Question 1

Suppose that the demand for corn is price inelastic. If a technological advance makes corn farms more productive, the equilibrium price of corn will ________ and the farmers' total revenue will ________.
A) rise; increase
B) rise; decrease
C) fall; increase
D) fall; decrease

Accepted Answer

With a more productive technology, the supply of corn will increase, causing the equilibrium price of corn to fall. Since the demand for corn is price inelastic, the decrease in price will not result in a proportional increase in quantity demanded. Therefore, farmers' total revenue will decrease.

Question 2

-The above figure shows the demand curve for movie rentals from Blockbuster. At which of the following prices is the demand unit elastic?
A) $5.00
B) $3.50
C) $2.50
D) $0.00

Accepted Answer

The answer of 
-The above figure shows the demand curve...

Question 3

-The above table gives the demand schedule for Billy Bob's BBQ ribs. The price elasticity of demand for Billy Bob's ribs over the price range of $3 to $1 is equal to
A) 4.00.
B) 2.00.
C) 0.50.
D) 0.25.

Accepted Answer

The answer of 
-The above table gives the demand schedule...

Question 4

The price of milk rises, so the supply of ice cream decreases. there is, as a result a 5 percent increase in the price of ice cream and a 3 percent decrease in the quantity of ice cream sold. The revenue received by ice cream suppliers will ________ because the demand for ice cream is ________.
A) decrease; price inelastic
B) increase; price inelastic
C) increase; price elastic
D) decrease; price elastic

Accepted Answer

The answer of The price of milk rises, so the...

Question 5

When the price of a Caesar salad is $5.00, the demand for Caesar salads is elastic, and when the price is $4.00, the demand is inelastic. If Mike's Roadside Restaurant cuts the price from $5.00 to $4.00, its total revenue from Caesar salads ________.
A) will increase
B) will decrease
C) will remain the same
D) might increase, decrease, or remain the same

Accepted Answer

The answer of When the price of a Caesar salad...

Question 6

Total revenue for skis is at a maximum when the price elasticity of demand is
A) between 0 and 1.
B) 1.
C) greater than 1.
D) 0.

Accepted Answer

Total revenue is at a maximum point when price elasticity of demand is equal to 1, which means that a 1% increase in price will result in a 1% decrease in quantity demanded, leaving total revenue unchanged. In other words, the increase in price is offset by the decrease in quantity sold, resulting in no change in revenue. Any elasticity value above 1 indicates that a 1% increase in price will result in a greater than 1% decrease in quantity demanded, leading to a decrease in total revenue. Similarly, any elasticity value below 1 indicates that a 1% increase in price will result in a less than 1% decrease in quantity demanded, also leading to a decrease in total revenue. Therefore, the optimal price point for skis is at the price elasticity of demand of 1.

Question 7

-The above figure shows the demand curve for movie rentals from Blockbuster. If Blockbuster lowered its price from $4.00 to $3.50, then total revenue would ________ because demand is ________.
A) decrease; elastic
B) increase; elastic
C) decrease; inelastic
D) increase; inelastic

Accepted Answer

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

Question 8

-The above figure shows the demand curve for movie rentals from Blockbuster. Which of the following is true?
A) Consumer expenditure on movie rentals will always increase whenever Blockbuster lowers its price.
B) Blockbuster will receive more total revenue if it charges $4.00 per movie rental rather than $3.00.
C) The price elasticity of demand for movie rentals falls as Blockbuster raises its price.
D) The demand for movie rentals is more price inelastic at $1.00 than it is at $1.50.

Accepted Answer

The answer of 
-The above figure shows the demand curve...

Question 9

This summer the lobster catch in Maine has been especially large, but instead of celebrating the fisherman are suffering from a lower total revenue. (Source: New York Times, July 28, 2012) We learn from the article that despite the larger quantity of lobster caught, the total revenue of the fisherman has decreased. This fact means that the demand for lobster is
A) unit elastic.
B) elastic.
C) inelastic.
D) perfectly elastic.

