Question 1

Exhibit 5-6
 
-We can tell that demand is elastic as price falls between point a and point b in Exhibit 5-6 because
A) quantity demanded is increasing
B) total revenue is increasing
C) total revenue is decreasing
D) total revenue is unchanged
E) the demand curve slopes downward

Accepted Answer

The answer of Exhibit 5-6
 
-We can tell that demand...

Question 2

Exhibit 5-8
 
-Which of the following statements is true in the range of the total revenue curve labeled A in Exhibit 5-8?
A) Demand is elastic.
B) Demand is inelastic.
C) Demand is unit elastic.
D) We cannot tell anything about elasticity of demand because this is a total revenue curve.
E) Demand is perfectly elastic.

Accepted Answer

The answer of Exhibit 5-8
 
-Which of the following statements...

Question 3

Dusty Rags,Inc.provides janitorial services to retail stores.Dusty had been charging $10 per hour and selling 400 hours of service per week at that rate.When he raised his price to $15 per hour,his customers cut back to 300 weekly hours of service.Which of the following is true?
A) Revenue went from $4,000 per week to $4,500 per week,indicating that the demand curve for his services must have shifted to the right.
B) Revenue went from $4,000 per week to $4,500 per week,indicating that the demand for his services must be elastic.
C) Revenue went from $4,000 per week to $4,500 per week,indicating that the demand for his services must be inelastic.
D) Revenue went from $400 to $300 per week,indicating that demand must be elastic.
E) Revenue went from $10 to $15 per week,indicating that demand must be inelastic.

Accepted Answer

When the price of the services increased, the total revenue also increased from $4,000 to $4,500 per week. This indicates that the demand for the services from Dusty Rags, Inc. is inelastic, meaning that customers are willing to pay a higher price for the same level of service. If the demand had been elastic, the increase in price would have resulted in a decrease in total revenue.

Question 4

Along a downward-sloping linear demand curve,
A) slope is constant and elasticity is changing
B) slope is changing and elasticity is constant
C) both slope and elasticity are constant
D) both slope and elasticity are changing
E) no generalizations can be made about slope

Accepted Answer

Along a linear demand curve, the slope remains constant while elasticity changes. This is because the slope of a linear demand curve is equal to the quantity change over the price change, which is a constant value. However, elasticity changes because it is affected by the initial level of price and quantity, as well as the price sensitivity of consumers.

Question 5

Along a downward-sloping linear demand curve,total revenue is greatest if demand is
A) inelastic
B) elastic
C) inelastic when prices are high
D) elastic when prices are high
E) unit elastic

Accepted Answer

The answer of Along a downward-sloping linear demand curve,total revenue...

Question 6

Suppose consumers spent $42 million on Christmas trees last year when the average tree cost $30 and this year spent $42 million when the average tree costs $25.Assuming nothing else changed,this data suggests that
A) consumers bought the same number of Christmas trees this year as last year
B) the price of Christmas trees stayed the same
C) total revenues to tree producers rose this year
D) the demand for trees is unit elastic
E) the demand for trees is inelastic

Accepted Answer

The answer of Suppose consumers spent $42 million on Christmas...

Question 7

Along a straight-line downward-sloping demand curve,elasticity is
A) constant,but its value cannot be determined without measurement
B) constant and equal to an absolute value of one
C) greater at higher prices
D) greater at lower prices
E) greater in the middle

Accepted Answer

The answer of Along a straight-line downward-sloping demand curve,elasticity is
A)...

Question 8

Exhibit 5-8
 
-Which of the following is not true in the range of the total revenue curve labeled A in Exhibit 5-8?
A) Demand is inelastic.
B) Total revenue is increasing.
C) Total revenue is positive.
D) Demand is elastic.
E) Demand elasticity decreases as total revenue increases.

Accepted Answer

The answer of Exhibit 5-8
 
-Which of the following is...

