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Chapter 5/Elasticity and Its Application/ ❖ 21
Table 5-2
Price
Quantity
$100
0
$80
10
$60
20
$40
30
$20
40
$0
50
102. Refer to Table 5-2. Using the midpoint method, if the price falls from $80 to $60, the absolute value of the
price elasticity of demand is
a.
20.
b.
10.
c.
2.33.
d.
0.43.
103. Refer to Table 5-2. Using the midpoint method, if the price falls from $60 to $40, the absolute value of the
price elasticity of demand is
a.
0.4.
b.
1.
c.
4.
d.
20.
104. Refer to Table 5-2. Using the midpoint method, if the price falls from $40 to $20, the absolute value of the
price elasticity of demand is
a.
20.
b.
10.
c.
2.33.
d.
0.43.
105. Refer to Table 5-2. Using the midpoint method, if the price falls from $80 to $60, the price elasticity of de-
mand is
a.
zero.
b.
unit elastic.
c.
inelastic.
d.
elastic.
22 ❖ Chapter 5/Elasticity and Its Application
106. Refer to Table 5-2. Using the midpoint method, if the price falls from $60 to $40, the price elasticity of de-
mand is
a.
zero.
b.
inelastic.
c.
unit elastic.
d.
elastic.
107. Refer to Table 5-2. Using the midpoint method, if the price falls from $40 to $20, the price elasticity of de-
mand is
a.
zero.
b.
inelastic.
c.
unit elastic.
d.
elastic.
Table 5-3
The following table shows the demand schedule for a particular good.
Price
Quantity
$15
0
$12
5
$9
10
$6
15
$3
20
$0
25
108. Refer to Table 5-3. Using the midpoint method, what is the price elasticity of demand when price rises from
$9 to $12?
a.
0.43
b.
0.67
c.
1.50
d.
2.33
109. Refer to Table 5-3. Using the midpoint method, when price rises from $6 to $9, the price elasticity of de-
mand is
a.
0.43
b.
0.67
c.
1.00
d.
1.5
Chapter 5/Elasticity and Its Application/ ❖ 23
110. Refer to Table 5-3. Using the midpoint method, when price falls from $6 to $3, the price elasticity of demand
is
a.
0.43
b.
0.67
c.
1.50
Table 5-4
Price
Total
Revenue
$10
$100
$12
$108
$14
$112
$16
$112
111. Refer to Table 5-4. As price rises from $10 to $12, the price elasticity of demand using the midpoint method
is approximately
a.
0.08.
b.
0.18.
c.
0.42.
d.
0.58.
112. Refer to Table 5-4. Demand is unit elastic when quantity demanded changes from
a.
10 to 9.
b.
9 to 8.
c.
8 to 7.
d.
There is not enough information given to determine the correct answer.
113. Refer to Table 5-4. When price is between $10 and $14, 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.
24 ❖ Chapter 5/Elasticity and Its Application
Figure 5-1
A
B
Demand
2 4 6 8 10 12 14 16 18 20 22 24 26 Quantity
1
2
3
4
5
6
7
8
9
10 Price
114. Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to
a.
0.33.
b.
0.67.
c.
1.5
d.
2.67.
115. Refer to Figure 5-1. Between point A and point B, the slope is equal to
a.
-1/4, and the price elasticity of demand is equal to 2/3.
b.
-1/4, and the price elasticity of demand is equal to 3/2.
c.
-3/2, and the price elasticity of demand is equal to 1/4.
d.
-2/3, and the price elasticity of demand is equal to 3/2.
116. Refer to Figure 5-1. Between point A and point B on the graph, demand is
a.
perfectly elastic.
b.
inelastic.
c.
unit elastic.
d.
elastic, but not perfectly elastic.
117. Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result,
a.
the equilibrium quantity decreases, and the equilibrium price is unchanged.
b.
the equilibrium price increases, and the equilibrium quantity is unchanged.
c.
the equilibrium quantity and the equilibrium price both are unchanged.
d.
buyers’ total expenditure on the good is unchanged.
