Title: Elasticity
Course: Macro Quiz Test

Q: Elasticity refers to
- how frequently a demand curve or supply curve changes slope.
- how long it takes a market to reach equilibrium.
- how responsive one variable is to changes in another.
A: how responsive one variable is to changes in another.

Q: Elasticity allows economists to measure
- how firms can maximize profits.
- the frequency of shifts in demand.
- the responsiveness of one variable to changes in another variable.
A: the responsiveness of one variable to changes in another variable.

Q: If a small change in price creates a large change in demand, then we would say that the demand is
- inelastic.
- stagnant.
- elastic.
A: elastic.

Q: Demand is ________ if a small change in price creates a large change in demand.
- inelastic
- stagnant
- elastic
A: elastic

Q: If a large change in price results in a small change in demand, then demand is
- elastic.
- stagnant.
- inelastic.
A: inelastic.

Q: Demand is ________ if a large change in price causes a small change in demand.
- elastic
- stagnant
- inelastic
A: inelastic

Q: Which of these questions is the best example of elasticity?
- What is the least amount of goods a supplier can produce without upsetting the customers?
- How will a change in consumer behavior affect the overall consumer experience?
- How much will a change in price or quantity impact consumer and producer behavior?
A: How much will a change in price or quantity impact consumer and producer behavior?

Q: An addicted smoker likely has which type of demand?
- elastic
- constant
- inelastic
A: inelastic

Q: Elasticity measures the behavioral response of economic agents in a given situation. Which of the following questions is likely to be answered using elasticity?
- If hot dogs go on sale, will it affect the price of bread?
- If you get a pay raise, are you more productive at work?
- If a business raises its prices, will that have a large or small impact on demand?
A: If a business raises its prices, will that have a large or small impact on demand?

Q: Elasticity measures the behavioral response of economic agents in a given situation. Which question is likely to be answered using elasticity?
- If a business raises its prices, are they utilizing new technology?
- Does on-demand Internet streaming media cause more people to stay home?
- If a restaurant puts their pizza on sale, will the additional number of pizzas sold offset the discount on each item? Will their sales revenues for pizza go up or down?
A: If a restaurant puts their pizza on sale, will the additional number of pizzas sold offset the discount on each item? Will their sales revenues for pizza go up or down?

Q: Determining the price elasticity of demand involves all of the following factors, but NOT
- the availability of substitutes.
- whether or not something is a luxury or a necessity.
- the total number of firms in a market.
A: the total number of firms in a market.

Q: Which of the following factors does NOT influence the price elasticity of demand of a product?
- share of the consumer budget
- short run versus long run
- the slope of the supply curve
A: the slope of the supply curve

Q: A product is considered relatively elastic ________.
- when it takes up a small share of the consumer’s budget
- in the short run
- when there are many substitutes
A: when there are many substitutes

Q: A product is considered relatively inelastic ________.
- when there are many substitutes
- in the long run
- when there is only one supplier
A: when there is only one supplier

Q: Demand is relatively inelastic if ________.
- the demand curve is horizontal
- there are numerous suppliers
- buyers do not respond much to a change in price
A: buyers do not respond much to a change in price

Q: If buyers do not respond much to a change in price, then demand is considered
- relatively elastic.
- fairly elastic.
- relatively inelastic
A: relatively inelastic

Q: Which of the following describe a product with an inelastic demand?
- A pair of walking shoes.
- Computer tablet for surfing the internet.
- An appointment with a dentist.
A: An appointment with a dentist.

Q: Which of the following describe a product with an elastic demand?
- A pack of cigarettes for a chain smoker.
- An appointment with a dentist.
- Computer tablet for surfing the internet.
A: Computer tablet for surfing the internet.

Q: The size of the change in the quantity demanded of a good or service due to change in its price is measured by the elasticity of demand. When the percentage change in the quantity demanded for a good or service is less than the percentage change in price, the demand for that good or service is ________ and price elasticity is ________.
- elastic; greater than 1
- unitary; equal to 1
- inelastic; less than 1
A: inelastic; less than 1

Q: The size of the change in the quantity demanded of a good or service due to change in its price is measured by the elasticity of demand. When the percentage change in the quantity demanded for a good or service is more than the percentage change in price, the demand for that good or service is ________ and price elasticity is ________.
- inelastic; less than 1
- unitary; equal to 1
- elastic; greater than 1
A: elastic; greater than 1

Q: If the price elasticity of demand for gas in the short run is 0.3 and the price elasticity of demand for gas in the long run is 1.1, then which of the following is true?
- Demand for gas is elastic in the short run and inelastic in the long run.
- Demand for gas is unit elastic for both.
- Demand for gas is inelastic in the short run and elastic in the long run.
A: Demand for gas is inelastic in the short run and elastic in the long run.