Accepted Answer

The decrease in total revenue despite the larger quantity of lobster caught suggests that the increase in supply has not been met with a proportional increase in demand. This indicates that the demand for lobster is relatively inelastic, meaning that changes in price have a relatively small effect on the quantity demanded.

Question 10

-The above figure shows the demand curve for movie rentals from Blockbuster. If Blockbuster raised its price from $2.50 to $3.00, between these two prices the price elasticity of demand equals
A) 1.2.
B) 0.8.
C) 2.0.
D) 0.5.

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. If the elasticity is greater than 1, demand is elastic; if it is less than 1, demand is inelastic. An elasticity of 1.2 indicates that demand is elastic between these two prices.

Question 11

A shift of the supply curve of oil raises the price from $60 a barrel to $75 a barrel and reduces the quantity demanded from 40 million to 20 million barrels a day. You can conclude that the
A) demand for oil is elastic.
B) demand for oil is inelastic.
C) supply of oil is elastic.
D) supply of oil is inelastic.

Accepted Answer

The answer of A shift of the supply curve of...

Question 12

-The above figure shows the demand curve for movie rentals from Blockbuster. At which of the following prices does Blockbuster have the maximum total revenue?
A) $5.00
B) $3.50
C) $2.50
D) $0.00

Accepted Answer

The answer of 
-The above figure shows the demand curve...

Question 13

-The above table gives the demand schedule for Billy Bob's BBQ ribs. The demand for Billy Bob's ribs is unit elastic at which of the following prices?
A) $10
B) $7
C) $5
D) $1

Accepted Answer

The answer of 
-The above table gives the demand schedule...

Question 14

If hot dog vendors at baseball games want to maximize their total sales revenue, they will have to
A) be willing to experience reduced hot dog expenditure by baseball fans.
B) set the price of their hot dogs so that the demand is unit elastic.
C) sell as many hot dogs as they can, even if it means lowering price.
D) raise their price, even if it means selling fewer hot dogs.

Accepted Answer

The answer of If hot dog vendors at baseball games...

Question 15

-The above table gives the demand schedule for Billy Bob's BBQ ribs. The demand for Billy Bob's ribs over the price range of $1 per pound to $3 per pound is
A) perfectly elastic.
B) elastic.
C) unit elastic.
D) inelastic.

Accepted Answer

The answer of 
-The above table gives the demand schedule...

Question 16

-The above table gives the demand schedule for Billy Bob's BBQ ribs. An increase in the price of a pound of ribs will lead to a decrease in total revenue when
A) demand is inelastic.
B) the demand curve is vertical.
C) the price increase occurs over the price range of 0 to $5.
D) the price increase occurs over the price range of $5 to $10.

Accepted Answer

The answer of 
-The above table gives the demand schedule...

Question 17

This summer the lobster catch in Maine has been especially large, but instead of celebrating the fisherman are suffering from a lower total revenue. (Source: New York Times, July 28, 2012) As the lobster catch increases there is
A) a movement along the demand curve, resulting in a higher price and a decreased quantity.
B) a movement along the demand curve, resulting in a lower price and an increased quantity.
C) no change in either the price or the quantity.
D) a movement along the demand curve, resulting in a higher price and an increased quantity.

Accepted Answer

An increase in the lobster catch means there is a larger supply of lobster. According to the law of supply and demand, an increase in supply will result in a decrease in price and an increase in quantity demanded. Therefore, there will be a movement along the demand curve, resulting in a lower price and an increased quantity. This explains why the fishermen are suffering from a lower total revenue, as they are selling more lobster but at a lower price.

Question 18

-The above table gives the demand schedule for Billy Bob's BBQ ribs. If the price of a pound of ribs falls from $3 per pound to $1 per pound, what is the change in Billy Bob's total revenue?
A) $42
B) $24
C) -$2
D) -$24

Accepted Answer

The answer of 
-The above table gives the demand schedule...

