Question 1

Demand is unit elastic when
A) the slope of the demand curve is -1.
B) a shift of the supply curve leads to no change in price.
C) a shift of the supply curve leads to an equal shift of the demand curve.
D) a change in the price of the product leads to no change in the total revenue.

Accepted Answer

Demand is unit elastic when a change in the price of the product leads to no change in the total revenue, meaning the percentage change in quantity demanded is equal to the percentage change in price.

Question 2

Producers' total revenue will increase if
A) income increases and the good is an inferior good.
B) the price rises and demand is elastic.
C) the price rises and demand is inelastic.
D) income falls and the good is a normal good.

Accepted Answer

When demand is inelastic, consumers are less sensitive to price changes, so an increase in price leads to a proportionally smaller decrease in quantity demanded, resulting in higher total revenue.

Question 3

If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price elastic, she should
A) lower her price to increase the demand and shift the demand curve rightward.
B) raise her price because she knows that the quantity demanded will also increase.
C) raise her price because she knows that the percentage decrease in the quantity demanded will be smaller than the percentage increase in price.
D) lower her price because she knows that the percentage increase in the quantity demanded will be greater than the percentage decrease in price.

Accepted Answer

When demand is price elastic, lowering the price will lead to a proportionally larger increase in quantity demanded, thus increasing total revenue.

Question 4

Producers' total revenue will decrease if
A) income increases and the good is a normal good.
B) the price rises and demand is elastic.
C) the price rises and demand is inelastic.
D) income falls and the good is an inferior good.

Accepted Answer

When the price rises and demand is elastic, the percentage decrease in quantity demanded is greater than the percentage increase in price, leading to a decrease in total revenue.

Question 5

At a local ice cream parlor, when the price of half-gallons of chocolate ice cream was lowered by fifty cents per half-gallon, total revenue from the sale of chocolate ice cream decreased. This result indicates that
A) there are more people who like vanilla ice cream than there are people who like chocolate ice cream.
B) the demand for chocolate ice cream is inelastic.
C) the demand for chocolate ice cream is elastic.
D) None of the above answers is correct.

Accepted Answer

The decrease in total revenue despite a price reduction indicates that the demand is inelastic, meaning consumers are not significantly increasing their quantity demanded in response to the price drop.

Question 6

If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price inelastic, she should
A) lower her price to increase the demand and shift the demand curve rightward.
B) raise her price because she knows that the quantity demanded will also increase.
C) raise her price because she knows that the percentage decrease in the quantity demanded will be smaller than the percentage increase in price.
D) lower her price because she knows that the percentage increase in the quantity demanded will be greater than the percentage decrease in price.

Accepted Answer

When demand is price inelastic, the percentage decrease in quantity demanded is smaller than the percentage increase in price, leading to an increase in total revenue when the price is raised.

Question 7

To maximize its revenue
A) a firm facing inelastic demand should always raise its price.
B) a firm facing elastic demand should always raise its price.
C) a firm should always charge the highest price possible regardless of the elasticity of demand.
D) None of the above answers is correct.

Accepted Answer

When demand is inelastic, consumers are less sensitive to price changes, so increasing the price can lead to higher total revenue.

Question 8

If demand is inelastic, an increase in the price will
A) decrease total revenue.
B) increase total revenue.
C) not change total revenue.
D) increase the quantity demanded.

Accepted Answer

When demand is inelastic, consumers are not very responsive to price changes, so an increase in price leads to an increase in total revenue.

Question 9

If University of Nebraska increased its season football ticket sales from 43,000 to 47,000 when it lowered price from $350.00 to $300.00, then its demand for season tickets must be ________ because total revenue ________ when the price was lowered.
A) elastic; decreased
B) elastic; increased
C) inelastic; decreased
D) inelastic; increased

Accepted Answer

The answer of If University of Nebraska increased its season...

Question 10

When demand is ________, a decrease in price ________ total revenue.
A) elastic; decreases
B) inelastic; decreases
C) unit elastic; increases
D) elastic; does not change

Accepted Answer

When demand is inelastic, a decrease in price leads to a decrease in total revenue because the percentage drop in price is greater than the percentage increase in quantity demanded.

Question 11

A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.1. To increase its revenue, the transit authority should
A) raise the fare.
B) lower the fare.
C) leave the fare as it is.

Accepted Answer

When demand is elastic (elasticity > 1), lowering the price will increase total revenue because the percentage increase in quantity demanded will be greater than the percentage decrease in price.

Question 12

According to the total revenue test, a price cut increases total revenue if demand is
A) inelastic.
B) perfectly inelastic.
C) elastic.
D) unit elastic.

Accepted Answer

When demand is elastic, a decrease in price leads to a proportionally larger increase in quantity demanded, thus increasing total revenue.

