Marco Econ Chapter 5 1-100 questions

The midpoint price between $20 and $40 is

$30

If price elasticity of demand is

-0.5, a 1% decrease in price leads to a 0.5% increase in quantity demanded

Elasticity rises as price falls along a linear, downward-sloping demand curve.

False

A perfectly elastic demand curve is

a horizontal straight line

If the demand for airline tickets to Fort Lauderdale is price elastic

airline revenue will increase if supply increases

The demand for a good is elastic if

an increase in price leads to a decrease in total revenue

A government-imposed price floor above the market price of milk would increase consumers' expenditures on milk only if

demand is inelastic

If demand is price elastic, total revenue is

directly related to quantity demanded

Along a linear demand curve, as the price rises, demand becomes more

elastic

If a 5% increase in price leads to an 8% decrease in quantity demanded, demand is

elastic

If a price reduction leads to larger total revenue, demand is

elastic

The total revenue curve that corresponds to a downward-sloping linear demand curve

first rises, then falls

If demand is unit elastic, a price reduction will

have no effect on revenues

If the administration raises tuition on our campus in order to increase revenue, it will be successful if demand is

inelastic

Suppose that you allow yourself $50 per month to spend on compact disks. You spend exactly this much every month regardless of the price of compact disks. Therefore, your demand for CDs

is unit elastic

If a firm facing a perfectly elastic demand curve raises its price,

its sales will decrease to zero

If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the Pepsi-Cola Company could increase its total revenue by

lowering price

If the demand for a product is price inelastic,

producers' revenues will increase if supply decreases

A good synonym for elasticity would be

responsiveness

Suppose consumers spent $42 million on Christmas trees last year when the average tree cost $30 and this year spent $42 million when the average tree costs $25. Assuming nothing else changed, this data suggests that

the demand for trees is unit elastic

Demand is inelastic if

the percentage change in price is greater than the percentage change in quantity demanded

Price elasticity of demand is calculated as

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

Price elasticity of demand is defined as

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

Along a downward-sloping linear demand curve, total revenue is greatest if demand is

unit elastic

Price elasticity of demand is typically negative because

as price decreases, quantity demanded increase

Along a straight-line downward-sloping demand curve, elasticity is

constant, but its value cannot be determined without measurement

Price elasticity of demand is useful because it measures __________ responsiveness to changes in __________.

consumers'; price

If an increase in the price of a product from $100 to $200 per unit leads to a decrease in the quantity demanded from 10 to 8 units, then demand is

inelastic

If city officials expect that an increase in bus fares will raise mass transit revenues, they must think that the demand for bus travel is

inelastic

If the managers of a theater plan to raise ticket prices to increase ticket revenues, then they must believe that demand is

inelastic

Wheat farmers in Kansas would benefit from a devastating crop failure in North Dakota (another major wheat-producing state) if the U.S. demand for wheat is

inelastic

"More elastic" means

more responsive

The absolute value of the price elasticity of demand at the midpoint of a linear demand curve is always

one

The general term elasticity refers to a relationship between

percentage changes in any two variables

Demand is elastic whenever

price elasticity has an absolute value greater than 1

Demand is inelastic only if

price elasticity has an absolute value less than 1

Demand is unit elastic whenever

price elasticity has an absolute value of 1

Unit elastic demand occurs when

price elasticity of demand is exactly -1

When quantity is measured in gallons, the price elasticity of demand for milk will be __________ the price elasticity when quantity is measured in quarts.

the same as

Along a linear demand curve,

the slope is constant, but the price elasticity varies

If the demand for swordfish is price elastic and the price of swordfish increases, then

the total revenue from swordfish sales will decrease

Along a linear demand curve, as the price increases from zero,

total revenue first increases but eventually decreases

If the demand for ptyalin is unit elastic, then

total revenue remains constant as price increases

Suppose the price elasticity of demand for your economics textbook is -1. If the publisher raises the price by 5 percent,

total revenues will not change

Along a linear demand curve, total revenue is maximized when demand is

unit elastic

John spends exactly the same dollar amount on candy bars each week, regardless of their price. John's demand curve for candy bars is

unit elastic

If a $1 increase in price leads to a 3-unit decrease in quantity demanded, then demand must be elastic.

False

If demand is elastic, a decrease in price leads to a decrease in total revenue.

False

The price elasticity of demand is equal to the slope of the demand curve.

False

Total revenue is maximized where demand is inelastic.

False

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then the value of price elasticity of demand is

-1/3

If the price of Pepsi-Cola increases from 40 cents to 50 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then, according to the midpoint formula, the value of price elasticity of demand for Pepsi-Cola is

-3

The midpoint quantity between 100 and 300 units is

200 units

If the value of the price elasticity of demand is -0.2, this means that a

5 percent decrease in price causes a 1 percent increase in quantity demanded

It has been suggested that if NHL hockey teams would lower ticket prices, they could increase revenue from ticket sales. Which of the following assumptions forms the basis for this suggestion?

Both d and e are correct.

If the sellers in the cigarette industry formed a cartel and decided to set price along a straight-line downward-sloping demand curve, which point would they choose if they wanted to gain the highest total revenue?

The point of unit elasticity, in the middle of the demand curve.

Which of the following describes a situation in which demand must be inelastic?

The price of pens rises by 10 cents, and total revenue rises.

One group of people uses New York City subways only during rush hour to travel to and from work. Another group uses them only in midday for leisure activity. If New York City wants to increase transit fares with the smallest possible reduction in revenue, for which group should it increase the fare?

The rush-hour group because its demand for subway service is less elastic than that of the midday group

Which of the following will cause demand to be relatively elastic?

The time interval is relatively long

Which of the following describes a situation in which demand must be elastic?

Total revenue decreases by more than 15 percent when the price of corndogs rises by 15 percent.

Which of the following describes a situation in which demand must be elastic?

Total revenue decreases when the price of pencils rises.

Which of the following describes a situation in which demand must be inelastic?

Total revenue increases by more than 10 percent when the price of spats rises by 10 percent.

As price decreases along a linear demand curve, price elasticity of demand decreases.

True

If demand is inelastic, the percentage change in price is greater than the resulting percentage change in quantity demanded.

True

Price elasticity is unit elastic at the midpoint of a linear, downward-sloping demand curve.

True

Total revenue is the same for every price-quantity combination along a unit elastic demand curve.

True

If a firm raises the price of its product, its total revenue will

increase only if demand is price inelastic

If the demand for a good is elastic, then total revenue

increases as price decreases

Elasticity is always

independent of the units of measurement

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then the value of price elasticity of demand is

inelastic

If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the demand for Pepsi-Cola is

relatively elastic

Another word for elasticity is

responsiveness

The price elasticity of demand helps determine the effect of price changes on a firm's

revenues

Along a downward-sloping linear demand curve,

slope is constant and elasticity is changing

The price elasticity of demand

tells producers what will happen to total revenue if they change product price

The total revenue from selling trucks is equal to

the price of a truck times the quantity sold

In calculating price elasticity of demand, which of the following is assumed to be constant?

the prices of all other products

Elasticity measures

the responsiveness of decision makers to changes in prices, income, or other variables