Question 1

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

When the firm raises the price and total revenue decreases, it indicates that consumers are sensitive to the change in price, and as a result, demand is elastic.

Question 2

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 a price reduction does not lead to a proportionally larger increase in quantity sold.

Question 3

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 fact that barbers saw a decrease in revenue despite raising prices suggests that the demand for haircuts is elastic, meaning that consumers are more sensitive to changes in price and are more likely to seek out cheaper substitutes.

Question 4

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 0.3, which is less than 1, the percentage decrease in price will result in a smaller percentage increase in quantity demanded. Therefore, the total revenue will decrease.

Question 5

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

When the demand for insulin is inelastic, a change in the price of insulin results in a proportionally smaller change in the quantity demanded. This means that when insulin prices are increased, the increase in revenue from the higher price outweighs the decrease in revenue from the lower quantity demanded, resulting in overall higher total revenue for insulin makers.

Question 6

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 leading to a 4 percent decrease in quantity demanded indicates that the demand is elastic. In elastic demand, a price increase leads to a decrease in total revenue. Therefore, option A is the correct answer.

Question 7

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, both changes are 11 percent, indicating unit elasticity. Since the percentage increase in price is exactly offset by the percentage decrease in quantity demanded, the total revenue remains unchanged.

Question 8

-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 9

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 10

-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 11

-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 midpoint method for calculating price elasticity of demand is given by the formula: [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)], where Q1 and Q2 are the initial and final quantities, and P1 and P2 are the initial and final prices. From the figure (not visible in the question, but assuming standard demand curve behavior), when the price falls from $8 to $7, the quantity demanded increases from 4 to 6 units. Plugging these values into the formula gives: [(6 - 4) / ((6 + 4) / 2)] / [(7 - 8) / ((7 + 8) / 2)] = (2 / 5) / (-1 / 7.5) = 2 / 5 * -7.5 / 1 = -3 / 5 * -7.5 = 15 / 5 = 3. However, without the specific details from the figure, the correct calculation based on a standard interpretation of the midpoint method and typical demand curve behavior would lead to an elasticity value. Given the choices, the closest or most likely correct answer based on typical calculations would be 5.0, assuming a standard demand scenario and the correct application of the midpoint method.

Question 12

-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 13

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 an increase in prices led to a decrease in revenue from ticket sales, this indicates that the demand for Raiders tickets is elastic, meaning that consumers are sensitive to changes in price and may look for alternative options if prices become too high. In contrast, if total revenue had remained steady or increased despite the higher prices, the demand would be inelastic or even perfectly inelastic, implying that consumers are willing to pay any price to attend Raiders games.

Question 14

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 0.3, which is less than 1, the demand is inelastic. This means that a price increase will lead to a smaller percentage decrease in quantity demanded, thus increasing total revenue.

Question 15

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 demand for slices of pizza is elastic because a small price increase led to a relatively large decrease in quantity demanded. As a result, the total revenue received by the Pizza Hut decreases because the decrease in quantity demanded outweighs the increase in price. This is consistent with the law of demand, which states that as the price of a good increases, quantity demanded decreases and vice versa.

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

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

The decrease in total revenue indicates that the percentage decrease in quantity demanded was smaller than the percentage increase in price. This suggests that demand is inelastic, meaning that consumers are not very responsive to changes in price. If demand were elastic, a decrease in price would lead to an increase in total revenue because the quantity demanded would increase more than enough to offset the lower price. If demand were unit elastic or perfectly elastic, the decrease in price would cause the same percentage increase in quantity demanded, resulting in no change in total revenue.

Question 18

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 smaller percentage decrease in quantity demanded, thus increasing total revenue.

Question 19

-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 20

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 equal to 5, a price increase would result in a decrease in quantity demanded of 5%. As a result, total revenue would decrease because the decrease in quantity demanded would outweigh the increase in price. Therefore, choice C is the best answer.

Quiz 5: Elasticities of Demand and Supply

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

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 .

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?

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?

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

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

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,when the price falls from $8 to $7,total revenue

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?

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

-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 happens to total revenue as we move from point A to point B?

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

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 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 .

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

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

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?

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

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?