Ohio University Economics Elasticity Total Revenue & Demand Curve Exam Practice

QUESTION 1

1. Elasticity measures how “sensitive” consumers are by measuring their change in ____ as the price of the product changes.

   	a.	taxes
   	b.	supply
   	c.	quantity demanded
   	d.	attitude
   	e.	income

1 points

QUESTION 2

1. When demand is price inelastic:

   	a.	total revenue decreases whether price goes up or down.
   	b.	price and total revenue move in the opposite direction.
   	c.	price and total revenue move in the same direction.
   	d.	total revenue increases whether price goes up or down.

1 points

QUESTION 3

1. Along the elastic range of a demand curve, a decrease in price causes:

   	a.	a decrease in total revenue.
   	b.	no change in total revenue.
   	c.	an increase in total revenue.
   	d.	an unpredictable change in total revenue.

1 points

QUESTION 4

1. If the price elasticity of demand coefficient equals 2, this means a 10 percent increase in price will result in a 20 percent decrease in the quantity demanded.

   True False

1 points

QUESTION 5

1. There is no change in total revenue when the demand curve for a good is:

   	a.	inelastic.
   	b.	unitary elastic.
   	c.	perfectly inelastic.
   	d.	perfectly elastic.
   	e.	elastic.

1 points

QUESTION 6

1. Demand price elasticity is measured by the:

   	a.	percentage change in price / percentage change in quantity demanded.
   	b.	percentage change in income / percentage change in price.
   	c.	percentage change in total revenue / percentage change in price.
   	d.	percentage change in quantity demanded / percent change in price.
   	e.	percentage change in quantity demanded / percentage change in income.

1 points

QUESTION 7

1. Tara buys four music cassettes when the price is $10 and two cassettes when the price is $14. Her price elasticity of demand is:

   	a.	0.
   	b.	2.
   	c.	3.
   	d.	4.
   	e.	1.

1 points

QUESTION 8

1. Necessities have a much smaller price elasticity of demand, ceteris paribus, than goods that have many close substitutes.

   True False

1 points

QUESTION 9

1. As price decreases and we move down further along a linear demand curve, the price elasticity of demand will:

   	a.	stay the same.
   	b.	approach infinity.
   	c.	increase or decrease.
   	d.	decrease.
   	e.	increase.

1 points

QUESTION 10

1. Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent, and as a result, the quantity of the dolls sold increases by 25 percent. This indicates that the price elasticity of demand for the dolls over this range is:

   	a.	5.0.
   	b.	2.5.
   	c.	0.5.
   	d.	0.4.

1 points

QUESTION 11

1. Exhibit 5-7 Demand curve for concert tickets
   
   
   In Exhibit 5-7, If promoters charge a price of $10 per ticket, then their total revenue is:

   	a.	$800,000.
   	b.	$300,000.
   	c.	$240,000.
   	d.	$333,333.

1 points

QUESTION 12

1. The price elasticity of demand coefficient for a good will be greater:

   	a.	if minor complements exist.
   	b.	if close substitutes exist.
   	c.	in the short-run.
   	d.	if a small portion of the budget will be spent on it.

1 points

QUESTION 13

1. If New York City expects that an increase in bus fares will raise mass transit revenues, it must think that the demand for bus travel is:

   	a.	perfectly inelastic.
   	b.	unit elastic.
   	c.	inelastic.
   	d.	elastic.
   	e.	10.

1 points

QUESTION 14

1. The price elasticity of demand for gasoline measures the:

   	a.	responsiveness of gasoline producers to changes in the quality of gasoline.
   	b.	responsiveness of customers to changes in the price of gasoline.
   	c.	responsiveness of consumer preferences to changes in the quality of gasoline.
   	d.	both a and c above.

1 points

QUESTION 15

1. Suppose an economist found that total revenues increase for the bus system when fares were raised, the conclusion is that the price elasticity demand for subway services over the range of fare increase is inelastic.

   True False

1 points

QUESTION 16

1. If a good has a price elasticity of demand coefficient less than one, then:

   	a.	this good has an inelastic demand.
   	b.	this good has an elastic demand.
   	c.	a 10 percent increase in the price will result in a greater than 10 percent decrease in the quantity demanded.
   	d.	the demand curve will be vertical.

1 points

QUESTION 17

1. Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup, and as a result, the quantity sold per day increased from 350 to 450. Over this price range, the price elasticity of demand for Starbucks coffee is:

   	a.	0.40.
   	b.	1.25.
   	c.	2.50.
   	d.	0.80.

