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