Total Revenue Test

Question 1

The ____ from the sale of good or service equals the price of the good multiplied by the quantity sold.

Answer 1

Total revenue

Question 2

If demand is inelastic E<1

Answer 2

a price rise increases total revenue

Question 3

If demand is elastic E>1

Answer 3

a price rise decreases total revenue

Question 4

If demand is unitary elastic E=1

Answer 4

a price change does not change total revenue

Question 5

The _____ is a method of estimating the price elasticity of demand by observing the change in total revenue that results from a price change (when all other influences on the quantity sold remain the same)

Answer 5

Total revenue Test

Question 6

If price cut increases total revenue

Answer 6

demand is elastic

Question 7

if price cut decreases total revenue

Answer 7

demand is inelastic

Question 8

if a price cut leaves total revenue unchanged

Answer 8

demand is unit elastic

Question 9

Total revenue =

Answer 9

Price per unit x number of units sold

Question 10

TR =

Answer 10

P x Q

Question 11

If demand is elastic, the percentage change in quantity demanded will exceed the percentage change in price that caused it

Answer 11

….

Question 12

If demand is elastic, the positive effect of a price increase on revenue will be offset by the negative effect of the fall in quantity demanded.

Answer 12

Total revenue will therefore fall

Question 13

If demand is inelastic

Answer 13

a price increase will cause total revenue to rise

Question 14

If demand is unit elastic

Answer 14

any change in price will have no effect on total revenue

Question 15

If demand is elastic

Answer 15

demand in price will increase TR and a price increase will reduce TR and vice versa

Question 16

If demand is inelastic

Answer 16

decrease in price will decrease TR and a price increase will increase TR and vice versa

Question 17

If demand elastic

Answer 17

price and TR will change in opposite directions

Question 18

if demand inelastic

Answer 18

price and TR will change in same direction

Question 19

Implies that if price changes by any percentage quantity demanded will fall to 0

Answer 19

Perfectly elastic demand

Question 20

Price elasticity of demand =

Answer 20

infinite

Question 21

where small price reduction causes buyer to increase their purchases from 0 to all they could obtain

Answer 21

perfect elasticity

Question 22

QD changes by an infinitely large percentage in response to a tiny price change

Answer 22

Perfect elasticity

Question 23

implies the quantity demanded remains constant when price changes occur

Answer 23

perfectly inelastic demand

Question 24

price elasticity of demand =

Answer 24

0

Question 25

Price change results in no change at all in QD

Answer 25

perfect inelasticity