Deck 6: Elasticity and Demand

Question 1

-In the figure above, what is the point price elasticity of demand when price is $60?

A) -0.50
B) -0.75
C) -1.00
D) -1.60
E) -2.00

Answer 1

-1.00

Question 2

When marginal revenue is positive,

A) demand is elastic.
B) marginal revenue is greater than price.
C) decreasing price will decrease total revenue.
D) both b and c
E) all of the above

Answer 2

demand is elastic.

Question 3

-What is demand elasticity over the price range $40 to $60?

A) -2.00
B)-1.00
C) -0.50
D) -0.95
E) -0.71

Answer 3

-0.71

Question 4

Marginal revenue

A) is the change in total revenue when output increases by one unit.
B) is always greater than zero.
C) measures the slope of the total revenue curve.
D) both a and c
E) all of the above

Question 5

The cross-price elasticity of demand between goods X and Y

A) measures the responsiveness of the quantity of X demanded to changes in the price of Y.
B) is the percentage change in the price of Y divided by the percentage change in the quantity of X demanded.
C) is greater than zero if X and Y are substitutes.
D) both a and c
E) all of the above

Question 6

-If price INCREASES from $40 to $60, an arrow representing the PRICE effect

A) will point upward.
B) will point downward.
C) will be longer than (and in opposite direction of) the arrow representing the quantity effect.
D) will be shorter than (and in the opposite direction of) the arrow representing the quantity effect.
E) both a and c

Question 7

Use the figure below, which shows a linear demand curve and the associated total revenue curve, to answer the questions.



-The marginal revenue of the 700th unit is $_____ and demand is __________ at this point.

A) -20; elastic
B) -20; inelastic
C) 15; elastic
D) 15; inelastic

Question 8

-In the figure above, what is the point price elasticity of demand when price is $80?

A) -0.50
B) -0.75
C) -1.00
D) -1.60
E) -2.00

Question 9

-In the figure above, what is the point price elasticity of demand when price is $40?

A) -0.50
B) -0.75
C) -1.00
D) -1.50
E) -2.00

Question 10

Which of the following will NOT affect the elasticity of demand for a product?

A) the number of substitutes
B) how long consumers have to adapt to price changes
C) the cost of producing the product
D) the percentage of the consumer's budget spent on the product
E) all of the above will affect the elasticity of demand for a product

Question 11

-If price DECREASES from $80 to $60, an arrow representing the QUANTITY effect

A) will point upward.
B) will point downward.
C) will be shorter than (and in the opposite direction of) the arrow representing the price effect.
D) will be shorter than (and in the same direction of) the arrow representing the price effect.
E) will point in the opposite direction in which total revenue will move.

Question 12

Use the figure below, which shows a linear demand curve and the associated total revenue curve, to answer the questions.



-The maximum possible total revenue is $_________.

A) 10,500
B) 11,000
C) 11,500
D) 12,000
E) 12,500

Question 13

-If price INCREASES from $60 to $80, an arrow representing the PRICE effect

A) will point upward.
B) will point downward.
C) will be longer than (and in opposite direction of) the arrow representing the quantity effect.
D) will be shorter than (and in the opposite direction of) the arrow representing the quantity effect.
E) both a and d

Question 14

-If price DECREASES from $60 to $40, an arrow representing the QUANTITY effect

A) will point downward.
B) will be shorter than (and in opposite direction of) the arrow representing the price effect.
C) will be shorter than (and in same direction of) the arrow representing the price effect.
D) will point in the direction in which total revenue will move.
E) both a and d

Question 15

Use the figure below, which shows a linear demand curve and the associated total revenue curve, to answer the questions.



-The price at which total revenue is maximized is $_____.

A) 10
B) 15
C) 20
D) 25
E) 30

Question 16

Use the figure below, which shows a linear demand curve and the associated total revenue curve, to answer the questions.



-The Interior Department recently announced that it will increase the entrance fees at Yellowstone National Park in order to increase park revenues. The Interior Department must believe that

A) park goers are very responsive to price changes.
B) the demand for park services is elastic.
C) the percentage increase in fees will be greater than the percentage decrease in the number of park visitors.
D) demand is unitary elastic, and thus the number of visitors will NOT decrease.

Question 17

Use the figure below, which shows a linear demand curve and the associated total revenue curve, to answer the questions.



-The marginal revenue of the 100^th unit is $_____.

A) 0
B) 20
C) 40
D) 50
E) cannot tell from the information provided

Question 18

If the demand for umbrellas is price inelastic,

A) changes in price do not affect the number of umbrellas demanded.
B) if more umbrellas are sold as the result of a price decrease, total expenditures by consumers on umbrellas will decrease.
C) the percentage change in price is less than the percentage change in quantity demanded.
D) the percentage change in quantity demanded is greater than the percentage change in price.
E) none of the above

Question 19

-What is the interval elasticity of demand over the price range $60 to $80?

A) -0.75
B) -1.10
C) -1.00
D) -1.40
E) -2.00

Question 20

Use the figure below, which shows a linear demand curve and the associated total revenue curve, to answer the questions.



-The price for which 100 units can be sold is $_____.

A) 10
B) 15
C) 25
D) 45
E) 50

Question 21

Refer to the following table showing a demand schedule:

$\begin{array}{ll}\text { Price } & \text { Quantity } \\ &\text { demanded } \\\$ 200 &1000\\150 & 1400 \\100 & 1800\end{array}$

-If price falls from $200 to $150, what is the elasticity of demand over this range?

A) -0.625
B) -1.0
C) -1.17
D) -.5
E) -3.0

Question 22

Refer to the following table showing a demand schedule:

$\begin{array}{ll}\text { Price } & \text { Quantity } \\ &\text { demanded } \\\$ 200 &1000\\150 & 1400 \\100 & 1800\end{array}$

-If price falls from $200 to $150,

A) arrows representing the price and quantity effects both point down.
B) an arrow representing the price effect points down and is longer than an arrow for the quantity effect.
C) an arrow representing the price effect points down and is shorter than an arrow for the quantity effect.
D) arrows representing the price and quantity effects both point up.
E) total revenue moves in the same direction as the arrow representing the price effect.

Question 23

When the price of corn dogs is $0.50, 10,000 corn dogs are demanded. When the price of corn dogs is $1.20, 5,000 are demanded. What is the price elasticity of demand for corn dogs?

A) -0.40
B) -0.81
C) -1.20
D) -1.40

Question 24

If the quantity of Harley-Davidson motorcycles demanded decreases by 10% when the price increases by 20%, the price elasticity of demand for Harley-Davidson motorcycles is:

A) -0.50
B) -2.0
C) -10.0
D) -20.0

Question 25

Refer to the following table showing a demand schedule:

$\begin{array}{ll}\text { Price } & \text { Quantity } \\ &\text { demanded } \\\$ 200 &1000\\150 & 1400 \\100 & 1800\end{array}$

-If price falls from $200 to $150,

A) arrows representing the price and quantity effects both point down.
B) an arrow representing the price effect points down and is longer than an arrow for the quantity effect.
C) an arrow representing the quantity effect points up and is shorter than an arrow for the price effect.
D) arrows representing the price and quantity effects both point up.
E) total revenue moves in the same direction as the arrow representing the quantity effect.

Question 26

Use the figure to calculate the income elasticity of demand when income increases from $25,000 to $30,000:

A) -1.0
B) -0.1818
C) 0.1818
D) -1.5
E) 1.2

Question 27

Refer to the following table showing a demand schedule:

$\begin{array}{ll}\text { Price } & \text { Quantity } \\ &\text { demanded } \\\$ 200 &1000\\150 & 1400 \\100 & 1800\end{array}$

-If price falls from $150 to $100,

A) arrows representing the price and quantity effects both point down.
B) an arrow representing the price effect points down and is shorter than an arrow for the quantity effect.
C) total revenue moves in the same direction as the arrow representing the price effect.
D) the arrow representing the price effect points down and the arrow representing the quantity effect points up.
E) both c and d

Question 28

Refer to the following table showing a demand schedule:

$\begin{array}{ll}\text { Price } & \text { Quantity } \\ &\text { demanded } \\\$ 200 &1000\\150 & 1400 \\100 & 1800\end{array}$

-If price rises from $100 to $150,

A) arrows representing the price and quantity effects both point upward.
B) an arrow representing the price effect points upward and is shorter than an arrow for the quantity effect, which points downward.
C) total revenue moves up, or increase, as indicated by the direction of the arrow representing the price effect.
D) the arrow representing the price effect points down and the arrow representing the quantity effect points up.
E) both c and d

Question 29

When demand is inelastic,

A) quantity sold does not increase when price decreases.
B) selling one more unit of output causes marginal revenue to increase.
C) selling one more unit of output cause total revenue to increase.
D) Buyers are not very responsive to changes in the price of the product.
E) The percentage change in quantity demanded will exceed the percentage change in price (in absolute value).

Question 30

The demand for heart surgery is price inelastic. So it follows that

A) the percentage change in price is less than the resulting percentage change in quantity demanded.
B) if the price of heart surgery increases, total expenditure by consumers on heart surgery will rise.
C) changes in price do not affect the number of operations demanded.
D) both a and b
E) all of the above

Question 31

If the price elasticity of DVD recorders is -0.3 and price increases 20%, what happens to the quantity of DVD recorders demanded?

A) quantity decreases by 26%
B) quantity decreases by 6%
C) quantity increases by 15%
D) quantity increases by 21%

Question 32

Suppose that the Houston Rockets' management is considering a plan in which fans who donate blood can attend games for $35 instead of the usual $40. If both ticket revenues and blood donations rise with this plan, which of the following is true?

A) The demand for Houston Rockets' tickets is price elastic.
B) The demand for Houston Rockets' tickets is price inelastic.
C) The demand for blood donations is price elastic.
D) The demand for blood donations is price inelastic.

Question 33

If the price elasticity of demand for Harley-Davidson motorcycles is -1.2 and quantity demanded increases by 24%, price must have

A) decreased by 20%.
B) increased by 20%.
C) decreased by 28.8%.
D) decreased by 0.05%.

Question 34

Use the figure to calculate the income elasticity of demand when income increases from $25,000 to $30,000:

A) -0.10
B) -1.10
C) 0.1818
D) 0.20
E) 1.10

Question 35

If the price elasticity of demand for a good is -0.8 and quantity demanded decreases by 40%, price must have

A) increased by 5%.
B) increased by 32%.
C) decreased by 20%.
D) decreased by 32%.
E) none of the above

Question 36

If the quantity of gidgets demanded increases when the price of gadgets decreases

A) gidgets and gadgets are substitutes.
B) gidgets and gadgets are complements.
C) gidgets are normal goods, while gadgets are inferior goods.
D) gadgets are normal goods, while gidgets are inferior goods.

Question 37

Refer to the following table showing a demand schedule:

$\begin{array}{ll}\text { Price } & \text { Quantity } \\ &\text { demanded } \\\$ 200 &1000\\150 & 1400 \\100 & 1800\end{array}$

-As output rises from 1,400 to 1,800, what is marginal revenue?

A) $25
B) $50
C) -$400
D) -$50
E) -$75

Question 38

Refer to the following table showing a demand schedule:

$\begin{array}{ll}\text { Price } & \text { Quantity } \\ &\text { demanded } \\\$ 200 &1000\\150 & 1400 \\100 & 1800\end{array}$

-If price falls from $150 to $100, what is the elasticity of demand over this range?

A) -0.625
B) -1.0
C) -1.17
D) -2.5
E) -3.0

Question 39

Refer to the following table showing a demand schedule:

$\begin{array}{ll}\text { Price } & \text { Quantity } \\ &\text { demanded } \\\$ 200 &1000\\150 & 1400 \\100 & 1800\end{array}$

-As output increases from 1,000 to 1,400 what is marginal revenue?

A) $25
B) $50
C) -$400
D) -$25
E) -$75

Question 40

Use the figure below to calculate the cross-price elasticity of demand for good X when the price of good Y increases from $12 to $14:

A) 0.645
B) 0.42
C) 0.20
D) 2.00
E) 15.38

Question 41

Demand is (more elastic / less elastic) in the short run than in the long run

A) (more elastic) because goods account for a larger percentage of the consumer's budget in the short run than in the long run.
B) (less elastic) because goods account for a smaller percentage of the consumer's budget in the short run than in the long run.
C) (more elastic) because consumers have less time to adapt to a price change in the short run than in the long run.
D) (less elastic) because consumers have less time to adapt to a price change in the short run than in the long run.

Question 42

Refer to the following graph:


-Suppose price rises from $90 to $110. Using representative arrows, the quantity effect is a relatively ________ (short, long) arrow pointing _______ (upward, downward).

A) short; upward
B) short; downward
C) long; upward
D) long; downward

Question 43

Refer to the following graph:


-The price elasticity of demand over the price interval $90 to $110 is

A) -0.5
B) -1.0
C) -1.5
D) -2.0
E) -0.4

Question 44

"When the British government tripled university fees for foreign students in Great Britain, about one-half of them left to study in other countries."

