chapter 5

14. Refer to Figure 5-1. With reference to Graph A, at a price of $10, total revenue equals:

C. $400.

3. Demand is said to be ___________ when the quantity demanded is very responsive to changes in price.

A. elastic

20. The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise:

A. increasing the price of game tickets because demand is inelastic.

17. Refer to Figure 5-1. Graph B represents a demand curve that is relatively __________. Total revenue __________ as the price decreases from $10 to $5.

A. inelastic; decreases

19. A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:

A. total revenue will decrease.

8. Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop?

B. 3.0

7. When demand is inelastic:

B. consumers are not very responsive to changes in price.

10. If the demand curve is perfectly elastic, then an increase in supply will:

B. increase the quantity exchanged but result in no change in the price.

4. Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price.

B. inelastic

9. If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:

B. rise and the equilibrium quantity to stay the same.

5. Demand is said to be __________ when the quantity demanded changes at the same proportion as the price.

B. unit elastic

15. Refer to Figure 5-1. With reference to Graph A, at a price of $5, total revenue equals:

C. $500.

12. Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve?

C. 1.0

11. Suppose that Bobo purchases 1 pizza per month when the price is $19 and 3 pizzas per month when the price is $15. What is the price elasticity of Bobo's demand curve?

C. 4.25

18. The demand for a product is unit elastic. At a price of $20, 10 units of a product are sold. If the price is increased to $40, then one would expect sales to equal:

C. 5 units.

6. The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in __________.

C. price

1. The price elasticity of demand measures the:

C. responsiveness of quantity demanded to a change in price.

16. Refer to Figure 5-1. With reference to Graph B, at a price of $5, total revenue equals:

D. $200.

13. A price cut will increase the total revenue a firm receives if the demand for its product is:

D. elastic.

2. Price elasticity of demand is defined as:

D. the percentage change in quantity demanded divided by the percentage change in price.