chapter 4 bank continued. Flashcards
58) The price elasticity of demand for airplane travel one week in advance of the departure date is most likely to be A) equal to infinity. B) equal to zero. C) between zero and 1. D) equal to 1. E) greater than 1.
C
59) If a price decrease results in an increase in total revenue, then demand is A) inelastic. B) unit elastic. C) perfectly inelastic. D) equal to supply. E) elastic.
E
60) Suppose Swiss Chalet in Moncton knows that the demand for their half-chicken meals is elastic. If the manager wants to increase total revenue from half-chicken meal sales, he should
A) lower the price of a half-chicken meal.
B) not change the price of a half-chicken meal.
C) raise the price of a half-chicken meal.
D) decrease the supply of half-chicken meals.
E) hire fewer employees.
A
61) As a result of a poor growing season, the supply curve of apples shifted leftward, the equilibrium price of apples rose, and total revenue fell. This suggests that the price elasticity of demand for apples is A) perfectly inelastic. B) elastic. C) inelastic. D) unit elastic. E) perfectly elastic.
B
62) Suppose the Nunavut government decides to repair Iqaluit roads. One way to generate sufficient funds for this plan is to increase taxes on gasoline. The government will be able to raise total revenue from gasoline sales only if the demand for gasoline is A) perfectly elastic. B) equal to the supply of gasoline. C) unit elastic. D) inelastic. E) elastic.
D
63) Which of the following will have the most elastic demand?
A) frozen desserts
B) ice cream
C) strawberry ice cream
D) a banana split made with strawberry and chocolate ice cream
E) a banana split with with Nestle strawberry and chocolate ice cream
E
64) Suppose your annual income is $65 000 and your favourite TV Guide magazine costs you $28 a year. Your demand for the TV Guide magazine is likely to be
A) perfectly elastic.
B) inelastic.
C) unit elastic.
D) elastic.
E) elastic – the same as your demand for all other goods.
B
65) The longer the time that has elapsed since a price change the more time consumers will have to respond to price changes. As a result, demand becomes A) zero. B) more inelastic. C) more elastic. D) perfectly inelastic. E) unit elastic.
C
66) The price of gasoline rises by 25 percent and remains fixed at the new higher level. Choose the correct statement.
A) The demand for gasoline will increase after consumers adjust their consumption behaviour to the new higher price.
B) The demand for gasoline will decrease after consumers adjust their consumption behaviour to the new higher price.
C) Initially after the price change, the price elasticity of demand will be less elastic than it will be a few years after the price change.
D) The price elasticity of demand for gasoline will decrease in the future.
E) Initially after the price change, the price elasticity of demand will be more elastic than it will be a few years after the price change.
c
67) The demand for a good is price elastic if
A) a rise in price results in an increase in total revenue.
B) a fall in price results in a decrease in total revenue.
C) a rise in price results in a decrease in total revenue.
D) the good is a necessity.
E) the demand for the good is very insensitive to changes in price.
C
68) The demand for a good is price inelastic if
A) a rise in price results in an increase in total revenue.
B) a rise in price results in a decrease in total revenue.
C) an increase in income results in a decrease in total revenue.
D) an increase in income results in an increase in total revenue.
E) the good is a luxury.
A
69) If the demand for a good is unit elastic, then a 5 percent increase in price results in
A) a 5 percent increase in total revenue.
B) a 5 percent decrease in total revenue.
C) no change in total revenue.
D) an increase in total revenue greater than 5 percent.
E) an increase in total revenue less than 5 percent.
Answer: C
C
70) Total revenue from the sale of a good will decrease if
A) income increases and the good is normal.
B) its price rises and demand is elastic.
C) its price rises and demand is inelastic.
D) income falls and the good is an inferior good.
E) its price falls and demand is elastic.
B
71) If Saudi Arabia argues that an increase in the supply of oil will decrease total revenue, then Saudi Arabia believes the demand for oil is A) income inelastic. B) income elastic. C) elastic. D) inelastic. E) unit elastic.
D
72) Suppose there is an increase in the cost of resources used in the production of good A. Then
A) if the price of A rises, we know the demand for A is elastic.
B) if the total revenue from sales of A rises, we know the demand for A is elastic.
C) if the total revenue from sales of A falls, we know the demand for A is elastic.
D) total revenue will increase because the price of A must rise.
E) total revenue must fall because the quantity bought and sold of A must fall.
C
73) When the price of peanut butter rises by 4 percent, total revenue decreases by 8 percent. The demand for peanut butter A) is elastic. B) is inelastic. C) is unit elastic. D) has a price elasticity equal to 1/2. E) has a price elasticity equal to 2.
A
74) If price elasticity of demand is zero, then as the price falls A) total revenue does not change. B) quantity demanded does not change. C) quantity demanded falls to zero. D) total revenue increases from zero. E) None of the above occurs.
B
76) A decrease in tuition fees will decrease the university's total revenue if the price elasticity of demand for university education is A) negative. B) greater than zero but less than 1. C) equal to 1. D) greater than 1. E) less than the elasticity of supply.
B
77) The demand for orange juice is price elastic. A severe frost, which destroys large quantities of oranges will
A) lower the equilibrium price but increase total consumer spending on juice.
B) decrease the equilibrium quantity and decrease total consumer spending on juice.
C) decrease both the equilibrium quantity and the price of juice.
D) raise the equilibrium price as well as total consumer spending for juice.
E) raise the equilibrium price but leave total consumer spending for juice constant.
B
78) Tina and Brian work for the same recording company. Tina claims they would be better off by raising the price of their CDs, while Brian claims they would be better off by lowering the price. We can conclude that
A) Tina thinks the demand for CDs has price elasticity of demand zero and Brian thinks price elasticity of demand equals 1.
B) Tina thinks the demand for CDs has price elasticity of demand equal to 1 and Brian thinks price elasticity of demand equals zero.
C) Tina thinks the demand for CDs is price elastic and Brian thinks it is price inelastic.
D) Tina thinks the demand for CDs is price inelastic and Brian thinks it is price elastic.
E) Tina and Brian should stick to singing and forget about economics.
D
80) If the Canucks lower ticket prices and find that total revenue does not change, then the price elasticity of demand for tickets is A) zero. B) greater than zero but less than 1. C) equal to 1. D) greater than 1. E) negative.
C
81) A good has a price elasticity of demand equal to 2. If new imports lower its price from $1.20 to $0.80, the percentage change in quantity demanded will be A) an increase of 80 percent. B) a decrease of 80 percent. C) a decrease of 40 percent. D) an increase of 2 percent. E) an increase of 40 percent.
A
82) Total revenue is more likely to rise when the price rises if
A) there are few substitutes for the good.
B) a high proportion of income is spent on the good.
C) some extended period of time passes.
D) all of the above.
E) none of the above.
A
83) Total revenue is more likely to rise when the price falls if
A) there are few substitutes for the good.
B) a low proportion of income is spent on the good.
C) some extended period of time passes.
D) all of the above.
E) none of the above.
C