Q: When elasticity of demand is equal to one and the change in the quantity demanded and the change in price are exactly proportional. This type of elasticity is described as ________.
- elastic
- inelastic
- unitary elastic
A: unitary elastic

Q: If the price of organic beef steak, regular beef steak, and pork chops each increased by 10%. Which of the products would you think was the most elastic. In other words, which has the most change to the quantity demanded because of the increase in price?
- non-organic beef steak
- non-organic pork chops
- organic beef steak
A: organic beef steak

Q: Which product would have the quantity demanded decrease the most (be the most elastic) to a price increase?
- non-organic whole chicken
- non-organic chicken thighs
- organic whole chicken
A: organic whole chicken

Q: What is the price elasticity of demand for designer shoes if for every 20% price increase clothing demand decreases by 5%. The price elasticity of demand would be
- -.5; inelastic
- -4; elastic
- -.25; inelastic
A: -.25; inelastic

Q: What is the price elasticity of demand for generic shoes if for every 10% price increase clothing demand decreases by 15%. The price elasticity of demand would be
- -.67; inelastic
- -.5; inelastic
- -1.5; elastic
A: -1.5; elastic

Q: Percentage change is calculated as
- the change in elasticity divided by the quantity.
- quantity divided by the change in quantity.
- the change in quantity divided by the quantity.
A: the change in quantity divided by the quantity.

Q: If you divide the change in quantity by the original quantity, you are calculating the
- quantity demanded change.
- change in elasticity.
- percentage change.
A: percentage change.

Q: The percentage change in quantity divided by the percentage change in quantity is the
- midpoint method.
- elasticity.
- growth rate.
A: growth rate.

Q: Another name for calculating percentage changes is computing
- the arc approach.
- the initial method.
- growth rates.
A: growth rates.

Q: Sylvia’s favorite burrito shop raised its prices from $6 to $9. The percentage change in price is
- 67%.
- 33%.
- 50%.
A: 50%.

Q: Kel loves orange soda. Unfortunately, the price has increased from $2 to $4. The percentage change in price is
- 67%.
- 33%.
- 50%.
A: 50%.

Q: Demelza purchased her favorite perfume three months ago, J’adore by Dior, for $75. She logs online to purchase one for her friends birthday and it is now $100. What is the percentage change in the perfume price?
- 25%
- 75%
- 33%
A: 33%

Q: Denzel bought headphones two months ago, Solo2 Beats by Dre, for $130. He gives them to his little brother and goes online to buy another for himself but they are now $160. What is the percentage change in the headphone’s price?
- 81%.
- 19%.
- 23%.
A: 23%.

Q: What is the name of the method that uses the average price and average quantity to calculate elasticity?
- The percent change approach
- The point elasticity approach
- The midpoint (arc) elasticity approach
A: The midpoint (arc) elasticity approach

Q: Which method for calculating elasticity uses the values of the average price and average quantity?
- The percent change approach
- The point elasticity approach
- The midpoint (arc) elasticity approach
A: The midpoint (arc) elasticity approach

Q: What is the name of the method for calculating elasticity that makes the math easier but is less accurate?
- The midpoint (arc) elasticity approach
- The percent change approach
- The point elasticity approach
A: The point elasticity approach

Q: The ________ approach for calculating elasticity makes for simple math, but is not as accurate.
- The midpoint (arc) elasticity approach
- The percent change approach
- The point elasticity approach
A: The point elasticity approach

Q: The price elasticity of demand measures the responsiveness of
- quantity demanded to a change in quantity supplied.
- price to a change in quantity demanded.
- quantity demanded to a change in price.
A: quantity demanded to a change in price.

Q: The price elasticity of demand measures the
- responsiveness of price to a change in quantity demanded.
- responsiveness of quantity demanded to a change in quantity supplied.
- responsiveness of quantity demanded to a change in price.
A: responsiveness of quantity demanded to a change in price.

