318 ? Chapter 5 /Elasticity and Its Application

Table 5-4 Price $10 $12 $14 $16 Total Revenue $100 $108 $112 $112 103. Refer to Table 5-4. As price rises from $10 to $12, the price elasticity of demand using the midpoint

method is approximately a. 0.08. b. 0.18. c. 0.42. d. 0.58.

ANS: D

NAT: Analytic MSC: Applicative

DIF: 3

LOC: Elasticity

REF: 5-1

TOP: Midpoint method | Price elasticity of demand

104. Refer to Table 5-4. Demand is unit elastic when quantity demanded changes from

a. 10 to 9. b. 9 to 8. c. 8 to 7.

d. There is not enough information given to determine the correct answer.

ANS: C

NAT: Analytic MSC: Analytical

DIF: 3

LOC: Elasticity

REF: 5-1

TOP: Midpoint method | Price elasticity of demand

105. Refer to Table 5-4. When price is between $10 and $14, demand is

a. elastic. b. unit elastic. c. inelastic.

d. There is not enough information given to determine whether demand is elastic, unit elastic, or

inelastic.

ANS: C

NAT: Analytic MSC: Analytical

DIF: 3

LOC: Elasticity

REF: 5-1

TOP: Midpoint method | Price elasticity of demand

Chapter 5 /Elasticity and Its Application ? 319

Figure 5-4

APriceBDemandCQuantity106. Refer to Figure 5-4. Suppose the point labeled B is the “halfway point” on the demand curve and it

corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01, the price elasticity of demand is a. less than 1 but greater than zero. b. equal to 1. c. greater than 1. d. equal to zero.

ANS: B

NAT: Analytic MSC: Interpretive

DIF: 2

LOC: Elasticity

REF: 5-1

TOP: Midpoint method | Price elasticity of demand

107. Refer to Figure 5-4. The section of the demand curve from A to B represents the

a. elastic section of the demand curve. b. inelastic section of the demand curve. c. unit elastic section of the demand curve. d. perfectly elastic section of the demand curve.

ANS: A

NAT: Analytic MSC: Interpretive

DIF: 2

LOC: Elasticity

REF: 5-1

TOP: Price elasticity of demand

108. Refer to Figure 5-4. The section of the demand curve from B to C represents the

a. elastic section of the demand curve. b. inelastic section of the demand curve. c. unit elastic section of the demand curve. d. perfectly elastic section of the demand curve.

ANS: B

NAT: Analytic MSC: Interpretive

DIF: 2

LOC: Elasticity

REF: 5-1

TOP: Price elasticity of demand

109. Refer to Figure 5-4. The section of the demand curve at point B represents the

a. elastic section of the demand curve. b. inelastic section of the demand curve. c. unit elastic section of the demand curve. d. perfectly elastic section of the demand curve.

ANS: C

NAT: Analytic MSC: Interpretive

DIF: 2

LOC: Elasticity

REF: 5-1

TOP: Price elasticity of demand

320 ? Chapter 5 /Elasticity and Its Application

110. Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $8

and $16. Then, when the price changes between $9 and $10,

a. quantity demanded changes proportionately less than the price. b. quantity demanded changes proportionately more than the price.

c. quantity demanded changes the same amount proportionately as price. d. the price elasticity of demand equals 1.

ANS: B

NAT: Analytic MSC: Applicative

DIF: 2

LOC: Elasticity

REF: 5-1

TOP: Elastic demand

111. Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $6

and $12. Then, when the price increases from $8 to $10,

a. the percent decrease in the quantity demanded exceeds the percent increase in the price. b. the percent increase in the price exceeds the percent decrease in the quantity demanded. c. sellers’ total revenue increases as a result.

d. it is possible that the quantity demanded fell from 550 to 500 as a result.

ANS: A

NAT: Analytic MSC: Applicative

DIF: 3

LOC: Elasticity

REF: 5-1

TOP: Elastic demand

112. Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q =

1,000, P = $40) and (Q = 1,500, P = $30). Then which of the following scenarios is possible? a. Both of these points lie on the section of the demand curve from B to C. b. The vertical intercept of the demand curve is the point (Q = 0, P = $60).

c. The horizontal intercept of the demand curve is the point (Q = 1,800, P = $0). d. Any of these scenarios is possible.

ANS: B

NAT: Analytic MSC: Analytical

DIF: 3

LOC: Elasticity

REF: 5-1

TOP: Elastic demand

113. Refer to Figure 5-4. The section of the demand curve from B to C represents the

a. elastic section of the demand curve.

b. perfectly elastic section of the demand curve. c. unit elastic section of the demand curve. d. inelastic section of the demand curve.

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 2

LOC: Elasticity

REF: 5-1

TOP: Inelastic demand

114. Refer to Figure 5-4. Assume the section of the demand curve from B to C corresponds to prices between $0

and $15. Then, when the price changes between $7 and $9,

a. quantity demanded changes proportionately less than the price. b. quantity demanded changes proportionately more than the price.

c. quantity demanded changes the same amount proportionately as price. d. the price elasticity of demand equals zero.

ANS: A

NAT: Analytic MSC: Applicative

DIF: 2

LOC: Elasticity

REF: 5-1

TOP: Inelastic demand

115. Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q =

2,000, P = $15) and (Q = 2,400, P = $12). Then which of the following scenarios is possible? a. Both of these points lie on section C of the demand curve.

b. The vertical intercept of the demand curve is the point (Q = 0, P = $22).

c. The horizontal intercept of the demand curve is the point (Q = 5,000, P = $0). d. Any of these scenarios is possible.

ANS: A

NAT: Analytic MSC: Analytical

DIF: 3

LOC: Elasticity

REF: 5-1

TOP: Inelastic demand

Chapter 5 /Elasticity and Its Application ? 321

116. Refer to Figure 5-4. If the price decreases in the region of the demand curve between points A and B, we can

expect total revenue to a. increase. b. stay the same. c. decrease.

d. first decrease, then increase until total revenue is maximized.

ANS: A

NAT: Analytic MSC: Analytical

DIF: 3

LOC: Elasticity

REF: 5-1

TOP: Total revenue | Price elasticity of demand

117. Refer to Figure 5-4. If the price increases in the region of the demand curve between points A and B, we can

expect total revenue to a. increase. b. stay the same. c. decrease.

d. first increase, then decrease until total revenue is maximized.

ANS: C

NAT: Analytic MSC: Analytical

DIF: 3

LOC: Elasticity

REF: 5-1

TOP: Total revenue | Price elasticity of demand

118. Refer to Figure 5-4. If the price decreases in the region of the demand curve between points B and C, we can

expect total revenue to a. increase. b. stay the same. c. decrease.

d. first increase, then decrease until total revenue is maximized.

ANS: C

NAT: Analytic MSC: Analytical

DIF: 3

LOC: Elasticity

REF: 5-1

TOP: Total revenue | Price elasticity of demand

119. Refer to Figure 5-4. If the price increases in the region of the demand curve between points B and C, we can

expect total revenue to a. increase. b. stay the same. c. decrease.

d. first decrease, then increase until total revenue is maximized.

ANS: A

NAT: Analytic MSC: Analytical

DIF: 3

LOC: Elasticity

REF: 5-1

TOP: Total revenue | Price elasticity of demand

322 ? Chapter 5 /Elasticity and Its Application

Figure 5-5

6054484236302418126369121518212427PriceDemand3033Quantity120. Refer to Figure 5-5. Demand is unit elastic between prices of

a. $18 and $24. b. $24 and $30. c. $24 and $36. d. $30 and $36.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2

LOC: Elasticity

REF: 5-1

TOP: Price elasticity of demand

121. Refer to Figure 5-5. Using the midpoint method, between prices of $12 and $18, price elasticity of demand is

a. 0.33. b. 0.67. c. 1.33. d. 1.89.

ANS: A

NAT: Analytic MSC: Applicative

DIF: 2

LOC: Elasticity

REF: 5-1

TOP: Midpoint method | Price elasticity of demand

122. Refer to Figure 5-5. Using the midpoint method, between prices of $48 and $54, price elasticity of demand is

about a. 0.92. b. 3.89. c. 4.33. d. 5.67.

ANS: D

NAT: Analytic MSC: Applicative

DIF: 2

LOC: Elasticity

REF: 5-1

TOP: Price elasticity of demand

123. Refer to Figure 5-5. Using the midpoint method, between prices of $30 and $36, price elasticity of demand is

about a. 0.5. b. 0.82. c. 1.22. d. 2.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2

LOC: Elasticity

REF: 5-1

TOP: Price elasticity of demand