1. Assume that the price elasticity of demand is -2 for a certain firm's product. If the firm raises price, the firm's managers can expect total revenue
... [Show More] to:
A. decrease.
B. increase.
C. remain constant.
D. either increase or remain constant, depending upon the size of the price increase.
AACSB: Reflective Thinking Blooms: Remember Difficulty: 1 Easy
Learning Objective: 03-02 Illustrate the relationship between the elasticity of demand and total revenues.
Topic: Own Price Elasticity of Demand
2. A price elasticity of zero corresponds to a demand curve that is:
A. horizontal.
B. downward sloping with a slope always equal to 1.
C. vertical.
D. either vertical or horizontal.
AACSB: Reflective Thinking Blooms: Remember Difficulty: 2 Medium
Learning Objective: 03-02 Illustrate the relationship between the elasticity of demand and total revenues.
Topic: Own Price Elasticity of Demand
3. As we move down along a linear demand curve, the price elasticity of demand becomes more:
A. elastic.
B. inelastic.
C. log-linear.
D. variable.
AACSB: Reflective Thinking Blooms: Remember Difficulty: 2 Medium
Learning Objective: 03-02 Illustrate the relationship between the elasticity of demand and total revenues.
Topic: Own Price Elasticity of Demand
4. If the demand for a product is Qxd = 10 - ln Px, then product x is:
A. elastic.
B. inelastic.
C. unitary elastic.
D. Cannot be determined without more information.
AACSB: Reflective Thinking Blooms: Remember Difficulty: 1 Easy
Learning Objective: 03-05 Show how to determine elasticities from linear and log-linear demand functions.
Topic: Obtaining Elasticities From Demand Functions
5. The demand for good X has been estimated by Qxd = 12 - 3Px + 4Py. Suppose that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate the own price elasticity.
A. -0.2
B. -0.3
C. -0.5
D. -0.6
AACSB: Analytic Blooms: Apply Difficulty: 1 Easy
Learning Objective: 03-05 Show how to determine elasticities from linear and log-linear demand functions.
Topic: Obtaining Elasticities From Demand Functions
6. The own price elasticity of demand for apples is -1.2. If the price of apples falls by 5 percent, what will happen to the quantity of apples demanded?
A. It will increase 5 percent.
B. It will fall 4.3 percent.
C. It will increase 4.2 percent.
D. It will increase 6 percent.
AACSB: Analytic Blooms: Apply Difficulty: 2 Medium
Learning Objective: 03-01 Apply various elasticities of demand as a quantitative tool to forecast changes in revenues; prices;
and/or units sold. Topic: Own Price Elasticity of Demand
7. If apples have an own price elasticity of -1.2 we know the demand is:
A. unitary.
B. indeterminate.
C. elastic.
D. inelastic.
AACSB: Reflective Thinking Blooms: Remember Difficulty: 1 Easy
Learning Objective: 03-01 Apply various elasticities of demand as a quantitative tool to forecast changes in revenues; prices;
and/or units sold. Topic: Own Price Elasticity of Demand
8. If quantity demanded for sneakers falls by 10 percent when price increases 25 percent, we know that the absolute value of the own price elasticity of sneakers is:
A. 2.5.
B. 0.4.
C. 2.0.
D. 0.27.
AACSB: Analytic Blooms: Apply Difficulty: 2 Medium
Learning Objective: 03-01 Apply various elasticities of demand as a quantitative tool to forecast changes in revenues; prices;
and/or units sold. Topic: Own Price Elasticity of Demand
9. The quantity consumed of a good is relatively unresponsive to changes in price whenever demand is:
A. elastic.
B. unitary.
C. falling.
D. inelastic.
AACSB: Reflective Thinking Blooms: Remember Difficulty: 1 Easy
Learning Objective: 03-01 Apply various elasticities of demand as a quantitative tool to forecast changes in revenues; prices;
and/or units sold. Topic: Own Price Elasticity of Demand
10. If the absolute value of the own price elasticity of steak is 0.4, a decrease in price will lead to:
A. a reduction in total revenue.
B. an increase in total revenue.
C. no change in total revenue.
D. None of the statements is correct.
AACSB: Reflective Thinking Blooms: Understand Difficulty: 1 Easy
Learning Objective: 03-02 Illustrate the relationship between the elasticity of demand and total revenues.
Topic: Own Price Elasticity of Demand
11. If a price increase from $5 to $7 causes quantity demanded to fall from 150 to 100, what is the absolute value of the own price elasticity at a price of $7?
A. 0.57
B. 1.75
C. 0.02
D. 1.24
AACSB: Reflective Thinking Blooms: Remember Difficulty: 3 Hard
Learning Objective: 03-05 Show how to determine elasticities from linear and log-linear demand functions.
