1
D)
is perfectly price-elastic
Use the following to answer questions 56-57:
Page 13
56.
(Ref 12-3 Figure: Estimating Price Elasticity) Use Figure 12-3: Estimating Price
Elasticity. Between the two prices, P1 and P2, which demand curve has the LOWEST
price elasticity?
A)
D1
B)
D2
C)
D3
D)
D4
57.
(Ref 12-3 Figure: Estimating Price Elasticity) Use Figure 12-3: Estimating Price
Elasticity. Between the two prices, P1 and P2, which demand curve has the HIGHEST
price elasticity?
A)
D1
B)
D2
C)
D3
D)
D4
58.
The price elasticity of demand along a demand curve with a constant slope:
A)
is equal to the slope.
B)
is greater than the slope.
C)
is less than the slope.
D)
increases in absolute value as the price rises.
59.
The price elasticity of demand along a demand curve with a constant slope:
A)
is equal to the slope.
B)
is greater than the slope.
C)
is less than the slope.
D)
decreases in absolute value as quantity demanded rises.
60.
On a linear demand curve:
A)
demand is elastic at high prices.
B)
demand is inelastic at high prices.
C)
elasticity is the same at all points on the demand curve.
D)
demand is elastic at low prices.
61.
A linear demand curve has:
A)
a constant price elasticity of demand.
B)
a price elasticity of demand equal to one at all prices.
C)
a calculated price elasticity of demand that is positive.
D)
both elastic and inelastic price elasticities of demand.
Page 14
62.
On a linear demand curve, the price elasticity of demand at very high prices will be:
A)
price-inelastic.
B)
price-elastic.
C)
price unit-elastic.
D)
perfectly price-inelastic.
63.
On a linear demand curve, demand at very low prices will be:
A)
price-inelastic.
B)
price-elastic.
C)
price unit-elastic.
D)
perfectly price-elastic.
64.
As you move down a linear demand curve, the price elasticity of demand will:
A)
increase.
B)
decrease.
C)
increase and then decrease.
D)
decrease and then increase.
65.
The demand for strawberry ice cream tends to be relatively price-elastic because:
A)
for most people, there are many close substitutes for strawberry ice cream.
B)
it costs so little.
C)
it has to be consumed very quickly.
D)
it is only popular in the summer.
66.
Which factor does NOT determine the price elasticity of demand?
A)
the number of available substitutes
B)
the time available to adjust to price changes
C)
the proportion of the budget spent on the item
D)
the slope of the supply curve
67.
If a good is a necessity with few substitutes, all others things equal, then demand will
tend to:
A)
be more price-elastic.
B)
be less price-elastic.
C)
have price elasticity equal to 1.
D)
be the same as that of a luxury good.
Page 15
68.
If a good has a price-inelastic demand, then which statement is NOT likely to be
characteristic of this good?
A)
It is a necessity and is relatively small proportion of the household budget.
B)
It has many substitutes.
C)
Consumers spend a small percentage of their income on it.
D)
Consumers do not have much time to adjust to market changes.
69.
There are several close substitutes for Bayer aspirin but fewer substitutes for a complete
medical examination. Therefore, all other things equal, you would expect the demand
for:
A)
medical examinations to be more price-elastic than is the demand for Bayer aspirin.
B)
Bayer aspirin to be more price-elastic than is the demand for medical examinations.
C)
Bayer aspirin to be more perfectly price-inelastic.
D)
the two to be equally price-elastic.
70.
If the price of emergency visits to the doctor rose, we would expect:
A)
a large decline in the number of emergency visits to the doctor.
B)
only a slight decline in the number of emergency visits to the doctor.
C)
the number of emergency visits to the doctor to increase.
D)
the total income of doctors to fall dramatically.
71.
If someone did not regard health care as very important, often using home remedies and
other substitutes, his or her demand curve for health care would most likely be more
_____ than that of other people.
A)
price-elastic
B)
price-inelastic
C)
upward-sloping
D)
bowed-out
72.
