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Question : 7.7   The Relationship between Price Elasticity of Demand and Total : 1267107

Economics

 

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.

 

 

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51) In the short run, a decrease in aggregate demand will lead to

A) a decrease in the price level and an increase in real GDP.

B) an increase in the price level and a decrease in real GDP.

C) a decrease in the price level and an increase in the unemployment rate.

D) an increase in the price level and an increase in real GDP.

E) no change in the price level and a decrease in real GDP.

 

52) If the economy moves upward along its short-run Phillips curve, in the AS-AD diagram, this movement is shown by a

A) movement upward along the AS curve as a result of a rightward shift of the AD curve.

B) rightward shift of potential GDP.

C) movement downward along the AS curve as a result of a leftward shift of the AD curve.

D) rightward shift of the AS curve and a movement along the AD curve.

E) leftward shift of the AS curve and a movement along the AD curve.

 

53) If aggregate demand increases, thereby leading to an increase in real GDP and inflation, there is

A) a movement downward along the short-run Phillips curve.

B) a movement upward along the short-run Phillips curve.

C) a rightward shift in the short-run Phillips curve.

D) a leftward shift in the short-run Phillips curve.

E) neither a movement along nor a shift in the short-run Phillips curve.

54) The relationship between the AS-AD model and the Phillips curve points out that as aggregate demand increases, the unemployment rate

A) decreases and the inflation rate rises.

B) increases and the inflation rate falls.

C) decreases and the price level falls.

D) increases and the inflation rate rises.

E) decreases and the inflation rate does not change, only the price level rises.

 

55) Data from the United States and the United Kingdom show that the short-run Phillips curve exhibits

A) a great deal of shifting.

B) stability with shifts occurring only when external forces are strong.

C) stability with shifts occurring only when there is an internal change of government.

D) shifts that occur every five years or so.

E) positive slopes in both nations.

 

56) Changes in which of the following shift the short-run Phillips curve?

i.changes in the natural unemployment rate

ii.changes in the expected inflation rate

iii.changes in the inflation rate

A) i only

B) ii only

C) iii only

D) i and ii

E) i, ii, and iii

57) The short-run Phillips curve shows a relationship between the

A) inflation rate and the interest rate.

B) inflation rate and real GDP.

C) unemployment rate and the interest rate.

D) inflation rate and the unemployment rate.

E) price level and real GDP.

 

58) The short-run Phillips curve is

A) vertical at the natural unemployment rate.

B) upward sloping.

C) downward sloping.

D) horizontal at the expected inflation rate.

E) U-shaped.

 

59) Moving along the short-run Phillips curve, as the unemployment rate increases the inflation rate

A) decreases.

B) increases.

C) remains unchanged.

D) initially decreases and then increases.

E) initially increases and then decreases.

 

60) When a movement up along the aggregate supply curve occurs, there is also

A) a movement down along the short-run Phillips curve.

B) a movement up along the short-run Phillips curve.

C) a rightward shift of the short-run Phillips curve.

D) a leftward shift of the short-run Phillips curve.

E) no movement along nor a shift in the short-run Phillips curve.

61) If real GDP exceeds potential GDP, then employment is ________ full employment and the unemployment rate is ________ the natural unemployment rate.

A) below; above

B) equal to; below

C) above; below

D) above; above

E) equal to; equal to

 

62) According to Okun's Law, if the natural unemployment rate is 5 percent, the actual unemployment rate is 4 percent, and potential GDP is $15 trillion, then actual real GDP is

A) $12.0 trillion.

B) $15.0 trillion.

C) $14.7 trillion.

D) $15.4 trillion.

E) $15.3 trillion.

 

63) When aggregate demand increases, there is a movement ________ along the AS curve and ________.

A) up; a movement up along the short-run Phillips curve

B) up; a movement down along the short-run Phillips curve

C) up; an upward shift of the short-run Phillips curve

D) down; a downward shift of the short-run Phillips curve

E) down; a movement down along the short-run Phillips curve

 

 

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July 1, 2023
    

 

 

51) In the short run, a decrease in aggregate demand will lead to

A) a decrease in the price level and an increase in real GDP.

