Question 1

To raise the most tax revenue, governments should tax which of the following goods?

Accepted Answer

A)  SUVs 
B)  gasoline 
C)  designer shoes 
D)  sofas

Question 2

If the quantity of concert tickets sold decreases by 10 percent when the price increases by 5 percent, this market is operating in which section of its downward-sloping straight-line demand curve?

Accepted Answer

A)  the section above the point of unit elasticity 
B)  the point equal to unit elasticity 
C)  the section below the point of unit elasticity 
D)  This market show elastic demand which could occur at any point along the demand curve.

Question 3

Exhibit 5-1 Demand curve

In Exhibit 5-1, between points b and c, the price elasticity of demand measures

Accepted Answer

A)  0.425. 
B)  1.571. 
C)  0.143 
D)  0.636.

Question 4

Suppose the president of a textbook publisher argues that a 10 percent increase in the price of textbooks will raise total revenue for the publisher. It can be concluded that the company president thinks that demand for textbooks is:

Accepted Answer

A)  unitary elastic. 
B)  inelastic. 
C)  elastic. 
D)  perfectly inelastic.

Question 5

What does the "price elasticity of demand" measure? What does a price elasticity of demand coefficient of 1.2 mean? Does the product have an elastic, unitary elastic or inelastic demand?

Accepted Answer

The answer of What does the "price elasticity of demand"...

Question 6

Suppose a good has a downward-sloping, straight-line demand curve. If the price elasticity of demand is 2.5 when the price is $10 per unit, then the price elasticity of demand when the price is $7 per unit could be

Accepted Answer

A)  approaching infinity. 
B)  2.7. 
C)  2.5. 
D)  1.7.

Question 7

A public transit company finds that when it reduces the price of a bus ticket, total revenues remain the same. One can conclude from this that:

Accepted Answer

A)  the demand curve is horizontal, reflecting infinite price elasticity. 
B)  if the price is lowered further total revenue will increase. 
C)  the demand curve for bus tickets must have shifted to the right. 
D)  the firm is operating in a range of the demand curve that is unit elastic.

Exam 5: Price Elasticity of Demand and Supply