Question 1

If a 20% price increase generates a 20% decrease in quantity demanded, then this is _____ response.
A) an inelastic
B) an elastic
C) a unit-elastic
D) a perfectly elastic

Accepted Answer

A 20% price increase resulting in a 20% decrease in quantity demanded indicates a unit-elastic response, where the percentage change in price equals the percentage change in quantity demanded.

Question 2

Use the following to answer questions:
Figure: Demand Curves 
-(Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly elastic demand curve?
A) A
B) B
C) C
D) D

Accepted Answer

The answer of Use the following to answer questions:
Figure: Demand...

Question 3

If a university decreases the price of tickets to football games to collect more revenue, it is assuming that the demand for tickets is:
A) unstable.
B) price-inelastic.
C) price-elastic.
D) price unit-elastic.

Accepted Answer

If the university decreases the price of tickets to football games, it is assuming that there will be an increase in the number of tickets sold. This would only be possible if the demand for tickets is price-elastic, meaning that consumers will respond positively to a decrease in price by purchasing more tickets. If the demand for tickets was price-inelastic, a decrease in price would not result in a significant increase in the number of tickets sold, and the university would not be able to collect more revenue. Therefore, C) is the best choice.

Question 4

If the demand for golf is price-inelastic and your local public golf course increases the greens fees for using the course, you expect:
A) a decrease in total revenue received by the course.
B) an increase in total revenue received by the course.
C) an increase in the amount of golf played on the course.
D) no change in the amount of golf played on the course.

Accepted Answer

If the demand for golf is price-inelastic, it means that a change in price will not significantly affect the quantity demanded. Therefore, if the golf course increases its prices, it can expect to earn more revenue as golfers are willing to pay the higher prices to continue playing golf. This means that an increase in greens fees will result in an increase in total revenue for the course.

Question 5

Use the following to answer questions:
Figure: The Demand for Notebook Computers 
-(Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. The change in total revenue resulting from a change in price from P to T suggests that demand is:
A) inelastic.
B) price-elastic.
C) price-inelastic.
D) price unit-elastic.

Accepted Answer

When the price decreases from P to T and total revenue increases, it indicates that demand is price-elastic. This is because the percentage increase in quantity demanded is greater than the percentage decrease in price.

Question 6

If an increase in the price of cotton increases total revenue, then the price effect is _____ the quantity effect.
A) equal to
B) stronger than
C) weaker than
D) not comparable to

Accepted Answer

The price effect is the impact of the higher price on each unit sold, meaning that with a higher price, each unit sold will contribute more to total revenue. On the other hand, the quantity effect is the decrease in the number of units sold due to the higher price.

If the price effect is stronger than the quantity effect, this means that the increase in revenue due to the higher price per unit sold exceeds the loss in revenue caused by the lower number of units sold. As a result, total revenue increases. Therefore, the correct answer is B - the price effect is stronger than the quantity effect.

Question 7

If the demand for golf is unit-price elastic and your local public golf course increases the greens fees for using the course, you expect:
A) a decrease in total revenue received by the course.
B) an increase in total revenue received by the course.
C) a decrease in the amount of golf played on the course.
D) no change in the amount of golf played on the course.

Accepted Answer

The answer of If the demand for golf is unit-price...

Question 8

When demand is _____, a rise in price leads to a(n) _____ in total revenue.
A) perfectly inelastic; decrease
B) perfectly elastic; increase
C) inelastic; increase
D) elastic; decrease

Accepted Answer

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

Question 9

Use the following to answer questions:
Figure: Demand Curves 
-(Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly inelastic demand curve?
A) A
B) B
C) C
D) D

Accepted Answer

The answer of Use the following to answer questions:
Figure: Demand...

Question 10

Use the following to answer questions:
Figure: Demand Curves 
-(Figure: Demand Curves) Look at the figure Demand Curves. Gala apples have many close but not perfect substitutes and are not very expensive. Which graph best represents the demand schedule for Gala apples?
A) A
B) B
C) C
D) D

Accepted Answer

The answer of Use the following to answer questions:
Figure: Demand...

Question 11

Demand for vegetables at a small farmers' market is steady, but the supply of vegetables has decreased because of a drought. This is good news for farmers if demand is _____ and the _____ effect outweighs the _____ effect.
A) inelastic; price; quantity
B) elastic; price; quantity
C) inelastic; output; price
D) elastic; output; price

Accepted Answer

When demand is inelastic, it means that customers are willing to pay a higher price for the same quantity of vegetables. This allows farmers to increase prices and still sell the same amount of vegetables, resulting in an increase in revenue. Additionally, the price effect outweighs the quantity effect because even though the supply has decreased, the demand is still steady, which means customers will still be willing to buy the vegetables at a higher price.

Question 12

Use the following to answer questions:
Figure: The Demand for Notebook Computers 
-(Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. Total revenue at point V equals the:
A) area 0TVN.
B) area 0PSVN.
C) distance 0T.
D) distance NV.

Accepted Answer

Total revenue is calculated as price times quantity. At point V, the total revenue is represented by the area under the demand curve up to point V, which is area 0TVN.

Question 13

After a price decrease, the quantity effect tends to:
A) decrease total revenue.
B) increase total revenue.
C) make the price effect stronger.
D) make the price effect weaker.

Accepted Answer

The quantity effect refers to the increase in quantity demanded when the price of a good or service is lowered. This means that when the price decreases, consumers are more willing and able to buy more of the product. As a result, the increase in quantity demanded can offset the decrease in price, leading to a total revenue increase. Therefore, after a price decrease, the quantity effect tends to increase total revenue.