Question 19

A shift of the supply curve of oil raises the price from $70 a barrel to $80 a barrel and reduces the quantity demanded from 40 million to 38 million barrels a day. You can conclude that the
A) demand for oil is elastic.
B) demand for oil is inelastic.
C) supply of oil is elastic.
D) supply of oil is inelastic.

Accepted Answer

The decrease in quantity demanded is relatively small compared to the increase in price, indicating that the demand for oil is relatively inelastic. If demand were elastic, the increase in price would cause a larger decrease in quantity demanded. The shift in the supply curve does not indicate whether the supply of oil is elastic or inelastic.

Question 20

Sara's Strawberry Market maximizes its total revenue by selling strawberries for $1.25 a basket. At a price of $1.25, you predict that ________.
A) the demand for strawberries is inelastic
B) Sara's sells most of the strawberries that she grows
C) the demand for strawberries is elastic
D) the demand for strawberries is unit elastic

Accepted Answer

The answer of Sara's Strawberry Market maximizes its total revenue...

Quiz 4: Elasticity

Suppose that the demand for corn is price inelastic. If a technological advance makes corn farms more productive, the equilibrium price of corn will and the farmers' total revenue will .

-The above figure shows the demand curve for movie rentals from Blockbuster. At which of the following prices is the demand unit elastic?

-The above table gives the demand schedule for Billy Bob's BBQ ribs. The price elasticity of demand for Billy Bob's ribs over the price range of $3 to $1 is equal to

The price of milk rises, so the supply of ice cream decreases. there is, as a result a 5 percent increase in the price of ice cream and a 3 percent decrease in the quantity of ice cream sold. The revenue received by ice cream suppliers will because the demand for ice cream is .

When the price of a Caesar salad is $5.00, the demand for Caesar salads is elastic, and when the price is $4.00, the demand is inelastic. If Mike's Roadside Restaurant cuts the price from $5.00 to $4.00, its total revenue from Caesar salads ________.

Total revenue for skis is at a maximum when the price elasticity of demand is

-The above figure shows the demand curve for movie rentals from Blockbuster. If Blockbuster lowered its price from $4.00 to $3.50, then total revenue would because demand is .

-The above figure shows the demand curve for movie rentals from Blockbuster. Which of the following is true?

-The above figure shows the demand curve for movie rentals from Blockbuster. If Blockbuster raised its price from $2.50 to $3.00, between these two prices the price elasticity of demand equals

A shift of the supply curve of oil raises the price from $60 a barrel to $75 a barrel and reduces the quantity demanded from 40 million to 20 million barrels a day. You can conclude that the

-The above figure shows the demand curve for movie rentals from Blockbuster. At which of the following prices does Blockbuster have the maximum total revenue?

-The above table gives the demand schedule for Billy Bob's BBQ ribs. The demand for Billy Bob's ribs is unit elastic at which of the following prices?

If hot dog vendors at baseball games want to maximize their total sales revenue, they will have to

-The above table gives the demand schedule for Billy Bob's BBQ ribs. The demand for Billy Bob's ribs over the price range of $1 per pound to $3 per pound is

-The above table gives the demand schedule for Billy Bob's BBQ ribs. An increase in the price of a pound of ribs will lead to a decrease in total revenue when

This summer the lobster catch in Maine has been especially large, but instead of celebrating the fisherman are suffering from a lower total revenue. (Source: New York Times, July 28, 2012) As the lobster catch increases there is

-The above table gives the demand schedule for Billy Bob's BBQ ribs. If the price of a pound of ribs falls from $3 per pound to $1 per pound, what is the change in Billy Bob's total revenue?

A shift of the supply curve of oil raises the price from $70 a barrel to $80 a barrel and reduces the quantity demanded from 40 million to 38 million barrels a day. You can conclude that the

Sara's Strawberry Market maximizes its total revenue by selling strawberries for $1.25 a basket. At a price of $1.25, you predict that ________.