Question 1

If demand is unit-elastic throughout the demand curve, then total revenues are

Accepted Answer

When demand is unit-elastic, the percentage change in quantity demanded is equal to the percentage change in price, meaning total revenue (price times quantity) remains constant regardless of the price.

Question 2

Within the range of prices around the midpoint on a straight-line demand curve, demand is

Accepted Answer

Within the range of prices around the midpoint on a straight-line demand curve, the elasticity of demand is equal to one. This means that a change in price will lead to an equal change in quantity demanded, resulting in a constant total revenue. Therefore, demand is unit-elastic in this range.

Question 3

Over the inelastic range of a demand curve, there is

Accepted Answer

The answer of Over the inelastic range of a demand...

Question 4

If the price of a good increases and the total revenue also increases, the good has a(n)

Accepted Answer

If the price of a good increases and the total revenue also increases, it indicates that the demand is inelastic. In other words, the quantity demanded does not decrease significantly with an increase in price, and hence the total revenue still increases.

Question 5

-Consider the above figure. Which of the following statements is correct?

Accepted Answer

The answer of 
-Consider the above figure. Which of the...

Question 6

If demand is perfectly elastic everywhere along the demand curve, then

Accepted Answer

When demand is perfectly elastic, the demand curve is horizontal, indicating that consumers are willing to buy any quantity at a specific price, but no quantity at a price even slightly higher.

Question 7

A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.1. To increase its revenue, the transit authority should

Accepted Answer

Since the elasticity of demand for bus trips is 1.1, a price decrease of 10% (from $1 to $0.90) is expected to increase the quantity of bus trips by 11%. This means that the transit authority can increase its revenue by lowering the fare, since the increase in the number of bus trips will offset the decrease in fare per ride. Therefore, lowering the fare is the best choice to increase revenue.

Question 8

A movie theatre raises ticket prices from $8 to $10 in order to raise revenues. The theatre's management is assuming the absolute value of the price elasticity of demand for tickets is

Accepted Answer

If the absolute value of the price elasticity of demand is less than 1, it means that the percentage change in quantity demanded will be less than the percentage change in price. Thus, increasing the price from $8 to $10 will result in a smaller decrease in quantity demanded than the increase in price, leading to an increase in total revenue for the theatre.

Question 9

If the slope of a demand curve is constant, then we know that

Accepted Answer

The slope of a demand curve tells us how much the quantity demanded changes in response to a change in price. The elasticity of demand, on the other hand, tells us how responsive quantity demanded is to a change in price. If the slope of the demand curve is constant, then we know that the change in quantity demanded is proportional to the change in price, but we do not know how responsive quantity demanded is overall. Therefore, elasticity of demand varies along the demand curve.

Question 10

Moving downward on a downward sloping linear demand curve, the absolute value of the price elasticity of demand

Accepted Answer

On a downward sloping linear demand curve, the price elasticity of demand decreases as we move down the curve, because as the price decreases, the percentage change in quantity demanded becomes smaller and smaller, resulting in a smaller price elasticity of demand. Therefore, the absolute value of the price elasticity of demand decreases continuously.

Question 11

If total revenues decline when the market clearing price increases, then we know that

Accepted Answer

When total revenues decline as the market clearing price increases, it means that consumers are very sensitive to price changes in the market, and a small increase in price causes a significant decrease in demand. This is known as elastic demand, where the price elasticity of demand is greater than 1.

Question 12

A university raises annual tuition by 10 percent. No other events have occurred, and the university's revenues have increased. It must be true that

Accepted Answer

The answer of A university raises annual tuition by 10...

Question 13

-In the above figure, along which range would total revenue rise by raising prices?

Accepted Answer

The answer of 
-In the above figure, along which range...

