Deck 5: Elasticity

Question 1

Demand determines ________ entirely when ________ is perfectly inelastic.

A) quantity; supply
B) price and quantity; supply
C) price; supply
D) price and quantity; demand

Answer 1

price; supply

Question 2

Demand determines price entirely when

A) demand is downward sloping.
B) demand is perfectly inelastic.
C) supply is perfectly inelastic.
D) supply is perfectly elastic.

Answer 2

supply is perfectly inelastic.

Question 3

Refer to the information provided in Figure 5.1 below to answer the question(s) that follow. Figure 5.1
Refer to Figure 5.1. The price elasticity of demand for tickets

A) is equal to zero.
B) is equal to 1.
C) is infinity.
D) varies at every point along the demand curve.

Answer 3

is equal to zero.

Question 4

When the price of oysters decreases 25%, quantity demanded increases 10%. The price elasticity of demand for oysters is ________ and total revenue from oyster sales will ________.

A) inelastic; increase
B) inelastic; decrease
C) elastic; decrease
D) elastic; increase

Question 5

A government wants to reduce electricity consumption by 10%. The price elasticity of demand for electricity is -5. The government must ________ the price of electricity by ________.

A) raise; 2.0%
B) raise; 0.5%
C) raise; 1.25%
D) lower; 0.5%

Question 6

When the price of coffee increases 5%, quantity demanded decreases 10%. The price elasticity of demand for coffee is ________ and total revenue from coffee sales will ________.

A) inelastic; increase
B) inelastic; decrease
C) elastic; increase
D) elastic; decrease

Question 7

Refer to the information provided in Figure 5.1 below to answer the question(s) that follow. Figure 5.1
Refer to Figure 5.1. The demand for tickets is

A) perfectly price elastic.
B) perfectly price inelastic.
C) unit price elastic.
D) perfectly income inelastic.

Question 8

A government wants to reduce electricity consumption by 5%. The price elasticity of demand for electricity is -0.5. The government must ________ the price of electricity by ________.

A) raise; 10.0%
B) raise; 1.0%
C) raise; 0.1%
D) lower; 0.5%

Question 9

A perfectly price elastic demand curve will be a ________ line.

A) horizontal
B) vertical
C) positively sloped
D) negatively sloped

Question 10

The price elasticity of demand for kale in Texas is -2, and the price elasticity of demand for kale in California is -0.5. In other words, demand in Texas is ________, and demand in California is ________.

A) elastic; inelastic
B) inelastic; elastic
C) elastic; unit elastic
D) inelastic; unit inelastic

Question 11

When the price of coffee decreases 5%, quantity demanded increases 5%. The price elasticity of demand for coffee is ________ and total revenue from coffee sales will ________.

A) elastic; decrease
B) elastic; increase
C) inelastic; decrease
D) unit elastic; not change

Question 12

When the price of tea decreases 7%, quantity demanded increases 12%. The price elasticity of demand for tea is ________ and total revenue from tea sales will ________.

A) inelastic; increase
B) inelastic; decrease
C) elastic; increase
D) elastic; decrease

Question 13

A perfectly price inelastic demand curve will be a ________ line.

A) horizontal
B) vertical
C) positively sloped
D) negatively sloped

Question 14

A ________ line is a perfectly price elastic demand curve.

A) horizontal
B) vertical
C) positively sloped
D) negatively sloped

Question 15

When the price of cheddar cheese increases 15%, quantity demanded decreases 15%. The price elasticity of demand for cheddar cheese is ________ and total revenue from cheddar cheese sales will ________.

A) elastic; decrease
B) elastic; increase
C) inelastic; decrease
D) unit elastic; not change

Question 16

The ABC Computer Company wants to increase the quantity of computers it sells by 5%. If the price elasticity of demand is -2.5, the company must

A) increase price by 2.0%.
B) decrease price by 2.0%.
C) increase price by 0.5%.
D) decrease price by 0.5%.

Question 17

When the price of oysters decreases 25%, quantity demanded is unchanged. The price elasticity of demand for oysters is

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

Question 18

The price elasticity of demand for heart transplants is perfectly inelastic. Thus, the price elasticity demand for heart transplants is

A) 1.0.
B) 0.0.
C) -1.0.
D) -100.0.

Question 19

When the price of fresh fish increases 10%, quantity demanded is unchanged. The price elasticity of demand for fresh fish is

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

Question 20

When the price of fresh fish increases 10%, quantity demanded decreases 5%. The price elasticity of demand for fresh fish is ________ and total revenue from fresh fish sales will ________.