The price elasticity of demand for a good will tend to be larger:
A)
the longer the time available to adjust to price changes.
B)
the fewer number of substitute goods available.
C)
if it is a staple.
D)
if it is relatively inexpensive.
73.
Determining the price elasticity of demand does NOT involve:
A)
the slope of the supply curve.
B)
the proportion of the budget spent on the item.
C)
time available to adjust to price changes.
D)
the number of available substitutes.
Page 16
74.
If a good is a necessity with few substitutes, then demand will tend to:
A)
be relatively price-elastic.
B)
be relatively price-inelastic.
C)
have price elasticity equal to 1.
D)
be the same as that of a luxury good.
75.
If a good is a luxury item that looms large in the household budget, then demand will
tend to:
A)
be relatively price-elastic.
B)
be relatively price-inelastic.
C)
have price elasticity equal to 1.
D)
be the same as that of a necessity.
76.
An important determinant of the price elasticity of demand is:
A)
time available to adjust to price changes.
B)
the price of related goods.
C)
the level of technology.
D)
the quantity of the good supplied.
77.
An important determinant of the price elasticity of demand is the:
A)
price of related goods.
B)
level of technology.
C)
availability of substitutes.
D)
quantity of the good supplied.
78.
Other things being equal, the price elasticity of demand for a product will be lower:
A)
if many substitutes are available.
B)
if it is a large part of the consumer’s budget.
C)
in the long run than in the short run.
D)
if there are few or no substitutes available.
79.
There are several close substitutes for Quaker State oil but fewer substitutes for a
complete checkup of your car’s engine. We can expect the demand for:
A)
Quaker State oil to be more price-inelastic than is demand for engine checkups.
B)
the two to be equally price-elastic.
C)
car checkups to be more price-elastic than is demand for Quaker State oil.
D)
Quaker State oil to be more price-elastic than is demand for engine checkups.
Page 17
80.
An important determinant of the price elasticity of demand is the:
A)
proportion of the household budget spent on the good.
B)
level of technology.
C)
quantity of the good supplied.
D)
extent of government regulation.
81.
A newspaper typically consumes a smaller fraction of a consumer’s budget than a home
entertainment system. Therefore, you would expect the demand for:
A)
a home entertainment system to be more price-elastic.
B)
a home entertainment system to be more price-inelastic.
C)
newspapers to be more price-elastic.
D)
the two to be equally price-elastic.
82.
The demand for textbooks is price-inelastic. Which statement would explain this
phenomenon?
A)
Many alternative textbooks can be used as substitutes.
B)
Students have a lot of time to adjust to price changes.
C)
Textbook purchases consume a large portion of most students’ income.
D)
Textbooks are a necessity for most students.
83.
After you graduate from college, you open a business selling computers. Many other
businesses in your city sell similar but not identical computers. Based on this
information, the price elasticity of demand for the computers that your business sells
will be:
A)
1.
B)
0.
C)
highly elastic.
D)
highly inelastic.
84.
The price elasticity of demand for a good such as water is likely to be very low because:
A)
the price is a small percentage of most budgets.
B)
water has some good substitutes.
C)
water is considered a luxury.
D)
the share of income spent on water is large.
85.
The price elasticity of a good will tend to be larger:
A)
the longer the relevant time period for behavior change.
B)
the fewer the number of substitute goods available.
C)
if it is a staple or necessity with few substitutes.
D)
if the share of income spent on the good is small.
Page 18
86.
Which good is likely to have the largest price elasticity of demand?
A)
a bicycle
B)
a mountain bike
C)
a Cannondale mountain bike
D)
a green Cannondale mountain bike
87.
A good is likely to have an inelastic demand curve if the:
A)
consumer has significant time to respond to the price change.
B)
good has few available substitutes.
C)
good is a luxury.
D)
good accounts for a large share of consumer income.
88.
We predict the long-run price elasticity of demand for gasoline to be _____ the
short-run price elasticity of demand for it.
A)
less than
B)
larger than
C)
equal to
D)
not comparable to
89.
If a good is very inexpensive but is a necessity, you predict that demand for the good:
A)
is price-elastic.
B)
is price-inelastic.
C)
is price unit-elastic.
D)
has indeterminable price elasticity.
90.
In general, we predict demand for Gala apples to be:
A)
price-elastic.
B)
price-inelastic.
C)
perfectly price-elastic.
D)
perfectly price-inelastic.
Page 19
Use the following to answer question 91:
91.
(Ref 12-4 Figure: The Demand Curve for Bridge Crossings) Use Figure 12-4: The
Demand Curve for Bridge Crossings. Demand is price_____ between $0.90 and $1.10,
since total revenue _____ when the price _____.
A)
unit-elastic; increases; decreases
B)
inelastic; stays the same; decreases
C)
unit-elastic; stays the same; increases
D)
inelastic; increases; increases
Use the following to answer question 92:
Page 20
92.
(Ref 12-5 Figure: The Demand Curve for Oil) Use Figure 12-5: The Demand Curve for
Oil. Demand is price _____ between $20 and $21 since total revenue _____ when the
price _____.
A)
elastic; increases; decreases
B)
inelastic; stays the same; decreases
C)
elastic; decreases; increases
D)
inelastic; increases; increases
Use the following to answer questions 93-96:
93.
(Ref 12-6 Figure: The Demand for Shirts) Use Figure 12-6: The Demand for Shirts. The
Demand for Shirts. At a price of $40, total revenue is:
A)
$40.
B)
$200.
C)
$4,000.
D)
$8,000.
94.
(Ref 12-6 Figure: The Demand for Shirts) Use Figure 12-6: The Demand for Shirts. At a
price of $30, total revenue is _____, and at a price of $10, total revenue is _____.
A)
$9,000; $12,000
B)
$3,000; $5,000
C)
$9,000; $5,000
D)
$5,000; $9,000
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95.
(Ref 12-6 Figure: The Demand for Shirts) Use Figure 12-6: The Demand for Shirts.
Total revenue is maximized if the price is:
A)
$30.
B)
$40.
C)
$50.
D)
$60.
96.
(Ref 12-6 Figure: The Demand for Shirts) Use Figure 12-6: The Demand for Shirts. If
the price is below _____, demand is inelastic.
A)
$10
B)
$20
C)
$30
D)
$40
Use the following to answer questions 97-99:
97.
(Ref 12-7 Figure: The Demand for e-Books) Use Figure 12-7: The Demand for e-Books.
The demand schedule _____ when the price increases from $4 to $6 _____ when it
increases from $6 to $8.
A)
is less elastic; than
B)
is more elastic; than
C)
has the same elasticity; as
D)
is unit-elastic; and
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98.
(Ref 12-7 Figure: The Demand for e-Books) Use Figure 12-7: The Demand for e-Books.
If the price of e-Books decreases from $6 to $4, total revenue _____, which means that
demand is _____.
A)
changes from $60 to $90; elastic
B)
remains constant; unit-elastic
C)
changes from $240 to $360; elastic
D)
changes from $40 to $50; inelastic
99.
(Ref 12-7 Figure: The Demand for e-Books) Use Figure 12-7: The Demand for e-Books.
If the price of e-Books increases from $6 to $8, total revenue _____, which means that
demand is _____.
A)
increases; elastic
B)
decreases; inelastic
C)
remains constant; elastic
D)
decreases; elastic
Use the following to answer questions 100-103:
100.
(Ref 12-8 Figure: The Demand Curve) Use Figure 12-8: The Demand Curve. If the
price is $5, total revenue is:
A)
$5.
B)
$10.
C)
$20.
D)
$25.
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101.
(Ref 12-8 Figure: The Demand Curve) Use Figure 12-8: The Demand Curve. If the
price is $8, total revenue is _____. If the price is $7, total revenue is _____.