Question 9

A government-imposed price floor above the market price of milk would increase consumers' expenditures on milk only if
A) demand is elastic
B) supply is inelastic
C) demand falls
D) demand is inelastic
E) supply is unit elastic

Accepted Answer

If demand is inelastic, consumers will continue buying milk even if the price increases due to the price floor. Therefore, increasing the price of milk through a price floor would increase consumers' expenditures on milk only if demand is inelastic.

Question 10

The total revenue curve that corresponds to a downward-sloping linear demand curve
A) slopes downward
B) slopes upward
C) is a horizontal line
D) first rises,then falls
E) first falls,then rises

Accepted Answer

The total revenue curve for a linear demand curve first rises and then falls. This is because when the price is high, the quantity demanded is low and vice versa. As a result, revenue is high at a high price and low at a low price, but there is a point at which the decrease in price is greater than the increase in quantity demanded, leading to a decrease in revenue.

Question 11

Exhibit 5-7
 
-In Exhibit 5-7,demand is unit elastic
A) between points a and d
B) between points d and e
C) between points e and g
D) only at the top and bottom of the curve
E) anywhere along the curve

Accepted Answer

The answer of Exhibit 5-7
 
-In Exhibit 5-7,demand is unit...

Question 12

Exhibit 5-7
 
-Between points b and c in Exhibit 5-7,price decreases by $1,quantity demanded increases by 10,
A) total revenue decreases by $1,and demand is elastic
B) total revenue decreases by $1,and demand is inelastic
C) total revenue increases by $40,and demand is elastic
D) total revenue increases by $40,and demand is inelastic
E) and total revenue increases by $80

Accepted Answer

The answer of Exhibit 5-7
 
-Between points b and c...

Question 13

Exhibit 5-8
 
-Which of the following statements is true in the range of the total revenue curve labeled B in Exhibit 5-8?
A) Demand is elastic.
B) Demand is inelastic.
C) Demand is unit elastic.
D) We cannot tell anything about elasticity of demand because this is a total revenue curve.
E) Demand is perfectly elastic.

Accepted Answer

In the range of the total revenue curve labeled B, the price has increased and as a result, the total revenue has also increased. This indicates that demand is inelastic, meaning that the percentage change in quantity demanded is less than the percentage change in price.

Question 14

Along a linear demand curve,as the price rises,demand becomes more
A) steep
B) elastic
C) inelastic
D) unit elastic
E) variable

Accepted Answer

The answer of Along a linear demand curve,as the price...

Question 15

If the managers of a theater plan to raise ticket prices to increase ticket revenues,then they must believe that demand is
A) elastic
B) inelastic
C) unit elastic
D) perfectly elastic
E) income elastic

Accepted Answer

If the managers believe that raising ticket prices will increase ticket revenues, they must believe that demand is inelastic. This means that people will still be willing to pay the higher price for tickets, even if the price goes up, resulting in higher revenues for the theater. If demand were elastic, then raising ticket prices would actually decrease ticket revenues, as people would be less willing to pay the higher prices.

Question 16

Exhibit 5-6
 
-We can tell that demand is elastic as price increases between point b and point a in Exhibit 5-6 because:
A) Quantity demanded is decreasing
B) Total revenue is increasing
C) Total revenue is decreasing
D) Total revenue is unchanged
E) Demand curve slopes downward

Accepted Answer

When demand is elastic, an increase in price leads to a decrease in total revenue, indicating that the percentage decrease in quantity demanded is greater than the percentage increase in price.

Question 17

Exhibit 5-8
 
-In Exhibit 5-8,which of the following statements is true at a quantity of 10?
A) Demand is elastic.
B) Demand is inelastic.
C) Demand is unit elastic.
D) We cannot tell anything about elasticity of demand because this is a total revenue curve.
E) Demand is perfectly elastic.