Question 14

Total revenues reach a maximum when

Accepted Answer

Total revenues reach a maximum when demand is unit-elastic. This means that a change in price will lead to an equal change in total revenue, indicating that price has reached the optimal point where consumers are willing to purchase enough products at a higher price to offset the quantity decrease caused by the price increase. In contrast, when demand is elastic, a small change in price will result in a large change in quantity demanded and therefore total revenue will decrease. When demand is inelastic, a change in price will result in a proportionally smaller change in quantity demanded and therefore total revenue will also decrease. If price elasticity is at a minimum, it means that demand is either perfectly elastic or perfectly inelastic, which also implies a suboptimal price and therefore total revenue will not be maximized.

Question 15

If total revenues rise when the market price increases, then we know that

Accepted Answer

When total revenues rise as market price increases, we know that demand is inelastic. Inelastic demand means that consumers are not very responsive to changes in price and will continue to purchase the same amount, even if prices increase.

Question 16

If the bus fare of a city increases from $1.00 to $1.25 per ride and as a result total revenue increases, then we know that

Accepted Answer

If total revenue has increased, it means that the increase in fare has compensated for the decrease in the number of rides. This suggests that the percentage change in fare is greater than the percentage change in number of rides.

Question 17

Suppose 1000 units of a good are sold at $10 a unit. If price increases to $15 and total revenue increases to $15,000 and increases by $1000 for every dollar increase in price after that, we know that

Accepted Answer

The answer of Suppose 1000 units of a good are...

Question 18

Suppose that the demand for men's ties is price inelastic for the range of prices between $10 and $12. If Joe raises the price of the ties in his shop from $10 to $12, what will happen to Joe's total revenues?

Accepted Answer

Since the demand is price inelastic, increasing the price will not result in a significant decrease in demand. Therefore, as the price increases, the total revenue will also increase.

Question 19

-In the above figure, along which range would total revenue remain unchanged by raising prices?

Accepted Answer

The answer of 
-In the above figure, along which range...

Question 20

Moving upward along a downward sloping straight-line demand curve, as the price of the product goes up,

Accepted Answer

Along a downward sloping linear demand curve, the price elasticity of demand varies at different points. At higher prices, the curve becomes more elastic, meaning that a small change in price will cause a relatively larger change in quantity demanded. At lower prices, the curve is more inelastic, meaning that a large change in price will result in a relatively small change in quantity demanded. Therefore, as the price of the product goes up, the price elasticity of demand goes from being inelastic to being elastic.

Quiz 19: Demand and Supply Elasticity

If demand is unit-elastic throughout the demand curve, then total revenues are

Within the range of prices around the midpoint on a straight-line demand curve, demand is

Over the inelastic range of a demand curve, there is

If the price of a good increases and the total revenue also increases, the good has a(n)

-Consider the above figure. Which of the following statements is correct?

If demand is perfectly elastic everywhere along the demand curve, then

A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.1. To increase its revenue, the transit authority should

A movie theatre raises ticket prices from $8 to $10 in order to raise revenues. The theatre's management is assuming the absolute value of the price elasticity of demand for tickets is

If the slope of a demand curve is constant, then we know that

Moving downward on a downward sloping linear demand curve, the absolute value of the price elasticity of demand

If total revenues decline when the market clearing price increases, then we know that

A university raises annual tuition by 10 percent. No other events have occurred, and the university's revenues have increased. It must be true that

-In the above figure, along which range would total revenue rise by raising prices?

Total revenues reach a maximum when

If total revenues rise when the market price increases, then we know that

If the bus fare of a city increases from $1.00 to $1.25 per ride and as a result total revenue increases, then we know that

Suppose 1000 units of a good are sold at $10 a unit. If price increases to $15 and total revenue increases to $15,000 and increases by $1000 for every dollar increase in price after that, we know that

Suppose that the demand for men's ties is price inelastic for the range of prices between $10 and $12. If Joe raises the price of the ties in his shop from $10 to $12, what will happen to Joe's total revenues?

-In the above figure, along which range would total revenue remain unchanged by raising prices?

Moving upward along a downward sloping straight-line demand curve, as the price of the product goes up,