A)
$24; $16
B)
$14; $21
C)
$16; $21
D)
$10; $10
102.
(Ref 12-8 Figure: The Demand Curve) Use Figure 12-8: The Demand Curve. If the
price is $3, total revenue is _____. If the price is $4, total revenue is _____.
A)
$21; $24
B)
$21; $18
C)
$12; 28
D)
$7; $13
103.
(Ref 12-8 Figure: The Demand Curve) Use Figure Ref 12-8: The Demand Curve.
Between prices $4 and $5, demand is _____, and total revenue will _____ if price
increases.
A)
elastic; increase
B)
elastic; decrease
C)
inelastic; increase
D)
inelastic; decrease
104.
Consider the market for strawberries. Which statement most likely applies to the
strawberry market?
A)
The income elasticity of demand for strawberries is negative.
B)
The price elasticity of supply of strawberries is greater in the short run than in the
long run.
C)
The price elasticity of demand for strawberries is lower in the long run than in the
short run.
D)
The cross-price elasticity of demand for strawberries with respect to the price of
raspberries is positive.
105.
Suppose the price of Vanilla Coke increases by 9% and quantity demanded falls by 13%
overall but only by 4% for loyal Coca-Cola customers. This means that for the general
public there are _____ for Vanilla Coke, but for loyal Coca-Cola customers, Vanilla
Coke is more of a _____. This means that Coca-Cola will enjoy an increase in total
revenue only from _____.
A)
several substitutes; necessity; loyal Coca-Cola customers
B)
few substitutes; luxury item; the general public
C)
no substitutes; necessity; the general public
D)
several substitutes; necessity; the general public
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106.
If an increase in the price of a good leads to an increase in total revenue, the _____
curve is price _____.
A)
supply; inelastic
B)
demand; inelastic
C)
supply; elastic
D)
demand; elastic
107.
Suppose the price elasticity of demand for blueberries is 1.5. If climate change destroys
one-fourth of the nation’s blueberry crop, how will that affect total revenue for blueberry
producers, all other things unchanged?
A)
Total revenue will rise.
B)
Total revenue will fall.
C)
Total revenue will remain unchanged.
D)
The information is insufficient to answer the question.
108.
A perfectly inelastic demand curve for insulin would mean that the quantity demanded
does not respond at all to changes in the price of insulin.
A)
True
B)
False
109.
If funeral homes discover that the price elasticity of demand for caskets equals 0.55 at
the current price, funeral homes could increase revenue by increasing the price.
A)
True
B)
False
110.
Sarah has been told she has only one week to finish some pottery for a show. Sarah has
exhausted her supply of clay, and new clay is absolutely necessary for finishing her
products. For Sarah, the price elasticity of demand for new clay right now is elastic.
A)
True
B)
False
111.
If demand is perfectly inelastic, changes in price leave total revenue unchanged.
A)
True
B)
False
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112.
The director of River City Public Transport recently stated, “The last seven times we
increased bus fares, revenues dropped.” This remark suggests the demand for bus
service is elastic.
A)
True
B)
False
113.
The mayor advocates raising the entrance fee at the city’s pools to increase revenue for
the city. The mayor is right only if the price effect dominates the quantity effect.
A)
True
B)
False
114.
Local cable companies recently increased the price of basic services. A news expert
reporting on the increase stated, “While prices have increased 40%, the cable company
reports only a 20% increase in revenue.” This remark suggests the demand for basic
cable service is elastic.
A)
True
B)
False
115.
Given a price increase for any good, the price effect on revenue is always larger than the
quantity effect on revenue.
A)
True
B)
False
116.
The price elasticity of demand for gasoline is likely to be higher in the long run than in
the short run.
A)
True
B)
False
117.
A major determinant of the price elasticity of demand is the availability of substitutes.
A)
True
B)
False
118.
Demand for Wendy’s hamburgers is more inelastic than the demand for all fast food.