-The implied price elasticity of demand by foreigners for a British education is (in absolute value)

A) less than 1.
B) equal to 1.
C) between 1.0 and 1.5.
D) greater than 1.5.

Question 45

Perfume industry statistics show that over the past five years, the number of bottles of perfume sold decreased by 30%, but the total dollar amount spent by consumers was unchanged. This means that

A) consumers were unresponsive to changes in price, i.e., the percentage change in quantity demanded was less than the percentage change in price.
B) demand was elastic.
C) demand was inelastic.
D) demand was unitary elastic.
E) both a and c

Question 46

If a drought increases the price of corn by 10% and decreases the quantity of corn demanded by 5%, then demand for corn is

A) elastic and total revenue to corn farmers will decrease.
B) inelastic and total revenue to corn farmers will decrease.
C) elastic and total revenue to corn farmers will increase.
D) inelastic and total revenue to corn farmers will increase.

Question 47

Refer to the following graph:


-Suppose price rises from $90 to $110. Total revenue moves in the ________ (same, opposite) direction as the dominant effect. In this case, total revenue ____________ (increases, decreases, stays the same) because the quantity effect is _________ (larger than, smaller than, the same as) the price effect.

A) same; increases; larger than
B) same; decreases; smaller than
C) same; decreases; larger than
D) opposite; increases; larger than
E) opposite; decreases; smaller than

Question 48

Which of the following would tend to DECREASE the elasticity of demand for good X?

A) The cost of producing X decreases.
B) Several firms which used to produce substitutes for X go out of business.
C) Consumers begin spending a smaller percentage of their income on X.
D) both b and c
E) all of the above

Question 49

The fact that the cross-price elasticity of natural gas with respect to the price of fuel oil is 0.4 implies that

A) natural gas and fuel oil are substitutes.
B) natural gas is a normal good.
C) the quantity of natural gas demanded will decrease by 1.6% when the price of fuel oil decreases by 4%.
D) both a and c

Question 50

Which of the following would tend to INCREASE the elasticity of demand for good X?

A) a new discovery allows firms to produce X at a much lower cost.
B) the percent of a consumer's income spent on good X declines.
C) a new product, Y, which can be used in place of X, is introduced.
D) both b and c
E) all of the above

Question 51

Refer to the following graph:


-Over the price range $90 to $110, marginal revenue is ________ and demand is ________.

A) greater than one; inelastic
B) positive; elastic
C) negative; inelastic
D) less than one; elastic
E) none of the above

Question 52

Refer to the following graph:


-Suppose price rises from $90 to $110. Using representative arrows, the price effect is a relatively ________ (short, long) arrow pointing _______ (upward, downward).

A) short; upward
B) short; downward
C) long; upward
D) long; downward

Question 53

If E₁ is the demand elasticity for a product after a price change has been in effect one day, E₂ is the demand elasticity for that product after one week, and E₃ is demand elasticity for that product after one month,

A) |E₁| > |E₂| > |E₃|
B) |E₂| > |E₃| > |E₁|
C) |E₃| > |E₁| > |E₂|
D) |E₃|> |E₂| > |E₁|

Question 54

If the demand for plastic surgery is price inelastic,

A) changes in price do not affect the number of operations.
B) then when more plastic surgery is performed, total expenditures on plastic surgery will decrease.
C) the percentage change in price is less than the percentage change in quantity.
D) both b and c
E) both a and b

Question 55

"When the British government tripled university fees for foreign students in Great Britain, about one-half of them left to study in other countries."

-This move will ___________ university revenues from foreign students in Great Britain.

A) decrease
B) not change
C) increase
D) cannot determine without further information

Question 56

When demand is elastic,

A) marginal revenue is negative.
B) the percentage change in price exceeds the percentage change in quantity.
C) an increase in price causes total revenue to rise.
D) both b and c
E) none of the above

Question 57

When marginal revenue is zero,

A) P < MR.
B) P = MR.
C) a small increase in price causes no change in total revenue.
D) a small decrease in price causes no change in total revenue.
E) both c and d

Question 58

Total revenue increased for a firm operating in the elastic range of its demand curve. Which of the following statements is correct?

A) The firm must have raised price.
B) The firm must have lowered price.
C) Quantity demanded must have increased.
D) both a and c
E) both b and c

Question 59

The demand for good X will be more elastic than the demand for good Y when

A) good X has fewer substitutes than good Y.
B) good X accounts for a larger percentage of a typical consumer's budget than good Y.
C) consumers have more time to adjust to a change in the price of good X than they have time to adjust to a change in the price of good Y.
D) both b and c
E) all of the above

Question 60

E₁ is demand elasticity for Minutemaid orange juice, E₂ is demand elasticity for all orange juice, and E₃ is demand elasticity for all fruit drinks. Then

A) |E₁| > |E₂| > |E₃|
B) |E₂| > |E₃| > |E₁|
C) |E₃| > |E₁| > |E₂|
D) |E₃| > |E₂| > |E₁|

Question 61

Refer to the following figure:


-At what prices are demand curves D₁, D₂, and D₃ unitary elastic?

A) $5; $5; $5; respectively
B) $17; $6; $5; respectively
C) $6; $3; $6; respectively
D) $1; $1; $1; respectively

Question 62

Refer to the following figure:


-When quantity demanded is 2,000, what is marginal revenue?

A) $12
B) $15
C) 0
D) $10
E) -$10

Question 63

Refer to the following figure:


-Demand is unitary elastic at P = $________.

A) 5
B) 10
C) 15
D) 20
E) 25

Question 64

Refer to the following figure:


-At a price of $6, the point elasticity of demand for D₁ is ________ and marginal revenue is _______.

A) -5; positive
B) -0.5; negative
C) -0.2; negative
D) -; zero

Question 65

Refer to the following figure:


-When price is $10 and quantity demanded is 2,000, what is the point elasticity of demand?

A) -3
B) -1/3
C) -1
D) -5
E) -2/3

Question 66

Refer to the following figure:


-When quantity demanded is 3,000, what is marginal revenue?

A) $12
B) $15
C) 0
D) $10
E) -$10

Question 67

Refer to the following figure:


-Marginal revenue is zero at Q = ________.

A) 1,000 units
B) 2,000 units
C) 3,000 units
D) 4,000 units
E) none of the above

Question 68

Refer to the following figure:


-At a price of $1, the point elasticity of demand for D₂ is ________ and marginal revenue is _______.

A)-5; positive
B) -0.5; negative
C)-0.2; negative
D) -1; zero

Question 69

Suppose the demand for good X is $$Q = 500 P ^ { - 1 }$$ . This demand curve has a ________ (constant, variable) elasticity of demand equal to ________.

A) variable; -0.5
B) constant;-0.2
C) constant; -1
D) variable;-2

Question 70

Refer to the following figure:


-When price is $5 and quantity demanded is 3,000, what is the point elasticity of demand?

A) -3
B) -1/3
C) -1
D) -5
E) -2/3

Question 71

Refer to the following figure:


-At a price of $10, the point elasticity of demand for D₃ is ________ and marginal revenue is _______.

A) -5; positive
B) -0.5; negative
C) -0.2; negative
D) -1; zero

Question 72

Refer to the following figure:


-What is the equation for marginal revenue?

A) MR = 4,000 -0.005P
B) MR = 4,000 -200Q
C) MR = 4,000 -200P
D) MR = 20 - 0.01Q
E) MR = 20 - 200Q

Question 73

Refer to the following figure:


-When price is $15 and quantity demanded is 1,000, what is the point elasticity of demand?

A) -3
B) -1/3
C)-1
D) -5
E) -2/3

Question 74

Refer to the following figure:


-When quantity demanded is 1,000, what is marginal revenue?

A) $15
B) $7.50
C) 0
D) $10
E) -$10

Question 75

Refer to the following figure:


-The equation for marginal revenue is

A) MR = 50 -0.025Q.
B) MR = 4,000 - 2,000Q.
C) MR = 4,000 - 100Q.
D) MR = 50-160Q.
E) none of the above

Question 76

Refer to the following figure:


-The equation for demand is

A) P = 4,000 -50Q.
B) P = 4,000 - 80Q.
C) Q = 4,000 - 50P.
D) Q = 50 -80P.
E) none of the above

Question 77

Refer to the following figure:


-The point elasticities of demand for D₁, D₂, and D₃ at a price of $5 are ________, ________, and _______, respectively.

A) -.4; -0.2; -1.4
B) -0.71;-5; -0.71
C) -1.4; -0.2; -5
D)-12; -6; -12
E) -0.0833; -0.1667; -0.0833