Question 1

If a change in price causes total revenue to change in the same direction,we can conclude that the demand is:

Accepted Answer

When demand is price inelastic, a change in price leads to a smaller percentage change in quantity demanded, causing total revenue to move in the same direction as the price change.

Question 2

Use the following to answer question: 
-(Figure: Demand for Notebook Computers)Use Figure: The Demand for Notebook Computers.The change in total revenue resulting from a change in price from P to T suggests that demand is:

Accepted Answer

The change in total revenue resulting from a change in price from P to T suggests that demand is price-elastic because the change in price caused a proportionately larger change in quantity demanded, resulting in a decrease in total revenue.

Question 3

The demand for agricultural output is price inelastic.This means that if farmers,taken collectively,have a bumper crop,they will have _____ prices,_____ quantities sold,and _____ incomes.

Accepted Answer

The demand for agricultural output is price inelastic, which means that changes in supply will have a relatively smaller effect on price. Therefore, if farmers have a bumper crop and increase the supply of agricultural output, prices will go down (lower prices). However, since the demand is inelastic, quantity demanded will not increase proportionally, resulting in greater quantities sold. This would lead to a decrease in farmers' incomes (lower incomes) due to the decrease in prices. Therefore, option A is the best choice.

Question 4

If an increase in the price of cotton increases total revenue,then the price effect is _____ the quantity effect.

Accepted Answer

The price effect is the impact of the higher price on each unit sold, meaning that with a higher price, each unit sold will contribute more to total revenue. On the other hand, the quantity effect is the decrease in the number of units sold due to the higher price.

If the price effect is stronger than the quantity effect, this means that the increase in revenue due to the higher price per unit sold exceeds the loss in revenue caused by the lower number of units sold. As a result, total revenue increases. Therefore, the correct answer is B - the price effect is stronger than the quantity effect.

Question 5

If a university decreases the price of tickets to football games to collect more revenue,it is assuming that the demand for tickets is:

Accepted Answer

If the university believes that by lowering the price of tickets they will collect more revenue, then they are assuming that the demand for tickets is price-elastic. This means that as the price decreases, the quantity demanded will increase enough to offset the lower price, resulting in more revenue. If the demand for tickets were price-inelastic, decreasing the price would not result in a significant increase in quantity demanded and may actually result in decreased revenue. If the demand were unstable or price unit-elastic, it would not necessarily support the decision to lower ticket prices.

Question 6

If a 20% price increase generates a 20% decrease in quantity demanded,then this is a(n)_____ response.

Accepted Answer

When a percentage change in price results in an equal percentage change in quantity demanded, the demand is considered unit-elastic.

Question 7

The price elasticity of demand for lettuce has been estimated to be 2.58.If an insect infestation destroys 10% of the nation's lettuce crop,how will that affect total revenue from lettuce,all other things unchanged?

Accepted Answer

With a price elasticity of demand of 2.58, we can conclude that lettuce is relatively elastic, meaning that a change in quantity demanded is sensitive to changes in price. Therefore, if the price of lettuce were to increase due to the decrease in supply caused by the insect infestation, the total revenue from lettuce would decrease as consumers switch to substitute goods. This is because the percentage decrease in quantity demanded would be greater than the percentage increase in price, resulting in a decrease in total revenue.

Question 8

The price elasticity of demand for fresh tomatoes has been estimated to be 2.22.If a new insecticide and fertilizer treatment yields a 20% increase in the nation's fresh tomato crop,how will that affect total revenue from fresh tomatoes,all other things unchanged?

Accepted Answer

With a price elasticity of demand of 2.22, a 20% increase in the fresh tomato crop will lead to a roughly 44% decrease in the price of fresh tomatoes (20% increase in supply * 2.22 elasticity = 44% decrease in price). However, the greater quantity sold will increase total revenue. The increase in quantity sold will offset the decrease in price, resulting in an overall increase in total revenue. Therefore, total revenue will rise.

