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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.

E) B) and C)
F) A) and B)

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If soybean farmers know that the demand for soybeans is inelastic, in order to increase their total revenues they should


A) use more fertilizers and weed killers to increase their yields.
B) plant additional acres to increase their output.
C) reduce the number of acres they plant to decrease their output.
D) Both a and b are correct.

E) B) and C)
F) A) and D)

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Figure 5-5 Figure 5-5 -Refer to Figure 5-5. At a price of $10 per unit, sellers' total revenue equals A) $100. B) $450 C) $500. D) $1250. -Refer to Figure 5-5. At a price of $10 per unit, sellers' total revenue equals


A) $100.
B) $450
C) $500.
D) $1250.

E) A) and B)
F) All of the above

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On a downward-sloping linear demand curve, total revenue reaches its maximum value at the


A) midpoint of the demand curve.
B) lower end of the demand curve.
C) upper end of the demand curve.
D) It is impossible to tell without knowing prices and quantities demanded.

E) All of the above
F) C) and D)

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A key determinant of the price elasticity of supply is the


A) time horizon.
B) income of consumers.
C) price elasticity of demand.
D) importance of the good in a consumer's budget.

E) A) and D)
F) None of the above

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If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about


A) 0.24%.
B) 4.2%.
C) 6%.
D) 6.2%.

E) A) and B)
F) None of the above

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Suppose demand is given by the equation: Suppose demand is given by the equation: At what point along this demand curve will total revenue be maximized? At what point along this demand curve will total revenue be maximized?

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Total revenue is con...

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If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a


A) 0.1 percent decrease in the quantity demanded.
B) 1 percent decrease in the quantity demanded.
C) 2.5 percent decrease in the quantity demanded.
D) 10 percent decrease in the quantity demanded.

E) B) and C)
F) All of the above

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If the price elasticity of demand for a good is 1, then a 3 percent decrease in price results in a


A) 0.1 percent increase in the quantity demanded.
B) 1 percent increase in the quantity demanded.
C) 3 percent increase in the quantity demanded.
D) 4 percent increase in the quantity demanded.

E) B) and C)
F) A) and B)

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If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a


A) 0.6 percent increase in the quantity demanded.
B) 1.5 percent increase in the quantity demanded.
C) 2 percent increase in the quantity demanded.
D) 6 percent increase in the quantity demanded.

E) None of the above
F) A) and C)

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Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price elasticity of demand for this good is


A) inelastic and equal to 6.
B) elastic and equal to 6.
C) inelastic and equal to 0.17.
D) elastic and equal to 0.17.

E) B) and C)
F) None of the above

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In the early 1970s, OPEC's goal was to


A) decrease the world-wide price of oil so that the quantity demanded increased, thus raising total revenues for OPEC members.
B) increase the world-wide price of oil by reducing the quantity of oil supplied.
C) increase the world-wide price of oil by increasing the quantity of oil supplied, thus raising total revenues for OPEC members.
D) decrease the world-wide price of oil so that quantity demanded increased.

E) A) and C)
F) All of the above

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A good will have a more inelastic demand, the


A) greater the availability of close substitutes.
B) broader the definition of the market.
C) longer the period of time.
D) more it is regarded as a luxury.

E) B) and D)
F) A) and B)

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If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

A) True
B) False

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If the price elasticity of supply is 0.4, and a price increase led to a 5% increase in quantity supplied, then the price increase is about


A) 0.25%.
B) 1.2%.
C) 2%.
D) 12.5%.

E) B) and C)
F) None of the above

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Which of the following is likely to have the most price inelastic demand?


A) chocolate
B) Godiva chocolate
C) Hershey's chocolate
D) All three would have the same elasticity of demand because they are all related.

E) C) and D)
F) A) and B)

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The demand for soap is more elastic than the demand for Dove soap.

A) True
B) False

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Suppose that gasoline prices increase dramatically this month. Lola commutes 100 miles to work each weekday. Over the next few months, Lola drives less on the weekends to try to save money. Within the year, she sells her home and purchases one only 10 miles from her place of employment. These examples illustrate the importance of


A) the availability of substitutes in determining the price elasticity of demand.
B) a necessity versus a luxury in determining the price elasticity of demand.
C) the definition of a market in determining the price elasticity of demand.
D) the time horizon in determining the price elasticity of demand.

E) All of the above
F) None of the above

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Table 5-5 Table 5-5 -Refer to Table 5-5. Demand is unit elastic when quantity demanded changes from A) 9 to 8. B) 10 to 9. C) 10 to 11. D) There is not enough information given to determine the correct answer. -Refer to Table 5-5. Demand is unit elastic when quantity demanded changes from


A) 9 to 8.
B) 10 to 9.
C) 10 to 11.
D) There is not enough information given to determine the correct answer.

E) C) and D)
F) All of the above

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Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?


A) 0.8
B) 1
C) 1.8
D) 2.4

E) C) and D)
F) B) and D)

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