Question :
7.7 The Relationship between Price Elasticity of Demand and Total : 1267107
7.7 The Relationship between Price Elasticity of Demand and Total Revenue
1) Total revenue equals
A) price per unit times quantity sold.
B) price per unit times quantity supplied.
C) price per unit times change in quantity sold.
D) change in price per unit times quantity sold.
2) When demand is elastic, a fall in price causes total revenue to rise because
A) when price falls, quantity sold increases so total revenue automatically rises.
B) the increase in quantity sold is large enough to offset the lower price.
C) the percentage increase in quantity demanded is less than the percentage fall in price.
D) the demand curve shifts.
3) When demand is unit-elastic, a change in price causes total revenue to stay the same because
A) the percentage change in quantity demanded exactly offsets the percentage change in price.
B) buyers are buying the same quantity.
C) total revenue never changes with price changes.
D) the change in profit is offset by the change in production cost.
4) If a firm lowered the price of the product it sells and found that total revenue did not change, then the demand for its product is
A) perfectly inelastic.
B) perfectly elastic.
C) unit-elastic.
D) relatively elastic.
5) If a firm wanted to know whether the demand for its product was elastic, unit-elastic, or inelastic, then the firm could
A) survey competitors and ask them what they think demand elasticity is for the product.
B) talk to its customers.
C) change price a little bit and observe what happens to total revenue.
D) not do anything as there is no way to find an elasticity value.
Table 7-3
Price per Pound
(dollars)
Quantity of Cheese Demanded (pounds)
$16
3
14
4
12
5
10
6
8
7
6
8
4
9
2
10
6) Refer to Table 7-3. Over what range of prices is the demand elastic?
A) over the entire range of prices
B) between $14 and $16
C) between $8 and $16
D) between $2 and $8
7) Refer to Table 7-3. Over what range of prices is the demand inelastic?
A) over the entire range of prices
B) between $12 and $16
C) between $8 and $16
D) between $2 and $8
8) Consider a demand curve that has a constant elasticity value of 0. What happens to quantity demanded and total revenue when price increases?
A) The quantity demanded and total revenue remain the same.
B) The quantity demanded does not change but total revenue increases.
C) The quantity demanded and total revenue fall to zero.
D) The quantity demanded does not change but total revenue decreases.
9) If the price elasticity of demand for canned soup is estimated at -1.62. What happens to sales revenue if the price of canned soup rises?
A) It falls by 162 percent.
B) It rises by 1.62 percent.
C) It falls.
D) It rises.
10) Suppose a decrease in the supply of bottled water results in a decrease in revenue. This indicates that
A) the demand for bottled water is inelastic in the price range considered.
B) the demand for bottled water is elastic in the price range considered.
C) the supply of bottled water is inelastic in the price range considered.
D) the supply of bottled water is elastic in the price range considered.