Question 13

-The figure illustrates Anne's demand for books. At ________ a book, Anne's demand for books is inelastic.
A) all prices between $15 and $30
B) all prices between $10 and $15
C) all prices between $10 and $20
D) all prices below $30

Accepted Answer

The answer of 
-The figure illustrates Anne's demand for books....

Question 14

When the demand for a good is inelastic and its price increases, the total revenue from the sale of the good will
A) increase.
B) decrease initially and then increase.
C) decrease.
D) not change.

Accepted Answer

When demand is inelastic, consumers are less sensitive to price changes, so an increase in price leads to an increase in total revenue.

Question 15

Demand is inelastic when a price ________ results in total revenue ________.
A) rise; decreasing
B) fall; increasing
C) rise, increasing
D) fall, remaining the same

Accepted Answer

When demand is inelastic, a rise in price leads to an increase in total revenue because the percentage change in quantity demanded is less than the percentage change in price.

Question 16

"Last October, due to an early frost, the price of a pumpkin increased by 10 percent compared to the price in the previous Halloween season. As a result, the quantity demanded county-wide decreased from 2 million to 1.5 million." Based on this statement, it is certain that the
A) demand curve for Halloween costumes shifted leftward.
B) price elasticity of demand for pumpkins decreased from its value in previous years.
C) demand curve for pumpkins shifted leftward.
D) total revenue from the sale of pumpkins decreased.

Accepted Answer

The increase in price and decrease in quantity demanded suggests that the demand is elastic, leading to a decrease in total revenue.

Question 17

The demand for a good is elastic if
A) an increase in its price results in an increase in total revenue.
B) a decrease in its price results in a decrease in total revenue.
C) an increase in its price results in a decrease in total revenue.
D) the good is a necessity.

Accepted Answer

When demand is elastic, an increase in price leads to a proportionally larger decrease in quantity demanded, causing total revenue to fall.

Question 18

In 1973 and again in 1979, the Organization of Petroleum Exporting Countries (OPEC) raised the world price of crude oil and increased their revenue as well. Which of the following is a TRUE statement regarding these OPEC price hikes?
A) Their revenue increased because the demand for oil was income inelastic.
B) Their revenue increased because the demand for oil was price inelastic.
C) Their revenue would have increased regardless of income elasticity or price elasticity because oil is an imported product for most nations.
D) Their revenue only increased because oil was already very expensive.

Accepted Answer

The revenue increased because the demand for oil was price inelastic, meaning that consumers continued to purchase oil despite the price increase, leading to higher total revenue for OPEC.

Question 19

Demand is elastic when a price ________ results in total revenue ________.
A) rise, decreasing
B) fall, decreasing
C) rise, increasing
D) fall; remaining constant

Accepted Answer

When demand is elastic, a rise in price leads to a decrease in total revenue because the percentage drop in quantity demanded is greater than the percentage increase in price.

Question 20

The taxicab fare in Newville is regulated. The fare currently charged is $6 a ride. Newville taxicab drivers want to obtain government's permission to lower the fare, which they think will increase their total revenue. From this we can conclude that the drivers believe that the demand for taxicab rides is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.

Accepted Answer

The drivers believe that lowering the fare will increase total revenue, which implies they think the demand is elastic. In an elastic demand scenario, a decrease in price leads to a proportionally larger increase in quantity demanded, thus increasing total revenue.

Quiz 4: Elasticity

Demand is unit elastic when

Producers' total revenue will increase if

If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price elastic, she should

Producers' total revenue will decrease if

At a local ice cream parlor, when the price of half-gallons of chocolate ice cream was lowered by fifty cents per half-gallon, total revenue from the sale of chocolate ice cream decreased. This result indicates that

If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price inelastic, she should

To maximize its revenue

If demand is inelastic, an increase in the price will

If University of Nebraska increased its season football ticket sales from 43,000 to 47,000 when it lowered price from $350.00 to $300.00, then its demand for season tickets must be because total revenue when the price was lowered.

When demand is , a decrease in price total revenue.

A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.1. To increase its revenue, the transit authority should

According to the total revenue test, a price cut increases total revenue if demand is

-The figure illustrates Anne's demand for books. At ________ a book, Anne's demand for books is inelastic.

When the demand for a good is inelastic and its price increases, the total revenue from the sale of the good will

Demand is inelastic when a price results in total revenue .

"Last October, due to an early frost, the price of a pumpkin increased by 10 percent compared to the price in the previous Halloween season. As a result, the quantity demanded county-wide decreased from 2 million to 1.5 million." Based on this statement, it is certain that the

The demand for a good is elastic if

In 1973 and again in 1979, the Organization of Petroleum Exporting Countries (OPEC) raised the world price of crude oil and increased their revenue as well. Which of the following is a TRUE statement regarding these OPEC price hikes?

Demand is elastic when a price results in total revenue .