Question 1

Total revenue equals

Accepted Answer

Total revenue is the amount of money a company earns from sales. It is calculated by multiplying the price per unit by the quantity sold. Therefore, the correct formula for total revenue is price × quantity sold, which is option A.

Question 2

Moving downward along a linear (straight-line)downward sloping demand curve,the

Accepted Answer

The slope of a linear demand curve is constant because it is a straight line, meaning the change in price over the change in quantity is the same throughout the curve.

Question 3

Which of the following is correct?
i.All linear demand curves have a constant slope and a constant price elasticity of demand.
ii.The price elasticity of demand changes while moving along a downward-sloping linear demand curve.
iii.The magnitude of the slope of all linear demand curves is equal to the price elasticity of demand.

Accepted Answer

While all linear demand curves have a constant slope, the price elasticity of demand changes along the curve. As a result, option i is incorrect. Additionally, the magnitude of the slope of linear demand curves is not equal to the price elasticity of demand (option iii). Hence, the only correct statement is ii).

Question 4

The price of the good multiplied by the quantity sold is its

Accepted Answer

The price of the good multiplied by the quantity sold is its total revenue. This formula is used to calculate the amount of money a company makes from selling its products or services. Total revenue is an important metric used in analyzing a company's financial performance.

Question 5

In the mid-1970s,Newsweek magazine reported that the city of Atlanta lowered its city bus fares from 40 cents to 15 cents a passenger.The number of bus riders increased by 15 percent after the fare cut.This set of results indicates that the demand for bus rides in Atlanta at that time was

Accepted Answer

The answer of In the mid-1970s,Newsweek magazine reported that the...

Question 6

Along a linear (straight-line)downward-sloping demand curve,demand is unit elastic at

Accepted Answer

Along a linear demand curve, demand is unit elastic at the midpoint. This is because at the midpoint, the percentage change in quantity demanded is equal to the percentage change in price, resulting in an elasticity of 1. At any other point on the linear demand curve, demand will be either elastic (e > 1) or inelastic (e < 1).

Question 7

As you move up along a straight-line demand curve,

Accepted Answer

As you move up along a straight-line demand curve, the price elasticity of demand increases in size. This is because higher up on the curve, a smaller change in price will lead to a larger change in quantity demanded, making the demand more price sensitive. This means that changes in price will have a greater impact on total revenue. Therefore, option B is the correct answer.

Question 8

When hamburger is $3 per pound,Ms.Rush buys 6 pounds.When hamburger is $2 per pound,Ms.Rush buys 10 pounds.Describe Ms.Rush's demand between these two prices.

Accepted Answer

Ms. Rush's demand is elastic between these two prices because she changed the quantity of her purchases significantly in response to the change in price. When the price decreased from $3 per pound to $2 per pound, her purchase quantity increased from 6 pounds to 10 pounds, which is more than a proportional change. Therefore, her demand is elastic.

Question 9

At the midpoint of a linear,downward-sloping demand curve,the price elasticity of demand is

Accepted Answer

At the midpoint of a linear, downward-sloping demand curve, the price elasticity of demand is equal to one, indicating unit elasticity.

Question 10

Moving downward along a linear (straight-line)downward-sloping demand curve,the

Accepted Answer

As you move downward along a linear demand curve, the price elasticity of demand decreases, meaning demand becomes less elastic. This is because the percentage change in quantity demanded becomes smaller relative to the percentage change in price.

Question 11

Products X,Y,and Z have price elasticities of 3.0,0.80,and 1.0 respectively.Total revenue decreases if the price of

Accepted Answer

Product Y has a price elasticity of 0.80, which means that a 1% decrease in price will result in a 0.8% increase in quantity demanded. This indicates that the product Y is inelastic or less sensitive to price changes. Therefore, if the price of product Y falls, the quantity demanded will increase, resulting in an increase in total revenue.

Question 12

If the supply of a good decreases and it causes total revenue to increase,this shows that the good has an

Accepted Answer

When the supply of a good decreases, but the total revenue (price x quantity) increases, it indicates that the demand for the good is relatively insensitive to changes in price. This is called inelastic demand, where a change in price leads to a proportionately smaller change in quantity demanded. As a result, the increase in price due to the decrease in supply leads to a more than proportional increase in total revenue, which shows an inelastic demand.

Question 13

Total revenue increases if the price of the good

Accepted Answer

When the demand for a good is inelastic, a rise in price leads to a greater increase in total revenue than the decrease caused by the fall in quantity demanded. Therefore, total revenue increases when the price of the good rises and demand is inelastic.

Question 14

-In the figure above,using the midpoint method,the price elasticity of demand when the price falls from $6 to $5 is equal to

Accepted Answer

The answer of 
-In the figure above,using the midpoint method,the...

Question 15

Which of the following statements is correct for the price elasticity of demand along a linear,downward-sloping demand curve?

Accepted Answer

The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good. Along a linear, downward-sloping demand curve, the elasticity varies: it is elastic (greater than 1) at high prices because a small percentage decrease in price leads to a relatively large percentage increase in quantity demanded. Conversely, at low prices, the demand becomes inelastic (less than 1) because a percentage decrease in price results in a smaller percentage increase in quantity demanded. This variation occurs despite the slope of the demand curve being constant because elasticity depends on the ratio of the percentage change in quantity demanded to the percentage change in price, which changes along the curve.

Question 16

If demand is inelastic and the price falls,the total revenue

Accepted Answer

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

Question 17

The total revenue test says
i.Demand is elastic if a decrease in price results in an increase in total revenue.
ii.Total revenue is maximized when demand is elastic.
iii.Total revenue is minimized when demand is unit elastic.

Accepted Answer

The total revenue test indicates that demand is elastic if a decrease in price leads to an increase in total revenue. The statements about total revenue being maximized or minimized based on elasticity are incorrect; total revenue is maximized at unit elasticity, not when demand is elastic, and the concept of minimizing total revenue is not directly related to elasticity in this context.

Question 18

You own a small store.Your cashier thinks you should raise prices to increase your total revenue and your customer thinks you should lower prices to increase your total revenue.The cashier thinks the price elasticity of demand is ________ and the customer believes the price elasticity of demand is ________.

Accepted Answer

The cashier believes the price elasticity of demand is inelastic, meaning that a price increase will lead to a smaller percentage decrease in quantity demanded, potentially increasing total revenue. The customer believes the price elasticity of demand is elastic, meaning that a price decrease will lead to a larger percentage increase in quantity demanded, potentially increasing total revenue.

Question 19

Economists use elasticity to measure the responsiveness of quantity to a change in price rather than the slope of the demand curve because elasticity is

Accepted Answer

Elasticity is a unitless measurement, meaning it is independent of the units of measurement used for both price and quantity. This allows for easier comparison between different products and markets. In contrast, calculation of the slope of the demand curve involves using specific units of measurement for both price and quantity.

Question 20

If demand is price inelastic and the price is lowered,which of the following occurs?

Accepted Answer

When demand is price inelastic, a decrease in price leads to a proportionally smaller increase in quantity demanded, resulting in a decrease in total revenue for the firms selling the product.

Quiz 5: Elasticities of Demand and Supply