Q: The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in
- quantity supplied.
- the slope of the demand curve.
- price.
A: price.

Q: The elasticity of demand is defined as
- the percentage change in price divided by the percentage change in quantity demand.
- change in quantity demanded divided by quantity demanded.
- the percentage change in quantity demanded divided by the percentage change in price.
A: the percentage change in quantity demanded divided by the percentage change in price.

Q: The equation for calculating the price elasticity of demand
- does not use percent change in the numerator and denominator.
- takes into account slope.
- uses percent change in both the numerator and denominator.
A: uses percent change in both the numerator and denominator.

Q: If in your equation you are using the percent change in both the numerator and denominator, you are most likely
- calculating the price elasticity of supply.
- calculating the endpoint elasticity approach.
- calculating the price elasticity of demand.
A: calculating the price elasticity of demand.

Q: Using the midpoint method, calculate the price elasticity of demand of Good X using the following information: When the price of good X is $50, the quantity demanded of good X is 400 units. When the price of good X rises to $60, the quantity demanded of good X falls to 300 units.
- The price elasticity of demand for good X = 0.64.
- The price elasticity of demand for good X = 1.23.
- The price elasticity of demand for good X = 1.57.
A: The price elasticity of demand for good X = 1.57.

Q: Using the midpoint method, calculate the price elasticity of demand of Good Z using the following information: When the price of good Z is $10 (P1), the quantity demanded of good Z is 85 units (Q1). When the price of good Z rises to $15 (P2), the quantity demanded of good Z falls to 60 units (Q2).
- The price elasticity of demand for good Z = 0.52.
- The price elasticity of demand for good Z = 1.90.
- The price elasticity of demand for good Z = 0.86.
A: The price elasticity of demand for good Z = 0.86.

Q: Suppose the price for an Uber ride in Austin, TX decreases from $15 to $12 causing the quantity of rides demanded to increase from 1000 to 1600. Using the midpoint method, the price elasticity of demand for an Uber ride is ________.
- 3.0
- 0.50
- 2.08
A: 2.08

Q: The price for a fidget spinner is $5 with the quantity demanded at 7,000 a day. As time goes on the price for a fidget spinner drops to $3 and the quantity demanded increases to 12,500 a day. What is the price elasticity of demand for fidget spinners using the midpoint method?
- Price elasticity of demand = .97
- Price elasticity of demand = .51
- Price elasticity of demand = 1.0
A: Price elasticity of demand = 1.0

Q: Using the midpoint method, the price elasticity of demand is determined to be about 0.85. If there is a 10% decrease in the quantity demanded of the product then what effect would this have on the price of the product?
- A decrease in the price of the product from $8.50 to $10
- An increase in the price of the product from $8.50 to $10
- A 11.8% increase in the price of the product
A: A 11.8% increase in the price of the product

Q: The price for a cell phone case is $25 with the quantity demanded at 10,000 a day. As time goes on the price for a cell phone case increases to $30 and the quantity demanded decreases to 5,000 a day. Based on the price elasticity of demand using the midpoint method, this cell phone case is
- unit elastic
- inelastic
- elastic
A: elastic

Q: Based on the following information, calculate the price elasticity of demand using the midpoint method. The price for virtual reality goggles is $100 with the quantity demanded at 12,000 a day. On Black Friday the VR goggles were selling for $85 and the quantity demanded increased to 14,000 a day. The VR goggles are ________.
- elastic
- unit elastic
- inelastic
A: inelastic

Q: In the figure below, which of the following statements is true regarding elasticity?
- the upper part (when price is higher) of a demand curve is considered more inelastic.
- the upper part (when price is higher) of a demand curve is considered unit elastic.
- the upper part (when price is higher) of a demand curve is considered more elastic.
A: the upper part (when price is higher) of a demand curve is considered more elastic.

Q: Which part of the demand curve is considered the most inelastic?
- the upper part
- the middle part
- the lower part
A: the lower part

Q: Price elasticity of demand is
- the same as slope.
- the change in quantity demanded divided by the change in price.
- used to determine price sensitivity.
A: used to determine price sensitivity.