Accepted Answer

At a quantity of 10, the total revenue is $50, which is the same as the total revenue at a quantity of 5. This means that the demand is unit elastic, as a 10% increase in quantity sold results in a 10% decrease in price and the total revenue stays the same.

Question 18

Along a linear demand curve,total revenue is maximized when demand is
A) elastic
B) inelastic
C) unit elastic
D) perfectly elastic
E) perfectly inelastic

Accepted Answer

Total revenue is maximized at the point where the elasticity of demand is unitary or equal to one. At unit elasticity, a percentage change in price results in an equal percentage change in quantity demanded, resulting in no change in total revenue. A linear demand curve that passes through the origin has unit elastic demand. Therefore, the answer is C) unit elastic.

Question 19

Exhibit 5-7
 
-Which of the following is true between points g and h in Exhibit 5-7?
A) Total revenue remains constant at $180.
B) Total revenue falls by $12.
C) Total revenue falls by $60.
D) Total revenue falls by $180.
E) Demand is elastic.

Accepted Answer

Between points g and h, quantity demanded falls from 6 to 3, resulting in a $60 decrease in total revenue (from $180 to $120). This suggests that demand is relatively elastic in this range as a decrease in price led to a relatively large decrease in total revenue.

Question 20

If the sellers in the cigarette industry formed a cartel and decided to set price along a straight-line downward-sloping demand curve,which point would they choose if they wanted to gain the highest total revenue?
A) The point nearest the vertical axis,where the price is highest.
B) The point nearest the horizontal axis,where quantity demanded is greatest.
C) One of the points higher up on the demand curve,where demand is elastic.
D) One of the points lower down on the demand curve,where demand is inelastic.
E) The point of unit elasticity,in the middle of the demand curve.

Accepted Answer

The answer of If the sellers in the cigarette industry...

Quiz 5: Elasticity of Demand and Supply

Exhibit 5-6 -We can tell that demand is elastic as price falls between point a and point b in Exhibit 5-6 because

Exhibit 5-8 -Which of the following statements is true in the range of the total revenue curve labeled A in Exhibit 5-8?

Dusty Rags,Inc.provides janitorial services to retail stores.Dusty had been charging $10 per hour and selling 400 hours of service per week at that rate.When he raised his price to $15 per hour,his customers cut back to 300 weekly hours of service.Which of the following is true?

Along a downward-sloping linear demand curve,

Along a downward-sloping linear demand curve,total revenue is greatest if demand is

Suppose consumers spent $42 million on Christmas trees last year when the average tree cost $30 and this year spent $42 million when the average tree costs $25.Assuming nothing else changed,this data suggests that

Along a straight-line downward-sloping demand curve,elasticity is

Exhibit 5-8 -Which of the following is not true in the range of the total revenue curve labeled A in Exhibit 5-8?

A government-imposed price floor above the market price of milk would increase consumers' expenditures on milk only if

The total revenue curve that corresponds to a downward-sloping linear demand curve

Exhibit 5-7 -In Exhibit 5-7,demand is unit elastic

Exhibit 5-7 -Between points b and c in Exhibit 5-7,price decreases by $1,quantity demanded increases by 10,

Exhibit 5-8 -Which of the following statements is true in the range of the total revenue curve labeled B in Exhibit 5-8?

Along a linear demand curve,as the price rises,demand becomes more

If the managers of a theater plan to raise ticket prices to increase ticket revenues,then they must believe that demand is

Exhibit 5-6 -We can tell that demand is elastic as price increases between point b and point a in Exhibit 5-6 because:

Exhibit 5-8 -In Exhibit 5-8,which of the following statements is true at a quantity of 10?

Along a linear demand curve,total revenue is maximized when demand is

Exhibit 5-7 -Which of the following is true between points g and h in Exhibit 5-7?

If the sellers in the cigarette industry formed a cartel and decided to set price along a straight-line downward-sloping demand curve,which point would they choose if they wanted to gain the highest total revenue?