Chap06ElasticityDem-1

# Chap06ElasticityDem-1 - Chapter 6 ELASTICITY AND DEMAND...

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Chapter 6: ELASTICITY AND DEMAND Multiple Choice Use the figure below, which shows a linear demand curve and the associated total revenue curve, to answer the next 5 questions. 1 , 0 0 0 Q u a n t i t y T o t a l R e v e n u e D e m a n d Total revenue (in dollars) 0 0 Price (in dollars) T R Q Q P 1 1 T T ’ 7 0 0 5 0 4 , 5 0 0 4 0 - 2 0 1 0 0 1 0 , 5 0 0 6-1 The price for which 100 units can be sold is \$_____. a. 10 b. 15 c. 25 d. 45 e. 50 6-2 The price at which total revenue is maximized is \$_____. a. 10 b. 15 c. 20 d. 25 e. 30 6-3 The marginal revenue of the 100 th unit is \$_____. a. 0 b. 20 c. 40 d. 50 e. cannot tell from the information provided 6-4 The marginal revenue of the 700oth unit is \$_____ and demand is __________ at this point. a. –20; elastic b. –20; inelastic c. 15; elastic d. 15; inelastic Chapter 6 : ELASTICITY AND DEMAND 93

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6-5 The maximum possible total revenue is \$_________. a. 10,500 b. 11,000 c. 11,500 d. 12,000 e. 12,500 6-6 The Interior Department recently announced that it will increase the entrance fees at Yellowstone National Park in order to increase park revenues. The Interior Department must believe that a. park goers are very responsive to price changes. b. the demand for park services is elastic. c. the percentage increase in fees will be greater than the percentage decrease in the number of park visitors. d. demand is unitary elastic, and thus the number of visitors will NOT decrease. 6-7 Which of the following will NOT affect the elasticity of demand for a product? a. the number of substitutes b. how long consumers have to adapt to price changes c. the cost of producing the product d. the percentage of the consumer’s budget spent on the product e. all of the above will affect the elasticity of demand for a product 6-8 If the demand for umbrellas is price inelastic, a. changes in price do not affect the number of umbrellas demanded. b. if more umbrellas are sold as the result of a price decrease, total expenditures by consumers on umbrellas will decrease. c. the percentage change in price is less than the percentage change in quantity demanded. d. the percentage change in quantity demanded is greater than the percentage change in price. e. none of the above The next 9 questions refer to the following figure: 2 0 0 4 0 0 6 0 0 8 0 0 1 , 0 0 0 1 , 2 0 0 0 2 0 4 0 6 0 8 0 1 2 0 Price (\$) Q u a n t i t y D e m a n d Q P 1 0 0 94
6-9 In the figure above, what is the point price elasticity of demand when price is \$60? a. - 0.50 b. - 0.75 c. - 1.00 d. - 1.60 e. - 2.00 6-10 In the figure above, what is the point price elasticity of demand when price is \$80? a. - 0.50 b. - 0.75 c. - 1.00 d. - 1.60 e. - 2.00 6-11 What is the interval elasticity of demand over the price range \$60 to \$80? a. - 0.75 b. - 1.10 c. - 1.00 d. - 1.40 e. - 2.00 6-12 If price INCREASES from \$60 to \$80, an arrow representing the PRICE effect a. will point upward. b. will point downward. c. will be longer than (and in opposite direction of) the arrow representing the quantity effect.

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Chap06ElasticityDem-1 - Chapter 6 ELASTICITY AND DEMAND...

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