A) inelastic; increase
B) inelastic; decrease
C) elastic; decrease
D) elastic; increase

Question 21

An increase in quantity demanded caused no change in the equilibrium price. Thus, demand must be

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

Question 22

Refer to the information provided in Figure 5.2 below to answer the question(s) that follow. Figure 5.2
Refer to Figure 5.2. If the price of a hamburger increases from $6 to $8, the price elasticity of demand equals ________. Use the midpoint formula.

A) -0.24
B) -1.0
C) -1.4
D) -2.0

Question 23

Slope is the best measure of responsiveness of the quantity demanded to a price change.

Question 24

Refer to the information provided in Figure 5.2 below to answer the question(s) that follow. Figure 5.2
Refer to Figure 5.2. If the price of a hamburger increases from $2 to $4, the price elasticity of demand equals ________. Use the midpoint formula.

A) -0.33
B) -2.0
C) -3.0
D) -5.0

Question 25

The price elasticity of demand for bottled water in New York is -3, and the price elasticity of demand for bottled water in Florida is -0.6. In other words, demand in New York is ________ and demand in Florida is ________.

A) elastic; inelastic
B) inelastic; elastic
C) elastic; unit elastic
D) inelastic; unit inelastic

Question 26

Refer to the information provided in Figure 5.2 below to answer the question(s) that follow. Figure 5.2
Refer to Figure 5.2. If the price of a hamburger increases from $8 to $10, the price elasticity of demand equals ________. Use the midpoint formula.

A) -0.33
B) -3.0
C) -30.
D) -300

Question 27

Refer to the information provided in Figure 5.2 below to answer the question(s) that follow. Figure 5.2
Refer to Figure 5.2. At Point C the price elasticity of demand is -1. Along line segment AB of the demand curve, the demand is

A) elastic.
B) unit elastic.
C) inelastic.
D) either elastic or inelastic, depending on whether price increases or decreases.

Question 28

The All Smiles Greeting Card Company wants to increase the quantity of greeting cards it sells by 20%. If the price elasticity of demand is -5.0, the company must

A) increase price by 4.0%.
B) decrease price by 4.0%.
C) increase price by 0.25%.
D) decrease price by 0.25%.

Question 29

The price elasticity of demand is generally negative to reflect the indirect relationship between the quantity demanded of a good and its price.

Question 30

Perfectly elastic demand has an elasticity value of zero.

Question 31

Perfectly inelastic demand is represented as a vertical line.

Question 32

Perfectly inelastic demand has an elasticity value of 1.

Question 33

Refer to the information provided in Figure 5.2 below to answer the question(s) that follow. Figure 5.2
Refer to Figure 5.2. If the price of a hamburger decreases from $10 to $6, the price elasticity of demand equals ________. Use the midpoint formula.

A) -0.5
B) -2.0
C) -20
D) -200

Question 34

Refer to the information provided in Figure 5.2 below to answer the question(s) that follow. Figure 5.2
Refer to Figure 5.2. At Point C the price elasticity of demand is -1. Along line segment EC of the demand curve, the demand is

A) elastic.
B) unit elastic.
C) inelastic.
D) either elastic or inelastic, depending on whether price increases or decreases.

Question 35

Price elasticity of demand is calculated as the ratio of the change in quantity demanded to the change in price.

Question 36

Price elasticity of demand is calculated as the change in price divided by the change in quantity demanded.

Question 37

A government wants to reduce electricity consumption by 40%. The price elasticity of demand for electricity is -10. The government must ________ the price of electricity by ________.

A) raise; 4.0%
B) raise; 0.25%
C) raise; 1.25%
D) lower; 0.25%

Question 38

A government wants to reduce electricity consumption by 10%. The price elasticity of demand for electricity is -0.1. The government must ________ the price of electricity by ________.

A) raise; 100.0%
B) raise; 10.0%
C) raise; 1.0%
D) lower; 20%

Question 39

Perfectly elastic demand is represented as a horizontal line.

Question 40

The price elasticity of demand for alfalfa is perfectly elastic. Thus, the price elasticity demand for alfalfa is

A) 1.0.
B) 0.0.
C) -1.0.
D) infinity.

Question 41

At a price of $11, quantity demanded is 90; and at a price of $9, quantity demanded is 110. Since total revenue ________ by the price decrease, demand must be ________.

A) is increased; elastic
B) is decreased; inelastic
C) is unchanged; unit elastic
D) is unchanged; elastic

Question 42

Price and total revenue move in inverse directions when demand is

A) price elastic.
B) price inelastic.
C) unit price elastic.
D) perfectly price inelastic.

Question 43

Total revenue increases if price ________ and demand is ________.