Question 9

If the demand for golf is unit-price elastic and your local public golf course increases the greens fees for using the course,you expect:

Accepted Answer

When demand is unit-price elastic, a change in price does not affect total revenue, but it does affect the quantity demanded. An increase in price will lead to a proportional decrease in the quantity demanded, resulting in less golf being played.

Question 10

After a price decrease,the quantity effect tends to:

Accepted Answer

The quantity effect refers to the increase in demand that comes with a price decrease. This increase in quantity sold can offset the decrease in price and result in an overall increase in total revenue. Therefore, after a price decrease, the quantity effect tends to increase total revenue.

Question 11

Suppose the price elasticity of demand for oranges is 1.8.If a fall frost destroys one-third of the nation's orange crop,how will that affect total revenue from oranges,all other things unchanged?

Accepted Answer

A decrease in supply due to the frost will lead to an increase in price, but the price elasticity of demand being 1.8 implies that the quantity demanded will also decrease by a proportionately larger amount. As a result, the decrease in quantity demanded will more than offset the increase in price, leading to a decrease in total revenue from oranges.

Question 12

Use the following to answer question: 
-(Figure: Demand for Notebook Computers)Use Figure: The Demand for Notebook Computers.Total revenue at point V equals the:

Accepted Answer

Total revenue is calculated by multiplying the price by the quantity sold. At point V, the price is represented by the distance 0T, and the quantity is represented by the distance 0N. Therefore, the total revenue at point V is the area of the rectangle formed by these distances, which is area 0TVN.

Question 13

Demand for vegetables at a small farmers' market is steady,but the supply of vegetables has decreased because of a drought.This is good news for farmers if demand is _____ and the _____ effect outweighs the _____ effect.

Accepted Answer

When demand is inelastic, consumers are less sensitive to price changes, meaning they will continue to buy relatively the same amount even if the price increases. Therefore, if the price effect (increased revenue from selling each unit at a higher price) outweighs the quantity effect (lost revenue from selling fewer units), farmers can benefit from higher overall revenue despite selling fewer vegetables due to the drought.

Question 14

Which statement is NOT true regarding a price-elastic demand curve?

Accepted Answer

A price-elastic demand curve means that the absolute value of the price elasticity is greater than 1, indicating that the percent changes in quantity demanded are greater than the percent changes in price. Therefore, statement B, which suggests that the absolute value of the price elasticity is a fraction greater than 0 but less than 1 (indicating inelastic demand), is not true for a price-elastic demand curve.

Question 15

When a public transit system (such as a subway or bus line)raises its fares,its total revenue may increase.This suggests that demand is:

Accepted Answer

If the total revenue of a public transit system increases after raising its fares, it means that the demand is price-inelastic. This implies that even if the fares are increased, the demand for the service will not decrease significantly. In other words, the consumers are not very sensitive to the price change, and the demand for the service continues to remain high.

Question 16

In the market for computers,if the demand curve is elastic and the price of a computer decreases,we expect total revenue to _____.If the demand curve is inelastic and the price of a computer decreases,we expect total revenue to _____.

Accepted Answer

When demand is elastic, a decrease in price leads to a proportionally larger increase in quantity demanded, raising total revenue. Conversely, when demand is inelastic, a decrease in price doesn't lead to a sufficient increase in quantity demanded to offset the lower price, thus reducing total revenue.

Question 17

There is one gas station in a small rural town.The owner of the station claims that he will sell the same quantity of gas no matter how high or low the price.If he is correct in this assertion,the demand curve for gas at his station must be _____,with a price elasticity of _____.

Accepted Answer

If the owner's claim is true, it means that consumers will continue to purchase the same quantity of gas regardless of the price. This indicates a perfectly inelastic demand, which is represented by a vertical demand curve with zero price elasticity.

