Question 1

Khimaira Farms sells handcrafted cookie cutters.When graphed,the demand schedule for Khimaira Farms brand cookie cutters forms a straight line.If at $3 per cutter,500 cookie cutters are demanded,and at $4 per cutter,450 cookie cutters are ordered,how many will be ordered at a price of $6 per cutter?
A) 350
B) 450
C) 400
D) 333
E) 375

Accepted Answer

With a linear demand curve,the slope of the line will remain constant.In this example,for every $1 that price increases,sales will decrease by 50 cookie cutters.

Question 2

Critics claim bank ATMs take advantage of the _____ of customers who suffer a poverty of time and have a strong need for convenience.
A) elasticity of demand
B) inelastic demand schedule
C) unitary supply and demand
D) ROI characteristics
E) supply characteristics

Accepted Answer

Customers are paying a premium for the convenience of ATM use.

Question 3

When the NES Group lowered the price of its professional-grade meat slicers from $2,300 to $1,600,demand doubled from 4 units sold per month to 8 units per month.However,total revenue dropped.This is an example of:
A) substitute goods
B) unitary elasticity
C) elastic demand
D) consumer shortage
E) inelastic demand

Accepted Answer

Inelastic demand is characterized by price and revenue both falling.

Question 4

_____ is the quantity of a product that will be offered to the market at various prices for a specified period.
A) Distribution
B) Supply
C) Price
D) Equilibrium
E) Elasticity

Accepted Answer

This is the definition of supply.

Question 5

While the sales of the Apple iPhone have been great from the beginning,when Apple released its iPhone 3G cut the price of the iPhone for $399 to $199 sales exploded with one million iPhones sold the first weekend.Demand for the iPhone appears to be _____.
A) unitary
B) predictable
C) synergistic
D) inelastic
E) elastic

Accepted Answer

If demand is elastic,price increases will decrease demand by a larger amount,reducing total revenue.

Question 6

Consumers' responsiveness or sensitivity to changes in prices is known as:
A) break-even
B) equilibrium
C) unitary revenue
D) asymmetrical demand
E) elasticity of demand

Accepted Answer

This is the definition of elasticity of demand.

Question 7

What happens when demand is elastic?
A) As price goes up, revenue goes down.
B) As price goes down, revenue goes down.
C) As price goes up, revenue goes up.
D) As price goes up, revenue does not change.
E) As price goes down, revenue does not change.

Accepted Answer

If demand is elastic,price increases will decrease demand by a larger amount,reducing total revenue.

Question 8

When price decreases and total revenue falls,demand is:
A) elastic
B) inelastic
C) absolute
D) unitary
E) stable

Accepted Answer

This is characteristic of inelastic demand,which means that an increase or decrease in price will not significantly affect the demand for the product.

Question 9

Personal Touch produces and markets beaded purses.When graphed,the demand schedule for its purses is a straight line.If one purse costs $20,5,000 beaded purses are sold.At $25,4,500 purses are sold.How many beaded purses will be sold if the price per purse is increased to $30?
A) 5,500
B) 4,250
C) 4,000
D) 3,750
E) 3,500

Accepted Answer

With a linear demand curve,the slope of the line will remain constant.In this example,for every $5 increase in price,sales will decrease by 500 beaded purses.

Question 10

The manager of a souvenir shop in Florida graphed the demand per week for fresh orange juice.The graph indicates a demand schedule that slopes downward and to the right.This graph indicates that the quantity of juice demanded increases as:
A) cost increases
B) supply decreases
C) price increases
D) price decreases
E) supply increases

Accepted Answer

The lower the price,the more goods or services will be demanded.

Question 11

The _____ is the quantity of a product that will be sold in the market at various prices for a specified time period,and _____ is the quantity of a product that will be offered to the market by suppliers at various prices for a specified period.
A) demand; equity
B) demand; supply
C) supply; demand
D) inventory; demand
E) inventory; supply

Accepted Answer

Demand refers to the amount of a product consumers are willing and able to buy at different prices over a certain time period. Supply refers to the amount that producers are willing and able to produce and offer for sale at different prices over a certain time period. Therefore, the best choice is B - demand and supply.

Question 12

Procter & Gamble dropped the price of Pringles Potato Chips in the Southeast due to price competition and consumer demand.As a result of the price reduction,Procter & Gamble increased unit sales and earnings by 10 percent due to:
A) reduction in supply
B) increases in both supply and demand
C) demand being elastic
D) demand being inelastic
E) market share fluctuations

Accepted Answer

When Procter & Gamble reduced prices,sales and revenues increase.This shows that the demand for chips is elastic.

Question 13

When Nesco brand food hydrators sold for $59.99,Nesco sold 90 dehydrators.When the company dropped the price of its dehydrators to $44.95,it sold 145 dehydrators.Demand for the food dehydrators appears to be:
A) elastic
B) inelastic
C) unitary
D) symmetrical
E) asymmetrical

Accepted Answer

The first price is $59.99 with total revenue of $5,399.10; the second price is $44.95 with total revenue of $6,517.75.Therefore,price dropped,and total revenue went up.