B) an increase in the price level and a decrease in real GDP.

C) a decrease in the price level and an increase in the unemployment rate.

D) an increase in the price level and an increase in real GDP.

E) no change in the price level and a decrease in real GDP.

 

52) If the economy moves upward along its short-run Phillips curve, in the AS-AD diagram, this movement is shown by a

A) movement upward along the AS curve as a result of a rightward shift of the AD curve.

B) rightward shift of potential GDP.

C) movement downward along the AS curve as a result of a leftward shift of the AD curve.

D) rightward shift of the AS curve and a movement along the AD curve.

E) leftward shift of the AS curve and a movement along the AD curve.

 

53) If aggregate demand increases, thereby leading to an increase in real GDP and inflation, there is

A) a movement downward along the short-run Phillips curve.

B) a movement upward along the short-run Phillips curve.

C) a rightward shift in the short-run Phillips curve.

D) a leftward shift in the short-run Phillips curve.

E) neither a movement along nor a shift in the short-run Phillips curve.

54) The relationship between the AS-AD model and the Phillips curve points out that as aggregate demand increases, the unemployment rate

A) decreases and the inflation rate rises.

B) increases and the inflation rate falls.

C) decreases and the price level falls.

D) increases and the inflation rate rises.

E) decreases and the inflation rate does not change, only the price level rises.

 

55) Data from the United States and the United Kingdom show that the short-run Phillips curve exhibits

A) a great deal of shifting.

B) stability with shifts occurring only when external forces are strong.

C) stability with shifts occurring only when there is an internal change of government.

D) shifts that occur every five years or so.

E) positive slopes in both nations.

 

56) Changes in which of the following shift the short-run Phillips curve?

i.changes in the natural unemployment rate

ii.changes in the expected inflation rate

iii.changes in the inflation rate

A) i only

B) ii only

C) iii only

D) i and ii

E) i, ii, and iii

57) The short-run Phillips curve shows a relationship between the

A) inflation rate and the interest rate.

B) inflation rate and real GDP.

C) unemployment rate and the interest rate.

D) inflation rate and the unemployment rate.

E) price level and real GDP.

 

58) The short-run Phillips curve is

A) vertical at the natural unemployment rate.

B) upward sloping.

C) downward sloping.

D) horizontal at the expected inflation rate.

E) U-shaped.

 

59) Moving along the short-run Phillips curve, as the unemployment rate increases the inflation rate

A) decreases.

B) increases.

C) remains unchanged.

D) initially decreases and then increases.

E) initially increases and then decreases.

 

60) When a movement up along the aggregate supply curve occurs, there is also

A) a movement down along the short-run Phillips curve.

B) a movement up along the short-run Phillips curve.

C) a rightward shift of the short-run Phillips curve.

D) a leftward shift of the short-run Phillips curve.

E) no movement along nor a shift in the short-run Phillips curve.

61) If real GDP exceeds potential GDP, then employment is ________ full employment and the unemployment rate is ________ the natural unemployment rate.

A) below; above

B) equal to; below

C) above; below

D) above; above

E) equal to; equal to

 

62) According to Okun's Law, if the natural unemployment rate is 5 percent, the actual unemployment rate is 4 percent, and potential GDP is $15 trillion, then actual real GDP is

A) $12.0 trillion.

B) $15.0 trillion.

C) $14.7 trillion.

D) $15.4 trillion.

E) $15.3 trillion.

 

63) When aggregate demand increases, there is a movement ________ along the AS curve and ________.

A) up; a movement up along the short-run Phillips curve

B) up; a movement down along the short-run Phillips curve

C) up; an upward shift of the short-run Phillips curve

D) down; a downward shift of the short-run Phillips curve

E) down; a movement down along the short-run Phillips curve

 

 

default image
July 1, 2023
    

 

 

51) In the short run, a decrease in aggregate demand will lead to

A) a decrease in the price level and an increase in real GDP.

B) an increase in the price level and a decrease in real GDP.

C) a decrease in the price level and an increase in the unemployment rate.

D) an increase in the price level and an increase in real GDP.

E) no change in the price level and a decrease in real GDP.

 

52) If the economy moves upward along its short-run Phillips curve, in the AS-AD diagram, this movement is shown by a

A) movement upward along the AS curve as a result of a rightward shift of the AD curve.

B) rightward shift of potential GDP.

C) movement downward along the AS curve as a result of a leftward shift of the AD curve.

D) rightward shift of the AS curve and a movement along the AD curve.

E) leftward shift of the AS curve and a movement along the AD curve.

 

53) If aggregate demand increases, thereby leading to an increase in real GDP and inflation, there is

A) a movement downward along the short-run Phillips curve.

B) a movement upward along the short-run Phillips curve.

C) a rightward shift in the short-run Phillips curve.

D) a leftward shift in the short-run Phillips curve.

E) neither a movement along nor a shift in the short-run Phillips curve.

54) The relationship between the AS-AD model and the Phillips curve points out that as aggregate demand increases, the unemployment rate

A) decreases and the inflation rate rises.

B) increases and the inflation rate falls.

C) decreases and the price level falls.

D) increases and the inflation rate rises.

E) decreases and the inflation rate does not change, only the price level rises.

 

55) Data from the United States and the United Kingdom show that the short-run Phillips curve exhibits

A) a great deal of shifting.

B) stability with shifts occurring only when external forces are strong.

C) stability with shifts occurring only when there is an internal change of government.

D) shifts that occur every five years or so.

E) positive slopes in both nations.

 

56) Changes in which of the following shift the short-run Phillips curve?

i.changes in the natural unemployment rate

ii.changes in the expected inflation rate

iii.changes in the inflation rate

A) i only

B) ii only

C) iii only

D) i and ii

E) i, ii, and iii

57) The short-run Phillips curve shows a relationship between the

A) inflation rate and the interest rate.

B) inflation rate and real GDP.

C) unemployment rate and the interest rate.

D) inflation rate and the unemployment rate.

E) price level and real GDP.

 

58) The short-run Phillips curve is

A) vertical at the natural unemployment rate.

B) upward sloping.

C) downward sloping.

D) horizontal at the expected inflation rate.

E) U-shaped.

 

59) Moving along the short-run Phillips curve, as the unemployment rate increases the inflation rate

A) decreases.

B) increases.

C) remains unchanged.

D) initially decreases and then increases.

E) initially increases and then decreases.

 

60) When a movement up along the aggregate supply curve occurs, there is also

A) a movement down along the short-run Phillips curve.

B) a movement up along the short-run Phillips curve.

C) a rightward shift of the short-run Phillips curve.

D) a leftward shift of the short-run Phillips curve.

E) no movement along nor a shift in the short-run Phillips curve.

61) If real GDP exceeds potential GDP, then employment is ________ full employment and the unemployment rate is ________ the natural unemployment rate.

A) below; above

B) equal to; below

C) above; below

D) above; above

E) equal to; equal to

 

62) According to Okun's Law, if the natural unemployment rate is 5 percent, the actual unemployment rate is 4 percent, and potential GDP is $15 trillion, then actual real GDP is

A) $12.0 trillion.

B) $15.0 trillion.

C) $14.7 trillion.

D) $15.4 trillion.

E) $15.3 trillion.

 

63) When aggregate demand increases, there is a movement ________ along the AS curve and ________.

A) up; a movement up along the short-run Phillips curve

B) up; a movement down along the short-run Phillips curve

C) up; an upward shift of the short-run Phillips curve

D) down; a downward shift of the short-run Phillips curve

E) down; a movement down along the short-run Phillips curve

 

 

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