Topic: The Elasticity Concept
12. Demand is perfectly elastic when the absolute value of the own price elasticity of demand is:
A. zero.
B. one.
C. infinite.
D. unknown.
AACSB: Reflective Thinking Blooms: Remember Difficulty: 1 Easy
Learning Objective: 03-02 Illustrate the relationship between the elasticity of demand and total revenues.
Topic: Own Price Elasticity of Demand
13. The demand curve for a good is horizontal when it is:
A. a perfectly inelastic good.
B. a unitary elastic good.
C. a perfectly elastic good.
D. an inferior good.
AACSB: Reflective Thinking Blooms: Remember Difficulty: 1 Easy
Learning Objective: 03-02 Illustrate the relationship between the elasticity of demand and total revenues.
Topic: Own Price Elasticity of Demand
14. Suppose Qxd = 10,000 - 2 Px + 3 Py - 4.5M, where Px = $100, Py = $50, and M = $2,000. What is the own price elasticity of demand?
A. -2.34
B. -0.78
C. -0.21
D. -1.21
AACSB: Analytic Blooms: Apply Difficulty: 2 Medium
Learning Objective: 03-05 Show how to determine elasticities from linear and log-linear demand functions.
Topic: Obtaining Elasticities From Demand Functions
15. Suppose Qxd = 10,000 - 2 Px + 3 Py - 4.5M, where Px = $100, Py = $50, and M = $2,000. Then good X has a demand which is:
A. elastic.
B. inelastic.
C. unitary.
D. neither elastic, inelastic, nor unitary elastic.
AACSB: Analytic Blooms: Apply Difficulty: 1 Easy
Learning Objective: 03-05 Show how to determine elasticities from linear and log-linear demand functions.
Topic: Obtaining Elasticities From Demand Functions
16. Suppose Qxd = 10,000 - 2 Px + 3 Py - 4.5M, where Px = $100, Py = $50, and M = $2,000. How much of good X is consumed?
A. 100 units
B. 500 units
C. 1,100 units
D. 950 units
AACSB: Analytic Blooms: Apply Difficulty: 1 Easy
Learning Objective: 03-05 Show how to determine elasticities from linear and log-linear demand functions.
Topic: Obtaining Elasticities From Demand Functions
17. Which of the following factors would NOT affect the own price elasticity of a good?
A. Time
B. Price of an input
C. Available substitutes
D. Expenditure share
AACSB: Reflective Thinking Blooms: Remember Difficulty: 2 Medium
Learning Objective: 03-03 Discuss three factors that influence whether the demand for a given product is relatively elastic or
inelastic. Topic: Own Price Elasticity of Demand
18. Lemonade, a good with many close substitutes, should have an own price elasticity that is:
A. unitary.
B. relatively elastic.
C. relatively inelastic.
D. perfectly inelastic.
AACSB: Reflective Thinking Blooms: Understand Difficulty: 2 Medium
Learning Objective: 03-03 Discuss three factors that influence whether the demand for a given product is relatively elastic or
inelastic. Topic: Own Price Elasticity of Demand
19. We would expect the demand for jeans to be:
A. more elastic than the demand for clothing.
B. less elastic than the demand for clothing.
C. the same as the demand for clothing.
D. neither more elastic, less elastic, nor the same elasticity as that of the demand for clothing.
AACSB: Reflective Thinking Blooms: Understand Difficulty: 2 Medium
Learning Objective: 03-03 Discuss three factors that influence whether the demand for a given product is relatively elastic or
inelastic. Topic: Own Price Elasticity of Demand
20. Demand is more inelastic in the short term because consumers:
A. are impatient.
B. have no time to find available substitutes.
C. are present-oriented.
D. None of the statements is correct.
AACSB: Reflective Thinking Blooms: Understand Difficulty: 2 Medium
Learning Objective: 03-03 Discuss three factors that influence whether the demand for a given product is relatively elastic or
inelastic. Topic: Own Price Elasticity of Demand
21. We would expect the own price elasticity of demand for food to be:
A. less elastic than the demand for cereal.
B. more elastic than the demand for cereal.
C. the same as that for soap.
D. perfectly inelastic.
AACSB: Reflective Thinking Blooms: Understand Difficulty: 2 Medium
Learning Objective: 03-03 Discuss three factors that influence whether the demand for a given product is relatively elastic or
inelastic. Topic: Own Price Elasticity of Demand
22. The elasticity which shows the responsiveness of the demand for a good due to changes in the price of a related good is the:
A. own price elasticity.
B. income elasticity.
C. log-linear elasticity.
D. cross-price elasticity.
AACSB: Reflective Thinking Blooms: Remember Difficulty: 1 Easy
Learning Objective: 03-01 Apply various elasticities of demand as a quantitative tool to forecast changes in revenues; prices;
and/or units sold. Topic: Cross-Price Elasticity [Show Less]