A)
True
B)
False
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119.
Since for most people, eating in restaurants is a luxury and eating at home is a necessity,
the price elasticity of demand for food eaten at home is lower than the price elasticity of
demand for eating in restaurants.
A)
True
B)
False
120.
The city government is losing millions of dollars on its buses and subways. The
government proposes to increase the fare by 20% to raise revenue and has asked for
your advice. You know that the price elasticity of demand for mass transit in the city is
approximately equal to 0.75. What do you think of the proposal to increase the fare to
raise revenue for the city? Be as specific as possible.
121.
Suppose the price elasticity of demand for electricity is equal to 0.15 in the short run but
is equal to 0.5 in the long run. What explains this difference, and what does this imply
about the demand curve for electricity in the short run versus the long run?
122.
A demand curve that is perfectly inelastic is:
A)
horizontal.
B)
vertical.
C)
downward sloping.
D)
upward sloping.
123.
If the price elasticity of demand equals 0, the demand curve is:
A)
horizontal.
B)
vertical.
C)
upward sloping.
D)
unit-elastic.
124.
The price of a gallon of gasoline increases 10% this year. As a result, which event is
most likely to occur?
A)
More people will drive their cars.
B)
Public transportation usage will decrease.
C)
Gasoline expenditures will increase if gasoline is an inelastic good.
D)
Fewer people will ride bicycles, a substitute for car travel.
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Use the following to answer questions 125-127:
125.
(Ref 12-9 Figure: The Linear Demand Curve) Use Figure 12-9: The Linear Demand
Curve. If the price is initially $10, then falls to $9, this will result in a(n) _____ in
quantity demanded and a(n) _____ in total revenue.
A)
decrease; decrease
B)
decrease; increase
C)
increase; decrease
D)
increase; increase
126.
(Ref 12-9 Figure: The Linear Demand Curve) Use Figure 12-9: The Linear Demand
Curve. As a producer, you are interested in maximizing your total revenues in this
market. At what price should you sell your good? What is the corresponding total
revenue?
A)
$10; $100
B)
$20; $200
C)
$0; $100
D)
$5; $100
127.
(Ref 12-9 Figure: The Linear Demand Curve) Use Figure 12-9: The Linear Demand
Curve. Suppose this is the demand curves for scarves in your scarf shop. If you increase
the price of your scarves from $7 to $8, your total revenue will _____, and you notice
that your price elasticity of demand is _____.
A)
increase; elastic
B)
decrease; elastic
C)
increase; inelastic
D)
decrease; inelastic
Page 28
Use the following to answer question 128:
321. (Ref 12-10 Figure: The Linear Demand Curve II) Use Figure 12-10: Linear Demand
Curve II. At prices greater than $7, demand is _____; at prices below $7, demand is _____; and
at $7, demand is _____.
A) elastic; inelastic; unit-elastic
B) inelastic; elastic; unit-elastic
C) unit-elastic; inelastic; elastic
D) equal to 0; elastic; inelastic
Ans: A
Refer To: Ref 12-10 Figure: The Linear Demand Curve II
bloomslevel: Applying
modulename: Module 12
levelofdifficulty: Moderate
questiontype: Multiple Choice
sequence: 6322
topic: Price Elasticity Along the Demand Curve
128.
(Ref 12-10 Figure: The Linear Demand Curve II) Use Figure 12-10: Linear Demand
Curve II. If price was initially set at $8 and then increased to $10, total revenue would:
A)
decrease, as the price effect is dominated by the quantity effect.
B)
decrease, as the price effect dominates the quantity effect.
C)
stay the same, as both the price and quantity effects remain unchanged.
D)
increase, as the price effect is dominated by the quantity effect.
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129.
Which characteristic is not true of a good with elastic demand?
A)
There is only a short time to adjust to price changes.
B)
There are a large number of substitutes.
C)
It is a luxury good.
D)
It is a specific brand.
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