A) falls; inelastic
B) falls; elastic
C) rises; elastic
D) rises; unit elastic

Question 44

Refer to the information provided in Figure 5.2 below to answer the question(s) that follow. Figure 5.2
Refer to Figure 5.2. At Point C the price elasticity of demand is -1. Along line segment ________ of the demand curve, the demand is elastic.

A) AC
B) BE
C) CF
D) AF

Question 45

Refer to the information provided in Figure 5.2 below to answer the question(s) that follow. Figure 5.2
Refer to Figure 5.2. If the price of a hamburger decreases from $6 to $4, the price elasticity of demand equals ________. Use the midpoint formula.

A) -0.35
B) -0.71
C) -1.4
D) -2.4

Question 46

Refer to the information provided in Figure 5.2 below to answer the question(s) that follow. Figure 5.2
Refer to Figure 5.2. If the price of a hamburger decreases from $6 to $2, the price elasticity of demand equals ________. Use the midpoint formula.

A) -0.25
B) -0.5
C) -2.0
D) -4.0

Question 47

Refer to the information provided in Figure 5.3 below to answer the question(s) that follow. Figure 5.3
Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger decreases from $9 to $8, the price elasticity of demand equals ________ and demand is ________.

A) 6.33; elastic
B) -0.16; inelastic
C) -6.33; elastic
D) -19.0; inelastic

Question 48

Price and total revenue are directly related when demand is

A) price elastic.
B) price inelastic.
C) unit price elastic.
D) perfectly price elastic.

Question 49

Refer to the information provided in Figure 5.3 below to answer the question(s) that follow. Figure 5.3
Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger decreases from $8 to $7, the price elasticity of demand equals ________ and demand is ________.

A) -0.47; inelastic
B) -2.14; elastic
C) -2.29; inelastic
D) -3.5; elastic

Question 50

Refer to the information provided in Figure 5.4 below to answer the question(s) that follow. Figure 5.4
Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If the milkshake price falls from P₁ to P₂, total revenue will

A) increase.
B) decrease.
C) remain constant.
D) either increase or decrease.

Question 51

Refer to the information provided in Figure 5.4 below to answer the question(s) that follow. Figure 5.4
Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If a store reduces the price of a milkshake from P₃ to P₄, its total revenue will

A) increase.
B) decrease.
C) remain constant.
D) either increase or decrease.

Question 52

Refer to the information provided in Figure 5.3 below to answer the question(s) that follow. Figure 5.3
Refer to Figure 5.3. Using the midpoint formula, if the price of a gardenburger decreases from $7 to $6, the price elasticity of demand equals ________, and the decrease results in a(n) ________ in total revenue.

A) -.13; decrease
B) -.69; increase
C) -1.44; increase
D) -13; increase

Question 53

At a price of $20, a store can sell 24 picture frames a day. At a price of $18 the store can sell 33 picture frames a day. Since total revenue ________ by the price decrease, demand must be ________.

A) is increased; elastic
B) is increased; inelastic
C) is increased; unit elastic
D) is decreased; elastic

Question 54

Refer to the information provided in Figure 5.2 below to answer the question(s) that follow. Figure 5.2
Refer to Figure 5.2. At Point C the price elasticity of demand is -1. Along line segment ________ of the demand curve, the demand is inelastic.

A) AC
B) BE
C) CF
D) AF

Question 55

Refer to the information provided in Figure 5.4 below to answer the question(s) that follow. Figure 5.4
Refer to Figure 5.4. Along the given demand curve, which of the following is true?

A) Demand is less elastic along the segment AB than the segment EF.
B) Demand is less elastic along the segment EF than the segment AB.
C) Since the demand curve is linear, the price elasticity of demand between each of the points is the same.
D) All of the above are true.

Question 56

Total revenue decreases if price ________ and demand is ________.

A) falls; elastic
B) falls; inelastic
C) rises; inelastic
D) rises; unit elastic

Question 57

The owner of a local hot dog stand has estimated that if he lowers the price of hot dogs from $2.00 to $1.50, he will increase sales from 400 to 500 hot dogs per day. Using the midpoint formula, the demand for hot dogs is

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

Question 58

Refer to the information provided in Figure 5.3 below to answer the question(s) that follow. Figure 5.3
Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger increases from $6 to $8, the price elasticity of demand equals ________ and demand is ________.

A) -0.57; inelastic
B) -1.75; elastic
C) -1.9; inelastic
D) -2.0; elastic

Question 59

Refer to the information provided in Figure 5.3 below to answer the question(s) that follow. Figure 5.3
Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger increases from $8 to $10, the price elasticity of demand equals ________ and demand is ________.

A) 4.5; elastic
B) -0.5; inelastic
C) -4.5; elastic
D) -9.0; inelastic

Question 60

Refer to the information provided in Figure 5.3 below to answer the question(s) that follow. Figure 5.3
Refer to Figure 5.3. Using the midpoint formula, if the price of a gardenburger increases from $7 to $9, the price elasticity of demand equals ________ and the increase results in a(n) ________ in total revenue.

A) -0.375; increase
B) -0.5; decrease
C) -2.67; decrease
D) -8; decrease

Question 61

A firm is currently producing in the elastic portion of its demand curve. What course of action do you recommend for it assuming it wants to raise revenue?

A) Continue producing at the current output level, because it maximizes its total revenue by producing in the elastic portion of its demand curve.
B) Reduce price, because if it reduces price and demand is elastic, total revenue will increase.
C) Increase price, because if it increases price and demand is elastic, total revenue will increase.
D) Continue selling at the same price, but increase the amount it produces.

Question 62

A demand curve with continuously changing slope over all quantity values will always have a constant price elasticity of demand.

Question 63

When demand is elastic, an increase in price will result in an increase in total revenue.

Question 64

Total revenue increases if price ________ and demand is ________.

A) falls; inelastic
B) falls; unit elastic
C) rises; elastic
D) rises; inelastic

Question 65

Total revenue decreases if price ________ and demand is ________.

A) falls; elastic
B) falls; unit elastic
C) rises; inelastic
D) rises; elastic

Question 66

When demand is elastic, a decrease in price will result in an increase in total revenue.

Question 67

At a price of $5, quantity demanded is 70; and at a price of $7, quantity demanded is 50. Since total revenue ________ by the price increase, demand must be ________.

A) is increased; elastic
B) is decreased; inelastic
C) is unchanged; unit elastic
D) is unchanged; elastic

Question 68

If a firm wants to increase revenue, it should increase the selling price of its product if it is currently producing in the ________ portion of its demand curve.

A) elastic
B) inelastic
C) unit elastic
D) perfectly elastic

Question 69

When the slope of a demand curve is constant, price elasticity of demand is constant as well.

Question 70

Refer to the information provided in Figure 5.4 below to answer the question(s) that follow. Figure 5.4
Refer to Figure 5.4. Along the given demand curve, which of the following is true?

A) Demand is more elastic along the segment AC than the segment CF.
B) Demand is more elastic along the segment CF than the segment AC.
C) Since the demand curve is linear, the price elasticity of demand between each of the points is the same.
D) All of the above are true.

Question 71

Price and total revenue are inversely related when demand is

A) price elastic.
B) price inelastic.
C) unit price elastic.
D) perfectly price inelastic.

Question 72

At a price of $40, a store can sell 35 toasters a day. At a price of $35 the store can sell 39 toasters a day. Since total revenue ________ by the price decrease, demand must be ________.

A) is increased; elastic
B) is decreased; inelastic
C) is increased; unit elastic
D) is decreased; elastic

Question 73

Refer to the information provided in Figure 5.4 below to answer the question(s) that follow. Figure 5.4
Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If the milkshake price rises from P₂ to P₁, total revenue will

A) increase.
B) decrease.
C) remain constant.
D) either increase or decrease.

Question 74

Refer to the information provided in Figure 5.4 below to answer the question(s) that follow. Figure 5.4
Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If a store increases the price of a milkshake from P₄ to P₃, its total revenue will

A) increase.
B) decrease.
C) remain constant.
D) either increase or decrease.

Question 75

The owner of a local pretzel cart has estimated that if he lowers the price of pretzels from $4.00 to $3.00, he will increase sales from 800 to 1,100 pretzels per day. Using the midpoint formula, the demand for pretzels is

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

Question 76

A firm is currently producing in the inelastic portion of its demand curve. What course of action do you recommend for it, assuming it wants to raise revenue?

A) Continue producing at the current output level, because it maximizes its total revenue by producing in the inelastic portion of its demand curve.
B) Reduce price, because if it reduces price and demand is inelastic, total revenue will increase.
C) Increase price, because if it increases price and demand is inelastic, total revenue will increase.
D) Continue selling at the same price, but increase the amount it produces.

Question 77

A demand curve with constant slope over all quantity values can have a continuously changing price elasticity of demand.

Question 78

How total revenue changes when a price changes can be predicted using price elasticity of demand.

Question 79

If a firm wants to increase revenue, it should decrease the selling price of its product if it is currently producing in the ________ portion of its demand curve.

A) elastic
B) inelastic
C) unit elastic
D) perfectly inelastic

Question 80

Price and total revenue move in the same direction when demand is

A) price elastic.
B) price inelastic.
C) unit price elastic.
D) perfectly price elastic.