Question 14

When consumers are sensitive to price changes,_____ occurs.
A) inelastic demand
B) elastic supply
C) elastic demand
D) inelastic supply
E) unitary elasticity

Accepted Answer

This is the definition of elastic demand.

Question 15

All of the following factors directly affect the elasticity of demand EXCEPT:
A) other uses of a product
B) inputs needed to manufacture the product
C) availability of substitute goods
D) price relative to a consumer's purchasing power
E) product durability

Accepted Answer

Inputs at time of manufacture only indirectly affect the demand,if at all.

Question 16

Which of the following would imply demand would be elastic?
A) price is low relative to purchasing power
B) nondurable product
C) low inflation rate
D) many substitute products
E) all of these choices

Accepted Answer

When there are many substitute products,the consumer can easily switch from one product to another,making demand elastic. The other situations make demand inelastic.

Question 17

When the price of a product is set at a level where demand and supply are the same,_____ has been achieved.
A) equilibrium
B) stability
C) leverage
D) symmetry
E) status quo

Accepted Answer

Price equilibrium is the price at which demand and supply are equal.

Question 18

At a price of $654,400 the SSC Ultimate Aero has been ranked as the third most expensive car in the world.The company is only planning to build twenty-five of the current model.If that matches the demand for the Ultimate Aero,then a state of _____has been achieved.
A) symmetry
B) marketing balance
C) unitary economics
D) commerce stability
E) price equilibrium

Accepted Answer

Price equilibrium is achieved at the price at which supply is equal to demand.

Question 19

_____ occurs when an increase in sales exactly offsets a decrease in price so that total revenue remains exactly the same.
A) Inelastic demand
B) Functional elasticity of demand
C) Unitary elasticity
D) Highly elastic demand
E) Fixed elasticity

Accepted Answer

Unitary elasticity is a situation in which total revenue remains the same when prices change.

Question 20

Bottles of Pure Hawaiian Air contain air that smells like the floral bouquet that greets tourists as they get off the plane in Hawaii.When a tourist shop began selling Pure Hawaiian Air,it charged $5 per bottle and could not keep up with the demand.It has since raised the price to $7.Now the shop is still selling all the bottles of Pure Hawaiian Air it carries,but the owner is not forced to reorder on a daily basis.The $7 price is probably a(n):
A) supply schedule
B) symmetrical price
C) price equilibrium
D) inventory equalizer
E) inelastic price

Accepted Answer

When demand and supply are approximately equal,price equilibrium is reached.

Quiz 19: Pricing Concepts

Khimaira Farms sells handcrafted cookie cutters.When graphed,the demand schedule for Khimaira Farms brand cookie cutters forms a straight line.If at $3 per cutter,500 cookie cutters are demanded,and at $4 per cutter,450 cookie cutters are ordered,how many will be ordered at a price of $6 per cutter?

Critics claim bank ATMs take advantage of the _____ of customers who suffer a poverty of time and have a strong need for convenience.

When the NES Group lowered the price of its professional-grade meat slicers from $2,300 to $1,600,demand doubled from 4 units sold per month to 8 units per month.However,total revenue dropped.This is an example of:

_____ is the quantity of a product that will be offered to the market at various prices for a specified period.

While the sales of the Apple iPhone have been great from the beginning,when Apple released its iPhone 3G cut the price of the iPhone for $399 to $199 sales exploded with one million iPhones sold the first weekend.Demand for the iPhone appears to be _____.

Consumers' responsiveness or sensitivity to changes in prices is known as:

What happens when demand is elastic?

When price decreases and total revenue falls,demand is:

Personal Touch produces and markets beaded purses.When graphed,the demand schedule for its purses is a straight line.If one purse costs $20,5,000 beaded purses are sold.At $25,4,500 purses are sold.How many beaded purses will be sold if the price per purse is increased to $30?

The manager of a souvenir shop in Florida graphed the demand per week for fresh orange juice.The graph indicates a demand schedule that slopes downward and to the right.This graph indicates that the quantity of juice demanded increases as:

The _ is the quantity of a product that will be sold in the market at various prices for a specified time period,and _ is the quantity of a product that will be offered to the market by suppliers at various prices for a specified period.

Procter & Gamble dropped the price of Pringles Potato Chips in the Southeast due to price competition and consumer demand.As a result of the price reduction,Procter & Gamble increased unit sales and earnings by 10 percent due to:

When Nesco brand food hydrators sold for $59.99,Nesco sold 90 dehydrators.When the company dropped the price of its dehydrators to $44.95,it sold 145 dehydrators.Demand for the food dehydrators appears to be:

When consumers are sensitive to price changes,_____ occurs.

All of the following factors directly affect the elasticity of demand EXCEPT:

Which of the following would imply demand would be elastic?

When the price of a product is set at a level where demand and supply are the same,_____ has been achieved.

At a price of $654,400 the SSC Ultimate Aero has been ranked as the third most expensive car in the world.The company is only planning to build twenty-five of the current model.If that matches the demand for the Ultimate Aero,then a state of _____has been achieved.

_____ occurs when an increase in sales exactly offsets a decrease in price so that total revenue remains exactly the same.