132) Producers’ total revenue will increase if
A) income increases and the good is an inferior good.
B) the price rises and demand is elastic.
C) the price rises and demand is inelastic.
D) income falls and the good is a normal good.
133) If University of Nebraska increased its season football ticket sales from 43,000 to 47,000
when it lowered price from $350.00 to $300.00, then its demand for season tickets must be
________ because total revenue ________ when the price was lowered.
A) elastic; decreased
B) elastic; increased
C) inelastic; decreased
D) inelastic; increased
134) “Last October, due to an early frost, the price of a pumpkin increased by 10 percent
compared to the price in the previous Halloween season. As a result, the quantity demanded
county-wide decreased from 2 million to 1.5 million.” Based on this statement, it is certain that
the
A) demand curve for Halloween costumes shifted leftward.
B) price elasticity of demand for pumpkins decreased from its value in previous years.
C) demand curve for pumpkins shifted leftward.
D) total revenue from the sale of pumpkins decreased.
135) At a local ice cream parlor, when the price of half-gallons of chocolate ice cream was
lowered by fifty cents per half-gallon, total revenue from the sale of chocolate ice cream
decreased. This result indicates that
A) there are more people who like vanilla ice cream than there are people who like chocolate ice
cream.
B) the demand for chocolate ice cream is inelastic.
C) the demand for chocolate ice cream is elastic.
D) None of the above answers is correct.
136) If Sam wants to increase her total revenue from her sales of flowers and she knows that the
demand for flowers is price elastic, she should
A) lower her price to increase the demand and shift the demand curve rightward.
B) raise her price because she knows that the quantity demanded will also increase.
C) raise her price because she knows that the percentage decrease in the quantity demanded will
be smaller than the percentage increase in price.
D) lower her price because she knows that the percentage increase in the quantity demanded will
be greater than the percentage decrease in price.
137) A local transit authority charges $1 for a bus ride. An economics study suggests that in the
price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.1. To increase its
revenue, the transit authority should
A) raise the fare.
B) lower the fare.
C) leave the fare as it is.
138) The taxicab fare in Newville is regulated. The fare currently charged is $6 a ride. Newville
taxicab drivers want to obtain government’s permission to lower the fare, which they think will
increase their total revenue. From this we can conclude that the drivers believe that the demand
for taxicab rides is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.
139) If Sam wants to increase her total revenue from her sales of flowers and she knows that the
demand for flowers is price inelastic, she should
A) lower her price to increase the demand and shift the demand curve rightward.
B) raise her price because she knows that the quantity demanded will also increase.
C) raise her price because she knows that the percentage decrease in the quantity demanded will
be smaller than the percentage increase in price.
D) lower her price because she knows that the percentage increase in the quantity demanded will
be greater than the percentage decrease in price.
140) In 1973 and again in 1979, the Organization of Petroleum Exporting Countries (OPEC)
raised the world price of crude oil and increased their revenue as well. Which of the following is
a TRUE statement regarding these OPEC price hikes?
A) Their revenue increased because the demand for oil was income inelastic.
B) Their revenue increased because the demand for oil was price inelastic.
C) Their revenue would have increased regardless of income elasticity or price elasticity because
oil is an imported product for most nations.
D) Their revenue only increased because oil was already very expensive.
141) The marketing people at Ben and Jerry’s Ice Cream Company believe that if they lower the
price of their Cherry Garcia flavor ice cream by 25 percent, the quantity demanded will increase
by 5 percent. If they are correct in their belief, then
A) the demand for Cherry Garcia is price elastic.
B) their total revenue from Cherry Garcia will increase if they lower the price.
C) the demand for Cherry Garcia is income elastic.
D) their total revenue from Cherry Garcia will decrease if they lower the price.
142) The marketing people for AT&T believe that if they lower the price of long-distance phone
calls by 5 percent, their quantity demanded will increase by 15 percent. If they are correct in
their belief, then
A) the demand for long-distance phone calls is price inelastic.
B) the total revenue from long-distance phone calls will increase if they lower the price.
C) the demand for long-distance phone calls is income elastic.
D) the total revenue from long-distance phone calls will decrease if they lower the price.
143) One year, the government boosted regulated taxi fares in New York City by 15 percent with
the expectation that the total revenue from taxi rides would also increase by 15 percent. The taxi
commission that authorized this fare increase must have believed that the demand for taxi service
was
A) elastic, but not perfectly elastic.