Q: Price elasticity of demand is closely related, but not the same as the slope of the demand curve. The more sensitive buyers are to changes in price the
- demand curve becomes more curved and less linear.
- the more the demand curve will shift.
- the flatter the demand curve.
A: the flatter the demand curve.

Q: As we move along a typical negatively sloping, linear demand curve
- the elasticity is constant.
- it results in elasticity and slope being the same.
- the slope is constant.
A: the slope is constant.

Q: One of the characteristics of a negatively sloping, linear demand curve is that
- the elasticity is constant.
- it results in elasticity and slope are the same.
- the slope is constant.
A: the slope is constant.

Q: The rate of change in units along the curve is the
- elasticity of a curve.
- run of a curve.
- slope of a curve.
A: slope of a curve.

Q: If you are looking at the rise over the run on a curve you are determining
- elasticity of a curve.
- run of a curve.
- slope of a curve.
A: slope of a curve.

Q: When the demand for a product has zero variance when there is a change in price, the good is ________.
- perfectly elastic
- unitarian
- perfectly inelastic
A: perfectly inelastic

Q: When a good is perfectly inelastic the
- product varies when there is a change in price.
- product graph is a perfectly horizontal line.
- product does not vary when there is a change in price.
A: product does not vary when there is a change in price.

Q: Analyze the following diagram:

Demand "D" represents a demand curve that is
- relatively inelastic.
- perfectly elastic.
- perfectly inelastic.
A: perfectly inelastic.

Q: Analyze the following diagram:

Demand "C" represents a demand curve that is
- perfectly inelastic.
- perfectly elastic.
- relatively inelastic.
A: relatively inelastic.

Q: Analyze the following diagram:

Demand "B" represents a demand curve that is
- perfectly inelastic.
- perfectly elastic.
- relatively elastic.
A: relatively elastic.

Q: Analyze the following diagram:

Demand "A" represents a demand curve that is
- relatively elastic.
- perfectly inelastic.
- perfectly elastic.
A: perfectly elastic.

Q: If the change % in quantity and % change in price from a graph for gasoline is less than 1, it is considered
- inelastic.
- unitary.
- elastic.
A: elastic.

Q: If you have a graph of the supply and demand for salt and calculate that the % change in quantity and % change in price is greater than 1, it is considered
- elastic.
- unitary.
- inelastic.
A: inelastic.

Q: The elasticity of supply is defined as the ________ change in quantity supplied divided by the ________ change in price.
- total; percentage
- marginal; percentage
- percentage; percentage
A: percentage; percentage

Q: The elasticity of supply is defined as the
- the percentage change in price divided by the percentage change in quantity supplied.
- the change in quantity supplied divided by quantity supplied.
- the percentage change in quantity supplied divided by the percentage change in price.
A: the percentage change in quantity supplied divided by the percentage change in price.

Q: Supply is said to be ________ when the quantity supplied is very responsive to changes in price.
- inelastic
- unit elastic
- elastic
A: elastic

Q: Elastic supply occurs if the change in quantity supplied is ________ to a change in price.
- relatively unresponsive
- the same
- relatively responsive
A: relatively responsive

Q: If the supply curve for a product is horizontal, then the elasticity of supply is
- equal to 1.
- equal to zero.
- equal to infinity.
A: equal to infinity.

Q: A perfectly elastic supply curve is
- upward sloping to the right.
- vertical.
- horizontal.
A: horizontal.

Q: Suppose the price elasticity of supply has been calculated as 0.80 for a particular product and the price increases by 5%. What would happen to the quantity supplied?
- It would increase by 8%.
- It would increase by 6.3%.
- It would increase by 4%.
A: It would increase by 4%.

Q: If the price elasticity of supply was calculated as 0.40 for a product and the price increases by 12%, what would happen to the quantity supplied?
- Quantity supplied would increase by 8%.
- Quantity supplied would increase by 6.3%.
- Quantity supplied would increase by 4.8%.
A: Quantity supplied would increase by 4.8%.

Q: If the price of Sperry shoes goes up from $100 to $120 and the quantity supplied increases from 800 to 900 pairs.
- It would increase by 1.65%.
- It would increase by 1.63%.
- It would increase by 0.65%.
A: It would increase by 0.65%.

Q: If the price of Saint’s Suits goes up from $200 to $220 and the quantity supplied increases from 700 to 800 suits.
- It would increase by 0.72%.
- It would increase by 1.49%.
- It would increase by 1.40%.
A: It would increase by 1.40%.

