Question 1

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...

Question 2

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...

Question 3

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...

Question 4

Exhibit 5-9  Between points a and b on the demand curve in Exhibit 5-9, demand is
A)perfectly elastic
B)elastic
C)perfectly inelastic
D)inelastic
E)unit elastic

Accepted Answer

The answer of Exhibit 5-9  Between points a and...

Question 5

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...

Question 6

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

The answer of Exhibit 5-7  Which of the following...

Question 7

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...

Question 8

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...

Question 9

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 total expenditure on Christmas trees remained the same despite a decrease in price, indicating that the percentage change in quantity demanded is equal to the percentage change in price, which is characteristic of unit elastic demand.

Question 10

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

At the point of unit elasticity, total revenue is maximized because the percentage change in quantity demanded equals the percentage change in price, resulting in no change in total revenue.

Question 11

It has been suggested that if NHL hockey teams would lower ticket prices, they could increase revenue from ticket sales.Which of the following assumptions forms the basis for this suggestion?
A)Both d and e are correct.
B)All of the following are correct.
C)Demand for NHL hockey is income inelastic.
D)Demand for NHL hockey is price elastic.
E)There are many substitutes for NHL hockey.

Accepted Answer

Demand for NHL hockey is price elastic, meaning that a decrease in ticket prices would lead to an increase in the quantity of tickets demanded. This would result in an increase in total revenue from ticket sales.

Question 12

Exhibit 5-10  In Exhibit 5-10, between the two equilibrium prices shown, demand is
A)price elastic
B)price inelastic
C)unit elastic
D)perfectly elastic
E)perfectly inelastic

Accepted Answer

The answer of Exhibit 5-10  In Exhibit 5-10, between...

Question 13

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

The slope of a linear demand curve is constant because it is a straight line. However, elasticity changes along the curve because elasticity depends on the percentage change in quantity and price, which varies at different points on the curve.

Question 14

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 of unit elastic demand because a small increase in price does not significantly decrease the quantity demanded, and a small decrease in price does not significantly increase the quantity demanded. Beyond this point, a price increase will result in a more than proportionate decrease in quantity demanded, leading to a decrease in total revenue, and a price decrease will result in a more than proportionate increase in quantity demanded, also leading to a decrease in total revenue.

Question 15

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 first rises then falls with a downward-sloping linear demand curve. This is because when the price is high (at the left end of the curve), the quantity demanded is low, so the total revenue is also low. As the price decreases (moving to the right along the curve), the quantity demanded increases, thereby increasing the total revenue. However, at a certain point, the decrease in price will lead to a decrease in revenue since the increase in quantity demanded will not be enough to offset the decrease in price. Therefore, the total revenue curve first rises, reaches its maximum point, and then falls.

Question 16

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

The range of the total revenue curve labeled B shows that as price decreases, total revenue also decreases, but at a decreasing rate. This indicates that demand is inelastic, meaning that a change in price has a relatively small effect on the quantity demanded. If demand were elastic or unit elastic, a decrease in price would lead to a larger increase in quantity demanded, resulting in a more significant increase in total revenue.

Question 17

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 still purchase milk despite the higher price, thus increasing their expenditures on milk. If demand is elastic, consumers will switch to substitute products, and their expenditures on milk will decrease. Supply elasticity is not directly relevant to this question.

Question 18

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

The increase in price from $10 to $15 per hour led to a decrease in quantity demanded from 400 hours to 300 hours. However, the increase in price more than offset the decrease in quantity demanded, leading to an increase in total revenue from $4,000 to $4,500 per week. This indicates that the demand for his services is inelastic, as customers are willing to pay a higher price without significantly reducing their demand for the service.

Question 19

Exhibit 5-11  Refer to Exhibit 5-11.What can be said of the price elasticity of demand for this good?
A)Demand is inelastic.
B)Demand is unit elastic.
C)Demand is elastic.
D)Demand is perfectly elastic.
E)Not enough information is given to determine elasticity.

Accepted Answer

The slope of the demand curve is steep, indicating that a small change in price resulted in a relatively large change in quantity demanded. This suggests that demand is relatively elastic.

Question 20

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

The answer of Exhibit 5-8  In Exhibit 5-8, which...

Quiz 5: Elasticity of Demand and Supply

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

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

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

Exhibit 5-9 Between points a and b on the demand curve in Exhibit 5-9, demand is

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

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

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

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

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

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?

It has been suggested that if NHL hockey teams would lower ticket prices, they could increase revenue from ticket sales.Which of the following assumptions forms the basis for this suggestion?

Exhibit 5-10 In Exhibit 5-10, between the two equilibrium prices shown, demand is

Along a downward-sloping linear demand curve,

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

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

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

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?

Exhibit 5-11 Refer to Exhibit 5-11.What can be said of the price elasticity of demand for this good?

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