B) inelastic, but not perfectly inelastic.
C) unit elastic.
D) perfectly inelastic.
144) Suppose Sandy’s Candies wants to increase its total revenues. If Sandy increases the price
of her candy, she must be assuming that the demand for candy is
A) unit elastic.
B) inelastic.
C) elastic.
D) income elastic.
145) Suppose Carol’s Candid Cameras wants to increase its total revenue. If the firm lowers the
price of cameras by 2 percent, Carol must be predicting that the quantity
A) supplied will increase by more than 2 percent.
B) demanded will increase by more than 2 percent.
C) demanded will decrease by less than 2 percent.
D) supply will decrease by less than 2 percent.
146) Suppose Clem’s Chemical Company wants to increase its total revenue. If there are few
substitutes for Clem’s Chemicals
A) Clem should increase the price of his chemicals.
B) Clem should decrease the price of his chemicals.
C) the demand for chemicals is elastic.
D) Clem will not be able to change the price of his chemicals.
147) If an increase in price results in no change in total revenue, then demand must be
A) inelastic.
B) elastic.
C) unit elastic.
D) infinitely elastic.
148) If demand for Farmer John’s maple syrup is inelastic, then when Farmer John raises the
price of maple syrup, his total revenue will
A) increase.
B) decrease.
C) stay the same.
D) probably change, but more information is needed to determine if the total revenue increases,
decreases, or stays the same.
149) If the total revenue received by sellers of DVDs increases by 20 percent when price
increases by 10 percent, then demand for DVDs is
A) perfectly elastic.
B) unitary elastic.
C) inelastic.
D) elastic.
150) Total revenue received by surfboard manufacturers increases by $2 million when the price
of a surfboard decreases by $10. The price the elasticity of demand for surfboards is
A) between 0 and 1.
B) greater than 1.
C) equal to 0.
D) some amount that is impossible to determine without more information.
151) If a 20 percent decrease in the price of a good leads to a 15 percent increase in the quantity
demanded, then demand is ________ and total revenue will ________ as a result of the fall in
price.
A) elastic; increase
B) elastic; decrease
C) inelastic; increase
D) inelastic; decrease
152) The price elasticity of demand for wheat is 0.42. A drought cuts the supply of wheat. What
will happen to the farmers’ total revenue?
A) The total revenue will increase.
B) The total revenue will decrease.
C) The total revenue will not change.
D) There is not enough information to determine what happens to the total revenue.
153) The price elasticity of demand for corn is 0.4. A new hybrid of corn is discovered and all
farmers start to use it, which increases the quantity of corn they can produce from each acre.
What happens to the farmers’ total revenue?
A) The total revenue will increase.
B) The total revenue will decrease.
C) The total revenue will not change.
D) There is not enough information to determine what happens to the total revenue.
154) A university conducts a survey of students, which shows that a 10 percent tuition hike
would lead to a 12 percent decrease in the enrollment. If the university wants to increase its total
revenue, it should ________ tuition because the demand for education at this university is
________.
A) raise; elastic
B) not raise; elastic
C) raise; inelastic
D) not raise; inelastic
155) A university conducts a survey of students, which shows that a 10 percent tuition hike
would lead to a 7 percent decrease in the enrollment. If the university wants to increase its total
revenue, it should ________ tuition because the demand for education at this university is
________.
A) raise; elastic
B) not raise; elastic
C) raise; inelastic
D) not raise; inelastic
156) The price of a bus ride decreases, and the total revenue of the bus company decreases. The
demand for bus rides is ________.
A) perfectly elastic
B) inelastic
C) unit elastic
D) elastic but not necessarily perfectly elastic
157) The price elasticity of demand for gasoline is 0.40. If the price of gasoline rises by 20
percent, there will be
A) a decrease of more than 20 percent in the quantity of gasoline demanded.
B) an increase in the total revenue received from the sale of gasoline.
C) a loss of total revenue for gasoline producers, because at a higher price the quantity of
gasoline demanded decreases.
D) no change in the quantity of gasoline sold because people need gasoline.
158) When Monica’s Catering lowered the price of catered meals from $60 per person to $20 per
person, the quantity demanded doubled from 500 meals to 1,000 meals. You can conclude that
the demand for Monica’s catered meals over the price range of $20 to $60 is
A) upward sloping.