Q: When income increases and the demand for a good increases, the good is considered a
- inferior good.
- complementary good.
- normal good.
A: normal good.

Q: When income increases and demand for a good falls, the good is considered a
- normal good.
- complementary good.
- inferior good.
A: inferior good.

Q: When a 5% increase in income causes a 3% drop in quantity demanded of a good
- the cross-price elasticity is .6 and the good is an inferior good.
- the income elasticity is 1.67 and the good is a normal good.
- the income elasticity is .6 and the good is an inferior good.
A: the income elasticity is .6 and the good is an inferior good.

Q: When a 10% increase in income causes a 4% increase in quantity demanded of a good
- the price elasticity of demand is .4 and the good is an inferior good.
- the income elasticity is 2.5 and the good is a normal good.
- the income elasticity is .4 and the good is a normal good.
A: the income elasticity is .4 and the good is a normal good.

Q: Sunny expanded her business last year by adding a gift shop in her salon. Because of this addition her income has increased by 13%. Although her income has increased, she has a 9% drop in the quantity demanded of hamburgers. In this example, Sunny’s
- income elasticity is .69 and the good is a normal good.
- cross-price elasticity is 1.44 and the good is an inferior good.
- income elasticity is .69 and the good is an inferior good.
A: income elasticity is .69 and the good is an inferior good.

Q: Joe received a promotion this year at work and now has an income which has increased by 21% since last year. Joe has now increased his quantity demanded of red wine by 7%. In this example, Joe’s
- cross-price elasticity is 3 and the good is an inferior good.
- income elasticity is .33 and the good is an inferior good.
- income elasticity is .33 and the good is a normal good.
A: income elasticity is .33 and the good is a normal good.

Q: Sebastian received a raise this year so his income climbed from $45,000 to $52,000. Last year Sebastian purchased 2 sunglasses. This year he has purchased 7 sunglasses. Assuming that all of the other things remain constant, what type of a good are sunglasses and what type of income elasticity of demand does Sebastian have?
- The sunglasses are an inferior good and the income elasticity of demand is 7.7.
- The sunglasses are a normal good and the income elasticity of demand is .13.
- The sunglasses are a superior good and the income elasticity of demand is 7.7.
A: The sunglasses are a superior good and the income elasticity of demand is 7.7.

Q: Kelly’s salary was bumped up this year after she accepted the new position of Vice President of Marketing. Her income increased from $65,000 to $83,000. Last year Kelly purchased 2 used cars. This year she purchased 0 used cars. Assuming that all of the other things remain constant, what type of a good is a used car and what type of income elasticity of demand does Kelly have?
- A used car is a normal good and the income elasticity of demand is .12.
- A used car is a superior good and the income elasticity of demand is 8.22.
- A used car is an inferior good and the income elasticity of demand is 8.22.
A: A used car is an inferior good and the income elasticity of demand is 8.22.

Q: A 10% decrease in the price of potato chips leads to a 30% increase in the quantity of soda demanded. It appears that
- price elasticity of demand for potato chips is 3.
- price elasticity of demand for soda is 3.
- cross-price elasticity of demand for soda is -3.
A: cross-price elasticity of demand for soda is -3.

Q: Suppose the price of apples increase by 20%, resulting in consumers to purchase 15% more pears. Given this information, it appears that
- price elasticity of demand of apples is 1.33.
- price elasticity of demand of pears is 0.75.
- cross-price elasticity of pears is 0.75.
A: cross-price elasticity of pears is 0.75.

Q: If consumers find cola and iced tea to be substitute goods, then it is likely that
- the goods’ price elasticities of demand are less than one.
- the goods’ income elasticities are less than zero.
- the goods’ cross-price elasticities are greater than zero.
A: the goods’ cross-price elasticities are greater than zero.

Q: Which of the following goods represent a cross-price elasticity likely greater than zero?
- The complementary goods of hot dog sausages and hot dog buns.
- The complementary goods of printers and printer ink.
- The substitute goods of blueberries and strawberries.
A: The substitute goods of blueberries and strawberries.

Q: The cross-price elasticity of demand is ________ for substitute goods and ________ for complementary goods.
- negative; positive
- positive; positive
- positive; negative
A: positive; negative

Q: The ________ is negative for complementary goods and positive for substitute goods.
- price elasticity of demand
- income elasticity of demand
- cross-price elasticity of demand
A: cross-price elasticity of demand

Q: You read an article stating that HTC’s latest cell phone price has increased from $450 to $550. At the same time the quantity demanded for the Samsung Galaxy 7s increases from 1000 to 1850. Calculate the cross price elasticity of demand using the midpoint method. Are these two cell phones complements or substitutes?
- The cross-price elasticity of demand is -2.98 and they are compliments.
- The cross-price elasticity of demand is .33 and they are substitutes.
- The cross-price elasticity of demand is 2.98 and they are substitutes.
A: The cross-price elasticity of demand is 2.98 and they are substitutes.

Q: Epson’s office printer price increased from $97 to $150. At the same time the quantity demanded for printer ink decreased from 260 to 160. Calculate the cross price elasticity of demand using the midpoint method. Are these products complements or substitutes?
- The cross-price elasticity of demand is .90 and they are compliments.
- The cross-price elasticity of demand is 1.11 and they are substitutes.
- The cross-price elasticity of demand is -1.11 and they are compliments.
A: The cross-price elasticity of demand is -1.11 and they are compliments.

Q: Teenage workers are assumed to have ________ labor supply; therefore a 5% increase in wages would result in ________ percentage change in quantity of labor supplied.
- elastic; less
- inelastic; greater
- elastic; greater
A: elastic; greater

Q: Adult workers are assumed to have ________ labor supply and teenage workers are assumed to have ________ labor supply.
- elastic; inelastic
- elastic; elastic
- inelastic; elastic
A: inelastic; elastic

Q: The wage elasticity of labor demand calculation is
- the % change in quantity of labor supplied divided by the % change in wage.
- the % change in wage divided by the % change in quantity of labor demanded.
- the % change in quantity of labor demanded divided by the % change in wage.
A: the % change in quantity of labor demanded divided by the % change in wage.

Q: What is the calculation to solve for the wage elasticity of labor?
- The % change in quantity of labor supplied divided by the % change in wage.
- The % change in wage divided by the % change in quantity of labor demanded.
- The % change in quantity of labor demanded divided by the % change in wage.
A: The % change in quantity of labor demanded divided by the % change in wage.

Q: Tylor, who is 16, is considered part of the ________ labor supply, while Robert, who is 52, is considered part of the ________ labor supply.
- inelastic; elastic
- elastic; elastic
- elastic; inelastic
A: elastic; inelastic

Q: Marge, who is 46, is considered part of the ________ labor supply, while Jessica, who is 17, is considered part of the ________ labor supply.
- elastic; inelastic
- elastic; elastic
- inelastic; elastic
A: inelastic; elastic

Q: If the government wanted to encourage savings by offering a tax break, such a policy would work if the supply curve for financial capital is
- inelastic.
- steep.
- elastic.
A: elastic.

Q: Tax breaks to encourage savings is effective only if the supply curve for financial capital is
- inelastic.
- steep.
- elastic.
A: elastic.

Q: Price and total revenue are positively related when demand is
- elastic.
- unit elastic.
- inelastic.
A: inelastic.

Q: If demand is ________, an increase in price also causes an increase in total revenue.
- elastic.
- unit elastic.
- inelastic.
A: inelastic.

Q: Total revenue is defined as ________ and represented as ________.
- the price of a product divided the number of units purchased; TR - TC = Profit
- the price of a product times the number of units produced; TR=P x Qd
- the price of a product times the number of units sold; TR=P x Qd
A: the price of a product times the number of units sold; TR=P x Qd

Q: The total revenue for J-Money’s T-Shirt shop is calculated as ________.
- the price of a product divided the number of units purchased, or TR - TC = Profit
- the price of a product times the number of units produced, or TR=P x Qd
- the price of a product times the number of units sold, or TR=P x Qd
A: the price of a product times the number of units sold, or TR=P x Qd

Q: What happens to total revenue (TR) if the price decreases on a product with demand that is price elastic?
- Total revenue will fall.
- Total profit will remain the same.
- Total revenue will rise.
A: Total revenue will rise.

Q: What happens to total revenue (TR) if the price decreases on a product with demand that is price inelastic?
- Total revenue will rise.
- Total profit will remain the same.
- Total revenue will fall.
A: Total revenue will fall.

Q: What happens to total revenue (TR) if the price rises on a product with demand that is price elastic?
- Total revenue will rise.
- Total revenue will remain the same.
- Total revenue will fall.
A: Total revenue will fall.

Q: What happens to total revenue (TR) if the price rises on a product with demand that is price inelastic?
- Total revenue will fall.
- Total revenue will remain the same.
- Total revenue will rise.
A: Total revenue will rise.

Q: Complete the following sentence. Given that total revenue = price x quantity, a reduction in price will lead to an increase in total revenue when demand is
- inelastic.
- unit elastic.
- elastic.
A: elastic.

Q: Given that total revenue = price x quantity, what will happen to total revenue if price increases when demand is elastic?
- It will increase.
- It will stay the same.
- It will decrease.
A: It will decrease.

Q: You are the manager of the public transit system. You are informed that the system faces a deficit, but you cannot cut service, which means you cannot cut costs. Your only hope is to increase revenue by increasing fares. You are advised that the estimated price elasticity of demand, several years after the price change, will be about −1.5. Select the statement that best describes the results of raising the fare in the long run.
- Total revenue rises immediately, since demand will remain price inelastic.
- Total revenue will fluctuate as the demand fluctuates.
- Total revenue falls, since demand changes and becomes price elastic.
A: Total revenue falls, since demand changes and becomes price elastic.

Q: You are the manager of the public transit system. You are informed that the system faces a deficit, but you cannot cut service, which means you cannot cut costs. Your only hope is to increase revenue by increasing fares. You are advised that the estimated price elasticity of demand for the first few months after a price change is about −0.3. Select the statement that best describes the results of raising the fare in the short run.
- Total revenue falls, since demand changes and becomes price inelastic.
- Total revenue will rise incrementally as the demand fluctuates and price moves back and forth between being elastic and inelastic.
- Total revenue rises immediately after the fare increase, since demand over the immediate period is price inelastic.
A: Total revenue rises immediately after the fare increase, since demand over the immediate period is price inelastic.

Q: Suppose you are in charge of sales at a pharmaceutical company, and your firm has a new drug that causes bald men to grow hair. Assume that the company wants to earn as much revenue as possible from this drug. If the elasticity of demand for your company’s product at the current price is 1.4, what would you advise the company to do?
- raise the price
- keep the price the same
- lower the price
A: lower the price

Q: If the elasticity of demand for a company’s product is estimated to be 1.72, what would you advise the company to do if their objective is to increase revenue?
- raise the price
- keep the price the same
- lower the price
A: lower the price

Q: A person who takes life-saving prescription drugs most likely has a(n) ________demand for that drug. Therefore an increase in the price of the drug will result in ________ total revenue for the drug company.
- inelastic; decreased
- elastic; increased
- inelastic; increased
A: inelastic; increased

Q: A person who takes aspirin most likely has a(n) ________demand for that drug. Therefore an increase in the price of aspirin will result in ________ total revenue for the drug company.
- inelastic; decreased
- inelastic; increased
- elastic; decreased
A: elastic; decreased

Q: Suppose there is a major technological advance in the production of a good that causes production costs to fall. If demand for the product is relatively inelastic, what will happen in the market?
- The price decrease will be relatively less than the increase in quantity.
- Price and quantity will change by the same amount.
- The price decrease will be relatively greater than the increase in quantity.
A: The price decrease will be relatively greater than the increase in quantity.

Q: Suppose there is a major technological issue in the production of a good that causes production costs to rise. If demand for the product is relatively inelastic, what will happen in the market?
- The price increase will be relatively less than the decrease in quantity.
- Price and quantity will change by the same amount.
- The price increase will be relatively greater than the decrease in quantity.
A: The price increase will be relatively greater than the decrease in quantity.

Q: A new technological breakthrough increases production for an industry and shifts the supply curve to the right. If the firm ________, then the firm will likely be happy about this new technology.
- produces products that are considered inelastic
- produces products because consumer will buy less
- produces products that are considered elastic
A: produces products that are considered elastic

Q: A new technological hurdle decreases production for an industry and shifts the supply curve to the left. If the firm ________, then the firm will likely be unhappy about this new technology problem.
- produces products that are considered inelastic
- produces products because consumer will buy less
- produces products that are considered elastic
A: produces products that are considered elastic

Q: Good news for an industry that typically produces inelastic goods can
- be bad news for individual producers because when these factors shift the supply curve to the left it decreases total revenues.
- be good news for individual producers because when these factors shift the supply curve to the right it increases total revenues.
- be bad news for individual producers because when these factors shift the supply curve to the right it decreases total revenues.
A: be bad news for individual producers because when these factors shift the supply curve to the right it decreases total revenues.

Q: If a tobacco farmer has inelastic demand and voluntarily does not plant tobacco on 15% of their land then what scenario would happen?
- Total revenues would decrease.
- Consumers would buy more tobacco
- Total revenues would increase.
A: Total revenues would increase.

Q: Higher costs can typically be passed on to consumers when a product is considered
- elastic.
- perfectly elastic.
- inelastic.
A: inelastic.

Q: If a product is considered ________, then higher costs can be passed on to the consumer.
- elastic
- perfectly elastic
- inelastic
A: inelastic

Q: In a market with relatively inelastic demand, if the supply curve shifts due to a fall in production costs, the equilibrium price will ________ by ________ than equilibrium quantity.
- increase; less
- decrease; less
- decrease; more
A: decrease; more

Q: An increase in demand will shift the demand curve to the right, therefore ________ the equilibrium price.
- decreasing
- not change
- increasing
A: increasing

Q: Elasticities are often ________ in the short run than in the long run.
- higher
- the same
- lower
A: lower

Q: Elasticities are often ________ in the long run than in the short run.
- lower
- the same
- higher
A: higher

Q: The flatter the demand curve, the ________.
- lower the elasticity of demand
- elasticity stays the same
- higher the elasticity of demand
A: higher the elasticity of demand

Q: If the demand curve for energy is at first inelastic, then changes over time and becomes increasingly elastic, then the demand curve is
- getting steeper.
- moving outward.
- getting flatter.
A: getting flatter.

Q: The electric power company in a city increased its prices by 15% this year. Since the demand for electricity is a(n) ________ demand in the short run, the equilibrium price will ________.
- elastic; decrease
- inelastic; decrease
- inelastic; greatly increase
A: inelastic; greatly increase

Q: The electric company in a city increased its prices by 15% five years ago. Over time more people have purchased efficient appliances or switched to gas, and the demand of electricity in the long run has become more ________. Also in the long run the equilibrium quantity demanded has ________.
- inelastic; decrease
- elastic; increased
- elastic; decreased
A: elastic; decreased

Q: When supply is inelastic and demand is elastic, the tax incidence falls on ________.
- the consumer
- government
- the producer
A: the producer

Q: When supply is elastic and demand is inelastic, the tax incidence falls on the ________.
- producer
- government
- consumer
A: consumer

Q: If the demand for a product is inelastic but the supply is elastic, the ________ will bear the tax incidence.
- producer
- government
- consumer
A: consumer

Q: The demand for cigarettes is highly inelastic. This suggests that the incidence of a higher tax on cigarettes will fall primarily on
- cigarette sellers.
- government.
- cigarette consumers.
A: cigarette consumers.

Q: The government imposes an excise tax on house paint. The house paint tax incidence takes place within a market where the supply of house paint is elastic and the demand for house paint is inelastic. Who pays the most of the excise tax?
- producers of house paint
- the government
- consumers of house paint
A: consumers of house paint

Q: The government imposes an excise tax on house paint. The house paint tax incidence takes place within a market where the supply of house paint is perfectly inelastic and the demand for house paint is perfectly elastic. The excise tax is paid by the
- government.
- consumers of house paint.
- producers of house paint.
A: producers of house paint.

Q: A tax is imposed on chewing gum. Consumers pay all of the tax while the producers pay none of the tax. If you were to draw a graph you would see that the demand curve
- is relatively inelastic.
- perfectly elastic.
- perfectly inelastic.
A: perfectly inelastic.

Q: A tax is imposed on chewing gum. Chewing gum producers pay all of the bulk of the tax while the consumers pay little of the tax. If you were to draw a graph you would see that the curve
- for demand shifts upward.
- for supply shifts downward.
- for supply shifts upward.
A: for supply shifts upward.