1 points

QUESTION 18

1. Suppose the Good Food supermarket increases the price of a pound of bananas from $.75 to $1.25 and finds that the quantity of bananas it sells per month drops from 1,500 to 1,000. The price elasticity of demand coefficient for bananas in this price range is:

   	a.	0.50.
   	b.	3.00.
   	c.	2.00.
   	d.	0.80.

1 points

QUESTION 19

1. If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:

   	a.	inelastic.
   	b.	perfectly inelastic.
   	c.	perfectly elastic.
   	d.	elastic.

1 points

QUESTION 20

1. A lower price elasticity of demand coefficient occurs when:

   	a.	the market is broadly defined.
   	b.	many substitutes exist.
   	c.	few substitutes exist.
   	d.	the quantity demanded is more responsive.

1 points

QUESTION 21

1. The president of Tucker Motors says, “Lowering the price won’t sell a single additional Tucker car.” The president believes that the price elasticity of demand is:

   	a.	perfectly elastic.
   	b.	perfectly inelastic.
   	c.	unitary elastic.
   	d.	elastic.
   	e.	inelastic.

1 points

QUESTION 22

1. A _______ demand curve has a price elasticity of demand that is perfectly inelastic.

   	a.	horizontal
   	b.	circular
   	c.	rectangular hyperbola
   	d.	vertical

1 points

QUESTION 23

1. If the price of Pepsi-Cola increases from 40 cents to 50 cents per bottle and the quantity demanded decreases from 100 bottles to 50 bottles, then according to the averaging equation, the value of price elasticity of demand for Pepsi-Cola is:

   	a.	0.5.
   	b.	2.
   	c.	3.
   	d.	1.
   	e.	0.25.

1 points

QUESTION 24

1. Exhibit 5-3 Demand curves for gallons of orange juice
   

   Price	Albert	Betty	Carl	Dana	Edward
   10	0	1	2	0	0
   9	0	1.5	2	0.5	0
   8	0	2	2	2	4
   7	0	2.5	2	3.5	8
   6	1	3	3	5	12
   5	3	3.5	3	6.5	16
   4	5	4	3	8	20
   3	7	4.5	3	9.5	24
   2	9	5	3	11	28
   1	11	5.5	3	12.5	32

   Using Exhibit 5-3, whose “quantity demanded” experiences the largest percentage increase when the price falls from $2 to $1?

   	a.	Albert
   	b.	Carl
   	c.	Dana
   	d.	Betty
   	e.	Edward

1 points

QUESTION 25

1. Exhibit 5-6 Demand curve for concert tickets
   
   
   In Exhibit 5-6, the demand curve for concert tickets shown above is classified as:

   	a.	inelastic.
   	b.	elastic.
   	c.	unitary elastic.
   	d.	cross elastic.

1 points

QUESTION 26

1. If the demand curve is unit elastic, this implies that:

   	a.	consumers do not react to a change in product price.
   	b.	the good can only be purchased in units of 1.
   	c.	the good is a basic food staple.
   	d.	this good has no good substitutes.
   	e.	the percentage change in the quantity demanded = the percentage change in product price.

1 points

QUESTION 27

1. Suppose that a jewelry store found that when it increased prices by 10 percent, sales revenue increased by 3 percent. Which of the following is true about the price elasticity of demand for the store’s goods?

   	a.	Demand is inelastic, but not perfectly.
   	b.	Demand is unitary classic.
   	c.	Demand is elastic, but not perfectly.
   	d.	Demand is perfectly elastic.
   	e.	Demand is perfectly inelastic.

1 points

QUESTION 28

1. An economist estimates that .67 is the price elasticity of demand for disposable diapers. This suggests that disposable diaper producers could:

   	a.	maximize revenues by staying at the current price.
   	b.	advertise more to raise the price elasticity of demand.
   	c.	raise the price of disposable diapers to raise more revenue.
   	d.	lower the price of disposable diapers to raise more revenue.
   	e.	encourage more parents to use cloth diapers.

1 points

QUESTION 29

1. Exhibit 5-5 Demand curve for computers
   
   
   In Exhibit 5-5, the total revenue at point E on the demand curve equals:

   	a.	OD.
   	b.	FE.
   	c.	DE.
   	d.	ODEF.
   	e.	None of the above.

1 points

QUESTION 30

1. In the short run, consumers typically ____ to price changes (when compared to the long run).

   	a.	are more demand sensitive
   	b.	are very responsive
   	c.	overreact
   	d.	do not respond at all
   	e.	are less demand sensitive

1 points

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