B) unit elastic.
C) elastic.
D) inelastic.
159) If the demand for a good is unit elastic
A) a 5 percent increase in price results in a 5 percent increase in total revenue.
B) a 5 percent increase in price results in a 5 percent decrease in total revenue.
C) a 5 percent increase in price does not change total revenue.
D) the demand curve is a straight line with slope of -1.
160) If OPEC, a group of oil producing nations, cuts oil production to increase the total revenue,
OPEC presumes that the demand for oil is
A) perfectly elastic.
B) unit elastic.
C) elastic.
D) inelastic.
161) A shift of the supply curve of oil raises the price from $70 a barrel to $80 a barrel and
reduces the quantity demanded from 40 million to 38 million barrels a day. You can conclude
that the
A) demand for oil is elastic.
B) demand for oil is inelastic.
C) supply of oil is elastic.
D) supply of oil is inelastic.
162) A shift of the supply curve of oil raises the price from $60 a barrel to $75 a barrel and
reduces the quantity demanded from 40 million to 20 million barrels a day. You can conclude
that the
A) demand for oil is elastic.
B) demand for oil is inelastic.
C) supply of oil is elastic.
D) supply of oil is inelastic.
163) The price of milk rises, so the supply of ice cream decreases. there is, as a result a 5 percent
increase in the price of ice cream and a 3 percent decrease in the quantity of ice cream sold. The
revenue received by ice cream suppliers will ________ because the demand for ice cream is
________.
A) decrease; price inelastic
B) increase; price inelastic
C) increase; price elastic
D) decrease; price elastic
164) In the summer 2012 the lobster catch in Maine was especially large, but instead of
celebrating the fisherman were suffering from a lower total revenue. (Source: New York Times,
July 28, 2012) As the lobster catch increases, there is
A) a movement along the demand curve, resulting in a higher price and a decreased quantity.
B) a movement along the demand curve, resulting in a lower price and an increased quantity.
C) no change in either the price or the quantity.
D) a movement along the demand curve, resulting in a higher price and an increased quantity.
165) In the summer 2012 the lobster catch in Maine was especially large, but instead of
celebrating the fisherman were suffering from a lower total revenue. (Source: New York Times,
July 28, 2012) We learn from the article that despite the larger quantity of lobster caught, the
total revenue of the fisherman decreased. This fact means that the demand for lobster is
A) unit elastic.
B) elastic.
C) inelastic.
D) perfectly elastic.
166) When the price of a Caesar salad is $5.00, the demand for Caesar salads is elastic, and when
the price is $4.00, the demand is inelastic. If Mike’s Roadside Restaurant cuts the price from
$5.00 to $4.00, its total revenue from Caesar salads ________.
A) will increase
B) will decrease
C) will remain the same
D) might increase, decrease, or remain the same
167) Suppose that the demand for corn is price inelastic. If a technological advance makes corn
farms more productive, the equilibrium price of corn will ________ and the farmers’ total
revenue will ________.
A) rise; increase
B) rise; decrease
C) fall; increase
D) fall; decrease
168) Total revenue for skis is at a maximum when the price elasticity of demand is
A) between 0 and 1.
B) 1.
C) greater than 1.
D) 0.
169) If hot dog vendors at baseball games want to maximize their total sales revenue, they will
have to
A) be willing to experience reduced hot dog expenditure by baseball fans.
B) set the price of their hot dogs so that the demand is unit elastic.
C) sell as many hot dogs as they can, even if it means lowering price.
D) raise their price, even if it means selling fewer hot dogs.
170) Sara’s Strawberry Market maximizes its total revenue by selling strawberries for $1.25 a
basket. At a price of $1.25, you predict that ________.
A) the demand for strawberries is inelastic
B) Sara’s sells most of the strawberries that she grows
C) the demand for strawberries is elastic
D) the demand for strawberries is unit elastic
Price
(dollars per
pound)
Quantity
demanded
(pounds)
10
0
9
2
7
6
5
10
3
14
1
18
0
20
171) The above table gives the demand schedule for Billy Bob’s BBQ ribs. The price elasticity of
demand for Billy Bob’s ribs over the price range of $3 to $1 is equal to
A) 4.00.
B) 2.00.
C) 0.50.
D) 0.25.
172) The above table gives the demand schedule for Billy Bob’s BBQ ribs. If the price of a
pound of ribs falls from $3 per pound to $1 per pound, what is the change in Billy Bob’s total
revenue?
A) $42
B) $24
C) -$2
D) -$24
173) The above table gives the demand schedule for Billy Bob’s BBQ ribs. The demand for Billy
Bob’s ribs over the price range of $1 per pound to $3 per pound is
A) perfectly elastic.
B) elastic.
C) unit elastic.
D) inelastic.
174) The above table gives the demand schedule for Billy Bob’s BBQ ribs. An increase in the
price of a pound of ribs will lead to a decrease in total revenue when
A) demand is inelastic.
B) the demand curve is vertical.
C) the price increase occurs over the price range of 0 to $5.
D) the price increase occurs over the price range of $5 to $10.
175) The above table gives the demand schedule for Billy Bob’s BBQ ribs. The demand for Billy
Bob’s ribs is unit elastic at which of the following prices?
A) $10
B) $7
C) $5
D) $1
176) The above figure shows the demand curve for movie rentals from Redbox. If Redbox raised
its price from $2.50 to $3.00, between these two prices the price elasticity of demand equals
A) 1.2.
B) 0.8.
C) 2.0.
D) 0.5.
177) The above figure shows the demand curve for movie rentals from Redbox. Which of the
following is TRUE?
A) Consumer expenditure on movie rentals will always increase whenever Redbox lowers its
price.
B) Redbox will receive more total revenue if it charges $4.00 per movie rental rather than $3.00.
C) The price elasticity of demand for movie rentals falls as Redbox raises its price.
D) The demand for movie rentals is more price inelastic at $1.00 than it is at $1.50.
178) The above figure shows the demand curve for movie rentals from Redbox. At which of the
following prices is the demand unit elastic?
A) $5.00
B) $3.50
C) $2.50
D) $0.00
179) The above figure shows the demand curve for movie rentals from Redbox. At which of the
following prices does Redbox have the maximum total revenue?
A) $5.00
B) $3.50
C) $2.50
D) $0.00
180) The above figure shows the demand curve for movie rentals from Redbox. If Redbox
lowered its price from $4.00 to $3.50, then total revenue would ________ because demand is
________.
A) decrease; elastic
B) increase; elastic
C) decrease; inelastic
D) increase; inelastic
181) The above figure shows the demand curve for movie rentals from Redbox. If Redbox
lowered its price from $2.00 to $1.50, then total revenue would ________ because demand is
________.
A) decrease; elastic
B) increase; elastic
C) decrease; inelastic
D) increase; inelastic
182) The above figure shows the demand curve for movie rentals from Redbox. If Redbox
lowered its price from $1.50 to $1.00, then total revenue would ________ because demand is
________.
A) decrease; elastic
B) increase; elastic
C) decrease; inelastic
D) increase; inelastic
183) The figure illustrates the demand for magazines. Newsagents will maximize their total
revenue when they ________.
A) sell 375 magazines a day
B) sell as many magazines as they can
C) charge $2.50 a magazine
D) sell 750 magazines a day
184) The figure illustrates the demand for peanuts. If the price falls from $12 to $9 a bag, total
revenue will ________, and if the price rises from $3 to $6 a bag, total revenue will ________.
A) increase; decrease
B) increase; increase
C) decrease; increase
D) decrease; decrease
185) In the above figure, at which point on the demand curve is the price elasticity of demand
equal to 1?
A) a
B) b
C) c
D) It is impossible to say at which point the elasticity equals one.
186) In the above figure, at point b on the demand curve, a price cut of one dollar will
A) increase total revenue.
B) decrease total revenue.
C) leave total revenue unchanged.
D) have an indeterminate effect on total revenue.
187) Consider the straight-line demand curve illustrated in the figure above. At a price of $6,
demand is
A) inelastic.
B) elastic.
C) unit elastic.
D) More information is needed to determine if the demand is elastic, unit elastic, or inelastic.
188) Consider the straight-line demand curve illustrated in the above figure. At what price is
total revenue maximized?
A) at a price of $8
B) at a price of $6
C) at a price of $4
D) More information is needed to determine the price at which total revenue is maximized.
189) The figure illustrates the demand for eggs. At what price will egg sellers maximize their
total revenue?
A) above $0.75 a dozen
B) $0.75 a dozen
C) less than $0.75 a dozen
D) $1.50 a dozen