Question 14

If a change in price causes total revenue to change in the same direction, we can conclude that the demand is:
A) price inelastic.
B) price elastic.
C) price unit-elastic.
D) zero elastic.

Accepted Answer

If a change in price causes total revenue to change in the same direction, it means that the percentage change in quantity demanded was lower than the percentage change in price. This indicates that the demand is price inelastic.

Question 15

Use the following to answer questions:
Figure: The Demand for Notebook Computers 
-(Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. Total revenue at point S equals the:
A) distance 0P.
B) distance MS.
C) area 0TUM.
D) area 0PSM.

Accepted Answer

Total revenue is calculated as price multiplied by quantity. At point S, the total revenue is represented by the area 0PSM, which is the product of the price (0P) and the quantity (0M).

Question 16

Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply), at its current price the good must be:
A) price-inelastic.
B) price-elastic.
C) perfectly price-elastic.
D) inferior.

Accepted Answer

If an increase in price leads to an increase in total revenue, then the demand for the good is relatively inelastic, meaning that consumers are not highly responsive to changes in price. This is because the increase in price is outweighed by the relatively small decrease in quantity demanded. Therefore, the good must be price-inelastic.

Question 17

In the market for computers, if the demand curve is elastic and the price of a computer decreases, we expect total revenue to _____. If the demand curve is inelastic and the price of a computer decreases, we expect total revenue to _____.
A) increase; decrease
B) increase; increase
C) decrease; increase
D) decrease; decrease

Accepted Answer

When demand is elastic, a decrease in price leads to a proportionally larger increase in quantity demanded, raising total revenue. Conversely, when demand is inelastic, a decrease in price doesn't lead to a sufficient increase in quantity demanded to offset the lower price, thus reducing total revenue.

Question 18

There is one gas station in a small rural town. The owner of the station claims that he will sell the same quantity of gas no matter how high or low the price. If he is correct in this assertion, the demand curve for gas at his station must be _____, with a price elasticity of _____.
A) vertical; zero
B) vertical; infinity
C) horizontal; zero
D) horizontal; infinity

Accepted Answer

If the owner is correct in his assertion, it means that the quantity demanded of gas is completely unaffected by changes in price. This can only occur if the demand curve is perfectly vertical, with a price elasticity of zero. Any other elasticity value would imply that changes in price lead to changes in quantity demanded, and therefore the owner's assertion would be false.

Question 19

Yovanka has diabetes, and she will pay any amount of money for insulin. What is likely the best characterization of Yovanka's demand for insulin?
A) price-inelastic
B) price-elastic
C) perfectly price-inelastic
D) perfectly price-elastic

Accepted Answer

Yovanka's demand for insulin is perfectly price-inelastic because she will pay any amount for it, indicating that her demand does not change with price.

Question 20

When a public transit system (such as a subway or bus line) raises its fares, its total revenue may increase. This suggests that demand is:
A) unstable.
B) price-inelastic.
C) price-elastic.
D) price unit-elastic.

Accepted Answer

If the increase in fare results in a proportionately smaller decrease in the demand for the service, it indicates price-inelastic demand. This means that customers are willing to continue using the service even at a higher price, leading to increased revenue for the transit system.

Quiz 6: Elasticity

If a 20% price increase generates a 20% decrease in quantity demanded, then this is _____ response.

Use the following to answer questions: Figure: Demand Curves -(Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly elastic demand curve?

If a university decreases the price of tickets to football games to collect more revenue, it is assuming that the demand for tickets is:

If the demand for golf is price-inelastic and your local public golf course increases the greens fees for using the course, you expect:

Use the following to answer questions: Figure: The Demand for Notebook Computers -(Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. The change in total revenue resulting from a change in price from P to T suggests that demand is:

If an increase in the price of cotton increases total revenue, then the price effect is _____ the quantity effect.

If the demand for golf is unit-price elastic and your local public golf course increases the greens fees for using the course, you expect:

When demand is _, a rise in price leads to a(n) _ in total revenue.

Use the following to answer questions: Figure: Demand Curves -(Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly inelastic demand curve?

Use the following to answer questions: Figure: Demand Curves -(Figure: Demand Curves) Look at the figure Demand Curves. Gala apples have many close but not perfect substitutes and are not very expensive. Which graph best represents the demand schedule for Gala apples?

Demand for vegetables at a small farmers' market is steady, but the supply of vegetables has decreased because of a drought. This is good news for farmers if demand is ___ and the _ effect outweighs the ___ effect.

Use the following to answer questions: Figure: The Demand for Notebook Computers -(Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. Total revenue at point V equals the:

After a price decrease, the quantity effect tends to:

If a change in price causes total revenue to change in the same direction, we can conclude that the demand is:

Use the following to answer questions: Figure: The Demand for Notebook Computers -(Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. Total revenue at point S equals the:

Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply) , at its current price the good must be:

In the market for computers, if the demand curve is elastic and the price of a computer decreases, we expect total revenue to _. If the demand curve is inelastic and the price of a computer decreases, we expect total revenue to _.

There is one gas station in a small rural town. The owner of the station claims that he will sell the same quantity of gas no matter how high or low the price. If he is correct in this assertion, the demand curve for gas at his station must be _, with a price elasticity of _.

Yovanka has diabetes, and she will pay any amount of money for insulin. What is likely the best characterization of Yovanka's demand for insulin?

When a public transit system (such as a subway or bus line) raises its fares, its total revenue may increase. This suggests that demand is: