Chapter 5 /Elasticity and Its Application ? 323
124. Refer to Figure 5-5. The maximum value of total revenue corresponds to a price of
a. $18. b. $30. c. $42. d. $48.
ANS: B
NAT: Analytic MSC: Applicative
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Total revenue | Price elasticity of demand
125. Refer to Figure 5-5. At a price of $48 per unit, sellers' total revenue amounts to
a. $150. b. $200. c. $288. d. $364.
ANS: C
NAT: Analytic MSC: Definitional
DIF: 1
LOC: Elasticity
REF: 5-1
TOP: Total revenue | Price elasticity of demand
126. Refer to Figure 5-5. At a price of $12 per unit, sellers' total revenue amounts to
a. $150. b. $200. c. $288. d. $364.
ANS: C
NAT: Analytic MSC: Definitional
DIF: 1
LOC: Elasticity
REF: 5-1
TOP: Total revenue | Price elasticity of demand
127. Refer to Figure 5-5. At a price of $30 per unit, sellers' total revenue amounts to
a. $150. b. $200. c. $288. d. $450.
ANS: D
NAT: Analytic MSC: Definitional
DIF: 1
LOC: Elasticity
REF: 5-1
TOP: Total revenue | Price elasticity of demand
324 ? Chapter 5 /Elasticity and Its Application
Figure 5-6
Price222018161412108642CBADemand100200300400500600700800900Quantity128. Refer to Figure 5-6. Using the midpoint method, the price elasticity of demand between point A and point B
is a. 1. b. 1.5. c. 2. d. 2.5.
ANS: D
NAT: Analytic MSC: Applicative
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Midpoint method | Price elasticity of demand
129. Refer to Figure 5-6. Using the midpoint method, the price elasticity of demand between point B and point C
is
a. 0.5. b. 0.75. c. 1.0. d. 1.3.
ANS: B
NAT: Analytic MSC: Applicative
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Midpoint method | Price elasticity of demand
130. Refer to Figure 5-6. If the price decreased from $18 to $6,
a. total revenue would increase by $1,200, and demand is elastic between points A and C. b. total revenue would increase by $800, and demand is elastic between points A and C. c. total revenue would decrease by $1,200, and demand is inelastic between points A and C. d. total revenue would decrease by $800, and demand is inelastic between points A and C.
ANS: A
NAT: Analytic MSC: Applicative
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Total revenue | Price elasticity of demand
131. Refer to Figure 5-6. Sellers’ total revenue would increase if the price
a. increased from $4 to $6. b. increased from $16 to $18. c. decreased from $8 to $6. d. All of the above are correct.
ANS: A
NAT: Analytic MSC: Applicative
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Total revenue | Price elasticity of demand
Chapter 5 /Elasticity and Its Application ? 325
132. Refer to Figure 5-6. Sellers’ total revenue would increase if the price
a. increased from $6 to $8. b. decreased from $18 to $16. c. decreased from $16 to $15. d. All of the above are correct.
ANS: D
NAT: Analytic MSC: Applicative
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Total revenue | Price elasticity of demand
133. Refer to Figure 5-6. Which of the following price changes would result in no change in sellers’ total revenue?
a. The price increases from $6 to $9. b. The price increases from $9 to $15. c. The price decreases from $12 to $9. d. The price decreases from $9 to $5.
ANS: C
NAT: Analytic MSC: Applicative
DIF: 3
LOC: Elasticity
REF: 5-1
TOP: Total revenue | Price elasticity of demand
134. Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,
a. the equilibrium quantity decreases, and the equilibrium price is unchanged. b. the equilibrium price increases, and the equilibrium quantity is unchanged. c. the equilibrium quantity and the equilibrium price both are unchanged. d. buyers’ total expenditure on the good is unchanged.
ANS: B
NAT: Analytic MSC: Applicative
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Perfectly inelastic demand
135. Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result,
a. the equilibrium quantity decreases, and the equilibrium price is unchanged. b. the equilibrium price increases, and the equilibrium quantity is unchanged. c. the equilibrium quantity and the equilibrium price both are unchanged. d. buyers’ total expenditure on the good is unchanged.
ANS: A
NAT: Analytic MSC: Applicative
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Perfectly elastic demand
136. A perfectly elastic demand implies that
a. buyers will not respond to any change in price.
b. any rise in price above that represented by the demand curve will result in a quantity demanded of
zero.
c. quantity demanded and price change by the same percent as we move along the demand curve. d. price will rise by an infinite amount when there is a change in quantity demanded.
ANS: B
NAT: Analytic MSC: Interpretive
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Perfectly elastic demand
137. The case of perfectly elastic demand is illustrated by a demand curve that is
a. vertical. b. horizontal.
c. downward-sloping but relatively steep. d. downward-sloping but relatively flat.
ANS: B
NAT: Analytic MSC: Interpretive
DIF: 1
LOC: Elasticity
REF: 5-1
TOP: Perfectly elastic demand
326 ? Chapter 5 /Elasticity and Its Application
138. When small changes in price lead to infinite changes in quantity demanded, demand is perfectly
a. elastic, and the demand curve will be horizontal. b. inelastic, and the demand curve will be horizontal. c. elastic, and the demand curve will be vertical. d. inelastic, and the demand curve will be vertical.
ANS: A
NAT: Analytic MSC: Interpretive
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Perfectly elastic demand
139. For a horizontal demand curve,
a. slope is undefined, and price elasticity of demand is equal to 0. b. slope is equal to 0, and price elasticity of demand is undefined. c. slope and price elasticity of demand both are undefined. d. slope and price elasticity of demand both are equal to 0.
ANS: B
NAT: Analytic MSC: Interpretive
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Perfectly elastic demand
140. In the case of perfectly inelastic demand,
a. the change in quantity demanded equals the change in price.
b. the percentage change in quantity demanded equals the percentage change in price.
c. infinitely-large changes in quantity demanded result from very small changes in the price. d. quantity demanded stays the same whenever price changes.
ANS: D
NAT: Analytic MSC: Interpretive
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Perfectly inelastic demand
141. When demand is perfectly inelastic, the demand curve will be
a. negatively sloped, because buyers decrease their purchases when the price rises.
b. vertical, because buyers purchase the same amount as before whenever the price rises or falls. c. positively sloped, because buyers increase their purchases when price rises.
d. positively sloped, because buyers increase their total expenditures when price rises.
ANS: B
NAT: Analytic MSC: Interpretive
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Perfectly inelastic demand
142. When demand is perfectly inelastic, the price elasticity of demand
a. is zero, and the demand curve is vertical. b. is zero, and the demand curve is horizontal.
c. approaches infinity, and the demand curve is vertical. d. approaches infinity, and the demand curve is horizontal.
ANS: A
NAT: Analytic MSC: Interpretive
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Perfectly inelastic demand
143. A perfectly inelastic demand implies that buyers
a. decrease their purchases when the price rises.
b. purchase the same amount as before when the price rises or falls. c. increase their purchases only slightly when the price falls. d. respond substantially to an increase in price.
ANS: B
NAT: Analytic MSC: Interpretive
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Perfectly inelastic demand
Chapter 5 /Elasticity and Its Application ? 327
144. Alice says that she would buy one banana split a day regardless of the price. If she is telling the truth,
a. Alice's demand for banana splits is perfectly inelastic. b. Alice's price elasticity of demand for banana splits is 1. c. Alice's income elasticity of demand for banana splits is 0. d. None of the above answers is correct.
ANS: A
NAT: Analytic MSC: Interpretive
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Perfectly inelastic demand
145. For a vertical demand curve,
a. slope is undefined, and price elasticity of demand is equal to 0. b. slope is equal to 0, and price elasticity of demand is undefined. c. slope and price elasticity of demand both are undefined. d. slope and price elasticity of demand both are equal to 0.
ANS: A
NAT: Analytic MSC: Interpretive
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Perfectly inelastic demand
146. In which of these instances is demand said to be perfectly inelastic?
a. An increase in price of 2% causes a decrease in quantity demanded of 2%. b. A decrease in price of 2% causes an increase in quantity demanded of 0%. c. A decrease in price of 2% causes a decrease in total revenue of 0%. d. The demand curve is horizontal.
ANS: B
NAT: Analytic MSC: Interpretive
DIF: 2
LOC: Elasticity
REF: 5-1
TOP: Perfectly inelastic demand
147. When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A
rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method,
a. the price elasticity of demand for good A is 1.50, and an increase in price will result in an increase
in total revenue for good A.
b. the price elasticity of demand for good A is 1.50, and an increase in price will result in a decrease in
total revenue for good A.
c. the price elasticity of demand for good A is 0.67, and an increase in price will result in an increase
in total revenue for good A.
d. the price elasticity of demand for good A is 0.67, and an increase in price will result in a decrease in
total revenue for good A.
ANS: NAT: TOP: MSC: C DIF: 2 REF: 5-1 Analytic LOC: Elasticity
Midpoint method | Total revenue | Price elasticity of demand Analytical
148. Consider airfares on flights between New York and Minneapolis. When the airfare is $250, the quantity
demanded of tickets is 2,000 per week. When the airfare is $280, the quantity demanded of tickets is 1,700 per week. Using the midpoint method,
a. the price elasticity of demand is about 1.43, and an increase in the airfare will cause airlines' total
revenue to decrease.
b. the price elasticity of demand is about 1.43, and an increase in the airfare will cause airlines' total
revenue to increase.
c. the price elasticity of demand is about 0.70, and an increase in the airfare will cause airlines' total
revenue to decrease.
d. the price elasticity of demand is about 0.70, and an increase in the airfare will cause airlines' total
revenue to increase.
ANS: NAT: TOP: MSC: A DIF: 2 REF: 5-1 Analytic LOC: Elasticity
Midpoint method | Total revenue | Price elasticity of demand Applicative