Test Prep questions #6
C
If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula. a) 0.17 b) 0.62 c) 1.62 d) 5
A
Price elasticity of demand measures a) how responsive quantity demanded is to change in price b) how responsive sales are to a change in buyer's incomes c) how responsive sales are to changes in the price of a related good d) how responsive suppliers are to price changes
D
Refer to the diagram to the right. The absolute value of the price elasticity of demand at points a and b is 1. What is the value of Pb? a) $20 b) $50 c) $30 d) $40
D
Total revenue equals a) price per unit times quantity supplied b) price per unit times change in quantity sold c) change in price per unit times quantity sold d) price per unit times quantity sold
B
A demand curve which is ____ represents perfectly inelastic demand, and a demand curve which is ____ represents inelastic demand a) upward sloping, horizontal b) vertical; downward sloping c) downward sloping; vertical d) horizontal; downward sloping
C
A the midpoint of the demand curve, in absolute value a) the price elasticity coefficient is 0 b) the price elasticity coefficient is at a maximum c) the price elasticity coefficient is 1 d) the price elasticity coefficient is at a minimum
C
If a firm lowered the price of a product it sells and found that total revenue did not change, then the demand for its product is a) relatively elastic b) perfectly elastic c) unit elastic d) perfectly inelastic
True
If a firm's goal is to maximize revenue, it will price its product to correspond to the unit-elastic segment of its demand curve. True or False
C
If at a price of $15, Kelly sells 20 boxes of her special organic soap and at $20 she sells 10 boxes then, the demand for her organic soaps is a) unit price elastic b) perfectly price elastic c) price elastic d) price inelastic
B
If demand is inelastic, the absolute value of the price elasticity of demand is a) greater than the absolute value of the slope of the demand curve b) less than one c) greater than one d) one
C
If demand is perfectly inelastic, the absolute value of the price elasticity of demand is a) less than one b) more than one c) zero d) equal to the absolute value of the slope of the demand curve
True
If the demand of a product is elastic, the quantity demanded changes by a larger percentage than the percentage change in price True or False
B
If the price elasticity of demand for canned soup is estimated at -1.62. What happens to sales revenue if the price of canned soup rises? a) it rises b) it fails c) it falls by 162% d) it rises by 1.62%
C
If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because a) buyers of steel are less sensitive to a price change if they have more time to adjust to the price change b) profits will fall by a greater amount in the long run than in the short run c) buyers if steel are more sensitive to a price change if they have more time to adjust to the price change d) sales revenue in the building industry will fall sharply
D
If, for a given percentage increase in price, quantity demanded falls by a proportionately smaller percentage, then demand is a) perfectly elastic b) unit elastic c) relatively elastic d) relatively inelastic
A
Jenna runs a small boutique in Capitola. She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more. On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers? a) it is perfectly elastic b) it is perfectly inelastic c) the price elastically coefficient is 0 d) it is elastic
True
Necessities tend to have more inelastic demand than luxuries. True or False
D
Refer to the diagram to the right. Using the midpoint formula, calculate the absolute value of the price elasticity of demand between e and f. a) 2.5 b) 0.4 c) 0.32 d) 3.125
A
Refer to the table to the right. Over what range of price is the demand price elastic? a) between $12 and $16 b) between $8 and $16 c) between $2 and $8 d) over the entire range of prices
A
Refer to the table to the right. Over what range of prices is the demand price inelastic? a) between $2 and $8 b) between $8 and $16 c) between $12 and $16 d) over the entire range of prices
C
Seth is a competitive body builder. He says he has to have his 12-oz package of protein powder to "feed his muscles" every day. On the basis of this information, what can you conclude about his price elasticity of demand for protein powder? a) it is elastic b) it is perfectly elastic c) it is perfectly inelastic d) the price elasticity is 1
D
Suppose a decrease in the supply of bottle water resulted in a decrease in revenue. This indicates that a) the supply of bottle water is price inelastic in the price range considered b) the supply of bottled water is price elastic in the price range considered c) the demand for bottled water is price inelastic in the price range considered d) the demand for bottled water is price elastic in the price range considered
D
Suppose the value of the price elasticity of demand is -3. What does this mean? a) A 1% increase in the price of a good causes b) a 3% increase in the price of the good causes quantity demanded to decrease by 1% c) a $1 increase in price caused quantity demanded to fall by 3 units d) a 1% increase in the price of the good causes quantity demanded to decrease by 3%
C
The demand for all carbonated beverages is likely to be _____ the demand for Dr Pepper. a) perfectly inelastic compared to b) more elastic than c) less elastic than d) perfectly elastic compared to
A
The demand for gasoline in the short run is a) inelastic because there are no good substitutes for gasoline b) perfectly inelastic because people have no choice but to buy gasoline c) elastic because people can easily switch to public transportation d) unit elastic because people tend to consume a stable amount of gasoline per period
C
The inelastic segment of the demand curve a) is coincident with the vertical axis b) lies above the midpoint of the curve c) lies below the midpoint of the curve d) is coincident with the horizontal axis
A
When demand is price elastic, a fall in price causes total revenue to rise because a) the increase in quantity sold is large enough to offset the lower price b) percentage increase in quantity demanded is less than the percentage fall in price c) the demand curve shifts d) when price falls, quantity sold increases so total revenue automatically rises
D
When there few close substitutes available for a good, demand tends to be a) perfectly elastic b) perfectly inelastic c) relatively elastic d) relatively inelastic
B
Which of the following goods would have the most inelastic demand? a) ski vacations b) bread c) big screen TVs d) luxury cars
A
Which of the following products comes closest to having a perfectly price inelastic demand? a) cholesterol medication in general b) iphones c) bus rides d) gasoline
D
Which of the following statements about price elasticity of demand is true? a) the inelastic portion of the demand curve corresponds to the segment above the midpoint b) at the midpoint of the demand curve, the elasticity coefficient is zero c) the elasticity coefficient is constant along with demand curve d) the elastic portion of a straight line, downward sloping demand curve corresponds to the segment above the midpoint
C
Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true? a) it is perfectly elastic at very high prices and perfectly inelastic at very low prices b) it is unit elastic throughout the demand curve c) it is elastic at the highest prices and inelastic at the lowest prices d) it is inelastic at high prices and elastic at low prices
A
Which of the following statements about the price elasticity of demand is correct? a) Demand is more elastic in the long run than it is in the short run b) The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of a good c) Demand is more elastic the smaller percentage of the consumer's budget the item takes up d) The absolute value of the elasticity of demand ranges from 0 to 1.
D
Which of the following would result in a higher absolute value of the price elasticity of demand for a product? a) the time period under consideration is short b) the expenditure on the good is small relative to one's budget c) the good is a necessity d) a wide variety of substitutes are available for the good
