Question 1

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

Accepted Answer

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. 
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.

Question 2

Which of the following is likely to have the most price inelastic demand?

Accepted Answer

A) white chocolate chip with macadamia nut cookies 
B) Mrs.Field's chocolate chip cookies 
C) milk chocolate chip cookies 
D) cookies 
A) white chocolate chip with macadamia nut cookies 
B) Mrs.Field's chocolate chip cookies 
C) milk chocolate chip cookies 
D) cookies

Question 3

When demand is elastic,a decrease in price will cause

Accepted Answer

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. 
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.

Question 4

Moving downward and to the right along a linear demand curve,we know that total revenue

Accepted Answer

A) first increases,then decreases. 
B) first decreases,then increases. 
C) always increases. 
D) always decreases. 
A) first increases,then decreases. 
B) first decreases,then increases. 
C) always increases. 
D) always decreases.

Question 5

In which of the following situations will total revenue increase?

Accepted Answer

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. 
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.

Question 6

The value of the price elasticity of demand for a good will be relatively large when

Accepted Answer

A) there are no good substitutes available for the good. 
B) the time period in question is relatively short. 
C) the good is a luxury rather than a necessity. 
D) All of the above are correct. 
A) there are no good substitutes available for the good. 
B) the time period in question is relatively short. 
C) the good is a luxury rather than a necessity. 
D) All of the above are correct.

Question 7

Figure 5-12  
-Refer to Figure 5-12.Using the midpoint method,the price elasticity of demand between point Y and point Z is

Accepted Answer

A) 0.5. 
B) 0.75. 
C) 1.0. 
D) 1.3. 
A) 0.5. 
B) 0.75. 
C) 1.0. 
D) 1.3.

Question 8

Figure 5-5  
-Refer to Figure 5-5.At a price of $10 per unit,sellers' total revenue equals

Accepted Answer

A) $100. 
B) $450. 
C) $500. 
D) $1250. 
A) $100. 
B) $450. 
C) $500. 
D) $1250.

Question 9

If demand is price inelastic,then when price rises,total revenue

Accepted Answer

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. 
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.

Question 10

Which of the following statements about the price elasticity of demand is correct?

Accepted Answer

A) The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. 
B) Price elasticity of demand reflects the many economic,psychological,and social forces that shape consumer tastes. 
C) Other things equal,if good x has close substitutes and good y does not have close substitutes,then the demand for good x will be more elastic than the demand for good y. 
D) All of the above are correct. 
A) The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases. 
B) Price elasticity of demand reflects the many economic,psychological,and social forces that shape consumer tastes. 
C) Other things equal,if good x has close substitutes and good y does not have close substitutes,then the demand for good x will be more elastic than the demand for good y. 
D) All of the above are correct.

Question 11

If a 6% decrease in price for a good results in a 2% increase in quantity demanded,the price elasticity of demand is

Accepted Answer

A) 0.02. 
B) 0.33. 
C) 3. 
D) 4. 
A) 0.02. 
B) 0.33. 
C) 3. 
D) 4.

Question 12

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

Accepted Answer

A) unit elastic. 
B) inelastic. 
C) elastic. 
D) None of the above is correct because a price decrease never leads to an decrease in total revenue. 
A) unit elastic. 
B) inelastic. 
C) elastic. 
D) None of the above is correct because a price decrease never leads to an decrease in total revenue.

Question 13

Tyler purchases 5 pounds of hot dogs per month when his monthly income is $2,000 and 4 pounds of hot dogs per month when his monthly income is $2,200.Tyler's income elasticity of demand for hot dogs is

Accepted Answer

A) 2.33,and hot dogs are a normal good. 
B) -2.33,and hot dogs are an inferior good. 
C) 0.43,and hot dogs are a normal good. 
D) -0.43,and hot dogs are an inferior good. 
A) 2.33,and hot dogs are a normal good. 
B) -2.33,and hot dogs are an inferior good. 
C) 0.43,and hot dogs are a normal good. 
D) -0.43,and hot dogs are an inferior good.

Question 14

If the demand for textbooks is inelastic,then a decrease in the price of textbooks will

Accepted Answer

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. 
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.

Question 15

For a particular good,an 8 percent increase in price causes a 12 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A) There are no close substitutes for this good. 
B) The good is a necessity. 
C) The market for the good is broadly defined. 
D) The relevant time horizon is long. 
A) There are no close substitutes for this good. 
B) The good is a necessity. 
C) The market for the good is broadly defined. 
D) The relevant time horizon is long.

Question 16

If a 15% increase in price for a good results in a 20% decrease in quantity demanded,the price elasticity of demand is

Accepted Answer

A) 0.75. 
B) 1.25. 
C) 1.33. 
D) 1.60. 
A) 0.75. 
B) 1.25. 
C) 1.33. 
D) 1.60.

Question 17

If the price elasticity of demand for a good is 1,then a 3 percent decrease in price results in a

Accepted Answer

A) 0.1 percent increase in the quantity demanded. 
B) 1 percent increase in the quantity demanded. 
C) 3 percent increase in the quantity demanded. 
D) 4 percent increase in the quantity demanded. 
A) 0.1 percent increase in the quantity demanded. 
B) 1 percent increase in the quantity demanded. 
C) 3 percent increase in the quantity demanded. 
D) 4 percent increase in the quantity demanded.

Question 18

For a particular good,a 3 percent increase in price causes a 10 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Accepted Answer

A) The relevant time horizon is short. 
B) The good is a necessity. 
C) The market for the good is broadly defined. 
D) There are many close substitutes for this good. 
A) The relevant time horizon is short. 
B) The good is a necessity. 
C) The market for the good is broadly defined. 
D) There are many close substitutes for this good.

Question 19

If the cross-price elasticity of demand for two goods is -4.5,then

Accepted Answer

A) the two goods are substitutes. 
B) the two goods are complements. 
C) one of the goods is normal while the other good is inferior. 
D) one of the goods is a luxury while the other good is a necessity. 
A) the two goods are substitutes. 
B) the two goods are complements. 
C) one of the goods is normal while the other good is inferior. 
D) one of the goods is a luxury while the other good is a necessity.

Question 20

Studies indicate that the price elasticity of demand for beer is about 0.9.A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20.According to the midpoint method,the government policy should have reduced beer consumption by

Accepted Answer

A) 30%. 
B) 40%. 
C) 60%. 
D) 74%. 
A) 30%. 
B) 40%. 
C) 60%. 
D) 74%.

Exam 5: Elasticity and Its Applications: The Elasticity of Demand

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

Which of the following is likely to have the most price inelastic demand?

When demand is elastic,a decrease in price will cause

Moving downward and to the right along a linear demand curve,we know that total revenue

In which of the following situations will total revenue increase?

The value of the price elasticity of demand for a good will be relatively large when

Figure 5-12 -Refer to Figure 5-12.Using the midpoint method,the price elasticity of demand between point Y and point Z is

Figure 5-5 -Refer to Figure 5-5.At a price of $10 per unit,sellers' total revenue equals

If demand is price inelastic,then when price rises,total revenue

Which of the following statements about the price elasticity of demand is correct?

If a 6% decrease in price for a good results in a 2% increase in quantity demanded,the price elasticity of demand is

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

Tyler purchases 5 pounds of hot dogs per month when his monthly income is $2,000 and 4 pounds of hot dogs per month when his monthly income is $2,200.Tyler's income elasticity of demand for hot dogs is

If the demand for textbooks is inelastic,then a decrease in the price of textbooks will

For a particular good,an 8 percent increase in price causes a 12 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

If a 15% increase in price for a good results in a 20% decrease in quantity demanded,the price elasticity of demand is

If the price elasticity of demand for a good is 1,then a 3 percent decrease in price results in a

For a particular good,a 3 percent increase in price causes a 10 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

If the cross-price elasticity of demand for two goods is -4.5,then

Studies indicate that the price elasticity of demand for beer is about 0.9.A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20.According to the midpoint method,the government policy should have reduced beer consumption by

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A