Question 18

If the demand for golf is price-inelastic and your local public golf course increases the greens fees for using the course,you expect:

Accepted Answer

When demand is price-inelastic, an increase in price leads to a less than proportionate decrease in quantity demanded, resulting in an increase in total revenue.

Question 19

The price elasticity of demand for gasoline in the short run has been estimated to be 0.4.If a war in the Middle East causes the price of oil (from which gasoline is made)to increase,how will that affect total revenue from gasoline in the short run,all other things unchanged?

Accepted Answer

The price elasticity of demand for gasoline being 0.4 indicates that the demand for gasoline is inelastic in the short run. This means that a price increase will lead to a smaller percentage decrease in quantity demanded. Therefore, total revenue (price x quantity) will rise because the effect of the price increase on revenue is greater than the effect of the decrease in quantity demanded.

Question 20

Use the following to answer question: 
-(Figure: Demand for Notebook Computers)Use Figure: The Demand for Notebook Computers.Total revenue at point S equals the:

Accepted Answer

Total revenue is equal to price multiplied by quantity. At point S, the price is OS and the quantity is SM. Therefore, the total revenue is the area of the rectangle 0PSM, which is represented by choice D.

Quiz 6: Elasticity

If a change in price causes total revenue to change in the same direction,we can conclude that the demand is:

Use the following to answer question: -(Figure: Demand for Notebook Computers) Use Figure: The Demand for Notebook Computers.The change in total revenue resulting from a change in price from P to T suggests that demand is:

The demand for agricultural output is price inelastic.This means that if farmers,taken collectively,have a bumper crop,they will have ___ prices,_ quantities sold,and ___ incomes.

If an increase in the price of cotton increases total revenue,then the price effect is _____ the quantity effect.

If a university decreases the price of tickets to football games to collect more revenue,it is assuming that the demand for tickets is:

If a 20% price increase generates a 20% decrease in quantity demanded,then this is a(n) _____ response.

The price elasticity of demand for lettuce has been estimated to be 2.58.If an insect infestation destroys 10% of the nation's lettuce crop,how will that affect total revenue from lettuce,all other things unchanged?

The price elasticity of demand for fresh tomatoes has been estimated to be 2.22.If a new insecticide and fertilizer treatment yields a 20% increase in the nation's fresh tomato crop,how will that affect total revenue from fresh tomatoes,all other things unchanged?

If the demand for golf is unit-price elastic and your local public golf course increases the greens fees for using the course,you expect:

After a price decrease,the quantity effect tends to:

Suppose the price elasticity of demand for oranges is 1.8.If a fall frost destroys one-third of the nation's orange crop,how will that affect total revenue from oranges,all other things unchanged?

Use the following to answer question: -(Figure: Demand for Notebook Computers) Use Figure: The Demand for Notebook Computers.Total revenue at point V equals the:

Demand for vegetables at a small farmers' market is steady,but the supply of vegetables has decreased because of a drought.This is good news for farmers if demand is ___ and the _ effect outweighs the ___ effect.

Which statement is NOT true regarding a price-elastic demand curve?

When a public transit system (such as a subway or bus line) raises its fares,its total revenue may increase.This suggests that demand is:

In the market for computers,if the demand curve is elastic and the price of a computer decreases,we expect total revenue to _.If the demand curve is inelastic and the price of a computer decreases,we expect total revenue to _.

There is one gas station in a small rural town.The owner of the station claims that he will sell the same quantity of gas no matter how high or low the price.If he is correct in this assertion,the demand curve for gas at his station must be _,with a price elasticity of _.

If the demand for golf is price-inelastic and your local public golf course increases the greens fees for using the course,you expect:

The price elasticity of demand for gasoline in the short run has been estimated to be 0.4.If a war in the Middle East causes the price of oil (from which gasoline is made) to increase,how will that affect total revenue from gasoline in the short run,all other things unchanged?

Use the following to answer question: -(Figure: Demand for Notebook Computers) Use Figure: The Demand for Notebook Computers.Total revenue at point S equals the: