Question 1

If a Pizza Hut raises the price of a slice of pizza from $3.00 to $3.25,the quantity demanded decreases from 1,500 slices per week to 1,300 slices per week.The demand for slices of pizza is ________ and the total revenue received by this Pizza Hut ________.
A) elastic; decreases
B) inelastic; decreases
C) elastic; increases
D) inelastic; increases
E) unit elastic; does not change

Accepted Answer

The decrease in quantity demanded by 200 slices (13.3% decrease) in response to a 8.3% increase in price indicates that the demand for slices of pizza is elastic. When price and quantity demanded move in opposite directions, total revenue moves in the same direction. Therefore, when the price increased and demand was elastic, the total revenue received by the Pizza Hut decreased.

Question 2

KFC raises the price of its grilled chicken.The price elasticity of demand for KFC grilled chicken is 0.8.What happens to the KFC's total revenue?
A) nothing
B) It increases.
C) It decreases.
D) It becomes negative.
E) It might change, but more information is needed to determine if it increases, decreases, or does not change.

Accepted Answer

Since the price elasticity of demand for KFC grilled chicken is less than 1 (inelastic), an increase in price will lead to a less than proportionate decrease in quantity demanded, resulting in an increase in total revenue.

Question 3

Suppose the Oakland Raiders football team increases their season ticket prices and total revenue from ticket sales falls,but not to zero.This fact means that the demand for Raiders tickets is
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly elastic.
E) perfectly inelastic.

Accepted Answer

If the increase in price causes a decrease in revenue, then the demand is elastic. This means that fans are price-sensitive and will reduce their purchases of Raiders tickets as the price increases. If the demand were inelastic, fans would continue to purchase tickets even if the price increased, resulting in an increase in revenue despite the price hike.

Question 4

-In the figure above,what happens to total revenue as we move from point A to point B?
A) It increases.
B) It decreases.
C) It remains constant.
D) It becomes negative.
E) More information about the elasticity of demand is needed to determine if it increases, decreases, or does not change.

Accepted Answer

The answer of 
-In the figure above,what happens to total...

Question 5

A firm raises the price it charges.The firm's total revenue decreases.What can we conclude about the price elasticity of demand?
A) Demand is elastic.
B) Demand is unit elastic.
C) Demand is inelastic.
D) Demand is perfectly inelastic.
E) Not enough information is given to conclude anything about price elasticity of demand.

Accepted Answer

If raising the price resulted in a decrease in total revenue, this means that the percent decrease in quantity demanded is greater than the percent increase in price. In other words, demand is relatively sensitive to changes in price, which is characteristic of elastic demand.

Question 6

After long hair for men became popular,barbers found that their incomes fell.In an attempt to boost their incomes,many barbers raised the price of a haircut and yet their total revenue fell even more.What can explain this result?
A) The demand for haircuts by barbers is elastic because of many substitutes.
B) The demand for haircuts by barbers became inelastic after the increase in price.
C) Haircuts are inferior products.
D) The demand for haircuts by barbers is inelastic because most people need haircuts.
E) None of the above can explain the phenomenon.

Accepted Answer

The decrease in demand despite the increase in price suggests that the demand for haircuts from barbers is elastic, meaning there are many substitutes available. As a result, customers are likely to switch to cheaper alternatives when the price of haircuts at barbers increases, leading to a decrease in revenue overall.

Question 7

A firm raises the price it charges.The firm's total revenue does not change.What can we conclude about the price elasticity of demand?
A) Demand is elastic.
B) Demand is unit elastic.
C) Demand is inelastic.
D) Demand is perfectly elastic.
E) Not enough information is given to conclude anything about price elasticity of demand.

Accepted Answer

When a firm raises its price and total revenue does not change, it indicates that the percentage change in quantity demanded is equal to the percentage change in price, which is characteristic of unit elastic demand.

Question 8

If a 2 percent rise in price leads to a 4 percent decrease in quantity demanded,then demand is
A) elastic and total revenue decreases.
B) elastic and total revenue increases.
C) inelastic and total revenue decreases.
D) elastic, but we cannot tell what happens to total revenue without more information.
E) Total revenue decreases but we cannot tell if the demand is elastic or inelastic without more information.

Accepted Answer

A 2 percent rise in price leads to a greater percentage decrease in quantity demanded (4 percent), indicating that demand is elastic. When demand is elastic, a change in price leads to a more than proportional change in quantity demanded, and total revenue decreases. Therefore, choice A is the best answer.

Question 9

-In the figure above,when the price falls from $8 to $7,total revenue
A) increases from $120 to $210 so demand is elastic.
B) decreases from $210 to $120 so demand is inelastic.
C) increases from $120 to $210 so demand is inelastic.
D) decreases from $210 to $120 so demand is elastic.
E) increases from $120 to $210, but more information is needed to determine whether demand is elastic, inelastic, or unit elastic.

Accepted Answer

When the price falls and total revenue increases, it indicates that the demand is elastic. This is because the percentage change in quantity demanded is greater than the percentage change in price, leading to an increase in total revenue.

Question 10

A Minnesota snowmobile dealer lowers its prices in February by 16 percent and the quantity demanded increases by 2 percent.Thus the demand for snowmobiles from this dealer is ________ and the dealer's total revenue will ________.
A) elastic; increase
B) elastic; decrease
C) inelastic; increase
D) inelastic; decrease
E) unit elastic; decrease

Accepted Answer

The demand is inelastic because the percentage change in quantity demanded (2%) is less than the percentage change in price (16%), leading to a decrease in total revenue since the price reduction does not lead to a proportionally larger increase in sales volume.

Question 11

-In the figure above,using the midpoint method,what is the price elasticity of demand between points A and B?
A) 0.05
B) 0.13
C) 0.43
D) 1.00
E) 2.33

Accepted Answer

The answer of 
-In the figure above,using the midpoint method,what...

Question 12

-In the figure above,if the price falls from $8 to $7,demand is
A) elastic.
B) inelastic.
C) unit elastic.
D) income elastic.
E) perfectly elastic.

Accepted Answer

When the price falls from $8 to $7 and demand increases, it indicates that the quantity demanded is responsive to price changes, which is a characteristic of elastic demand.

Question 13

If the price elasticity of demand for gasoline equals 0.3,then an increase in the price of a gallon of gasoline from $3.70 to $3.90
A) decreases total revenue.
B) increases total revenue.
C) leads to no change in total revenue.
D) makes the demand for gasoline elastic.
E) Both answers B and D are correct.

Accepted Answer

Since the price elasticity of demand for gasoline is less than 1 (0.3), it indicates that the demand for gasoline is inelastic. Therefore, an increase in the price of gasoline will lead to an increase in total revenue because the percentage decrease in quantity demanded will be less than the percentage increase in price.

Question 14

If an Atlanta bakery raises the price of their rye bread by 11 percent and the quantity demanded decreases by 11 percent,then the demand for the rye bread is ________ and the bakery's total revenue ________.
A) unit elastic; does not change
B) unit elastic; increases
C) unit elastic; decreases
D) elastic; does not change
E) inelastic; does not change

Accepted Answer

When the percentage change in quantity demanded is equal to the percentage change in price, the demand is considered unit elastic. In this case, since both the price and quantity demanded changed by 11 percent, the demand is unit elastic. Additionally, because the proportional increase in price is offset by a proportional decrease in quantity demanded, the total revenue (price times quantity) does not change.

Question 15

-In the figure above,using the midpoint method,what is the price elasticity of demand when the price falls from $8 to $7?
A) 4.0
B) 5.0
C) 0.5
D) 0.4
E) 0.25

Accepted Answer

The price elasticity of demand using the midpoint method is calculated as the percentage change in quantity demanded divided by the percentage change in price. From the figure (not shown), if the price falls from $8 to $7 and we assume the corresponding change in quantity demanded (not provided in the question), we use the formula: [(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)]. Without specific quantities, we can't calculate directly, but given the options, if the correct answer is provided as B) 5.0, it suggests a specific relationship between the change in price and quantity that fits this calculation.

Question 16

-In the figure above,what is the total revenue at point A?
A) $20
B) $150
C) $170
D) $3,000
E) 150 quantity units

Accepted Answer

The answer of 
-In the figure above,what is the total...

Question 17

If the demand for insulin is inelastic,an increase in insulin prices leads to
A) less total revenue for insulin makers.
B) more total revenue for insulin makers.
C) no change in total revenue for insulin makers.
D) first a decrease, then an increase in total revenue for insulin makers.
E) Total revenue probably changes, but we need more information about the change in total expenditures on insulin to determine if the total revenue rises, falls, or stays the same.

Accepted Answer

If the demand for insulin is inelastic, an increase in insulin prices will result in only a slight decrease in the quantity demanded, while the price increase will cause a greater increase in total revenue for insulin makers. Therefore, an increase in insulin prices leads to more total revenue for insulin makers.

Question 18

Taco Bell firm raises the price of its tacos.The price elasticity of demand for Taco Bell tacos equals 5.0.What happens to the Taco Bell's total revenue?
A) nothing
B) It increases.
C) It decreases.
D) It becomes negative.
E) It might change, but more information is needed to determine if it increases, decreases, or does not change.

Accepted Answer

With a price elasticity of demand of 5.0, a 1% increase in price results in a 5% decrease in quantity demanded. Therefore, if Taco Bell raises the price of its tacos, the quantity demanded will decrease, and since the demand is relatively elastic, the decrease in quantity demanded will be proportionally larger than the increase in price, leading to a decrease in total revenue.

Question 19

A firm lowers the price it charges.The firm's total revenue decreases.What can we conclude about the price elasticity of demand?
A) Demand is elastic.
B) Demand is unit elastic.
C) Demand is inelastic.
D) Demand is perfectly elastic.
E) Not enough information is given to conclude anything about price elasticity of demand.

Accepted Answer

When the firm lowers the price and total revenue decreases, it indicates that the demand for the product is inelastic. In other words, customers are not significantly altering their purchase behavior in response to the price change. If demand were elastic, a decrease in price would generate a proportionate increase in quantity demanded, resulting in higher total revenue. If demand were perfectly elastic, even a small decrease in price would cause total revenue to drop to zero. Therefore, the best choice is C, demand is inelastic.

Question 20

Pizza Hut lowers the price of its pizza.The price elasticity of demand for Pizza Hut pizza equals 0.3.What happens to the Pizza Hut's total revenue?
A) nothing
B) It increases.
C) It decreases.
D) It becomes negative.
E) It might change, but more information is needed to determine if it increases, decreases, or does not change.

Accepted Answer

Since the price elasticity of demand is less than 1, a decrease in price will lead to a proportionately smaller increase in the quantity demanded. This means that the total revenue will decrease as the increase in quantity demanded does not compensate for the decrease in price.

Quiz 5: Elasticities of Demand and Supply

If a Pizza Hut raises the price of a slice of pizza from $3.00 to $3.25,the quantity demanded decreases from 1,500 slices per week to 1,300 slices per week.The demand for slices of pizza is and the total revenue received by this Pizza Hut .

KFC raises the price of its grilled chicken.The price elasticity of demand for KFC grilled chicken is 0.8.What happens to the KFC's total revenue?

Suppose the Oakland Raiders football team increases their season ticket prices and total revenue from ticket sales falls,but not to zero.This fact means that the demand for Raiders tickets is

-In the figure above,what happens to total revenue as we move from point A to point B?

A firm raises the price it charges.The firm's total revenue decreases.What can we conclude about the price elasticity of demand?

After long hair for men became popular,barbers found that their incomes fell.In an attempt to boost their incomes,many barbers raised the price of a haircut and yet their total revenue fell even more.What can explain this result?

A firm raises the price it charges.The firm's total revenue does not change.What can we conclude about the price elasticity of demand?

If a 2 percent rise in price leads to a 4 percent decrease in quantity demanded,then demand is

-In the figure above,when the price falls from $8 to $7,total revenue

A Minnesota snowmobile dealer lowers its prices in February by 16 percent and the quantity demanded increases by 2 percent.Thus the demand for snowmobiles from this dealer is and the dealer's total revenue will .

-In the figure above,using the midpoint method,what is the price elasticity of demand between points A and B?

-In the figure above,if the price falls from $8 to $7,demand is

If the price elasticity of demand for gasoline equals 0.3,then an increase in the price of a gallon of gasoline from $3.70 to $3.90

If an Atlanta bakery raises the price of their rye bread by 11 percent and the quantity demanded decreases by 11 percent,then the demand for the rye bread is and the bakery's total revenue .

-In the figure above,using the midpoint method,what is the price elasticity of demand when the price falls from $8 to $7?

-In the figure above,what is the total revenue at point A?

If the demand for insulin is inelastic,an increase in insulin prices leads to

Taco Bell firm raises the price of its tacos.The price elasticity of demand for Taco Bell tacos equals 5.0.What happens to the Taco Bell's total revenue?

A firm lowers the price it charges.The firm's total revenue decreases.What can we conclude about the price elasticity of demand?

Pizza Hut lowers the price of its pizza.The price elasticity of demand for Pizza Hut pizza equals 0.3.What happens to the Pizza Hut's total revenue?