Chapter 5/Elasticity and Its Application/ ❖ 25
118. A perfectly elastic demand implies that
a.
buyers will not respond to any change in price.
b.
any rise in price above that represented by the demand curve will result in a quantity demanded of
zero.
c.
quantity demanded and price change by the same percent as we move along the demand curve.
d.
price will rise by an infinite amount when there is a change in quantity demanded.
119. The case of perfectly elastic demand is illustrated by a demand curve that is
a.
vertical.
b.
horizontal.
c.
downward-sloping but relatively steep.
d.
downward-sloping but relatively flat.
120. When small changes in price lead to infinite changes in quantity demanded, demand is perfectly
a.
elastic, and the demand curve will be horizontal.
b.
inelastic, and the demand curve will be horizontal.
c.
elastic, and the demand curve will be vertical.
d.
inelastic, and the demand curve will be vertical.
121. For a horizontal demand curve,
a.
the slope is undefined, and the price elasticity of demand is equal to 0.
b.
the slope is equal to 0, and the price elasticity of demand is undefined.
c.
both the slope and price elasticity of demand are undefined.
d.
both the slope and price elasticity of demand are equal to 0.
122. Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,
a.
the equilibrium quantity decreases, and the equilibrium price is unchanged.
b.
the equilibrium price increases, and the equilibrium quantity is unchanged.
c.
the equilibrium quantity and the equilibrium price both are unchanged.
d.
buyers’ total expenditure on the good is unchanged.
123. In the case of perfectly inelastic demand,
a.
the change in quantity demanded equals the change in price.
b.
the percentage change in quantity demanded equals the percentage change in price.
c.
infinitely-large changes in quantity demanded result from very small changes in the price.
d.
quantity demanded stays the same whenever price changes.
26 ❖ Chapter 5/Elasticity and Its Application
124. When demand is perfectly inelastic, the demand curve will be
a.
negatively sloped, because buyers decrease their purchases when the price rises.
b.
vertical, because buyers purchase the same amount as before whenever the price rises or falls.
c.
positively sloped, because buyers increase their purchases when price rises.
d.
positively sloped, because buyers increase their total expenditures when price rises.
125. When demand is perfectly inelastic, the price elasticity of demand
a.
is zero, and the demand curve is vertical.
b.
is zero, and the demand curve is horizontal.
c.
approaches infinity, and the demand curve is vertical.
d.
approaches infinity, and the demand curve is horizontal.
126. A perfectly inelastic demand implies that buyers
a.
decrease their purchases when the price rises.
b.
purchase the same amount as before when the price rises or falls.
c.
increase their purchases only slightly when the price falls.
d.
respond substantially to an increase in price.
127. Ryan says that he would buy one cup of coffee every day regardless of the price. If he is telling the truth,
Ryan’s
a.
demand for coffee is perfectly inelastic.
b.
price elasticity of demand for coffee is 1.
c.
income elasticity of demand for coffee is 0.
d.
None of the above answers is correct.
128. For a vertical demand curve,
a.
the slope is undefined, and the price elasticity of demand is equal to 0.
b.
the slope is equal to 0, and the price elasticity of demand is undefined.
c.
both the slope and price elasticity of demand are undefined.
d.
both the slope and price elasticity of demand are equal to 0.
129. In which of these instances is demand said to be perfectly inelastic?
a.
An increase in price of 2% causes a decrease in quantity demanded of 2%.
b.
A decrease in price of 2% causes an increase in quantity demanded of 0%.
c.
A decrease in price of 2% causes a decrease in total revenue of 0%.
d.
An increase in price of 2% causes a decrease in quantity demanded of 1/2%.
Chapter 5/Elasticity and Its Application/ ❖ 27
130. Demand is said to have unit elasticity if the price elasticity of demand is
a.
less than 1.
b.
greater than 1.
c.
equal to 1.
d.
equal to 0.
131. Demand is said to be unit elastic if quantity demanded
a.
changes by the same percent as the price.
b.
changes by a larger percent than the price.
c.
changes by a smaller percent than the price.
d.
does not respond to a change in price.
132. When quantity moves proportionately the same amount as price, demand is
a.
elastic, and the price elasticity of demand is 1.
b.
perfectly elastic, and the price elasticity of demand is infinitely large.
c.
perfectly inelastic, and the price elasticity of demand is 0.
d.
unit elastic, and the price elasticity of demand is 1.
133. Pierre says that he will spend exactly 75 cents a day on candy bars, regardless of the price of candy bars.
Pierre’s demand for candy bars is
a.
perfectly elastic.
b.
unit elastic.
c.
perfectly inelastic.
d.
None of the above answers is correct.
134. When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of de-
mand
a.
first becomes smaller, then larger.
b.
always becomes larger.
c.
always becomes smaller.
d.
first becomes larger, then smaller.
135. The price elasticity of demand changes as we move along a
a.
horizontal demand curve.
b.
vertical demand curve.
c.
linear, downward-sloping demand curve.
d.
All of the above are correct.
28 ❖ Chapter 5/Elasticity and Its Application
136. If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of
demand is
a.
0.75.
b.
1.25.
c.
1.33.
d.
1.60.
137. If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of
demand is
a.
0.75.
b.
1.25.
c.
1.33.
d.
1.60.
138. If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of
demand is
a.
0.50.
b.
1.
c.
1.5.
d.
2.
139. If a 6% decrease in price for a good results in a 2% increase in quantity demanded, the price elasticity of de-
mand is
a.
0.02.
b.
0.33.
c.
3.
d.
4.
Chapter 5/Elasticity and Its Application/ ❖ 29
Figure 5-2
Pa
Pb
D1
D2D3
Quantity
Price
140. Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?
a.
D1
b.
D2
c.
D3
d.
All of the above are equally elastic.
141. Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three
different values of the price elasticity of demand. Which of the three demand curves would produce the small-
est elasticity?
a.
D1
b.
D2
c.
D3
d.
All of the above are equally elastic.
30 ❖ Chapter 5/Elasticity and Its Application
Figure 5-3
A
A
B
B
C
C
D D
Quantity
Price
142. Refer to Figure 5-3. The demand curve representing the demand for a luxury good with several close substi-
tutes is
a.
A.
b.
B.
c.
C.
d.
D.
143. Refer to Figure 5-3. Mark says he would buy one Mt. Dew per day regardless of the price. If this is true,
then Mark's demand for Mt. Dew is represented by demand curve
a.
A.
b.
B.
c.
C.
d.
D.
144. Refer to Figure 5-3. Which demand curve is perfectly elastic?
a.
A
b.
B
c.
C
d.
D
145. Refer to Figure 5-3. Which demand curve is perfectly inelastic?
a.
A
b.
B
c.
C
d.
D
Chapter 5/Elasticity and Its Application/ ❖ 31
146. Refer to Figure 5-3. Which demand curve is unit elastic?
a.
A
b.
B
c.
D
d.
None of the above.
147. When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A
rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elastic-
ity of demand for good A is
a.
1.50, and an increase in price will result in an increase in total revenue for good A.
b.
1.50, and an increase in price will result in a decrease in total revenue for good A.
c.
0.67, and an increase in price will result in an increase in total revenue for good A.
d.
0.67, and an increase in price will result in a decrease in total revenue for good A.
148. Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is
2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using
the midpoint method, the price elasticity of demand is about
a.
1.43, and an increase in the price will cause hotels' total revenue to decrease.
b.
1.43, and an increase in the price will cause hotels' total revenue to increase.
c.
0.70, and an increase in the price will cause hotels' total revenue to decrease.
d.
0.70, and an increase in the price will cause hotels' total revenue to increase.
149. When the local used bookstore prices economics books at $15 each, it generally sells 70 books per month. If it
lowers the price to $7, sales increase to 90 books per month. Given this information, we know that the price
elasticity of demand for economics books is about
a.
2.91, and an increase in price from $7 to $15 results in an increase in total revenue.
b.
2.91, and an increase in price from $7 to $15 results in a decrease in total revenue.
c.
0.34, and an increase in price from $7 to $15 results in an increase in total revenue.
d.
0.34, and an increase in price from $7 to $15 results in a decrease in total revenue.
150. Fiona’s Fish Emporium increased its total monthly revenue from $1,500 to $1,800 when it raised the price of
tropical fish from $5 to $9. The price elasticity of demand for Fiona’s Fish Emporium is
a.
0.57.
b.
0.70.
c.
1.43.
d.
2.20.
32 ❖ Chapter 5/Elasticity and Its Application
151. Melvin’s Magnets earned $200 in total revenue last month when it sold 100 souvenir magnets. This month it
earned $300 in total revenue when it sold 60 souvenir magnets. The price elasticity of demand for Marvin’s
Magnets is
a.
0.27.
b.
0.58.
c.
1.25.
d.
1.71.
152. Suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. When the price of
wheat is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The
demand for wheat is
a.
income inelastic, so an increase in the price of wheat will increase the total revenue of wheat
farmers.
b.
income elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.
c.
price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.
d.
price elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.
153. Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price of
ginger ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statements is true?
a.
The demand for ginger ale is income inelastic, so an increase in the price of ginger ale will increase
the total revenue of ginger ale producers.
b.
The demand for ginger ale is income elastic, so an increase in the price of ginger ale will increase
the total revenue of ginger ale producers.
c.
The demand for ginger ale is price inelastic, so an increase in the price of ginger ale will increase
the total revenue of ginger ale producers.
d.
The demand for ginger ale is price elastic, so an increase in the price of ginger ale will decrease the
total revenue of ginger ale producers.
154. Suppose that 50 hot dogs are demanded at a particular price. If the price of hot dogs rises from that price by 5
percent, the number of hot dogs demanded falls to 48. Using the midpoint approach to calculate the price elas-
ticity of demand, it follows that the
a.
demand for hot dogs in this price range is unit elastic.
b.
price increase will decrease the total revenue of hot dog sellers.
c.
price elasticity of demand for hot dogs in this price range is about 1.22.
d.
price elasticity of demand for hot dogs in this price range is about 0.82.
Chapter 5/Elasticity and Its Application/ ❖ 33
155. Suppose that 500 candy bars are demanded at a particular price. If the price of candy bars rises from that price
by 10 percent, the number of candy bars demanded falls to 480. Using the midpoint approach to calculate the
price elasticity of demand, it follows that the
a.
demand for candy bars in this price range is unit elastic.
b.
price increase will decrease the total revenue of candy bar sellers.
c.
price elasticity of demand for candy bars in this price range is about 0.41.
d.
price elasticity of demand for candy bars in this price range is about 0.24.
156. An increase in price causes an increase in total revenue when demand is
a.
elastic.
b.
inelastic.
c.
unit elastic.
d.
All of the above are possible.
157. The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in
the price. If the owner is only interested in increasing revenue, she should
a.
lower the price of the cinnamon rolls.
b.
leave the price of the cinnamon rolls unchanged.
c.
raise the price of the cinnamon rolls.
d.
reduce costs.
158. Suppose that demand is inelastic within a certain price range. For that price range,
a.
an increase in price would increase total revenue because the decrease in quantity demanded is
proportionately less than the increase in price.
b.
an increase in price would decrease total revenue because the decrease in quantity demanded is
proportionately greater than the increase in price.
c.
a decrease in price would increase total revenue because the increase in quantity demanded is
proportionately smaller than the decrease in price.
d.
a decrease in price would not affect total revenue.
159. When demand is inelastic, the price elasticity of demand is
a.
less than 1, and price and total revenue will move in the same direction.
b.
less than 1, and price and total revenue will move in opposite directions.
c.
greater than 1, and price and total revenue will move in the same direction.
d.
greater than 1, and price and total revenue will move in opposite directions.
34 ❖ Chapter 5/Elasticity and Its Application
160. How does total revenue change as one moves downward and to the right along a linear demand curve?
a.
It always increases.
b.
It always decreases.
c.
It first increases, then decreases.
d.
It is unaffected by a movement along the demand curve.
161. On a downward-sloping linear demand curve, total revenue reaches its maximum value at the
a.
midpoint of the demand curve.
b.
lower end of the demand curve.
c.
upper end of the demand curve.
d.
It is impossible to tell without knowing prices and quantities demanded.
162. A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that
the city raise the price of admission to the current municipal pools this year to raise revenues. The city man-
ager suggests that the city lower the price of admission to raise revenues. Who is correct?
a.
the mayor
b.
the city manager
c.
The answer depends on the price elasticity of demand.
d.
The answer depends on the costs of construction of the new municipal swimming pool.
163. A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that
the city raise the price of admission to the current municipal pools this year to raise revenues. The city man-
ager suggests that the city lower the price of admission to raise revenues. Who is correct?
a.
Both the mayor and city manager would be correct if demand were price elastic.
b.
Both the mayor and city manager would be correct if demand were price inelastic.
c.
The mayor would be correct if demand were price elastic; the city manager would be correct if
demand were price inelastic.
d.
The mayor would be correct if demand were price inelastic; the city manager would be correct if
demand were price elastic.
164. When demand is inelastic, a decrease in price will cause
a.
an increase in total revenue.
b.
a decrease in total revenue.
c.
no change in total revenue but an increase in quantity demanded.
d.
no change in total revenue but a decrease in quantity demanded.
Chapter 5/Elasticity and Its Application/ ❖ 35
165. When demand is elastic, a decrease in price will cause
a.
an increase in total revenue.
b.
a decrease in total revenue.
c.
no change in total revenue but an increase in quantity demanded.
d.
no change in total revenue but a decrease in quantity demanded.
166. When demand is inelastic, an increase in price will cause
a.
an increase in total revenue.
b.
a decrease in total revenue.
c.
no change in total revenue but an increase in quantity demanded.
d.
no change in total revenue but a decrease in quantity demanded.
167. When demand is elastic, an increase in price will cause
a.
an increase in total revenue.
b.
a decrease in total revenue.
c.
no change in total revenue but an increase in quantity demanded.
d.
no change in total revenue but a decrease in quantity demanded.
168. Which of the following could be the price elasticity of demand for a good for which a decrease in price would
increase revenue?
a.
0
b.
0.2
c.
1
d.
2.1
169. Which of the following could be the price elasticity of demand for a good for which an increase in price would
increase revenue?
a.
0.2
b.
1
c.
1.5
d.
All of the above could be correct.
170. Which of the following could be the price elasticity of demand for a good for which a decrease in price would
decrease revenue?
a.
0.5
b.
1
c.
1.5
d.
All of the above could be correct.
36 ❖ Chapter 5/Elasticity and Its Application
171. Which of the following could be the price elasticity of demand for a good for which an increase in price would
decrease revenue?
a.
0
b.
0.5
c.
1
d.
1.5
172. Which of the following is not possible?
a.
Demand is elastic, and a decrease in price causes an increase in revenue.
b.
Demand is unit elastic, and a decrease in price causes an increase in revenue.
c.
Demand is inelastic, and an increase in price causes an increase in revenue.
d.
Demand is perfectly inelastic, and an increase in price causes an increase in revenue.
173. If demand is price inelastic, then when price rises, total revenue
a.
will fall.
b.
will rise.
c.
will remain unchanged.
d.
may rise, fall, or remain unchanged. More information is need to determine the change in total
revenue with certainty.
174. If the price elasticity of demand for tuna is 0.7, then a 1.5% increase in the price of tuna will decrease the
quantity demanded of tuna by
a.
1.05%, and tuna sellers' total revenue will increase as a result.
b.
1.05%, and tuna sellers' total revenue will decrease as a result.
c.
2.14%, and tuna sellers' total revenue will increase as a result.
d.
2.14%, and tuna sellers' total revenue will decrease as a result.
175. 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.
176. If a change in the price of a good results in no change in total revenue, then
a.
the demand for the good must be elastic.
b.
the demand for the good must be inelastic.
c.
the demand for the good must be unit elastic.
d.
buyers must not respond very much to a change in price.
Chapter 5/Elasticity and Its Application/ ❖ 37
177. When demand is unit elastic, price elasticity of demand equals
a.
1, and total revenue and price move in the same direction.
b.
1, and total revenue and price move in opposite directions.
c.
1, and total revenue does not change when price changes.
d.
0, and total revenue does not change when price changes.
178. If the demand curve is linear and downward sloping, which of the following statements is not correct?
a.
Demand is more elastic on the lower part of the demand curve than on the upper part.
b.
Different pairs of points on the demand curve can result in different values of the price elasticity of
demand.
c.
Different pairs of points on the demand curve result in identical values of the slope of the demand
curve.
d.
Starting from a point on the upper part of the demand curve, an increase in price leads to a decrease
in total revenue.
179. Total revenue
a.
always increases as price increases.
b.
increases as price increases, as long as demand is elastic.
c.
decreases as price increases, as long as demand is inelastic.
d.
remains unchanged as price increases when demand is unit elastic.
180. In which of the following situations will total revenue increase?
a.
Price elasticity of demand is 1.2, and the price of the good decreases.
b.
Price elasticity of demand is 0.5, and the price of the good increases.
c.
Price elasticity of demand is 3.0, and the price of the good decreases.
d.
All of the above are correct.
181. You have just been hired as a business consultant to determine what pricing policy would be appropriate in
order to increase the total revenue of a bakery. The first step you would take would be to
a.
increase the price of every loaf of bread in the store.
b.
look for ways to cut costs and increase profit for the bakery.
c.
determine the price elasticity of demand for the bakery's products.
d.
determine the price elasticity of supply for the bakery’s products.
38 ❖ Chapter 5/Elasticity and Its Application
182. You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the
aquatic center in order to meet expenses. The mayor advises you to increase the price of a day pass. The city
manager recommends reducing the price of a day pass. You realize that
a.
the mayor thinks demand is elastic, and the city manager thinks demand is inelastic.
b.
both the mayor and the city manager think that demand is elastic.
c.
both the mayor and the city manager think that demand is inelastic.
d.
the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.
183. You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the
aquatic center in order to meet expenses. The mayor advises you to decrease the price of a day pass. The city
manager recommends increasing the price of a day pass. You realize that
a.
the mayor thinks demand is elastic, and the city manager thinks demand is inelastic.
b.
both the mayor and the city manager think that demand is elastic.
c.
both the mayor and the city manager think that demand is inelastic.
d.
the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.
184. Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tui-
tion 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.
185. 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.
186. If the demand for apples is elastic, then an increase in the price of apples will
a.
increase total revenue of apple sellers.
b.
decrease total revenue of apple sellers.
c.
not change total revenue of apple sellers.
d.
There is not enough information to answer this question.
Chapter 5/Elasticity and Its Application/ ❖ 39
187. 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.
188. 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.
189. Kevin tunes pianos. If the demand for piano-tuning services is elastic, Kevin could increase his total revenue
by
a.
increasing the price of his piano-tuning services.
b.
decreasing the price of his piano-tuning services.
c.
leaving the price of his piano-tuning services unchanged.
d.
None of the above is correct.
190. 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.
191. 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 increase in total revenue.
192. 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 increase always leads to an increase in total revenue.
40 ❖ Chapter 5/Elasticity and Its Application
193. 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 increase always leads to an increase in total revenue.
194. Suppose you are in charge of setting prices at a local sandwich shop. The business needs to increase its total
revenue, and your job is on the line. If the demand for sandwiches is elastic, you
a.
should increase the price of sandwiches.
b.
should decrease the price of sandwiches.
c.
should not change the price of sandwiches.
d.
could not determine what to do with price until you determine whether supply is elastic or inelastic.
195. Suppose a producer is able to separate customers into two groups, one having an inelastic demand and the
other having an elastic demand. If the producer's objective is to increase total revenue, she should
a.
increase the price charged to customers with the elastic demand and decrease the price charged to
customers with the inelastic demand.
b.
decrease the price charged to customers with the elastic demand and increase the price charged to
customers with the inelastic demand.
c.
decrease the price to both groups of customers.
d.
increase the price for both groups of customers.
196. 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.
197. Suppose the point (Q = 2,000, P = $60) is the midpoint on a certain downward-sloping, linear demand curve.
Then
a.
an increase in price from $40 to $42 will increase total revenue.
b.
a decrease in price from $61 to $59 will leave total revenue unchanged.
c.
the maximum value of total revenue is $120,000.
d.
All of the above are correct.
